VALLEY NATIONAL CORP /AL/, S-4, 1998-05-12

VALLEY NATIONAL CORP /AL/
S-4, 1998-05-12

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MAY 12, 1998

REGISTRATION NO. 333-

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------

FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------

VALLEY NATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

6712 72-1355228
ALABAMA (PRIMARY STANDARD (I.R.S. EMPLOYER
INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
(STATE OR OTHER CODE NUMBER)
JURISDICTION OF
INCORPORATION OR
ORGANIZATION)

STEVEN R. TOWNSON,
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
VALLEY NATIONAL CORPORATION
1011 NORTH LANIER AVENUE 1011 NORTH LANIER AVENUE
LANETT, AL, 36863-0682 LANETT, AL, 36863-0682
(334) 644-3171 (334) 644-3171

(ADDRESS, INCLUDING ZIP CODE, AND (NAME, ADDRESS, INCLUDING ZIP CODE,
TELEPHONE NUMBER, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S INCLUDING AREA CODE, OF AGENT FOR
PRINCIPAL EXECUTIVE OFFICE) SERVICE)

----------------

COPIES TO:

HARRY I. BROWN, JR., STEVEN J. EISEN
PRESIDENT AND BAKER, DONELSON, BEARMAN & CALDWELL
CHIEF EXECUTIVE OFFICER 511 UNION STREET
FIRST NATIONAL SYLACAUGA CORPORATION SUITE 1700
43 NORTH BROADWAY NASHVILLE, TN 37219
SYLACAUGA, AL 35150 (615) 726-5600
(205) 249-0341

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED(1) REGISTERED(2) PER SHARE(3) PRICE(3) FEE
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<S> <C> <C> <C> <C>
Common Stock, $.001 par
value.................. 1,312,935 $10.43 $13,693,912 $4,039.71
</TABLE>
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(1) This Registration Statement relates to securities of the Registrant
issuable to holders of common stock of First National Sylacauga
Corporation ("FNSC"), in connection with the merger of FNSC with and into
Valley National Corporation (the "Merger").
(2) Based on the number of shares of Registrant's common stock, $.001 par
value per share, that could be issued in the Merger.
(3) Pursuant to Rule 457(f), and solely for the purpose of calculating the
registration fee, the proposed maximum offering price was based upon the
agreed purchase price of $10.43 per share.

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 SAID
SECTION 8(A), MAY DETERMINE.

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<PAGE>

VALLEY NATIONAL CORPORATION

Cross Reference Sheet pursuant to Rule 404(a) of the Securities Act of 1933
and Item 501(b) of Regulation S-K showing the location or heading in the Joint
Proxy Statement/Prospectus of the information required by Part I of Form S-4.

<TABLE>
<CAPTION>
LOCATION OR HEADING IN
S-4 ITEM NUMBER AND CAPTION JOINT PROXY STATEMENT/PROSPECTUS
--------------------------- --------------------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION

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

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

3. Risk Factors, Ratio of
Earnings to Fixed Charges and Summary; Pro Forma Financial Information;
Other Information............. Risk Factors; Information Concerning VNC;
Information Concerning FNSC; Index to
Financial Information.

4. Terms of the Transaction...... Summary; The Merger; Certain Federal Income
Tax Consequences; Description of VNC
Capital Stock; Comparison of Certain Rights
of Shareholders.

5. Pro Forma Financial
Information................... Summary; Pro Forma Financial Information.

6. Material Contacts with the
Company Being Acquired........ Not applicable.

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

8. Interests of Named Experts and
Counsel....................... Experts.

9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Management of VNC; Management of FNSC.

B. INFORMATION ABOUT THE REGISTRANT

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

11. Incorporation of Certain
Information by Reference...... Not applicable.

12. Information with Respect to S-
2 or S-3 Registrant........... Not applicable.

13. Incorporation of Certain
Information by Reference...... Not applicable.

14. Information with Respect to
Registrants Other Than S-3 or Summary; The Merger; Information Concerning
S-2 Registrants............... VNC; VNC's Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Management of VNC;
Description of VNC Capital Stock; Index to
Financial Information.
</TABLE>
<PAGE>

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

16. Information with Respect to S-
2 or S-3 Company.............. Not applicable.

17. Information with Respect to
Companies Other Than S-2 or S- Summary; The Merger; Information Concerning
3 Companies................... FNSC; FNSC's Management's Discussion and
Analysis of Financial Condition and Results
of Operation; Management of FNSC;
Description of FNSC Capital Stock; Index to
Financial Information.

D. VOTING AND MANAGEMENT INFORMATION

18. Information if Proxies,
Comments or Authorizations are
to be Solicited or in an Summary; The Meetings; The Merger, Cover
Exchange Offer................ Page of the Joint Proxy
Statement/Prospectus;

19. Information if Proxies,
Comments or Authorizations are
not to be Solicited in an
Exchange Offer................ Not applicable.
</TABLE>
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION
43 NORTH BROADWAY, SYLACAUGA, AL 35150

June , 1998

Dear Shareholder:

You are cordially invited to attend a Special Meeting of Shareholders of
First National Sylacauga Corporation ("FNSC"), to be held on Thursday, July 9,
1998, at the main office of First National-America's Bank ("FNA Bank") at 43
North Broadway, Sylacauga, Alabama 35150 at 2:00 p.m., Central Daylight
Savings Time (the "FNSC Meeting").

At the FNSC Meeting, you will be asked to consider and vote upon a proposal
to approve a Merger Agreement and Plan of Merger, dated as of February 24,
1998 (the "Merger Agreement"), between FNSC and Valley National Corporation.
The Merger Agreement provides for the merger of FNSC with and into Valley
National Corporation (the "Merger"), and for the surviving corporation to
change its name to Frontier National Corporation. The proposed Merger is more
fully described in the accompanying Joint Proxy Statement/Prospectus.

If the Merger is approved and consummated, each issued and outstanding share
of common stock of FNSC, $10.00 par value per share ("FNSC Common"), will be
converted into thirteen (13) shares of Class A common stock of Valley National
Corporation, $.001 par value per share (the "Frontier Common"). Each issued
and outstanding share of Frontier Common will remain issued and outstanding,
unaffected by the Merger.

As a result of the Merger, the separate existence of FNSC will cease and FNA
Bank, a wholly-owned subsidiary of FNSC, will become a wholly-owned subsidiary
of Frontier and will continue in operation serving its current markets as a
national banking association.

The enclosed Notice of Special Meeting of Shareholders and Joint Proxy
Statement/Prospectus explain the Merger and provide specific information
relative to the FNSC Meeting. Please read these materials carefully and
thoughtfully consider the information contained in them.

The Board of Directors of FNSC believes that the transactions contemplated
by the Merger Agreement are fair to and in the best interests of FNSC and its
shareholders. The Boards of Directors of both FNSC and Valley National
Corporation have approved the Merger Agreement. The Board of Directors of FNSC
recommends that you vote FOR approval of the Merger Agreement.

Your vote is of great importance since approval of the Merger requires the
affirmative vote of a majority of the outstanding shares of FNSC Common.
Whether or not you plan to attend the FNSC Meeting, you are urged to promptly
complete, sign, date and return the accompanying Proxy in the enclosed
envelope, so that your shares may be represented at the FNSC Meeting. All
shareholders are invited to attend the FNSC Meeting in person, and you may, if
you wish, vote personally on all matters brought before the FNSC Meeting, even
if you have previously returned your Proxy.

Sincerely,

Harry I. Brown, Jr.,
President and Chief Executive
Officer
<PAGE>

VALLEY NATIONAL CORPORATION
1011 NORTH LANIER AVENUE, LANETT, AL 36863-0682

June , 1998

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of
Valley National Corporation to be held on Thursday, July 9, 1998, at the main
office of Valley National Bank at 1011 North Lanier Avenue, Lanett, Alabama
36863-0682 at 10:00 a.m., Eastern Daylight Savings Time (the "VNC Meeting").

At the VNC Meeting, you will be asked to consider and vote upon a proposal
to approve a Merger Agreement and Plan of Merger, dated as of February 24,
1998 (the "Merger Agreement"), between First National Sylacauga Corporation
("FNSC") and Valley National Corporation. The Merger Agreement provides for
the merger of FNSC with and into Valley National Corporation (the "Merger"),
and for the surviving corporation to change its name to Frontier National
Corporation ("Frontier"). The proposed Merger is more fully described in the
accompanying Joint Proxy Statement/Prospectus.

At the VNC Meeting, shareholders of Valley National Corporation will also be
asked to elect the Board of Directors of Valley National Corporation.

The enclosed Notice of the Annual Meeting of Shareholders and Joint Proxy
Statement/Prospectus explain the Merger and provide specific information
relative to the VNC Meeting. Please read these materials carefully and
thoughtfully consider the information contained in them.

The Board of Directors of Valley National Corporation believes that the
Merger and the Merger Agreement are fair to, and in the best interests of,
Valley National Corporation and its shareholders. The Boards of Directors of
both FNSC and Valley National Corporation have approved the Merger Agreement.
The Board of Directors of Valley National Corporation recommends that you vote
FOR approval of the Merger.

Your vote is important since approval of the Merger requires the affirmative
vote of two-thirds of the outstanding shares of Frontier Common. Whether or
not you plan to attend the Valley National Corporation Meeting, you are urged
to promptly complete, sign, date and return the accompanying Proxy in the
enclosed envelope, so that your shares may be represented at the VNC Meeting.
All shareholders are invited to attend the VNC Meeting in person, and you may,
if you wish, vote personally on all matters brought before the Meeting, even
if you have previously returned your Proxy.

Sincerely,

Steven R. Townson,
President and Chief Executive
Officer
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION

----------------

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON JULY 9, 1998

----------------

NOTICE IS HEREBY GIVEN that the Special Meeting of Shareholders of First
National Sylacauga Corporation ("FNSC") will be held on Thursday, July 9, 1998
at the main office of First National-America's Bank ("FNA Bank") at 43 North
Broadway, Sylacauga, Alabama 35150 at p.m., Central Daylight Savings Time,
for the following purposes:

1. To consider and vote upon the approval and adoption of a Merger
Agreement and Plan of Merger dated as of February 24, 1998 (the "Merger
Agreement") among FNSC and Valley National Corporation, a copy of which is
set forth as Appendix A to the attached Joint Proxy Statement/Prospectus.
The Merger Agreement provides for, among other things, the merger of FNSC
with and into Valley National Corporation (the "Merger"), with Valley
National Corporation to be the surviving corporation of the Merger with a
resulting name change to Frontier National Corporation; and

2. To transact such other business as may properly come before the
meeting. The Board of Directors of FNSC is not aware of any other business
to come before the meeting.

The foregoing items of business are more fully described in the Joint Proxy
Statement/Prospectus accompanying this Notice.

Only shareholders of record at the close of business on June 15, 1998 are
entitled to notice of, and to vote at, the meeting and any adjournments
thereof.

Approval of the Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of FNSC common stock. The
Board of Directors of FNSC recommends that shareholders vote FOR approval of
the Merger Agreement.

BY ORDER OF THE BOARD OF DIRECTORS

Secretary

Sylacauga, Alabama
June , 1998

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YOUR VOTE IS IMPORTANT

To ensure your representation at the meeting, you are urged to mark, sign,
date and return the enclosed proxy as promptly as possible in the postage-
prepaid envelope enclosed for that purpose. To revoke a proxy, you must
submit to the Secretary of FNSC, prior to voting, either a signed instrument
of revocation or a duly executed proxy bearing a date or time later than the
proxy being revoked. If you attend the meeting, you may vote in person even
if you previously returned a proxy.
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<PAGE>

VALLEY NATIONAL CORPORATION

----------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON JULY 9, 1998

----------------

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Valley
National Corporation will be held on Thursday, July 9, 1998 at the main office
of Valley National Bank at 1011 North Lanier Avenue, Lanett, Alabama 36863-
0682 at 10:00 a.m., Eastern Daylight Savings Time (the "VNC Meeting"), for the
following purposes:

1. To consider and vote upon the approval and adoption of a Merger
Agreement and Plan of Merger dated as of February 24, 1998 (the "Merger
Agreement") among First National Sylacauga Corporation ("FNSC") and Valley
National Corporation, a copy of which is set forth as Appendix A to the
attached Joint Proxy Statement/Prospectus. The Merger Agreement provides
for, among other things, the proposed merger of FNSC with and into Valley
National Corporation (the "Merger"), with Valley National Corporation to be
the surviving corporation of the Merger with a resulting name change to
Frontier National Corporation;

2. To elect a Board of Directors to serve for the ensuing year and until
successors have been elected and qualified; and

3. To transact such other business as may properly come before the VNC
Meeting. The Board of Directors of Valley National Corporation is not aware
of any other business to come before the VNC Meeting.

The foregoing items of business are more fully described in the Joint Proxy
Statement/Prospectus accompanying this Notice.

Only shareholders of record at the close of business on June 15, 1998 are
entitled to notice of, and to vote at, the meeting and any adjournments
thereof.

Approval of the Merger Agreement requires the affirmative vote of two-thirds
of the outstanding common stock of Valley National Corporation. Election of
the Board of Directors requires an affirmative vote of the majority of shares
represented at the VNC Meeting. The Board of Directors of Valley National
Corporation recommends that shareholders vote FOR approval of the Merger
Agreement and election of the Board of Directors.

BY ORDER OF THE BOARD OF DIRECTORS

Secretary

Lanett, Alabama
June , 1998

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YOUR VOTE IS IMPORTANT

To ensure your representation at the meeting, you are urged to mark, sign,
date and return the enclosed proxy as promptly as possible in the postage-
prepaid envelope enclosed for that purpose. To revoke a proxy, you must
submit to the Secretary of Valley National Corporation, prior to voting,
either a signed instrument of revocation or a duly executed proxy bearing a
date or time later than the proxy being revoked. If you attend the meeting,
you may vote in person even if you previously returned a proxy.
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<PAGE>

JOINT PROXY STATEMENT

VALLEY NATIONAL CORPORATION FIRST NATIONAL SYLACAUGA
PROXY STATEMENT CORPORATION
FOR PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS FOR
TO BE HELD ON JULY 9, 1998 SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON JULY 9, 1998

PROSPECTUS

VALLEY NATIONAL CORPORATION

COMMON STOCK

This Joint Proxy Statement/Prospectus relates to the proposed merger of
First National Sylacauga Corporation ("FNSC"), a Delaware corporation
registered as a bank holding company pursuant to the Bank Holding Company Act
of 1956, as amended (the "BHC Act"), with and into Valley National Corporation
(hereinafter referred to as VNC, or after the Merger as "Frontier"), an
Alabama corporation registered as a bank holding company pursuant to the BHC
Act (the "Merger"). The Merger is upon the terms and subject to the conditions
set forth in the Merger Agreement and Plan of Merger, dated as of February 24,
1998, by and between FNSC and VNC (the "Merger Agreement"). The Merger
Agreement is attached hereto as Appendix A and is incorporated herein by
reference.

This Joint Proxy Statement/Prospectus is being furnished in connection with
the solicitation of proxies by the Board of Directors of VNC (the "VNC Board")
and the Board of Directors of FNSC (the "FNSC Board") to be used at the Annual
Meeting of Shareholders of VNC to be held on July 9, 1998 (the "VNC Meeting")
and the Special Meeting of Shareholders of FNSC to be held on July 9, 1998
(the "FNSC Meeting", and together with the VNC Meeting, the "Meetings").

At the Meetings, shareholders of VNC and FNSC will consider and vote upon
the approval and adoption of the Merger Agreement. The Merger Agreement
provides for, among other things, the merger of FNSC with and into VNC, with
VNC, as the surviving corporation, changing its name to Frontier National
Corporation. In addition, at the VNC Meeting, the VNC shareholders will
consider and vote upon the election of the Board of Directors.

The Merger Agreement provides that (i) each issued and outstanding share of
common stock of FNSC, $10.00 par value per share ("FNSC Common"), will be
converted into common stock of Frontier, $.001 par value per share (the
"Frontier Common"), and (ii) each issued and outstanding share of Frontier
Common will remain issued and outstanding, unaffected by the Merger. As a
result of the Merger, the separate existence of FNSC will cease, and First
National-America's Bank ("FNA Bank"), a wholly-owned subsidiary of FNSC, will
become a wholly-owned subsidiary of Frontier and will continue in operation
serving its current markets as a national banking association.

This Joint Proxy Statement/Prospectus also serves as a Prospectus under the
Securities Act of 1933, as amended (the "Securities Act"), relating to a
maximum of 1,312,935 shares of Frontier Common issuable to holders of FNSC
Common pursuant to the Merger. This Joint Proxy Statement/Prospectus and the
accompanying forms of proxy are first being mailed to the shareholders of VNC
and FNSC on or about June , 1998.

There is no established trading market for either Frontier Common or FNSC
Common. To management of VNC's knowledge and management of FNSC's knowledge,
the most recent transactions with respect to the Frontier Common and the FNSC
Common were at $10.00 and $125.00, respectively.

SEE "RISK FACTORS" ON PAGE 10 FOR A SUMMARY OF CERTAIN MATERIAL RISKS AND
CONSIDERATIONS RELATING TO AN INVESTMENT IN FRONTIER COMMON.

THE SHARES OF FRONTIER COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.

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

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THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS , 1998.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
PAGE
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AVAILABLE INFORMATION..................................................... 2
SUMMARY................................................................... 3
The Companies........................................................... 3
Meetings of Shareholders................................................ 4
Terms of the Merger..................................................... 4
Conditions; Regulatory Approvals........................................ 4
Certain Differences in Shareholders' Rights............................. 4
Appraisal and Dissenters' Rights........................................ 4
Certain Federal Income Tax Consequences................................. 4
RISK FACTORS.............................................................. 5
Absence of Existing Public Market; Market Prices........................ 5
Ability of Frontier to Execute Its Business Strategy.................... 5
Government Regulations and Monetary Policy.............................. 5
Economic Conditions and Geographic Concentration........................ 5
Competition............................................................. 5
Dependence on Key Personnel............................................. 6
Credit Quality.......................................................... 6
Potentially Adverse Impact of Interest Rates and Economic and Industry
Conditions............................................................. 6
Reserve for Loan Losses................................................. 6
Tax Considerations...................................................... 7
Interests of Certain Persons in the Transaction......................... 7
Restrictions of Resale of Frontier Common............................... 7
"Year 2000" Information System Issues................................... 7
THE MEETINGS.............................................................. 8
Meetings of Shareholders................................................ 8
Purpose of Meetings..................................................... 8
Voting Requirements at Meetings......................................... 8
Proxies................................................................. 9
THE MERGER................................................................ 10
Background of and Reasons for the Merger................................ 10
Terms of the Merger..................................................... 11
Effective Time.......................................................... 11
Surrender of Certificates............................................... 12
Conditions to Consummation of the Merger................................ 12
Conduct of Business Pending Merger...................................... 13
Regulatory Approvals.................................................... 14
Waiver; Amendment; Termination.......................................... 14
Management After the Merger............................................. 14
Interests of Certain Persons in the Merger.............................. 15
Appraisal and Dissenters' Rights........................................ 15
Certain Federal Income Tax Consequences................................. 19
Accounting Treatment.................................................... 19
Resales of Frontier Common.............................................. 19
Expenses................................................................ 20
INFORMATION CONCERNING VNC................................................ 21
Selected Financial Data for VNC......................................... 21
</TABLE>

i
<PAGE>

<TABLE>
<S> <C>
PAGE
----
VNC'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.................................................... 22
General................................................................. 22
Summary................................................................. 22
Financial Condition..................................................... 22
Balance Sheet Management................................................ 22
Results of Operations................................................... 25
Effects of Inflation and Changing Prices................................ 25
Net Interest Income..................................................... 26
Liability and Asset Management.......................................... 27
Deposits................................................................ 28
Assets.................................................................. 29
Investment Portfolio.................................................... 30
Investment Policy....................................................... 31
Loan Portfolio.......................................................... 31
Loan Policy............................................................. 32
Credit Risk Management and Reserve for Loan Losses...................... 33
Capital Resources/Liquidity............................................. 34
Capital Adequacy........................................................ 35
BUSINESS OF VNC........................................................... 37
General................................................................. 37
Employees............................................................... 37
Customers............................................................... 37
Properties.............................................................. 37
Legal Proceedings....................................................... 37
Banking................................................................. 37
Competition............................................................. 37
Supervision and Regulation.............................................. 37
MANAGEMENT OF VNC......................................................... 40
Directors and Executive Officers........................................ 40
Transactions with Management............................................ 41
Securities Law Limitations.............................................. 41
The VNC Board and its Committees........................................ 41
Executive Compensation.................................................. 42
Compensation of Directors............................................... 42
DESCRIPTION OF FRONTIER CAPITAL STOCK..................................... 43
INFORMATION CONCERNING FNSC............................................... 45
Selected Financial Data for FNSC........................................ 45
FNSC'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RE-
SULTS OF OPERATIONS...................................................... 46
General................................................................. 46
Summary................................................................. 46
Financial Condition..................................................... 46
Balance Sheet Management................................................ 47
Results of Operations................................................... 47
Effects of Inflation and Changing Prices................................ 49
Net Interest Income..................................................... 50
Liability and Asset Management.......................................... 51
Deposits................................................................ 52
Assets.................................................................. 53
</TABLE>

ii
<PAGE>

<TABLE>
<S> <C>
PAGE
----
Investment Portfolio..................................................... 54
Investment Policy........................................................ 54
Loan Portfolio........................................................... 55
Loan Policy.............................................................. 56
Credit Risk Management and Reserve for Loan Losses....................... 57
Capital Resources/Liquidity.............................................. 59
Capital Adequacy......................................................... 59
BUSINESS OF FNSC........................................................... 61
General.................................................................. 61
Employees................................................................ 61
Customers................................................................ 61
Properties............................................................... 61
Legal Proceedings........................................................ 61
Banking.................................................................. 62
Financial Services....................................................... 62
Competition.............................................................. 62
Supervision and Regulation............................................... 62
Effect of Governmental Policies.......................................... 62
MANAGEMENT OF FNSC......................................................... 63
Directors and Executive Officers......................................... 63
Transactions with Management............................................. 64
Securities Law Limitations............................................... 65
The FNSC Board and its Committees........................................ 65
Executive Compensation................................................... 65
Compensation of Directors................................................ 65
DESCRIPTION OF FNSC CAPITAL STOCK.......................................... 67
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS............................. 67
Authorized Capital Stock................................................. 67
Special Meetings of Shareholders......................................... 67
Amendment of Bylaws...................................................... 68
Voting Requirements...................................................... 68
Appraisal and Dissenters' Rights......................................... 68
Notice of Shareholder Meeting............................................ 69
Dividends................................................................ 69
Shareholder Consents..................................................... 69
Limitation of Liability of Directors..................................... 69
Removal of Directors..................................................... 70
VALIDITY OF COMMON STOCK................................................... 70
EXPERTS.................................................................... 70
</TABLE>

iii
<PAGE>

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS JOINT PROXY
STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE. NEITHER THE
DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES PURSUANT TO THIS JOINT PROXY STATEMENT/PROSPECTUS SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS JOINT PROXY
STATEMENT/PROSPECTUS.

----------------

AVAILABLE INFORMATION

All information concerning VNC included in this Joint Proxy
Statement/Prospectus and the attached Appendices has been furnished by VNC and
all information concerning FNSC included in this Joint Proxy
Statement/Prospectus and the attached Appendices has been furnished by FNSC.

VNC has filed with the Securities Exchange Commission ("SEC") a Registration
Statement on Form S-4 (the "Registration Statement") under the Securities Act
covering the securities described herein. This Joint Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. Statements contained herein or
incorporated herein by reference concerning the provisions of documents are
summaries of such documents, and each statement is qualified in its entirety
by reference to the applicable document if filed with the SEC or attached as
an appendix hereto. For further information, reference is hereby made to the
Registration Statement and the exhibits filed therewith. The Registration
Statement and any amendments thereto, including exhibits filed as a part
thereof, are available for inspection and copying as set forth below.

Frontier will be subject to the information filing requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports and other information with the SEC.
Such reports and other information will be available for copying and
inspection at the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates, as well as at the following
Regional Offices of the Commission: Seven World Trade Center, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Such material will also be accessible electronically by
means of the SEC's home page on the Internet at http://www.sec.gov.

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SUMMARY

The following is a summary of certain information contained elsewhere in this
Joint Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained elsewhere
in this Joint Proxy Statement/Prospectus and in the attached Appendices.
Shareholders of VNC and FNSC are urged to carefully read this Joint Proxy
Statement/Prospectus and the attached Appendices in their entirety.

THE COMPANIES

VNC, incorporated in Alabama in 1997, is a bank holding company registered
under the BHC Act. VNC's principal asset is the capital stock of Valley
National Bank ("VN Bank"), a national banking association. At March 31, 1998,
VNC had consolidated total assets of $75.5 million and shareholders' equity of
$7.8 million. VNC's principal offices are located at 1011 North Lanier Avenue,
Lanett, Alabama 36863-0682 and its telephone number is (334) 644-3171.

FNSC, incorporated in Delaware in 1984, is a bank holding company registered
under the BHC Act. FNSC's principal asset is the capital stock of FNA Bank, a
national banking association. At March 31, 1998 FNSC had consolidated total
assets of $135.6 million and stockholders' equity of $14.1 million. FNSC's
principal offices are located at 43 North Broadway, Sylacauga, Alabama 35150-
0100 and its telephone number is (205) 249-0341.

MEETINGS OF SHAREHOLDERS

The VNC Meeting will be held on Thursday, July 9, 1998, at the main office of
VN Bank, a wholly owned subsidiary of VNC, at 1011 North Lanier Avenue, Lanett,
Alabama 36863-0682 at 10:00 a.m., Eastern Daylight Savings Time. Only holders
of record of Frontier Common at the close of business on June 15, 1998 (the
"VNC Record Date") will be entitled to vote at the VNC Meeting. On the VNC
Record Date, there were issued and outstanding approximately 814,800 shares of
Frontier Common held by approximately 48 holders of record. Each such share is
entitled to one vote on each matter which comes up at the VNC Meeting.

At the VNC Meeting, shareholders of VNC will be asked to consider and vote
upon a proposal to approve and adopt the Merger Agreement, which provides for,
among other things, (i) the merger of FNSC with and into VNC, with VNC being
the surviving corporation; and (ii) the changing of VNC's name to Frontier
National Corporation. In addition, VNC shareholders will consider and vote on
the election of the Board of Directors. Approval of the Merger requires the
affirmative vote of two-thirds of the outstanding shares of Frontier Common.
Approval of the election of directors requires an affirmative note of the
majority of shares of Frontier Common represented at the VNC Meeting.

The FNSC Meeting will be held on Thursday, July 9, 1998, at the main office
of FNA Bank at 43 North Broadway, Sylacauga, Alabama 35150 at 2:00 p.m.,
Central Daylight Savings Time. Only holders of record of FNSC Common at the
close of business on June 15, 1998 (the "FNSC Record Date") will be entitled to
vote at the FNSC Meeting. On the FNSC Record Date, there were issued and
outstanding approximately 100,995 shares of FNSC Common held by approximately
200 holders of record. Each share is entitled to one vote on each matter to
come up at the FNSC Meeting.

At the FNSC Meeting, shareholders of FNSC will be asked to consider and vote
upon a proposal to approve and adopt the Merger Agreement, which provides for,
among other things, (i) the merger of FNSC with and into VNC, with VNC being
the surviving corporation; and (ii) the changing VNC's name to Frontier
National Corporation. Approval of the Merger Agreement requires the affirmative
vote of a majority of the outstanding shares of FNSC.

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TERMS OF THE MERGER

Upon the effectiveness of the Merger (the "Effective Time"), each share of
FNSC Common outstanding prior to the Effective Time, and pursuant to which
dissenters' rights have not been perfected, will be converted into thirteen
(13) fully paid and non-assessable shares of Frontier Common. Each share of
Frontier Common issued and outstanding immediately prior to the Effective Time
will remain issued and outstanding, unaffected by the Merger. See "The Merger--
Terms of the Merger.

As a result of the merger, the separate existence of FNSC will cease and FNA
Bank, a wholly owned subsidiary of FNSC, will become a wholly owned subsidiary
of Frontier and will continue in operation serving its current markets as a
national banking association.

MANAGEMENT AFTER THE MERGER

The Merger Agreement provides that the Frontier Board after the Effective
Time will consist of seven directors, three of whom will be incumbent directors
of VNC and four of whom will be named from among the current directors of FNSC.
The Merger Agreement further provides that the principal officers of Frontier
after the Effective Time will be Harry I. Brown, Jr., Chief Executive Officer
and Chairman of the Board; and Steven R. Townson, President, Chief Operating
Officer, and Vice Chairman of the Board. All directors and officers will serve
in accordance with the Bylaws of Frontier. See "The Merger--Management After
the Merger.

CONDITIONS; REGULATORY APPROVALS

Consummation of the Merger is subject to various conditions, including
receipt of the shareholder approval solicited hereby, receipt of the necessary
regulatory approvals, and satisfaction of customary closing conditions.

The regulatory approvals and consents necessary to consummate the
transactions contemplated by the Merger Agreement include, but are not limited
to, the approval of the Federal Reserve Board ("FRB"). An application has been
submitted and such approval was granted on May 7, 1998. See "The Merger--
Conditions to Consummation of the Merger," and "--Regulatory Approvals."

CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS

At the Effective Time, FNSC shareholders, whose rights are governed by FNSC's
Certificate of Incorporation and Bylaws and by Delaware General Corporation Law
("DGCL"), will automatically become shareholders of Frontier, whose rights are
governed by Frontier's Articles of Incorporation and Bylaws and by the Alabama
Business Corporation Act ("ABCA"). The rights of Frontier's shareholders differ
from the rights of FNSC shareholders in certain important respects. See "Effect
of the Merger on Rights of Shareholders."

APPRAISAL AND DISSENTERS' RIGHTS

Frontier shareholders and FNSC shareholders have the right to dissent from
the Merger Agreement and, upon satisfaction of certain specified procedures,
receive, in cash, the "fair value" of their shares of Frontier Common or FNSC
Common in accordance with applicable Alabama or Delaware law. FAILURE TO
PRECISELY FOLLOW THE APPLICABLE PROVISIONS MAY RESULT IN LOSS OF APPRAISAL OR
DISSENTERS' RIGHTS. See "The Merger--Appraisal and Dissenters' Rights."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

For federal income tax purposes the Merger is intended to be treated as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code") or as an exchange within the meaning of
Section 1036(a) of the Code, and, accordingly, for federal income tax purposes,
shareholders of FNSC Common will not recognize gain or loss upon the receipt of
Frontier Common. See "The Merger--Certain Federal Income Tax Consequences."

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RISK FACTORS

This Prospectus contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. VNC and FNSC wish to
caution readers that all forward-looking statements are necessarily
speculative and not to place undue reliance on any such forward-looking
statements, which speak only as of the date made, and to advise readers that
various risks and uncertainties, including regional and national economic
conditions, changes in levels of market interest rates, credit risks of
lending activities, and competitive and regulatory factors, could affect
financial performance and could cause actual results for future periods to
differ materially from those anticipated or projected. Some, but not all of
the risks, which could affect operations are highlighted below. Shareholders
of VNC and FNSC are urged to consider carefully the following Risk Factors, as
well as the other information contained in this Prospectus.

ABSENCE OF EXISTING PUBLIC MARKET; MARKET PRICES

There is no existing market for Frontier Common. Application has not been
made to list Frontier Common on the NASDAQ National Market or on any other
stock exchange. Although Frontier currently plans to register Frontier Common
under the Exchange Act, there can be no assurance that an active and liquid
trading market for Frontier Common will develop. Future trading prices of
Frontier Common will depend on many factors including, among other things, the
operating results and financial condition of Frontier and the market for
similar securities. There can be no assurance as to the market price for
Frontier Common.

ABILITY OF FRONTIER TO EXECUTE ITS BUSINESS STRATEGY

The future financial performance of Frontier will depend in part on its
ability to successfully integrate the operations and management of FNA Bank
and VN Bank (the "Banks"). There can be no assurance that Frontier will be
able to effectively and profitably integrate the operations and management of
the Banks.

GOVERNMENT REGULATIONS AND MONETARY POLICY

The banking industry is subject to extensive federal and state supervision
and regulation. Such regulation limits the manner in which Frontier and the
Banks conduct their respective businesses, undertake new investments and
activities, and obtain financing. This regulation is intended primarily for
the protection of the deposit insurance fund and consumers, and not to benefit
the holders of Frontier's securities. Financial institution regulation has
been the subject of significant legislation in recent years, and may be the
subject of further significant legislation in the future, none of which is in
the control of Frontier. Significant new laws or changes in, or repeals of,
existing laws may cause Frontier's results to differ materially. Further,
federal monetary policy, particularly as implemented through the Federal
Reserve System, significantly affects credit conditions for Frontier,
primarily through open market operations in the United States government
securities, the discount rates for bank borrowings and bank reserve
requirements, and a material change in these conditions would be likely to
have a material impact on Frontier's results of operations.

ECONOMIC CONDITIONS AND GEOGRAPHIC CONCENTRATION

The operations of the Banks are located and concentrated primarily in
Chambers and Talladega Counties in Alabama. As a result of the geographic
concentration, Frontier's results will depend largely upon economic conditions
in these areas. A deterioration in economic conditions in these market areas
could have a materially adverse impact on the quality of the loan portfolios
and the demand for products and services, and, accordingly, the results of
operations. See "Business of VNC" and "Business of FNSC."

COMPETITION

The banking and financial services business in the market area of both Banks
is highly competitive. The increasingly competitive environment is a result
primarily of changes in regulation, changes in technology and product delivery
systems, and the accelerating pace of consolidation among financial service
providers. The

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Banks compete for loans, deposits and customers and delivery of financial
services with other commercial banks, savings and loan associations,
securities and brokerage companies, mortgage companies, insurance companies,
finance companies, money market funds, credit unions, and other non-bank
financial service providers. Many of these competitors are much larger in
total assets and capitalization, have greater access to capital markets and
offer a broader array of financial services than either the Banks or Frontier.
There can be no assurance that Frontier will be able to compete effectively
and the results of operations of each could be adversely affected if
circumstances affecting the nature or level of competition change. See
"Business of VNC" and "Business of FNSC."

DEPENDENCE ON KEY PERSONNEL

After the Merger, Frontier's success will depend substantially on certain
members of the senior management of VN Bank, in particular Steven R. Townson,
and the senior management of FNA Bank, including Harry I. Brown, Jr.
Frontier's business and financial condition could be materially adversely
affected by the loss of the services of either of such individuals. Frontier
does not carry key man insurance.

CREDIT QUALITY

A significant source of risk for Frontier arises from the possibility that
losses will be sustained because borrowers, guarantors and related parties may
fail to perform in accordance with the terms of their loans. Both VN Bank and
FNA Bank have adopted underwriting and credit monitoring procedures and credit
policies, including the establishment and review of the allowance for credit
losses that management of each believes are appropriate to minimize this risk
by assessing the likelihood of nonperformance, tracking loan performance and
diversifying each company's credit portfolio. Such policies and procedures,
however, may not prevent unexpected losses that could materially adversely
affect Frontier's results of operations.

POTENTIALLY ADVERSE IMPACT OF INTEREST RATES AND ECONOMIC AND INDUSTRY
CONDITIONS

The results of operations of banking institutions are materially affected by
general economic conditions, the monetary and fiscal policies of the federal
government and the regulatory policies of governmental authorities and other
factors that affect market rates of interest. The results of operations of
banking institutions depend to a large extent on their level of "net interest
income," which is the difference between interest income on interest-earning
assets, such as loans and investments, and interest expense on interest-
bearing liabilities, such as deposits and borrowings. A significant portion of
the assets of most banking institutions consists of long-term residential
mortgages and loans with shorter terms to maturity. The repricing periods of
these assets are generally not as short as those of the banking institution's
interest-bearing liabilities. As a result, the yield on interest-earning
assets of most banking institutions has adjusted to changes in interest rates
at a slower rate than the cost of their interest-bearing liabilities. Banking
institutions in recent years have experienced significant fluctuations in net
interest income due to rapidly changing interest rates and to differences in
the repricing characteristics of their interest-earning assets and interest-
bearing liabilities. Because most banking institutions continue to hold assets
which reprice more slowly than their liabilities, any significant increase in
interest rates would be expected to have an adverse impact on net interest
income.

RESERVE FOR LOAN LOSSES

Management of the Banks maintains an allowance for loan losses based upon,
among other things, historical experience, and evaluation of economic
conditions and regular reviews of delinquencies and loan portfolio quality.
Based upon such factors, management makes various assumptions and judgments
about the ultimate collectibility of the respective loan portfolios and
provides an allowance for potential loan losses based upon a percentage of the
outstanding balances and for specific loans when their ultimate collectibility
is considered questionable. Although Frontier believes that allowances for
loan losses at each of the Banks are adequate, there can be no assurance that
such allowances will prove sufficient to cover future losses. Future
adjustments may be necessary if economic conditions differ or adverse
developments arise with respect to non-performing or performing loans of the
Banks. Material additions to the allowance for loan losses of the Banks would
result in a

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material decrease in Frontier's net income, and possibly its capital, and
could result in its inability to pay dividends, among other adverse
consequences.

TAX CONSIDERATIONS

It is intended that the Merger will be treated as a reorganization within
the meaning of Section 368 of the Code. No ruling has been requested from the
Internal Revenue Service ("IRS") and no formal opinion letter of counsel has
been requested, as to any Federal Income Tax consequences in connection with
the Merger. Further, because certain tax consequences of the Merger may vary
depending upon the particular circumstances of each shareholder and other
factors, each holder of Frontier Common or FNSC Common is urged to consult
such holder's own tax advisor to determine the particular tax consequences to
such holder of the Merger (including the application and effect of state,
local and other tax laws).

INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION

Directors and officers of VNC and FNSC (and certain of their family members
and related interests) have personal interests in the Merger that may present
them with conflicts of interest in connection with the Merger. The VNC Board
and the FNSC Board are aware of this and have considered the personal
interests disclosed in this Joint Proxy Statement/Prospectus in their
evaluation of the Merger. See "The Merger--Background of and Reasons for the
Merger" and "The Merger--Interests of Certain Persons in the Merger."

RESTRICTIONS OF RESALE OF FRONTIER COMMON

Affiliates of FNSC who receive Frontier Common pursuant to the Merger will
be restricted on the resale of such stock pursuant to Rule 145 under the
Securities Act. Additionally, individuals who are not affiliates of FNSC but
who will be affiliates of Frontier after the Merger will be restricted on the
resale of any Frontier Common, whether or not received in the Merger, pursuant
to Rule 144 under the Securities Act. An affiliate of FNSC who will also be an
affiliate of Frontier after the Merger will be subject to the restrictions on
resale contained in both Rule 145 and Rule 144. An "affiliate" is generally a
person that, directly or indirectly, controls an entity and generally includes
all officers, directors and 10% shareholders of such entity.

"YEAR 2000" INFORMATION SYSTEM ISSUES

The term "Year 2000 issue" refers to the necessity of converting computer
information systems such that such systems recognize more than two digits to
identify a year in any given date field, and are thereby able to differentiate
between years in the twentieth and twenty-first centuries ending with the same
two digits (e.g. 1900 and 2000). This issue affects not only VNC and FNSC, but
virtually all companies, organizations and governments worldwide that use
computer information systems. To address the Year 2000 issue, VNC and FNSC
have adopted broad-based approaches designed to encompass their total systems
and non-systems environments. This approach includes the development of a
conversion time line, costs budget, resource allocation, and independent
verification of each system's capacity to properly recognize dates following
such conversion.

To prepare for this event, management of FNSC implemented a Task Force
Committee to see that necessary steps are taken to make sure that all areas of
processing and operations will be in compliance at the required time. In
developing the plan for FNA Bank, the Task Force used as the guidelines the
regulatory Interagency Statement dated May 5, 1997. Supporting documentation
will be maintained for action plans taken.

For VNC, Open Systems Integration was engaged to assess VN Bank's hardware
as it pertained to the date changes for the year 2000. This company physically
checked each computer in VN Bank and ran a "Year 2000" verification program.
Application software residing on each computer was inventoried where possible.
Letters from each software provider indicating compliance with "Year 2000"
rollover were recorded and documented within these findings. As for the Jack
Henry & Associates CIF 20/20 core application, VN Bank will upgrade to the
latest release provided. Each new software and hardware acquisition will be
tested by a "Year 2000" committee person. VN Bank also is implementing a
renovation phase and validation phase for this project in compliance with the
Interagency Statement.

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VNC and FNSC expect to be substantially Year 2000 compliant by the end of
1998. Management anticipates that internally-developed and third-party
provided applications will be tested for compliance in 1998 and 1999. The
costs of their overall Year 2000 initiatives have not yet been finally
determined, but are not expected to exceed $500,000 in the aggregate.

THE MEETINGS

MEETINGS OF SHAREHOLDERS

This Joint Proxy Statement/Prospectus is being furnished to the holders of
Common Stock of VNC in connection with the solicitation of proxies by and on
behalf of the VNC Board for use at the VNC Meeting to be held at 10:00 a.m.,
Eastern Daylight Savings Time, on Thursday, July 9, 1998, at the main office
of VN Bank at 1011 North Lanier Avenue, Lanett, Alabama, and at any
adjournments thereof. The VNC Board has fixed the close of business on June
15, 1998 as the VNC Record Date for determining the shareholders of VNC
entitled to vote at the VNC Meeting. This Joint Proxy Statement/Prospectus and
the enclosed proxy are first being sent to holders of Common Stock of VNC on
or about June , 1998.

This Joint Proxy Statement/Prospectus is also being furnished to the holders
of FNSC Common in connection with the solicitation of proxies by and on behalf
of the FNSC Board for use at the FNSC Meeting to be held at 2:00 p.m., Central
Daylight Savings Time, on Thursday, July 9, 1998, at the main office of FNA
Bank at 43 North Broadway, Sylacauga, Alabama and at any adjournments thereof.
The FNSC Board has fixed the close of business on June 15, 1998 as the FNSC
Record Date for determining the shareholders of FNSC entitled to vote at the
FNSC Meeting. This Joint Proxy Statement/Prospectus and the enclosed proxy are
first being sent to holders of FNSC Common on or about June , 1998.

PURPOSE OF MEETINGS

At the VNC Meeting, VNC's shareholders will consider and vote upon (i) the
approval and adoption of the Merger Agreement, (ii) the election of the Board
of Directors, and (iii) such other business as may properly come before the
VNC Meeting or any adjournments thereof.

The Board of Directors of VNC recommends the election of the following
nominees to the Board of Directors, who will serve for a term of one year,
until their successors are elected and qualified, or until the Merger becomes
effective (at which time the directors named in the Articles of Merger shall
become the directors--see THE MERGER--MANAGEMENT AFTER THE MERGER).

Mac H. Langley
Timothy E. McLane
Charles M. Reeves
Steven R. Townson

The Board of VNC currently consists of the above-named four directors. The
VNC Board has the power to appoint the officers of VNC. Each officer will hold
office for such term as may be prescribed by the VNC Board and until such
person's successor is chosen and qualified or until such person's death,
resignation or removal. Additional information about each director is
contained in MANAGEMENT OF VNC.

At the FNSC Meeting, FNSC's shareholders will consider and vote upon (i) the
approval and adoption of the Merger Agreement and (ii) such other business as
may properly come before the FNSC Meeting or any adjournments thereof.

VOTING REQUIREMENTS AT MEETINGS

At the VNC Meeting, approval and adoption of the Merger Agreement requires
the affirmative vote of two-thirds of the outstanding shares of Frontier
Common; election of directors requires an affirmative vote of a

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majority of the Frontier Common represented at the VNC Meeting. The presence
at the VNC Meeting, in person or by proxy, of the holders of a majority of the
total number of outstanding shares of Frontier Common on the VNC Record Date
will constitute a quorum for the transaction of business by such holders at
the VNC Meeting. On the VNC Record Date, there were 814,800 outstanding shares
of Frontier Common, each holder of which is entitled to one vote per share
with respect to each matter to be voted on at the VNC Meeting. VNC has no
class or series of stock outstanding other than Frontier Common entitled to
vote at the VNC Meeting.

As of the VNC Record Date, directors and executive officers of VNC owned
beneficially an aggregate of 646,200 shares of Frontier Common or
approximately 79.31% of the shares of Frontier Common outstanding on such
date.

At the FNSC Meeting, approval and adoption of the Merger Agreement requires
the affirmative vote of the holders of a majority of the outstanding shares of
FNSC Common. The presence at the FNSC Meeting, in person or by proxy, of the
holders of a majority of the total number of outstanding shares of FNSC Common
on the FNSC Record Date will constitute a quorum for the transaction of
business by such holders at the FNSC Meeting. On the FNSC Record Date, there
were 100,995 outstanding shares of FNSC Common, each holder of which is
entitled to one vote per share with respect to each matter to be voted on at
the FNSC Meeting. FNSC has no class or series of stock outstanding other than
FNSC Common entitled to vote at the FNSC Meeting.

As of the FNSC Record Date, directors and executive officers of FNSC owned
beneficially an aggregate of 25,286 shares of FNSC Common, or approximately
25.03% of the shares of FNSC Common outstanding on such date.

At the Meetings, abstentions will be counted as present for quorum purposes,
but will have the same effect as a vote "against" the proposal to approve the
Merger Agreement. Broker "non-votes" will not be considered present for quorum
purposes and will have the same effect as a vote "against" the proposal to
approve the Merger Agreement. A "broker non-vote" refers to shares represented
at the Meetings in person or by proxy by a broker or nominee where such broker
or nominee (i) has not received voting instructions on a particular matter
from the beneficial owners or persons entitled to vote and (ii) the broker or
nominee does not have the discretionary voting power on such matter.

PROXIES

All proxies that are properly executed by holders of Frontier Common and
received by VNC prior to the VNC Meeting will be voted in accordance with the
instructions noted thereon. Any proxy that does not specify to the contrary
will be voted in favor of the approval and adoption of the Merger Agreement
and ratification of the auditors. Any holder of Frontier Common who submits a
proxy will have the right to revoke it, at any time before it is voted, by
filing with the Secretary of VNC written notice of revocation or a duly
executed later-dated proxy, or by attending the VNC Meeting and voting such
Frontier Common in person.

All proxies that are properly executed by holders of FNSC Common and
received by FNSC prior to the FNSC Meeting will be voted in accordance with
instructions noted thereon. Any proxy that does not specify to the contrary
will be voted in favor of approval and adoption of the Merger Agreement. Any
holder of FNSC Common who submits a proxy will have the right to revoke it, at
any time before it is voted, by filing with the Secretary of FNSC written
notice of revocation or a duly executed later-dated proxy, or by attending the
FNSC Meeting and voting such FNSC Common in person.

All costs relating to the solicitation of proxies of holders of Frontier
Common and FNSC Common will be borne by VNC and FNSC, respectively. Proxies
may be solicited by officers, directors and regular employees of VNC and VN
Bank and FNSC and FNA Bank personally, by mail or by telephone or otherwise.
Although there is no formal agreement to do so, VNC and FNSC may reimburse
banks, brokerage houses and other custodians, nominees and fiduciaries holding
shares of stock in their names or those of their nominees for their reasonable
expenses in sending solicitation material to their principals.

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It is important that proxies be returned promptly. Shareholders who do not
expect to attend the respective Meetings of VNC and FNSC in person are urged
to mark, sign and date the respective accompanying proxy and mail it in the
enclosed return envelope, which requires no postage if mailed in the United
States, so that their votes can be recorded.

THE MERGER

The following information concerning the Merger, insofar as it relates to
matters contained in the Merger Agreement, is qualified in its entirety by
reference to the Merger Agreement which is incorporated herein by reference
and attached hereto as Appendix A. VNC and FNSC shareholders are urged to read
carefully the Merger Agreement.

BACKGROUND OF AND REASONS FOR THE MERGER

Background. On October 30, 1997, Mr. Steven R. Townson, President and Chief
Executive Officer of VNC, had a telephone conversation with Mr. Harry I.
Brown, Jr., President and then Chief Operating Officer of FNSC, to express
VNC's interest in discussing a merger of equals with FNSC. After several
telephone conversations, Messrs. Brown, Jr. and Townson met on November 6,
1997, in Sylacauga to discuss some of the strategic and social issues involved
in such an alignment. On November 17, 1997, Messrs. Townson and Charles M.
Reeves, Jr. Chairman of the Board of VNC, met with Mr. Brown, Jr., and Harry
I. Brown, Sr., Chairman of the Board of FNSC, to discuss the merits of a
combination and allow VNC to articulate its long-term strategic plan to FNSC.
On November 26, 1997, Messrs. Townson and Reeves of VNC met with Messrs.
Brown, Jr., Brown, Sr., and FNSC management at FNSC's corporate office to
discuss further a potential merger of equals and price and value ranges of
such a transaction.

The FNSC Board held its regular meeting on December 16, 1997, and considered
the potential merger of FNSC and VNC as one of the items on its agenda. Mr.
Townson presented financial information regarding VNC to the FNSC Board along
with information relating to other VNC operational issues including loan
losses and information regarding employees, management, and directors. After
thorough and careful consideration, the FNSC Board determined that, based on
the factors described below, the Merger was in the best interest of FNSC and
its shareholders. The Board authorized Mr. Brown, Jr., President and then
Chief Operating Officer of FNSC, to sign a letter of intent and finalize
negotiations for the Merger. During the month of December and January, certain
additional meetings and phone discussions were conducted to refine and agree
upon an exchange ratio for VNC to be provided to FNSC shareholders.

On February 17, 1998, the Executive Committee of the FNSC met to consider
the terms of the offer. After careful consideration of the information
discussed below, FNSC's Executive Committee voted unanimously to recommend to
the FNSC Board the approval of the Merger. VNC and FNSC then met with outside
counsel to negotiate and agree upon the form of the Merger Agreement. After
reports from the Executive Committee, management, and legal counsel, and after
thorough and careful consideration, the FNSC Board determined that, based upon
the factors described below, VNC's proposal was in the best interest of FNSC
and its shareholders. The FNSC Board voted unanimously to approve the Merger
Agreement and to authorize its officers to execute such agreement and to take
all other action necessary to consummate the transaction.

The VNC Board held its regular meeting on December 15, 1997, and considered
the potential merger of FNSC and VNC as one of the items on its agenda. Mr.
Townson presented financial information regarding FNSC to the VNC Board along
with information relating to other FNSC operational issues including loan
losses, and information regarding employees, management and directors. After
thorough and careful consideration, the VNC Board determined that, based on
the factors described below, the Merger was in the best interests of VNC and
its shareholders. The VNC Board authorized Mr. Townson, President and Chief
Executive Officer of VNC, to finalize negotiations for the Merger. During the
following two months, certain additional meetings and phone discussions were
conducted to refine and agree upon a definitive merger agreement which was
approved by the VNC Board on February 24, 1998.

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On April 28, 1998, management of VNC and FNSC concluded their discussions
and negotiation of a final exchange ratio based upon the adjusted book values
of each corporation. The final decision was to convert each share of FNSC
Common to thirteen (13) shares of Frontier Common.

Reasons for the Merger. In reaching their determination that the Merger and
Merger Agreement are fair to, and in the best interest of, their companies and
their shareholders, both the VNC Board and the FNSC Board consulted with their
legal and financial advisers, as well as with their management, and considered
a number of factors. Without assigning any relative or specific weights to the
factors, the Boards considered, without limitation, the following:

--the Boards' belief that the Merger is consistent with their respective
company's strategy for enhancing long-term shareholder value through both
internal and external growth;

--the Boards' review, based in part on the presentation by management
regarding their due diligence of each other party, of (i) the business,
operations, earnings and financial conditions on both a historical and
prospective basis; (ii) the enhanced opportunities for operating
efficiencies (particularly in terms of integration of operations, data
processing and support functions, although the Boards did not quantify
such anticipated operating efficiencies) that could result from the
Merger; (iii) the enhanced opportunities for growth that the Merger would
make possible; and (iv) the respective contributions the parties would
bring to a combined institution;

--the Boards' belief, based upon an analysis of the anticipated financial
effects of the Merger, that upon consummation of the Merger, both
companies and their banking subsidiaries would be well capitalized
institutions, the financial positions of which would be in excess of all
applicable regulatory capital requirements;

--the current and prospective economic and regulatory environment and
competitive constraints facing the banking and financial institutions in
their market areas;

--the recent business combinations involving financial institutions, either
announced or completed, during the past year in the United States, the
State of Alabama and contiguous states and the effect of such combinations
on competitive conditions in their market area; and

--the Boards' belief that the Merger provides an opportunity to expand and
grow in their respective markets and to add a wider array of financial
services to the communities while still maintaining community banks.

Recommendation of the VNC Board and FNSC Board. For the reasons described
above, the VNC Board and FNSC Board unanimously approved the Merger Agreement
and believe that the Merger is fair to, and is in the best interest of, their
respective shareholders. Accordingly, the VNC Board and FNSC Board unanimously
recommend that their shareholders vote FOR adoption of the Merger Agreement.

TERMS OF THE MERGER

At the Effective Time, FNSC will merge with and into VNC with VNC to be the
surviving corporation. The Merger Agreement also provides for the change of
VNC's name to Frontier National Corporation.

Each share of FNSC Common, other than shares with respect to which
dissenters' rights have been perfected, will be converted into and exchanged
for thirteen (13) fully paid and non-assessable shares of Frontier Common.
Each share of Frontier Common issued and outstanding immediately prior to the
Effective Time will remain issued and outstanding, unaffected by the Merger.

EFFECTIVE TIME

The Effective Time of the Merger will be the later to occur of the
acceptance for filing by the Alabama Secretary of State of the Articles of
Merger, or on such later date as the Articles of Merger may specify. The
Merger will close at a time and place to be mutually agreed upon by the
parties.

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SURRENDER OF CERTIFICATES

As promptly as reasonably practicable after the Effective Time of the
Merger, each registered holder of outstanding FNSC Common shall deliver to
Frontier (the "Exchange Agent") the certificates evidencing and representing
all shares of FNSC Common which were validly issued and outstanding
immediately prior to the Effective Time, and the Exchange Agent shall take
prompt action to process such certificates.

HOLDERS OF FNSC COMMON SHOULD HOLD THEIR CERTIFICATES UNTIL AFTER THE
EFFECTIVE TIME OF THE MERGER.

Upon receipt of the proper submission of the certificates formerly
representing and evidencing FNSC Common, the Exchange Agent shall issue and
mail to the former FNSC shareholders in exchange for their FNSC Common
certificates, stock certificates representing the number of shares of Frontier
Common to which such holder is entitled. Such certificates representing and
evidencing the newly issued Frontier Common shall bear the new name of
Frontier National Corporation.

No dividend or other distribution payable after the Merger with respect to
Frontier Common will be paid to the holder of any unsurrendered certificate(s)
until the holder surrenders such certificate(s). At the Effective Time, the
stock transfer books of FNSC shall be closed and no transfer of FNSC Common
shall be made thereafter.

In addition, as promptly as reasonably practicable after the Effective Time
of the Merger, each registered holder of Frontier Common shall deliver to the
Exchange Agent the certificates evidencing and representing all shares of
Frontier Common which were validly issued and outstanding immediately prior to
the Effective Time. Upon receipt of the proper submission of the certificates
representing and evidencing such Frontier Common, the Exchange Agent shall
issue and mail to the VNC shareholders in exchange for their VNC certificates,
new stock certificates representing Frontier Common but bearing the new name
of Frontier National Corporation.

HOLDERS OF FRONTIER COMMON SHOULD HOLD THEIR CERTIFICATES UNTIL AFTER THE
EFFECTIVE TIME OF THE MERGER.

CONDITIONS TO CONSUMMATION OF THE MERGER

The obligation of FNSC to effect the Merger shall be subject to the
satisfaction, prior to the Merger, of the following additional conditions:

(a) the representations and warranties of VNC in the Merger Agreement
shall have been true when made and at the Effective Time;

(b) the covenants of VNC in the Merger Agreement shall have been
performed and complied with by the Effective Time;

(c) The VNC Board and shareholders shall have taken all corporation
and/or other action necessary to approve and consummate the Merger and
shall have provided FNSC with copies of resolutions evidencing such actions
as provided in the Merger Agreement;

(d) VNC shall have delivered to FNSC an opinion of its counsel as
provided in the Merger Agreement;

(e) All necessary approvals and authorizations by, filings and
registrations with, and notifications to, all federal and state authorities
required for consummation of the Merger and the prevention of the
termination of any licenses, permits or authorizations of VNC, VN Bank or
their subsidiaries, the termination of which would materially impair the
conduct of their business, shall have been duly obtained or made and shall
not have been canceled or rescinded and all required waiting period shall
have expired;

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(f) No injunction, restraining order, stop order, bankruptcy proceeding,
receivership, or other order or action of any federal or state court or
agency in the United States which specifically and materially enjoins or
otherwise prevents the consummation of the Merger in the opinion of FNSC
shall be in effect, and no action shall have been taken, and no statute,
rule or regulation shall have been enacted by any state or federal
government or governmental agency which makes unlawful the consummation of
the Merger;

(g) the Effective Time must occur on or before August 30, 1998, unless
delayed on account of awaiting FRB or SEC approval;

(h) FNSC shall have been allowed access to the books and records of VNC,
VN Bank, and each of VNC's or VN Bank's subsidiaries for the purpose of
conducting a pre-merger review and due diligence examination as provided
for in the Merger Agreement; and

(i) Frontier shall have entered into an employment agreement with Harry
I. Brown, Jr.

The obligation of VNC to effect the Merger is subject to the satisfaction at
or prior to the Merger of the following conditions:

(a) the representations and warranties of FNSC in the Merger Agreement
shall have been true when made and at the Effective Time;

(b) the covenants of FNSC in the Merger Agreement shall have been
performed and complied with by the Effective Time;

(c) The FNSC Board and shareholders shall have taken all corporation
and/or other action necessary to approve and consummate the Merger and have
provided VNC with copies of resolutions evidencing such actions as provided
in the Merger Agreement;

(d) FNSC shall have delivered to VNC an opinion of its counsel as
provided in the Merger Agreement;

(e) All necessary approvals and authorizations by, filings and
registrations with, and notifications to, all federal and state authorities
required for consummation of the Merger and the prevention of the
termination of any licenses, permits or authorizations of FNSC, FNA Bank or
their subsidiaries, the termination of which would materially impair the
conduct of their business, shall have been duly obtained or made and shall
not have been canceled or rescinded and all required waiting period shall
have expired;

(f) No injunction, restraining order, stop order, bankruptcy proceeding,
receivership, or other order or action of any federal or state court or
agency in the United States which specifically and materially enjoins or
otherwise prevents the consummation of the Merger in the opinion of VNC
shall be in effect, and no action shall have been taken, and no statute,
rule or regulation shall have been enacted by any state or federal
government or government agency which makes unlawful the consummation of
the Merger;

(g) the Effective Time must occur on or before August 30, 1998, unless
delayed on account of awaiting FRB or SEC approval;

(h) VNC shall have been allowed access to the books and records of FNSC,
FNA Bank, and each of FNSC's or FNA Bank's subsidiaries for the purpose of
conducting a pre-merger review and due diligence examination as provided
for in the Merger Agreement; and

(i) Frontier shall have entered into an employment agreement with Steven
R. Townson.

CONDUCT OF BUSINESS PENDING MERGER

The Merger Agreement contains certain restrictions on the conduct of FNSC's
and VNC's businesses pending consummation of the Merger. In general, the
business of FNSC and its subsidiaries and of VNC and its subsidiaries shall be
conducted only in the usual, regular and ordinary course and in substantially
the same manner as prior to the signing of the Merger Agreement. FNSC and VNC
must each preserve its business organization, good will, and relationships
with depositors, customers and employees.

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In particular the Merger Agreement provides that neither party may without
the prior written consent of the other, among other things, (a) change, alter,
amend or vote to amend their Certificate or Articles of Incorporation or
Bylaws or any of their subsidiaries' corresponding charting documents or
bylaws; (b) make any change in their authorized capital stock; issue, sell,
purchase, or retire any of their capital stock, other than the purchase of any
director's qualifying shares; grant any option, warrant, call or any other
right to purchase or to convert any obligation into any of their capital
stock; issue or sell or agree to issue or sell any other equity security or
issue or sell any debt security other than in the ordinary course of business;
(c) declare or pay any dividend; and (d) allow themselves or their
subsidiaries to enter into, agree to or amend any employment contract or
bonus, stock option, ESOP, profit-sharing, pension plan, employee plan,
retirement, incentive or other similar arrangement, except as may be required
by law.

REGULATORY APPROVALS

The Merger is subject to the prior approval of the Board of Governors of the
Federal Reserve (the "FRB") under Section 3 of the BHC Act. In evaluating the
Merger, the FRB must consider, among other factors, the financial and
managerial resources and future prospects of the institutions and the
conveniences and needs of the communities to be served. The relevant statutes
prohibit the FRB from approving the Merger if (i) it would result in a
monopoly or would be in furtherance of any combination or conspiracy to
monopolize or attempt to monopolize the business of baking in any part of the
United State or (ii) its effect in any section of the country may be to
substantially lessen competition or to tend to create a monopoly, or if it
would be a restraint of trade in any other manner, unless the FRB finds that
any anti-competitive effects are outweighed clearly by the public interest and
the probable effect of the transaction in meeting the convenience and needs of
the communities to be served. The Merger may not be consummated until the 30th
day (which the FRB may reduce to 15 days) following the date of the FRB
approval, during which time the United States Department of Justice may
challenge the transaction on antitrust grounds. The commencement of any
antitrust action would stay the effectiveness of the approval of the FRB,
unless a court of competent jurisdiction specifically orders other wise. FRB
approval was granted on May 7, 1998.

WAIVER; AMENDMENT; TERMINATION

The Merger Agreement may be amended by mutual written agreement of the
Boards of each party, at any time; provided, however, that any amendment which
reduces that effective purchase price must be approved by both the VNC and
FNSC shareholders.

At any time prior to the Effective Time, the Boards or authorized officers
of either party may, in writing: extend the time for performance by the other
party, waive any inaccuracies in the representations and warranties of the
other party, waive compliance with any of the covenants or agreements of the
other party, and/or waive any condition to the obligations of the waiving
party.

The Merger Agreement may be terminated at any time prior to the Effective
Time, either before or after its approval by the shareholders of FNSC and/or
VNC, as follows: (a) by the mutual consent of the FNSC and VNC Boards; (b)
automatically, if the Merger is not consummated due to failure to obtain
regulatory approval, or any other event or condition rendering performance of
the Merger impossible, which arises or exists without the fault of any party;
and (c) by any party upon written notice, if the Merger shall not have been
consummated on or before August 30, 1998 (unless delayed on account of
awaiting FRB or SEC approval) or such later date as the parties agree to in
writing.

In the event of the termination of the Merger Agreement, the Merger
Agreement shall become void and have no effect, except that the
confidentiality requirements shall survive such termination and such
termination will not relieve a breaching party from liability for an uncured,
willful breach.

MANAGEMENT AFTER THE MERGER

The Merger Agreement provides that the Frontier Board after the Effective
Time will consist of seven directors, three of whom will be incumbent
directors of VNC: Steven R. Townson, Charles M. Reeves, and

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Christopher N. Zodrow; and four of whom will be current directors of FNSC:
Harry I. Brown, Jr., Harry I. Brown, Sr., Wesley L. Bowden, Jr., and Raymond
C. Styres. See MANAGEMENT OF VNC and MANAGEMENT OF FNSC.

The Merger Agreement further provides that the principal officers of
Frontier after the Effective Time will be Harry I. Brown, Jr., Chief Executive
Officer and Chairman of the Board, Steven R. Townson, President, Chief
Operating Officer, and Vice Chairman of the Board, and Kerri C. Newton,
Secretary. All directors and officers will serve in accordance with the Bylaws
of Frontier.

After the Effective Time, all directors and officers of the subsidiaries of
Frontier and FNSC will continue to serve in accordance with the terms of the
bylaws of each such subsidiary, except that Steven R. Townson will be added to
the Board of Directors of FNA Bank and Harry I. Brown, Jr. will be added to
the Board of Directors of VN Bank.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Three of the current directors of VNC and four current directors of FNSC
will serve as directors of Frontier after the Effective Time. As set forth
above, certain officers of VNC, FNSC and their subsidiaries will continue to
serve as officers after the Effective Time. See--Management After the Merger.
For a description of the compensation received by certain executive officers
of VNC, FNSC, VN Bank and FNA Bank, see "Business of VNC" and "Business of
FNSC."

In the normal course of business, VN Bank and FNA Bank make loans to
directors and officers of VNC and FNSC, including loans to certain related
persons and entities. Such loans are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other customers, and in the opinion of management
of both FNSC and VNC, do not involve more than the normal risk of
collectibility. As of March 31, 1998, the amount of these loans (including
amounts available under lines of credit) by VN Bank to VNC directors and
officers was 3.84% of VN Bank's total loans, the amount of these loans
(including amounts available under lines of credit) by FNA Bank to FNSC
directors and officers was 1.91% of FNA Bank's total loans.

A condition precedent to the obligations set forth in the Merger Agreement
is that both Harry I. Brown, Jr. and Steven R. Townson will, as of the
Effective Time, enter into employment agreements with Frontier. Mr. Brown's
agreement is for him to serve as Chairman of the Board and Chief Executive
Officer of Frontier and President and Chief Executive Officer of FNA Bank. Mr.
Townson's agreement is for him to serve as Vice-Chairman of the Board,
President, and Chief Operating Officer of Frontier and President and Chief
Executive Officer of VN Bank. Mr. Brown's annual salary will be $125,000 while
Mr. Townson's salary will be $118,750 with a provision that Mr. Townson's
salary shall never be less than 5% of the salary paid to Mr. Brown. Both
agreements are for five (5) years, and are automatically extended each year by
one (1) additional year unless one hundred twenty (120) days prior to each
year end the Frontier Board gives notice that the agreement will not be
extended. Upon a "change of control" as defined in the agreements, in addition
to any remaining payments due under the agreements, Mr. Brown and Mr. Townson
may be eligible for an additional payment equal to the present value of 2.99
times their average annual compensation payable under the agreement for the
most recent five (5) taxable years ending before the "change of control."
Finally, both Mr. Brown and Mr. Townson will receive options to purchase
50,000 shares of Frontier Common at $10.00 per share for a period of ten (10)
years.

APPRAISAL AND DISSENTERS' RIGHTS

FNSC Appraisal Rights. If the Merger is consummated, holders of record of
FNSC Common who follow the procedures specified by Section 262 of the DGCL
("Section 262") will be entitled to judicial determination and payment in cash
of the "fair value" of their stock at the Effective Time, excluding value
resulting from the accomplishment or expectation of the Merger but including
"a fair rate of interest" thereon. Shareholders who elect to follow such
procedures are referred to herein as "Dissenting FNSC Shareholders."

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A VOTE IN FAVOR OF THE MERGER BY A HOLDER OF FNSC COMMON WILL RESULT IN THE
WAIVER OF THE SHAREHOLDER'S RIGHT TO APPRAISAL.

The following summary of the provisions of Section 262 is not intended to be
a complete statement of such provisions, the full text of which is attached as
Appendix B to this Joint Proxy Statement/Prospectus, and is qualified in its
entirety by reference thereto.

A holder of FNSC Common electing to exercise appraisal rights (1) must
deliver to FNSC, before the vote at the FNSC Meeting, a written demand for
appraisal of such shares made by or on behalf of the record holder reasonably
informing FNSC of the identity of such holder and of such holder's intention
to thereby demand the appraisal of such Dissenting FNSC Shareholder's shares,
and (2) must not vote in favor of the Merger Agreement. The requirement of
such written demand is in addition to and separate from the requirement that
such shares not be voted in favor of the Merger Agreement, and the requirement
of such written demand is not satisfied by voting against the Merger Agreement
either in person or by proxy. The requirement that such shares not be voted in
favor of the Merger Agreement will be satisfied if no proxy is returned and
such shares are not voted in person. Because a properly executed and delivered
proxy which is left blank will, unless revoked, be voted FOR approval of the
Merger Agreement, in order to be assured that such shareholder's shares are
not voted in favor of the Merger Agreement, a Dissenting FNSC Shareholder who
votes by proxy must not leave the proxy blank but must (i) vote AGAINST the
approval of the Merger Agreement or (ii) affirmatively ABSTAIN from voting.
Neither a vote against approval of the Merger Agreement nor an abstention will
satisfy the requirement that a written demand for appraisal be delivered to
FNSC before the vote on the Merger Agreement.

Only a holder of record of FNSC Common is entitled to assert appraisal
rights for the shares registered in that holder's name. The appraisal rights
may be asserted with respect to all or less than all shares of FNSC Common
Stock held of record by such holder. The demand should be executed by or for
the holder of record, fully and correctly, as the holder's name appears on the
holder's stock certificates. If the shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in that capacity, and if the shares are owned of record by more
than one person, as in a joint tenancy or tenancy in common, the demand should
be executed by or for all joint owners. An authorized agent, including one of
two or more joint owners, may execute the demand for appraisal for a holder of
record; however, the agent must identify the record holder or holders and
expressly disclose the fact that, in executing the demand, the agent is acting
as agent for the record holder. A record holder, such as a broker, who holds
shares as a nominee for the beneficial owner may exercise appraisal rights
with respect to the shares held for one or more beneficial owners while not
exercising such rights for other beneficial owners. In such case, the written
demand should set forth the number of shares covered by it. Where no number of
shares is expressly mentioned, the demand will be presumed to cover all shares
held in the name of the record holder.

Within 10 days after the Effective Time, Frontier, as the surviving
corporation in the Merger, will send notice of the effectiveness of the Merger
to each Dissenting FNSC Shareholder of record at the Effective Time who duly
filed a written demand for appraisal in accordance with the foregoing. Within
120 days after the Effective Time, Frontier or any shareholder who has
satisfied the foregoing provisions may file a petition in the Delaware Court
of Chancery demanding a determination of the "fair value" of the FNSC Common
at the Effective Time. Dissenting FNSC Shareholders should not assume that
Frontier will file a petition with respect to the appraisal of the value of
the FNSC stock or that Frontier will initiate any negotiations with respect to
the "fair value" of such stock. It is the obligation of Dissenting FNSC
Shareholders to initiate all necessary action to perfect their appraisal
rights within the time periods prescribed in Section 262. If no petition is
timely filed by either Frontier or a Dissenting FNSC Shareholder, all
appraisal rights will be lost, notwithstanding any previously submitted
written demand for appraisal.

Within 120 days after the Effective Time, any Dissenting FNSC Shareholder
who has compiled with the requirements of the exercise of appraisal rights, as
discussed above, is entitled, upon written request, to receive from Frontier a
statement setting forth the aggregate number of shares of FNSC Common not
voted in favor of the Merger and with respect of which demands for appraisal
have been made and the aggregate number of

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holders of such dissenting shares. Such statement must be mailed within 10
days after the written request thereof has been received by Frontier.

If a petition for appraisal is timely filed, at the hearing on such petition
the Court will determine the shareholders who have become entitled to
appraisal rights and will appraise the FNSC Common as to which appraisal
rights are applicable, determining the fair value, exclusive of any element of
value arising from the accomplishment of or expectation of the Merger,
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. In determining fair value, the Court will
take into account all relevant factors. In determining the fair rate of
interest, the Court may consider all relevant factors, including the rate of
interest Frontier would have had to pay to borrow money during the pendency of
the proceedings. The costs of the appraisal proceeding may be assessed against
one or more parties to the proceedings as the Court may consider equitable.
Upon application of a shareholder, the Court may order all or a portion of the
expenses incurred by any shareholder in connection with the appraisal
proceedings (including, without limitation, reasonable attorney's fees and the
fees and expenses of experts) to be charged pro rata against the value of all
FNSC Common entitled to an appraisal.

From and after the Effective Time, any FNSC shareholder who has duly
demanded an appraisal in compliance with Section 262 will not thereafter be
entitled to vote his or her shares for any purpose or to receive payment of
dividends or other distributions on his or her shares (other than those
payable to shareholders of record as of a date prior to the Effective Time).
If no petition for an appraisal is filed within the time provided by Section
262, or if a shareholder delivers to Frontier a written withdrawal of his or
her demand for an appraisal and an acceptance of the Merger, either within 60
days after the Effective Time or thereafter with the written approval of
Frontier, then the right of such shareholder to an appraisal will cease.

VNC Dissenters' Rights. If the Merger is consummated, holders of record of
Frontier Common who follow the procedures specified by Article 13 of the ABCA
("Article 13") will be entitled to determination and payment in cash of the
"fair value" of their stock immediately before the Effective Time, excluding
value resulting from the anticipation of the Merger but including "a fair and
equitable" rate of interest thereon. Shareholders who elect to follow such
procedures are referred to herein as "Dissenting VNC Shareholders".

A VOTE IN FAVOR OF THE MERGER AGREEMENT BY A HOLDER OF FRONTIER COMMON WILL
RESULT IN THE WAIVER OF THE SHAREHOLDER'S RIGHT TO DISSENT.

The following summary of the provisions of Article 13 is not intended to be
a complete statement of such provisions, the full text of which is attached as
Appendix C to this Joint Proxy Statement, and is qualified in its entirety by
reference thereto.

A holder of Frontier Common electing to exercise dissenters' rights (1) must
deliver to VNC, before the vote at the VNC Meeting, written notice of his or
her intent to demand payment for his or her shares if the Merger is
effectuated, and (2) must not vote in favor of the Merger Agreement. The
requirement of such written notice is in addition to and separate from the
requirement that such shares not be voted in favor of the Merger Agreement,
and the requirement of such written notice is not satisfied by voting against
the Merger Agreement either in person or by proxy. The requirement that such
shares not be voted in favor of the Merger Agreement will be satisfied if no
proxy is returned and such shares are not voted in person. Because a properly
executed and delivered proxy which is left blank will, unless revoked, be
voted FOR approval of the Merger Agreement, in order to be assured that such
shareholder's shares are not voted in favor of the Merger Agreement, a
Dissenting VNC Shareholder who votes by proxy must not leave the proxy blank
but must (1) vote AGAINST the approval of the Merger Agreement or (ii)
affirmatively ABSTAIN from voting. Neither a vote against approval of the
Merger Agreement nor an abstention will satisfy the requirement that a written
notice of intent to demand payment be delivered to VNC before the vote on the
Merger Agreement.

Both holders of record and beneficial owners of Frontier Common are entitled
to assert dissenters' rights for the shares registered in the name of or held
for the benefit of that holder or owner. Dissenters' rights may be

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asserted with respect to less than all shares of Frontier Common held of
record by such holder only if such holder dissents with respect to all shares
beneficially owned by any one person and notifies VNC in writing of the name
and address of each person on whose behalf such record holder is asserting
dissenters' rights. A beneficial shareholder, in order to assert his or her
dissenters' rights, must submit to VNC the record shareholder's written
consent to the dissent prior to or contemporaneously with such assertion and
must dissent with respect to all shares of which he or she is the beneficial
shareholder or over which he or she has the power to vote. Where no number of
shares is expressly mentioned, the notice of intent to demand payment will be
presumed to cover all shares held in the name of the record holder.

No later than 10 days after the Effective Time, Frontier, as the surviving
corporation, will send a written dissenters' notice to each Dissenting VNC
Shareholder who did not vote in favor of the Merger and who duly filed a
written notice of intent to demand payment in accordance with the foregoing.
The dissenters' notice will specify the deadline by which time Frontier must
receive a payment demand from such Dissenting VNC Shareholder and will include
a form for demanding payment. The deadline will be no fewer than 30 days or
more than 60 days after the date the dissenters notice is delivered. It is the
obligation of Dissenting VNC Shareholders to initiate all necessary action to
perfect their dissenters' rights within the time periods prescribed in Article
13 and the dissenters' notice. If no payment demand is timely received from a
Dissenting VNC Shareholder, all dissenters' rights will be lost,
notwithstanding any previously written notice of intent to demand payment.
Each Dissenting VNC Shareholder who demands payment retains all other rights
of a shareholder until those rights are canceled or modified by the Merger. A
Dissenting VNC Shareholder who demands payment in accordance with the
foregoing may not thereafter withdraw that demand and accept the terms offered
under the Merger Agreement unless Frontier shall consent thereto.

Within 20 days of the formal payment demand, a Dissenting VNC Shareholder
who has made a demand must submit his share certificate or certificates to
Frontier so that a notation to that effect may be placed on such certificate
or certificates. The shares must then be returned to the Dissenting VNC
Shareholder with the notation thereon. A shareholder's failure to submit
shares for notation will, at Frontier's option, terminate the holder's rights
as a dissenter, unless a court of competent jurisdiction determines otherwise.

Promptly after the Effective Time, or upon receipt of a payment demand,
Frontier shall offer to pay each Dissenting VNC Shareholder who complied with
Article 13 the amount Frontier estimates to be the fair market value of such
Dissenting VNC Shareholder's shares, plus accrued interest. Each Dissenting
VNC Shareholder who agrees to accept the above-referenced offer of payment in
full satisfaction of his or her demand must surrender to Frontier the
certificate or certificates representing his or her shares in accordance with
the terms of the dissenters notice. Upon receiving payment, a Dissenting VNC
Shareholder ceases to have any interest in the shares.

A Dissenting VNC Shareholder who has made a payment demand may notify
Frontier in writing of his or her own estimate of the fair value of his or her
shares and the amount of interest due, and demand payment of his or her
estimate, or reject the offer made to such shareholder and demand payment of
the fair value of his or her shares and interest due, if: (1) the Dissenting
VNC Shareholder believes that the amount offered him or her is less than the
fair value of his or her shares or that the interest due is incorrectly
calculated; (ii) Frontier fails to make an offer as required by Article 13
within sixty (60) days after the date set for demanding payment; or (iii)
Frontier having failed to consummate the Merger does not release the transfer
restrictions imposed on shares within sixty (60) days after the date set for
demanding payment; provided, however, that a Dissenting VNC Shareholder waives
his or her right to demand payment different from that offered unless he or
she notifies Frontier of his or her demand in writing within thirty (30) days
after Frontier offered payment for his or her shares.

If a demand for payment remains unsettled, Frontier shall commence a
proceeding within sixty (60) days after receiving the second payment demand
and petition the court to determine the fair value of the shares and accrued
interest. If the proceeding is not commenced within the sixty (60) day period,
each Dissenting VNC Shareholder whose demand remains unsettled shall be
entitled to receive the amount demanded. Each Dissenting

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VNC Shareholder made a party to the proceeding is entitled to judgment for the
amount the court finds to be the fair value of his or her shares, plus accrued
interest. Upon payment of the judgment and surrender to Frontier of the
certificate or certificates representing the judicially appraised shares, a
Dissenting VNC Shareholder will cease to have any interest in the shares. The
court may assess costs incurred in such a proceeding against all or some of
the Dissenting VNC Shareholders, in amount the court finds equitable, to the
extent the court finds that such Dissenting VNC Shareholders acted
arbitrarily, vexatiously, or not in good faith in demanding payment different
from that initially offered by Frontier. The Court may also assess the
reasonable fees and expenses of counsel and experts against all or some of the
Dissenting VNC Shareholders if the court finds that such Dissenting VNC
Shareholders acted arbitrarily, vexatiously or not in good faith with respect
to the rights provided in Article 13.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

Neither FNSC nor VNC has requested or will receive an advance ruling from
the Internal Revenue Service or a formal opinion letter from counsel as to the
tax consequences of the Merger. FNSC and VNC shareholders are urged to consult
their own tax advisers as to the specific tax consequences to them of the
Merger, including the applicability and effect of federal, state, local and
other tax laws.

General. The exchange of FNSC Common for Frontier Common is intended to be
treated as a recapitalization within the meaning of Section 368(a) of the Code
or as an exchange described in Section 1036(a) of the Code, and that,
accordingly, (a) no gain or loss will be recognized by those FNSC shareholders
who receive only Frontier Common in exchange for FNSC Common, and (b) the tax
basis of the Frontier Common to be received by those FNSC shareholders who
receive only Frontier Common in connection with the Merger will be the same as
the basis in the FNSC Common surrendered in exchange therefor. Consequently,
the holding period of any Frontier Common received by the FNSC shareholders in
connection with the Merger will include the holding period of the FNSC Common
surrendered in exchange therefor, provided that the FNSC Common is held as a
capital asset at the time of the Merger.

ACCOUNTING TREATMENT

The Merger will be accounted for as a purchase of FNSC by Frontier, in
accordance with generally accepted accounting principles. Accordingly, FNSC's
results of operations will be included in Frontier's consolidated results of
operations only from and after the Effective Time. For purposes of preparing
Frontier's consolidated financial statements, Frontier will establish a new
accounting basis for FNSC's assets and liabilities based upon the fair values
thereof and Frontier's purchase price, including the costs of the acquisition.
Furthermore, such earnings of FNSC will be reduced by certain depreciation and
amortization charges arising out of the ultimate purchase accounting
adjustments. However, a final determination of the required purchase
accounting adjustments and of the fair value of the assets and liabilities of
FNSC has not yet been made. Accordingly, the purchase accounting adjustments
made in connection with the development of the comparative pro forms per share
financial information appearing elsewhere in this Joint Proxy
Statement/Prospectus are preliminary and subject to change.

RESALES OF FRONTIER COMMON

The shares of Frontier Common issued to FNSC shareholders pursuant to the
Merger Agreement will be freely transferrable under the Securities Act, except
for shares issued to any shareholder who may be deemed to be an "affiliate"
(generally including, without limitation, directors, certain executive
officers and beneficial owners of 10% or more of a class of capital stock ) of
FNSC or FNA Bank for purposes of Rule 145 under the Securities Act ("Rule
145") as of the date of the FNSC Meeting. Affiliates may not sell their shares
of Frontier Common acquired in the Merger except pursuant to an effective
registration statement under the Securities Act covering such shares or in
compliance with Rule 145 or another applicable exemption from the registration
requirements of the Securities Act. Frontier may place restrictive legends on
certificates representing Frontier Stock issued to persons who are deemed
"affiliates" of Frontier under Rule 145. This Joint Proxy

19
<PAGE>

Statement/Prospectus does not cover resales of Frontier Common received by any
person who may be deemed to be an affiliate of FNSC or FNA Bank.

EXPENSES

The Merger Agreement provides, in general, that VNC and FNSC will each pay
its own expenses in connection with the Merger Agreement and the transactions
contemplated thereby.

20
<PAGE>

INFORMATION CONCERNING VNC

SELECTED FINANCIAL DATA FOR VNC

The following table presents for VNC, on a historical basis, selected
financial data and ratios. This information is based on the consolidated
financial statements of VNC included herein and should be read in conjunction
therewith and with the notes thereto. See, "Index to Consolidated Financial
Statements of Valley National Corporation."

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
---------------- --------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY INCOME STATE-
MENTS:
Interest income......... 1,366 1,235 5,261 4,743 4,580 4,480 4,893
Less interest expense... 641 525 2,374 2,121 1,982 1,573 1,855
Net interest income..... 725 710 2,887 2,622 2,598 2,907 3,038
Provision for loan
losses................. 30 0 90 0 0 0 (142)
Net interest income
after provision for
loan losses............ 695 710 2,797 2,622 2,598 2,907 3,180
Noninterest income...... 162 181 602 505 549 590 577
Adjusted gross income
after provision for
loan losses............ 857 891 3,399 3,127 3,147 3,497 3,757
Noninterest expense..... 567 600 2,303 2,306 2,337 2,336 2,338
Income before income
taxes.................. 290 291 1,096 821 810 1,161 1,419
Applicable income
taxes.................. 87 93 294 282 217 361 336
Net income.............. 203 198 802 539 593 800 1,083
Common Stock Data:
Net income per common
share(1)............... $ .27 $113.14 $ 1.00 $307.87 $338.65 $457.41 $618.86
Cash dividends declared
per common share....... 0 0 $ .46 $100.00 $100.00 $100.00 $100.00
SELECTED AVERAGE BAL-
ANCES:
Total assets............ 75,463 69,160 71,375 68,072 65,489 67,512 70,426
Total loans............. 42,967 37,123 38,800 34,921 30,995 29,464 30,482
Investment securities... 24,943 22,649 25,454 26,251 31,345 33,406 31,811
Earning assets.......... 69,924 64,824 66,410 64,375 63,259 65,287 66,378
Deposits................ 61,067 58,183 58,923 57,020 54,660 57,127 59,695
Shareholders' equity.... 7,842 9,045 7,598 10,678 10,145 9,279 9,024
Shares outstanding
(thousands)(1)......... 743 2 804 2 2 2 2
SELECTED PERIOD-END BAL-
ANCES:
Total assets............ 80,821 66,364 75,510 70,183 66,666 65,690 68,489
Total loans............. 43,281 37,096 42,166 37,474 32,666 29,494 29,908
Investment securities... 23,225 22,650 26,694 24,098 29,394 29,723 32,894
Earning assets.......... 72,082 62,246 69,676 66,104 62,161 60,419 64,104
Deposits................ 60,869 58,222 61,015 58,149 55,041 56,044 58,315
Shareholders' equity.... 7,972 7,251 7,778 10,837 10,539 9,021 9,356
Shares outstanding
(thousands)(1)......... 743 2 743 2 2 2 2
SELECTED RATIOS:
Return on average
equity(2).............. 10.49% 8.88% 10.56% 5.05% 5.85% 8.62% 12.00%
Return on average
assets(2).............. 1.09% 1.16% 1.12% .79% .91% 1.18% 1.54%
Net interest margin (not
a fully taxable
equivalent)(2)......... 4.20% 4.44% 4.35% 4.08% 4.11% 4.45% 4.58%
Allowance for loan
losses to loans........ 1.01% 1.07% .99% 1.04% 1.19% 1.30% 1.33%
Net charge-offs to
average loans(2)....... .104% (.055)% .17% .011% (.016)% .041% .052%
Average equity to
average assets......... 10.39% 13.08% 10.65% 15.69% 15.49% 13.74% 12.81%
</TABLE>
- --------
(1) In 1997, VNC was formed as a bank holding company to own 100% of the
outstanding shares of VN Bank. Upon formation, each share of VN Bank was
exchanged for 600 shares of VNC resulting in VNC having 742,800 shares
outstanding. Since that time, an additional 72,000 shares of VNC were
issued as a result of the exercise of stock options (see MANAGEMENT OF
VNC--EXECUTIVE OFFICER AND DIRECTOR COMPENSATION) resulting in there being
814,800 shares of Frontier Common outstanding.
(2) Information for three months ended March 31, 1998 and 1997 has been
annualized.

21
<PAGE>

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

GENERAL

VNC's Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the information and
tables which follow. For a discussion of liquidity and the impact of
inflation, see "Capital Resources/Liquidity" below.

In 1997, VNC was formed as a bank holding company to own 100% of the
outstanding shares of VN Bank. Upon formation, each share of VN Bank was
exchanged for 600 shares of VNC resulting in VNC having 742,800 shares
outstanding. Since that time, an additional 72,000 shares of VNC were issued
as a result of the exercise of stock options (see MANAGEMENT OF VNC--EXECUTIVE
OFFICER AND DIRECTOR COMPENSATION) resulting in there being 814,800 shares of
Frontier Common outstanding.

SUMMARY

Net income for 1997 was $802,000, a 49% increase from VNC's net income of
$539,000 in 1996. Net income for 1996 was $539,000 or 10% lower than the 1995
net income of $593,000. Net income per common share for 1997 was 96% higher
than in 1996. Pretax income for 1997 increased $275,000 or 34% from 1996 and
$11,000 or 1.4% from 1995 to 1996.

The increase in net income from 1996 to 1997 is primarily due to an increase
in net interest income and noninterest income. The decrease in net income from
1995 to 1996 was attributable to an increase in income tax expense.

The first three months of 1998 reflect net income of $203,000, 3% more than
the $198,000 earned for the first three months of 1997. No material changes
occurred in the results of operations or balance sheet during the first
quarter of 1998.

For the remainder of 1998, VNC will continue its objectives of maintaining
asset quality and providing superior customer service to its markets.

FINANCIAL CONDITION

Earning Assets. Average earning assets in 1997 increased $2,035,000 or 3%
over 1996 primarily due to loan growth. Average earning assets in 1996
increased by $1,116,000 or 2% over 1995 due primarily to loan growth.

Loan Portfolio. VNC's average loans for 1997 were $38,800,000, an increase
of 11% over $34,921,000 in average loans for 1996. Loan growth for 1997 was
primarily funded with deposits and maturing securities in the investment
portfolio. Average loans for 1996 increased by $3,926,000 over 1995, an
increase of 13%. The increase in ending balance from 1996 to 1997 and 1995 to
1996 was consistent with the increase in average balances.

Investment Portfolio. VNC's investment securities portfolio increased by 11%
or $2,596,000 from 1996 to 1997. The 1996 investment securities portfolio
decreased by $5,296,000 from 1995, a decrease of 18%.

VNC maintains an investment strategy of seeking portfolio yields within
acceptable risk levels, as well as providing liquidity. VNC maintains one
classification of investment securities -- "Available for Sale." The
"Available for Sale" securities are carried at fair market value. At year end
1997, unrealized gains in the "Available for Sale" portfolio amounted to
$143,000. At the end of 1996 the unrealized gains in the "Available for Sale"
portfolio amounted to $74,000.

Deposits. VNC's average deposits increased $1,903,000 or 3% from 1996 to
1997. Average deposits increased $2,360,000 or 4% from 1995 to 1996. From year
end 1996 to year end 1997, total deposits increased $2,866,000 or 5%. The
largest portion of growth during 1997 was in noninterest-bearing deposits that
increased $2,545,000 or 31%. This is due to an introduction of new products
that increased our deposit accounts and shifted some customers from interest
bearing accounts. From 1996 to 1997 interest-bearing transaction deposits

22
<PAGE>

increased $85,000 or 1%, savings deposits increased $212,000 or 3% and time
deposits increased $24,000 or .08%. From 1995 to 1996 interest-bearing
transaction deposits increased $734,000 or 6%, savings deposits decreased
$534,000 or 7%, other time deposits of less than $100,000 increased $1,490,000
or 6%, and time deposits of $100,000 or more increased by $545,000 or 14%.

Capital Resources. Stockholders' equity decreased $3,059,000 or 28% to
$7,778,000 as of December 31, 1997, compared with $10,837,000 at the end of
1996, and $10,359,000 at year end 1995. The largest decrease in stockholder's
equity from 1996 to 1997 resulted from a stock retirement of 512 shares at
$7,010.63 per share totaling $3,589,440. (Stock price of $7,010.63 indicates
value prior to the 600 to 1 exchange of VN Bank shares for VNC shares.) Net
income, dividends, and changes in net unrealized gains on securities accounted
for all other changes in stockholders equity. No shares of common stock were
issued during 1997.

BALANCE SHEET MANAGEMENT

Liquidity Management. Liquidity is the ability of a company to convert
assets into cash without significant loss and to raise funds by increasing
liabilities. Liquidity management involves having the ability to meet the day-
to-day cash flow requirements of its customers, whether they are depositors
wishing to withdraw funds or borrowers requiring funds to meet their credit
needs.

The primary function of asset/liability management is not only to assure
adequate liquidity in order for VNC to meet the needs of its customer base,
but to maintain an appropriate balance between interest-sensitive assets and
interest-sensitive liabilities so that VNC can profitably deploy its assets.
Both assets and liabilities are considered sources of liquidity funding and
both are, therefore, monitored on a daily basis.

The asset portion of the balance sheet provides liquidity primarily through
loan repayments and maturities of investment securities. Additional sources of
liquidity are the investments in federal funds sold and prepayments from the
mortgage-backed securities from the investment portfolio.

The liability portion of the balance sheet provides liquidity through
various interest bearing and noninterest bearing deposit accounts. At year
end, VNC had $2,000,000 of federal funds available and a line of credit from a
commercial bank of which approximately $2,000,000 was available and unused.

RESULTS OF OPERATIONS

Net Interest Income. Net interest income is the principal component of a
financial institution's income stream and represents the spread between
interest and fee income generated from earning assets and the interest expense
paid on deposits. The following discussion is on a fully taxable equivalent
basis.

Net interest income for 1997 increased $261,000 or 10% over 1996 and $16,000
or .6% in 1996 over 1995. The increase in the net interest income from 1996 to
1997 is primarily due to increases in loan volumes. The increase in the net
interest income from 1995 to 1996 was attributable to increase in loan
volumes.

Interest income increased $514,000 or 11% in 1997 from 1996, and increased
$151,000 or 3% in 1996 from 1995. Interest income produced by the loan
portfolio increased $506,000 or 17% in 1997 from 1996, and increased $310,000
or 11% in 1996 from 1995. Interest income on investment securities increased
$8,000 or 4% from 1996 to 1997, and decreased $159,000 or 8% from 1995 to
1996. The increase in investment income from 1996 to 1997 is due to an
increase in yields from the portfolio.

Total interest expense increased by $253,000 or 12% in 1997 from 1996, and
increased $139,000 or 7% in 1996 from 1995. The interest expense increase from
1996 to 1997 is primarily due to an increase in interest bearing deposits.

23
<PAGE>

The trend in net interest income is commonly evaluated in terms of average
rates using the net interest margin and the interest rate spread. The net
interest margin, or the net yield on earning assets is computed by dividing
fully taxable equivalent net interest income by average earning assets. This
ratio represents the difference between the average yield on average earning
assets and the average rate paid for all funds used to support those earning
assets. The net interest margin increased 27 basis points in 1997 to 4.45%.
The net cost of funds, defined as interest expense divided by average-earning
assets, increased 28 basis points from 3.29% in 1996 to 3.57% in 1997. The
yield on earning assets increased 54 basis points to 8.02% in 1997 from 7.48%
in 1996.

The interest rate spread measures the difference between the average yield
on earning assets and the average rate paid on interest bearing sources of
funds. The interest rate spread eliminates the impact of noninterest bearing
funds and gives a direct perspective on the effect of market interest rate
movements. During recent years, the net interest margins and interests rate
spreads have been under intense pressure to maintain historical levels, due in
part to tax laws that discouraged investment in tax-exempt securities and
intense competition for funds with non-bank institutions. As a result of
higher market interest rates during 1997, the interest rate spread increased
43 basis points from 1996 to 1997. Lower market interest rates during 1996
resulted in an interest rate spread decrease of 6 basis points from 1995.

Allowance for Loan Losses. Lending officers are responsible for the ongoing
review and administration of each loan. They make the initial identification
of loans which present some difficulty in collection or where there is an
indication that the probability of loss exists. Lending officers are
responsible for the collection effort on a delinquent loan. Senior management
is informed of the status of delinquent and problem loans on a monthly basis.

Senior management makes recommendations monthly to the board of directors as
to charge-offs. Senior management reviews the allowance for possible loan
losses on a quarterly basis. VNC's policy is to discontinue interest accrual
when payment of principal and interest is 90 days or more in arrears.

The allowance for possible loan losses represents management's assessment of
the risks associated with extending credit and its evaluation of the quality
of the loan portfolio. Management analyzes the loan portfolio to determine the
adequacy of the allowance for possible loan losses and the appropriate
provisions required to maintain a level considered adequate to absorb
anticipated loan losses. In assessing the adequacy of the allowance,
management reviews the size, quality and risk of loans in the portfolio.
Management also considers such factors as loan loss experience, the amount of
past due and nonperforming loans, specific known risk, the status and amount
of nonperforming assets, underlying collateral values securing loans, current
and anticipated economic conditions and other factors which affect the
allowance for potential credit losses.

While it is VNC's policy to charge off in the current period the loans in
which a loss is considered probable, there are additional risks of future
losses which cannot be quantified precisely or attributed to particular loans
or classes of loans. Because these risks include the state of the economy,
management's judgment as to the adequacy of the allowance is necessarily
approximate and imprecise.

Management believes that the $435,000 for March 31, 1998 and $416,000 for
December 31, 1997 in the allowance for loan losses was adequate to absorb
known risks in the portfolio. No assurance can be given, however, that adverse
economic circumstances will not result in increased losses in the loan
portfolio, and require greater provisions for possible loan losses in the
future.

24
<PAGE>

At the time a loan is placed on nonaccrual status, interest previously accrued
but not collected is reversed and charged against current earnings.
Recognition of any interest after a loan has been placed on nonaccrual is
accounted for on a cash basis.

VNC had nonperforming assets at March 31, 1998 of $0 and $115,000 as of
December 31, 1997.

Noninterest Income. Noninterest income consists of revenues generated from a
broad range of financial services and activities including fee-based services
and profits and commissions earned through credit life insurance sales and
other activities. In addition, gains or losses realized from the sale of
investment portfolio securities are included in noninterest income. Total
noninterest income decreased by $19,000 or 10% for the three months ended
March 31, 1998 as compared to 1997. Total noninterest income increased $97,000
or 19% in 1997 compared to 1996. Noninterest income for 1996 showed a decrease
of $44,000 or 8% from 1995.

Fee income from service charges on deposit accounts increased $53,000 or 12%
in 1997 following a $10,000 or 2% increase in 1996. Nonrecurring items of
noninterest income include sales of investment portfolio securities; VNC
realized gains from the sales of securities in 1996 and 1997 of $3,000 and
$1,000 respectively.

Noninterest Expenses. Noninterest expense for 1997 decreased $3,000 or .13%
from 1996 and decreased $31,000 or 1% in 1996 from 1995 and increased $2,000
or .09% in 1995 from 1994. Salaries and employee benefits in 1997 decreased
$117,000 or 8% from 1996 to a total of $1,317,000 at year-end 1997. Salaries
and employee benefits in 1996 decreased $118,000 or 8% from 1995. The decrease
in 1997 and 1996 were the result of improved efficiencies and technologies in
the operations of the bank.

Occupancy expense increased by $94,000 or 39% in 1997 following an increase
of $8,000 or 3% in 1996. Occupancy expense was higher in 1997 due to
investments made in technological advances.

All other noninterest expenses remain at steady levels from 1996 to 1997.

EFFECTS OF INFLATION AND CHANGING PRICES

Inflation generally increases the cost of funds and operating overhead, and
to the extent loans and other assets bear variable rates, the yields on such
assets. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on the performance of
a financial institution than the effects of general levels of inflation.
Although interest rates do not necessarily move in the same direction or to
the same extent as the prices of goods and services, increases in inflation
generally have resulted in increased interest rates. At the beginning of 1996,
the Federal Reserve Board decreased interest rates 75 basis points in an
effort to enhance growth in the economy through monetary policy. The prime
rate remained unchanged through 1996. Until March of 1997, the prime rate was
8.25%, but at that time it increased to 8.5% where it remains today. In
addition, inflation affects financial institutions' cost of goods and services
purchased, the cost of salaries and benefits, occupancy expense and similar
items. Inflation and related increases in interest rates generally decrease
the market value of investments and loans held and may adversely affect
liquidity, earnings and stockholders' equity. Mortgage originations and
refinancings tend to slow as interest rates increase and can reduce VNC's
earnings from such activities and the income from the sale of residential
mortgage loans in the secondary market.

25
<PAGE>

NET INTEREST INCOME

The following table sets forth weighted yields earned by VNC on its earning
assets and the weighted average rates paid on its deposits and other interest-
bearing liabilities for the years indicated and certain other information:

<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELDS/ AVERAGE INCOME/ YIELDS/
BALANCE EXPENSE RATES BALANCE EXPENSE RATES
------- -------- ------- ------- -------- -------
(FULLY TAXABLE EQUIVALENT) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Loans........................ 38,800 3,541 9.13% 34,921 3,035 8.69%
U.S. Treasury and other U.S.
government agencies......... 23,262 1,473 6.33% 23,807 1,406 5.91%
States and municipalities.... 1,832 202 11.03% 2,221 209 9.41%
Federal funds sold........... 2,516 113 4.49% 3,426 165 4.82%
Total interest-earning
assets/interest income.... 66,410 5,329 8.02% 64,375 4,815 7.48%
Cash and due from banks...... 2,952 -- -- 2,400 -- --
Other assets................. 2,416 -- -- 1,686 -- --
Allowance for loan losses.... (403) -- -- (389) -- --
Total assets............... 71,375 5,329 7.46% 68,072 4,815 7.07%
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Interest-bearing liabilities:
Demand deposits.............. 12,759 371 2.90% 12,531 347 2.77%
Savings...................... 7,523 218 2.90% 7,397 211 2.85%
Time certificates............ 30,121 1,584 5.26% 29,319 1,551 5.29%
Other borrowings............. 3,696 201 5.44% 364 12 3.30%
Total interest-bearing
liabilities/interest
expense................... 54,099 2,374 4.39% 49,611 2,121 4.28%
Non-interest-bearing demand
deposits.................... 8,520 -- -- 7,773 -- --
Other liabilities............ 1,158 -- -- 10 -- --
Shareholders' equity......... 7,598 -- -- 10,678 -- --
Total liabilities and
shareholders' equity...... 71,375 2,374 3.33% 68,072 2,121 3.12%
Net interest earnings........ -- 2,955 -- -- 2,694 --
Net interest on interest-
earning assets.............. -- -- 4.45% -- -- 4.18%
Taxable equivalent
adjustment:
Investment securities........ -- 68 -- -- 72 --
</TABLE>

<TABLE>
<CAPTION>
AVERAGE VOLUME CHANGE IN VOLUME AVERAGE RATE
-------------------- ------------------ -----------------
1997 1996 1995 1997-96 1996-95 1997 1996 1995
------ ------ ------ -------- -------- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans................... 38,800 34,921 30,995 3,879 3,926 9.13% 8.69% 8.79%
U.S. Treasury and other
U.S. government
agencies............... 23,262 23,807 28,548 (545) (4,741) 6.33% 5.91% 5.72%
States and
municipalities......... 1,832 2,221 2,582 (389) (361) 11.03% 9.41% 9.64%
Federal funds sold...... 2,516 3,426 1,134 (910) 2,292 4.49% 4.82% 5.11%
Total interest-earning
assets............... 66,410 64,375 63,259 2,035 1,116 8.02% 7.48% 7.37%
Interest-bearing
liabilities:
Demand deposits......... 12,759 12,531 12,273 228 258 2.91% 2.77% 3.26%
Savings................. 7,523 7,397 7,416 126 (19) 2.90% 2.85% 2.02%
Time certificates....... 30,121 29,319 28,190 802 1,129 5.26% 5.29% 5.01%
Other borrowings........ 3,696 364 397 3,332 (33) 5.44% 3.30% 5.04%
Total interest-bearing
liabilities.......... 54,099 49,611 48,276 4,488 1,335 4.39% 4.28% 4.11%
</TABLE>

26
<PAGE>

<TABLE>
<CAPTION>
INCOME/EXPENSE VARIANCE 1997 1996
----------------- --------------- ---------------- ----------------
1997 1996 1995 1997-96 1996-95 VOLUME RATE MIX VOLUME RATE MIX
----- ----- ----- ------- ------- ------ ---- --- ------ ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans................... 3,541 3,035 2,725 506 310 337 154 15 345 (31) (4)
U.S. Treasury and other
U.S. government
agencies............... 1,473 1,406 1,632 67 (226) (32) 100 (1) (271) 54 (9)
States and
municipalities......... 202 209 249 (7) (40) (37) 36 (6) (34) (6) --
Federal funds sold...... 113 165 58 (52) 107 (43) (11) 2 117 (3) (7)
Total interest-earning
assets................. 5,329 4,815 4,664 514 151 225 279 10 157 14 (20)
Interest-bearing
liabilities:
Demand deposits......... 371 347 400 24 (53) 6 18 -- 8 (60) (1)
Savings................. 218 211 150 7 61 4 4 (1) -- 61 --
Time certificates....... 1,584 1,551 1,412 33 139 42 (8) (1) 57 79 3
Other borrowings........ 201 12 20 189 (8) 110 8 71 (2) (7) 1
Total interest-bearing
liabilities.......... 2,374 2,121 1,982 253 139 162 22 69 63 73 3
Net interest earnings... 2,955 2,694 2,682 261 12 63 257 (59) 94 (59) (23)
</TABLE>

LIABILITY AND ASSET MANAGEMENT

The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and
by monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period
if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of interest-
earning assets maturing or repricing within a specific time period and the
amount of interest-bearing liabilities maturing or repricing within that time
period. A gap is considered positive when the amount of interest rate
sensitive assets exceeds the amount of interest rate sensitive liabilities. A
gap is considered negative when the amount of interest rate sensitive
liabilities exceeds the amount of interest rate sensitive assets. During a
period of rising interest rates, a negative gap would tend to adversely affect
net interest income while a positive gap would tend to result in an increase
in net interest income. During a period of falling interest rates, a negative
gap would tend to result in an increase in net interest income while a
positive gap would tend to adversely affect net interest income.

The asset/liability committee, which consists of the president and one other
director and certain other officers is charged with monitoring the liquidity
and funds position of VN Bank. The Committee regularly reviews (a) the rate
sensitivity position on a three-month, six-month, and one-year time horizon;
(b) loans to deposit ratios; and (c) average maturity for certain categories
of liabilities.

27
<PAGE>

The following table represents an interest sensitivity profile for VNC as of
December 31, 1997. The table represents a static point in time and does not
consider other variables, such as changing spread relationships or interest
rate levels. "Net repricing gap" is the difference between total earning
assets and total interest bearing liabilities repricing in any given period
and "cumulative gap" is the sum of the net repricing gap from period to
period.

Since interest-bearing demand deposits and savings accounts do not reprice
on a regular basis, these balances have been included in the "After 5 years
and non-rate sensitive" category.

<TABLE>
<CAPTION>
AFTER 5 YEARS
WITHIN AFTER 3 MONTHS AFTER 12 MONTHS AND NON-RATE
3 MONTHS WITHIN 12 MONTHS WITHIN 5 YEARS SENSITIVE TOTAL
-------- ---------------- ---------------- -------------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans................... 10,902 17,202 11,460 2,602 42,166
Investment securities... -- -- 15,923 10,771 26,694
Federal funds sold...... 816 -- -- -- 816
Total earning assets.. 11,718 17,202 27,383 13,373 69,676
INTEREST-BEARING
LIABILITIES:
Interest-bearing depos-
its.................... 11,601 13,481 5,134 20,172 50,388
Other borrowed funds.... 5,739 -- -- -- 5,739
Total interest-bearing
liabilities.......... 17,340 13,481 5,134 20,172 56,127
RATE SENSITIVITY GAP:
Net repricing gap....... (5,622) 3,721 22,249 (6,799) --
Net repricing gap as a
percentage of total
earning assets......... (8.07)% 5.34% 31.93% (9.76)% --
Cumulative gap.......... (5,622) (1,901) 20,348 13,549 --
Cumulative gap as a
percentage of total
earning assets......... (8.07)% (2.73)% 29.20% 19.45% --
</TABLE>

DEPOSITS

VNC's primary sources of funds are interest bearing deposits. The following
table sets forth VNC's deposit structure at December 31, in each of the last
two years.

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Non interest-bearing depos-
its:
Individuals, partnerships
and corporations......... 10,081 7,528
U. S. Government and
states and political sub-
divisions................ 80 281
Certified and official
checks................... 466 273
Total non-interest-bear-
ing deposits........... 10,627 8,082
Interest-bearing deposits:
Interest-bearing demand
accounts................. 12,798 12,713
Saving accounts........... 7,374 7,162
Certificates of deposit,
less than $100,000....... 25,388 25,838
Certificates of deposit,
more than $100,000....... 4,828 4,354
Total interest-bearing
deposits............... 50,388 50,067
Total deposits.......... 61,015 58,149
</TABLE>

28
<PAGE>

The following table presents a breakdown by category of the average amount
of deposits and the average rate paid on deposits for the periods indicated:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1996
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Non interest-bearing deposits.................. 8,520 0 7,773 0
Savings deposits............................... 7,523 2.9% 7,397 2.9%
Time deposits.................................. 30,121 5.3% 29,319 5.3%
Interest-bearing demand deposits............... 12,759 2.9% 12,531 2.8%
Total deposits............................. 58,923 3.7% 57,020 3.7%
</TABLE>

At December 31, 1997, time deposits greater than $100,000 aggregated
approximately $4,828,000. The following table indicates, as of December 31,
1997, the dollar amount of $100,000 or more by the time remaining until
maturity (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------
3 MONTHS 3 TO 12 1 TO 5 OVER 5
OR LESS MONTHS YEARS YEARS
--------- -------- ------- -------
<S> <C> <C> <C> <C>
Time certificates....................... 3,945 648 235 0
</TABLE>

ASSETS

The management of VNC considers many criteria in managing assets, including
creditworthiness, diversification and structural characteristics, maturity and
interest rate sensitivity. The following table sets forth VNC's interest-
earning assets by category at December 31, in each of the last two years.

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Interest-bearing deposits with banks....................... 263 32
Investment securities...................................... 26,694 24,098
Federal funds sold......................................... 553 4,500
Loans:
Real estate.............................................. 30,216 29,089
Commercial and other..................................... 11,950 8,385
Total loans............................................ 42,166 37,474
Interest-earning assets.................................... 69,676 66,104
</TABLE>

INVESTMENT PORTFOLIO

VNC has classified all investment securities as either available for sale or
held to maturity depending upon whether VNC has the intent and ability to hold
the investment securities to maturity. The classification of certain
investment securities as available for sale is consistent with VNC's
investment philosophy of maintaining flexibility to manage the portfolio. At
December 31, 1997, approximately $27 million of investment securities were
classified as available for sale. Approximately $143,000 of unrealized gain
was included in shareholders' equity related to the available for sale
investment securities.

29
<PAGE>

At year end 1997, obligations of the United States Government or its
agencies and obligations of states and political subdivisions, including
Fannie Mae, Freddie Mac, Ginnie Mae and Small Business Administration loans
represented approximately 98% of the total investment portfolio. The following
table presents the carrying amounts of VNC's investment portfolio at December
31, in each of the last two years.

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
AVAILABLE FOR SALE:
U.S. Treasury................................................. 1,509 3,826
U.S. Government agencies...................................... 22,515 18,109
States and political subdivisions............................. 2,227 1,938
Other securities.............................................. 443 225
Total available for sale.................................... 26,694 24,098
HELD TO MATURITY:
U.S. Government agencies...................................... -- --
States and political subdivisions............................. -- --
Total held to maturity...................................... -- --
Total investment portfolio.................................. 26,694 24,098
</TABLE>

The following table presents the maturity distribution of the carrying value
and estimated market value of VNC's investment portfolio at December 31, 1997.
The weighted average yields on these instruments are presented based on final
maturity. Yields on obligations of states and political subdivisions have not
been adjusted to a fully-taxable equivalent basis.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------
ESTIMATED WEIGHTED
CARRYING VALUE MARKET VALUE AVERAGE YIELD
-------------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
AVAILABLE FOR SALE:
U.S. Treasuries:
Due within 1 year.................. -- -- --
Due after 1 year but within 5
years............................. 1,509 1,509 5.404%
Total............................ 1,509 1,509 5.404%
U.S. Government agencies:
Due within 1 year.................. -- -- --
Due after 1 year but within 5
years............................. 13,763 13,763 6.134%
Due after 5 years but within 10
years............................. 179 179 9.960%
Due after 10 years................. 8,737 8,737 6.437%
Total............................ 22,679 22,679 6.278%
States and political subdivisions:
Due after 10 years................. 804 804 6.385%
Other:
Due after 10 years................. -- -- --
Total investments available for
sale............................ 24,992 24,992 6.228%
HELD TO MATURITY:
U.S. Government agencies:
Due after 1 year but within 5
years............................. -- -- --
Due after 10 years................. -- -- --
Total............................ -- -- --
States and political subdivisions:
Due after 5 years but within 10
years............................. -- -- --
Due after 10 years................. -- -- --
Total............................ -- -- --
Total investments held to
maturity........................ -- -- --
</TABLE>

30
<PAGE>

INVESTMENT POLICY

The objective of VNC's investment policy is to invest funds not otherwise
needed to meet the loan demand of VN Bank's market area to earn the maximum
return for VN Bank, yet still maintain sufficient liquidity to meet
fluctuations in VN Bank's loan demand and deposit structure. In doing so, VNC
balances the market and credit risk against the potential investment return,
makes investments compatible with the pledge requirements of VN Bank's
deposits of public funds, maintains compliance with regulatory investment
requirements, and assists the various public entities with their financing
needs. The Investment Committee is comprised of the president, the chief
financial officer, the senior lending officer and three other directors. All
the investment transactions occurring since the previous board of directors'
meeting are reviewed at its next monthly meeting. Limitations on the
Committee's investment authority include: (a) revenue obligations of
municipalities may not exceed 10% of capital per issuer; and (b) corporate
bonds will not be held in excess of 10% of capital per issuer. The investment
policy allows portfolio holdings to include short-term securities purchased to
provide VN Bank's needed liquidity and longer term securities purchased to
generate stable income for VN Bank during periods of interest rate
fluctuations.

LOAN PORTFOLIO

The following table sets forth the composition of VNC's loan portfolio at
December 31 in each of the past two years (in thousands).

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1997 1996
------ ------
<S> <C> <C>
Real estate loans:
Construction and land development............................... 825 0
Secured by residential properties............................... 23,367 22,843
Other real estate loans......................................... 6,024 6,246
Total real estate loans....................................... 30,216 29,089
Commercial and industrial loans................................. 5,929 750
Other consumer loans.............................................. 5,680 7,331
All other loans................................................... 341 304
Total loans................................................... 42,166 37,474
Less:
Allowance for loan losses......................................... 416 391
Net loans..................................................... 41,750 37,083
</TABLE>

The following table summarizes certain information concerning VNC's loan
portfolio (dollars in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------
AMOUNT % OF TOTAL LOANS
------ ----------------
<S> <C> <C>
Real estate loans:
Construction and land development..................... 825 1.96%
Secured by residential properties..................... 23,367 55.42%
Other real estate loans............................... 6,024 14.29%
Total real estate loans............................. 30,216 71.67%
Commercial and industrial loans....................... 5,929 14.06%
Other consumer loans.................................... 5,680 13.47%
All other loans......................................... 341 .80%
Total loans......................................... 42,166 100.00%
Less:
Allowance for loan losses............................... 416 .99%
Net loans........................................... 41,750 99.01%
</TABLE>

31
<PAGE>

The following table sets forth maturities of the loan portfolio and the
sensitivity to interest rate changes of VNC's loan portfolio (in thousands).

<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------
MATURITY RANGE
----------------------------------------
ONE YEAR ONE THROUGH OVER
OR LESS FIVE YEARS FIVE YEARS TOTAL
--------- ------------ ---------- ------
<S> <C> <C> <C> <C>
LOAN MATURITY:
Real estate construction loans........ 825 -- -- 825
Real estate mortgage loans............ 3,885 14,235 11,271 29,391
Commercial and industrial loans....... 4,807 788 334 5,929
All other loans....................... 3,875 1,798 348 6,021
Total loans....................... 13,392 16,821 11,953 42,166
LOAN INTEREST RATE SENSITIVITY:
Selected loans with:
Predetermined interest rates........ 9,053 11,437 2,602 23,092
Floating or adjustable interest
rates.............................. 19,051 23 0 19,074
Total............................. 28,104 11,460 2,602 42,166
</TABLE>

LOAN POLICY

All lending activities of VN Bank are under the direct supervision and
control of the VNC Board with secondary authority vested in the Executive
Committee. The Senior Loan Committee, which consists of the president, one
other director and two senior lending officers, enforces loan authorizations
for each officer, decides on loans exceeding such limits, services all
requests for officer credits to the extent allowable under current laws and
regulations, administers all problem credits, and determines the allocation of
funds for each lending division. The loan portfolio consists primarily of real
estate, commercial, small business, residential construction and consumer
installment loans. Maturity of term loans is normally limited to 15 years.
Conventional real estate loans may be made for no more than a 30-year term.
Installment loans are based on the earning capacity and vocational stability
of the borrower.

The VN Bank board at its regularly scheduled meetings reviews all new loans
made the preceding month. Loans which are 30 days or more past due are
reviewed monthly.

The Loan Committee of VN Bank periodically reviews the loan portfolio,
particularly nonaccrual and renegotiated loans. Each loan officer is
responsible for monitoring and collecting his or her own loan portfolio. Loan
Committee review may result in a determination that a loan should be placed on
a nonaccrual status for income recognition. In addition, to the extent that
management identifies potential losses in the loan portfolio and reduces the
book value of such loans through charge-offs, to their estimated collectible
value, VNC's policy is to classify as nonaccrual any loan on which payment of
principal or interest is 90 days or more past due, where there is adequate
collateral to cover principal and accrued interest and the loan is in the
process of collection. No concessions are granted and late fees are collected.
In addition, a loan will be classified as nonaccrual if, in the opinion of the
Loan Committee, based upon a review of the borrower's or guarantor's financial
condition, collateral value or other factors, payment is questionable, even
though payments are not 90 days or more past due.

When a loan is classified as nonaccrual, any unpaid interest is reversed
against current income. Interest is included in income thereafter only to the
extent received in cash. The loan remains in a nonaccrual classification until
such time as the loan is brought current, when it may be returned to accrual
classification. When principal or interest on a nonaccrual loan is brought
current, if in management's opinion future payments are questionable, the loan
would remain classified as nonaccrual. After a nonaccrual or renegotiated loan
is charged off, any subsequent payments of either interest or principal are
applied first to any remaining balance outstanding, then to recoveries and
lastly to income.

32
<PAGE>

The large number of consumer installment loans and the relatively small
dollar amount of each makes an individual review impracticable. It is VNC's
policy to charge off any consumer installment loan which is past due 120 days
or more.

In addition, mortgage loans secured by real estate are placed on nonaccrual
status when the mortgagor is in bankruptcy, or foreclosure proceedings are
instituted. Any accrued interest receivable remains in interest income as an
obligation of the borrower.

CREDIT RISK MANAGEMENT AND RESERVE FOR LOAN LOSSES

Credit risk and exposure to loss are inherent parts of the banking business.
Management seeks to manage and minimize these risks through its loan and
investment policies and loan review procedures. Management establishes and
continually reviews lending and investment criteria and approval procedures
that it believes reflect the risk sensitive nature of VNC. The loan review
procedures are set to monitor adherence to the established criteria and to
ensure that on a continuing basis such standards are enforced and maintained.

Management's objective in establishing lending and investment standards is
to manage the risk of loss and to provide for income generation through
pricing policies.

The loan portfolio is regularly reviewed and management determines the
amount of loans to be charged-off. In addition, such factors as VNC's previous
loan loss experience, prevailing and anticipated economic conditions, industry
concentrations and the overall quality of the loan portfolio are considered.
While management uses available information to recognize losses on loans and
real estate owned, future additions to the allowance may be necessary based on
changes in economic conditions. In addition, various regulatory agencies, as
an integral part of their examination process, periodically review the
allowances for losses on loans and real estate owned. Such agencies may
require VNC to recognize additions to the allowances based on their judgments
about information available at the time of their examinations. In addition,
any loan or portion thereof which is classified as a "loss" by regulatory
examiners is charged-off.

The reserve for loan losses is increased by provisions charged to operating
expense. The reserve is reduced by charging off loans or portions of loans at
the time they are deemed by management to be uncollectible and increased when
loans previously charged off are recovered. The resulting reserve for loan
losses is viewed by management as a single, unallocated reserve available for
all loans and, in management's opinion, is adequate to provide for reasonably
foreseeable potential loan losses. The risk associated with loans varies with
the creditworthiness of the borrower, the type of loan (consumer, commercial
or real estate) and its maturity. Cash flows adequate to support a repayment
schedule is an element considered for all types of loans. Real estate loans
are impacted by market conditions regarding the value of the underlying
property used as collateral. Commercial loans are also impacted by the
management of the business as well as economic conditions. The approximate
anticipated amount of loan charge-offs by category during 1998 is as follows:

<TABLE>
<S> <C>
Real Estate Loans................................................... $ 2,500
Commercial and industrial loans..................................... 0
All other loans..................................................... 43,500
-------
Total............................................................. $46,000
=======
</TABLE>

Management's estimate of charge-offs for 1998 is based upon historical data
as well as the composition of the loan portfolio at December 31, 1997.
Management believes the allowance for loan losses is adequate to absorb such
anticipated charge-offs.

Rules and formulas serve as useful guidelines in determining the adequacy of
the allowance for loan losses. In determining the amount of the allowance,
management uses historical and linear regression analysis. The reserve for
loan losses was $435,000 as of March 31, 1998 or 1% of loans outstanding. The
reserve for loan losses was $416,000 at year end 1997, or .99 of loans
outstanding compared to $391,000, or 1.04%, and

33
<PAGE>

$438,000, or 1.41%, at year ends 1996 and 1995, respectively. The following
table presents data related to VNC's reserve for loan losses for the periods
indicated (dollars in thousands).

<TABLE>
<CAPTION>
THREE MONTHS YEAR-TO-DATE
ENDED --------------
MARCH 31, 1998 1997 1996
-------------- ------ ------
<S> <C> <C> <C>
Total loans:
Average outstanding during the period......... 42,967 38,800 34,921
Allowance for loan losses:
Balance at beginning period................... 416 391 387
Charge-offs:
Real estate loans............................. 4 39 6
Installment loans............................. 15 63 44
Credit cards and related plans................ 0 0 0
Commercial and all other loans................ 0 0 0
Recoveries:
Real estate loans............................. 0 11 26
Installment loans............................. 8 26 28
Credit cards and related plans................ 0 0 0
Net charge-offs (recoveries).................... 11 65 (4)
Provision charged to income..................... 30 90 0
Balance at end of period........................ 435 416 391
Net charge-offs to average loans outstanding.... .026% .17% .011%
Allowance for loan losses to average loans
outstanding.................................... 1.01% 1.07% 1.12%
Allowance for loan losses to net charge-offs.... 39.55 6.4 8.3
</TABLE>

The following table sets forth information with respect to nonperforming
loans of VNC on the dates indicated. Accrual of interest is discontinued when
there is reasonable doubt as to the full, timely collections of interest or
principal. When a loan becomes contractually past due ninety (90) days with
respect to interest or principal, it is reviewed and a determination is made
as to whether it should be placed on nonaccrual status. When a loan is placed
on nonaccrual status, all interest previously accrued but not collected is
reversed against current period interest income. Income on such loans is then
recognized only to the extent that cash is received and where the future
collection of principal is probable. Interest accruals are resumed on such
loans only when they are brought fully current with respect to principal and
interest and when, in the judgment of management, the loans are estimated to
be fully collectible as to principal and interest. Restructured loans are
those loans on which concessions in terms have been granted because of a
borrower's financial difficulty. Interest is generally accrued on such loans
in accordance with the new terms. The information provided below is as of
March 31, 1998 and as of December 31 for the years indicated (dollars in
thousands).

<TABLE>
<CAPTION>
THREE MONTHS DECEMBER 31,
ENDED ---------------
MARCH 31, 1998 1997 1996
-------------- ------ ------
<S> <C> <C> <C>
Nonaccrual loans.............................. 0 115 55
Restructured loans............................ 0 0 0
Loans past due 90 days or more to principal or
interest payments.............................. 41 30 50
Nonperforming loans as a percentage of net loans
before allowance for loan losses............... -- .27% .15%
Allowance for loan losses as a percentage of
nonperforming loans............................ -- 362% 711%
</TABLE>

CAPITAL RESOURCES/LIQUIDITY

Liquidity. Of primary importance to depositors, creditors and regulators is
the ability to have readily available funds sufficient to repay fully maturing
liabilities. VNC's liquidity, represented by cash and cash due from banks, is
a result of its operating, investing and financing activities. In order to
insure funds are available at all times, VNC devotes resources to projecting
on a monthly basis the amount of funds which will be required and maintains
relationships with a diversified customer base so funds are accessible.
Liquidity requirements can

34
<PAGE>

also be met through short-term borrowings or the disposition of short-term
assets which are generally matched to correspond to the maturity of
liabilities.

VNC has a formal liquidity policy, and in the opinion of management, its
liquidity levels are considered adequate. Neither VNC nor VN Bank is subject
to any specific regulation liquidity requirements imposed by regulatory
authorities. VN Bank is subject to general FDIC guidelines which do not
require a minimum level of liquidity. Management believes its liquidity ratios
meet or exceed these guidelines. Management does not know of any trends or
demands which are reasonably likely to result in liquidity increasing or
decreasing in any material manner.

The following table sets forth liquidity ratios for the periods indicated:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Average loans to average deposits....................... 65.85% 61.24% 56.71%
</TABLE>

CAPITAL ADEQUACY

Capital adequacy refers to the level of capital required to sustain asset
growth over time and to absorb losses. The objective of VNC's management is to
maintain a level of capitalization that is sufficient to take advantage of
profitable growth opportunities while meeting regulatory requirements. This is
achieved by improving profitability through effectively allocating resources
to more profitable businesses, improving asset quality, strengthening service
quality, and streamlining costs. The primary measures used by management to
monitor the results of these efforts are the ratios of average equity to
average assets, average tangible equity to average tangible assets, and
average equity to net loans. The Federal Reserve Board has adopted capital
guidelines governing the activities of bank holding companies. These
guidelines require the maintenance of an amount of capital based on risk-
adjusted assets so that categories of assets with potentially higher credit
risk will require more capital backing than assets with lower risk. In
addition, banks and bank holding companies are required to maintain capital to
support, on a risk-adjusted basis, certain off-balance sheet activities such
as loan commitments.

The capital guidelines classify capital into two tiers, referred to as Tier
I and Tier II. Under risk-based capital requirements, total capital consists
of Tier I capital which is generally common shareholders' equity less goodwill
and Tier II capital which is primarily a portion of the allowance for loan
losses and certain qualifying debt instruments. In determining risk-based
capital requirements, assets are assigned risk-weights of 0% to 100%,
depending primarily on the regulatory assigned levels of credit risk
associated with such assets. Off-balance sheet items are considered in the
calculation of risk-adjusted assets through conversion factors established by
the regulators. The framework for calculating risk-based capital requires
banks and bank holding companies to meet the regulatory minimums of 4% Tier I
and 8% total risk-based capital. In 1990 regulators added a leverage
computation to the capital requirements, comparing Tier I capital to total
average assets less goodwill.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
(DOLLARS IN
THOUSANDS)
<S> <C>
CAPITAL:
Tier I capital:
Stockholders' equity..................................... 7,636
Less disallowed intangibles.............................. 0
Total Tier I capital................................... 7,636
Tier II capital:
Qualifying debt
Qualifying allowance for loan losses..................... 416
Total Tier II capital.................................. 416
Total capital.......................................... 8,052
Risk-adjusted assets....................................... 40,260
Quarterly average assets................................... 74,361
</TABLE>

35
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
(DOLLARS IN
THOUSANDS)
<S> <C>
RATIOS:
Tier I capital to risk-adjusted assets.................... 18.97%
Tier II capital to risk-adjusted assets................... 1.03%
Total capital to risk-adjusted assets..................... 20.00%
Leverage--Tier I capital to quarterly average assets less
disallowed intangibles................................... 10.27%
</TABLE>

The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
established five capital categories for banks and bank holding companies. The
bank regulators adopted regulations defining these five capital categories in
September 1992. Under these new regulations each bank is classified into one
of the five categories based on its level of risk-based capital as measured by
Tier I capital, total risk-based capital, and Tier I leverage ratios and its
supervisory ratings. The following table lists the five categories of capital
and each of the minimum requirements for the three risk-based capital ratios.

<TABLE>
<CAPTION>
TOTAL TIER I
RISK-BASED RISK-BASED LEVERAGE
CAPITAL RATIO CAPITAL RATIO RATIO
------------- ------------- ------------
<S> <C> <C> <C>
Well-capitalized.................... 10% or above 6% or above 5% or above
Adequately capitalized.............. 8% or above 4% or above 4% or above
Undercapitalized.................... Less than 8% Less than 4% Less than 4%
Significantly undercapitalized...... Less than 6% Less than 3% Less than 3%
Critically undercapitalized......... -- -- 2% or less
</TABLE>

On March 31, 1998, VNC exceeded the regulatory minimums and qualified as a
well-capitalized institution under the regulations.

36
<PAGE>

BUSINESS OF VNC

GENERAL

VNC, incorporated in Alabama, is a bank holding company that commenced
operations in 1997. Its principal asset is the capital stock of VN Bank. At
March 31, 1998, VNC had total assets of $81 million and stockholders' equity
of $8 million. VN Bank, VNC's wholly-owned subsidiary, is a national banking
association. VN Bank provides a variety of banking and financial services to
businesses and individuals. VN Bank's headquarters is located at 1011 North
Lanier Avenue, Lanett, Alabama 36863-0682. In addition, VN Bank has two
branches located in Valley, Alabama.

EMPLOYEES

As of March 31, 1998, VNC and its subsidiaries had approximately 34 full-
time employees. The employees are not represented by a collective bargaining
unit. VNC believes its relationship with its employees to be good.

CUSTOMERS

It is the opinion of management that there is no single customer or
affiliated group of customers whose deposits, if withdrawn, would have a
materially adverse effect on the business of VNC.

PROPERTIES

VNC has its principal offices in its headquarters building at 1011 North
Lanier Avenue, Lanett, Alabama 36863-0682, which is owned and occupied by VN
Bank. VN Bank also operates two branches located in Valley, Alabama, which is
in Chambers County. VN Bank owns one of these branch locations and leases the
space in the other location.

LEGAL PROCEEDINGS

The nature of its business generates a certain amount of litigation against
VNC and VN Bank involving matters arising in the ordinary course of business.
None of the legal proceedings currently pending or threatened to which VNC or
VN Bank is a party or to which any of their properties are subject will have,
in the opinion of management of VNC, a material effect on the business or
financial condition of VNC or VN Bank.

BANKING

VN Bank conducts its business as a commercial bank, with special emphasis in
retail banking, including the acceptance of checking and savings deposits, and
the making of commercial, real estate, personal, home improvement, automobile
and other installment and term loans. It also offers collections, notary
public services, and other customary bank services to its customers.

COMPETITION

All phases of VNC's banking activities are highly competitive. VN Bank
competes actively with five regional and community banks, as well as finance
companies, credit unions and other financial institutions located in its
service area.

SUPERVISION AND REGULATION

The following summary of the BHC Act and of the other Acts described herein
is qualified in its entirety by express reference to each of the particular
acts.

Bank Holding Company Act of 1956. VNC is a bank holding company within the
meaning of the federal BHC Act, and is registered with the Board of Governors
of the Federal Reserve System (the "Board"). VNC is

37
<PAGE>

required to file with the Board annual reports and such additional information
as the Board may require pursuant to the BHC Act. The Board may also make
examinations of VNC and its subsidiaries.

The BHC Act requires every bank holding company to obtain the prior approval
of the Board before acquiring direct or indirect ownership or control of more
than 5% of the voting shares of any bank which is not majority owned by VNC.
The BHC Act prohibits a bank holding company, with certain exceptions, from
acquiring direct or indirect ownership or control of more than 5% of the
outstanding voting shares of any company which is not a bank and from engaging
in any business other than banking or furnishing services to or performing
services for its subsidiaries. The 5% limitation is not applicable to
ownership of shares in any company the activities of which the Board has
determined to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto.

In addition, and subject to certain exceptions, the BHC Act and the Change
in Bank Control Act, together with regulations thereunder, require Board
approval (or, depending on the circumstances, no notice of disapproval) prior
to any person or company acquiring "control" of a bank holding company, such
as VNC. Control is conclusively presumed to exist if an individual or company
acquires 25% or more of any class of voting securities of the bank holding
company. Control is rebuttably presumed to exist if a person acquires 10% or
more but less than 25% of any class of voting securities and either the bank
holding company has registered securities under Section 12 of the Exchange Act
or no other person will own a greater percentage of that class of voting
securities immediately after the transaction. The regulations provide a
procedure for challenge of the rebuttable control presumption.

Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Interstate Banking and Branching Act"), bank holding companies
may acquire banks in states other than their home states without regard to the
permissibility of such acquisitions under state law, but subject to any state
requirement that the bank has been organized and operating for a minimum
period of time, not to exceed five years, and the requirement that the bank
holding company, prior to or following the proposed acquisition, controls no
more than 10% of the total amount of deposits of insured depository
institutions in the United States and less than 30% of such deposits in that
state (or such lesser or greater amount set by state law). The Interstate
Banking and Branching Act also authorizes banks to merge across state lines,
thereby creating interstate branches. This provision, which became effective
June 1, 1997, allowed each state, prior to the effective date, the opportunity
to "opt out" of this provision, thereby prohibiting interstate branching
within that state. Alabama did not adopt legislation to "opt out" of the
interstate branching provisions.

VN Bank is an "affiliate" of VNC within the meaning of the Federal Reserve
Act. This act places restrictions on a bank's loans or extensions of credit
to, purchases of or investments in the securities of, and purchases of assets
from an affiliate, a bank's loans or extensions of credit to third parties
collateralized by the securities or obligations of an affiliate, the issuance
of guarantees, acceptances, and letters of credit on behalf of an affiliate,
and certain bank transactions with an affiliate, or with respect to which an
affiliate acts as agent, participates, or has a financial interest.
Furthermore, a bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services.

Under Federal Reserve Board policy, VNC is expected to act as a source of
financial strength to its subsidiary bank and to commit resources to support
its subsidiary. This support may be required at times when, absent such
Federal Reserve Board policy, VNC may not be inclined to provide it. Under the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA"), a depository institution insured by the FDIC can be held liable
for any loss incurred by, or reasonably expected to be incurred by, the FDIC
after August 9, 1989 in connection with (a) the default of a commonly
controlled FDIC-insured depository institution or (b) any assistance provided
by the FDIC to any commonly controlled FDIC-insured depository institution "in
danger of default." "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a default is likely to

38
<PAGE>

occur in the absence of regulatory assistance. Under FDICIA (see discussion
below) a bank holding company may be required to guarantee the capital plan of
an undercapitalized depository institution. Any capital loans by a bank
holding company to any of its subsidiary banks are subordinate in right of
payment to deposits and to certain other indebtedness of such subsidiary bank.
In the event of a bank holding company's bankruptcy, any commitment by the
bank holding company to a federal bank regulatory agency to maintain the
capital of a subsidiary bank will be assumed by the bankruptcy trustee and
entitled to a priority of payment.

National Banking Act; Federal Deposit Insurance Act. VN Bank is incorporated
under the National Banking Act, as amended, and is subject to the applicable
provisions of that law. As a national banking association, VN Bank is subject
to the supervision of the OCC and to regular examination by that agency. In
addition, VN Bank is a member of the FDIC and its deposits are insured by the
FDIC. Therefore, VN Bank is subject to examination and regulation by the FDIC.

A number of federal statutes as regulations limit the amount of dividends
that can be paid by both VN Bank and VNC. See "Description of Frontier Capital
Stock."

VN Bank also is subject to regulation respecting the maintenance of certain
minimum capital levels (See "VNC's Management's Discussion and Analysis--
Capital Resources--Liquidity"), and VN Bank will be required to file annual
reports and such additional information as the National Banking Act and FDIC
regulations require. VN Bank is also subject to certain restrictions on loan
amounts, interest rates, "insider" loans to officers, directors and principal
shareholders, tie-in arrangements, and transactions with affiliates, as well
as many other matters. Strict compliance at all times with state and federal
banking laws is required.

In December 1991, a major banking bill entitled the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA") was enacted, which
substantially revises the bank regulatory and funding provisions of the
Federal Deposit Insurance Act and makes revisions to several other federal
banking statutes. Among other things, FDICIA requires the federal banking
regulators to take "prompt corrective action" in respect of depository
institutions that do not meet minimum capital requirements. In addition, an
institution that is not well capitalized is generally prohibited from
accepting brokered deposits and offering interest rates on deposits higher
than the prevailing rate in its market and also may not be able to "pass
through" insurance coverage for certain employee benefit accounts. FDICIA also
requires the holding company of any undercapitalized depository institution to
guarantee, in part, certain aspects of such depository institution's capital
plan for such plan to be acceptable. FDICIA contains numerous other
provisions, including new accounting, audit and reporting requirements,
termination of the "too big to fail" doctrine except in special cases,
limitations on the FDIC's payment of deposits at foreign branches, new
regulatory standards in such areas as asset quality, earnings and compensation
and revised regulatory standards for, among other things, powers of state
banks, real estate lending and capital adequacy. FDICIA also requires that a
depository institution provide 90 days prior notice of the closing of any
branches.

Under the Community Reinvestment Act ("CRA"), as implemented by Federal
Reserve Board and OCC regulations, holding companies and national banks have a
continuing and affirmative obligation consistent with their safe and sound
operation to help meet the credit needs of their entire community, including
low- and moderate-income neighborhoods. The CRA does not establish specific
lending requirements or programs for financial institutions nor does it limit
an institution's discretion to develop the types of products and services that
it believes are best suited to its particular community. The CRA requires the
Federal Reserve Board and the OCC, in connection with their examination of
holding companies or banks, to assess the companies' record of meeting the
credit needs of their communities and to take such record into account in its
evaluation of certain applications by such institution. The FIRREA amended the
CRA to require public disclosure of an institution's CRA rating and to require
that the Federal Reserve Board and the OCC provide a written evaluation of an
institution's CRA performance utilizing a four-tiered descriptive rating
system in lieu of the then existing five-tiered numerical rating system. VNC
and VN Bank are subject to these regulations.

39
<PAGE>

Alabama law contains limitations on the interest rates that may be charged
on various types of loans. The operations of banks are also affected by
various consumer laws and regulations, including those relating to equal
credit opportunity and regulation of consumer lending practices. All national
banks must become and remain insured banks under the FDIA. (See 12 U.S.C. (S)
1811, et seq.).

The U.S. federal and state banking agencies have broad enforcement powers
over bank holding companies and their subsidiaries, including, in the case of
the federal agencies, the power to terminate deposit insurance, impose
substantial fines and other civil penalties and, in the most severe cases, to
appoint a conservator or receiver for a depository institution. Failure to
maintain adequate capital or to comply with applicable laws, regulations and
supervisory agreements could subject VNC or its subsidiaries to these
enforcement provisions.

EFFECT OF GOVERNMENTAL POLICIES

VNC and VN Bank are affected by the policies of regulatory authorities,
including the Federal Reserve System. An important function of the Federal
Reserve System is to regulate the national money supply. Among the instruments
of monetary policy used by the Federal Reserve are: purchases and sales of
U.S. Government securities in the marketplace; changes in the discount rate,
which is the rate any depository institution must pay to borrow from the
Federal Reserve; and changes in the reserve requirements of depository
institutions. These instruments are effective in influencing economic and
monetary growth, interest rate levels and inflation.

The monetary policies of the Federal Reserve System and other governmental
policies have had a significant effect on the operating results of commercial
banks in the past and are expected to continue to do so in the future. Because
of changing conditions in the national economy and in the money market, as
well as the result of actions by monetary and fiscal authorities, it is not
possible to predict with certainty future changes in interest rates, deposit
levels, loan demand or the business and earnings of VNC or whether the
changing economic conditions will have a positive or negative effect on
operations and earnings.

Bills are pending before the United States Congress and the Alabama
Legislature which could affect the business of VNC and VN Bank, and there are
indications that other similar bills may be introduced in the future. It
cannot be predicted whether or in what form any of these proposals will be
adopted or the extent to which the business of VNC and VN Bank may be affected
thereby.

MANAGEMENT OF VNC

DIRECTORS AND EXECUTIVE OFFICERS

The following table provides certain information regarding Directors and
Executive Officers of VNC.

<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION FOR
NAME AGE POSITIONS SINCE PREVIOUS 5 YEARS
- ---- --- -------------- --------- --------------------------------
<S> <C> <C> <C> <C>
Mac H. Langley.......... 62 Director, 1997 Owner, Langley Motors
Treasurer
Timothy E. McLane....... 43 Director 1997 President & CEO of Skinner Corp.
Charles M. Reeves....... 75 Chairman 1997 Vice Chairman of Skinner Corp.
Steven R. Townson....... 40 Director, CEO 1997 Banker
Kerri C. Newton......... 28 CFO, Secretary -- Banker
</TABLE>

No director of VNC is related to any other director except Mr. McLane, who
is the stepson of Mr. Reeves. No director of VNC is a director or executive
officer of another bank holding company, bank, savings and loan association,
or credit union. The following is a brief description of the business
experience of the executive officers of VNC.

Charles M. Reeves, (75) is currently Chairman of the Board of Valley
National Corporation and is proposed to be Director of Frontier National
Corporation. Mr. Reeves has served as Director of VN Bank since 1984. He is a
Director of Skinner Corporation, a retail furniture chain and serves as
Director, President and Chief

40
<PAGE>

Executive Officer of Pearce Broadcasting. Mr. Reeves served in the U.S. Army
for four years and was the Auditor, Director of Accounting and Assistant
Treasurer of West Point-Pepperell from 1949 to 1988. He is currently the vice
chairman for Skinner Corporation.

Steven R. Townson, (40) is currently Chairman, President, and Chief
Executive Officer of VN Bank and President and Chief Executive Officer of VNC.
He has 12 years of banking experience and began his banking career in 1986
with AmSouth Bank where he served as Assistant Vice President and Corporate
Lending Officer. In 1991, Mr. Townson served as a Vice President for First
Tennessee Bank, N.A., Financial Institutions Division in Chattanooga,
Tennessee, and was responsible for the Alabama and Middle Tennessee markets.
In 1995, he was elected President and Chief Operating Officer of BancAlabama,
a bank holding company, and its wholly owned subsidiary, BankAlabama in
Huntsville, Alabama. In December 1995, he was elected President and Chief
Executive Officer until the merger of BancAlabama into Union Planters
Corporation in 1996, at which time he resigned. Mr. Townson was elected to his
current position in August 1996. Mr. Townson holds a Bachelor of Science
degree, cum laude, from the University of Tennessee, Chattanooga, Tennessee,
and a Masters of Management from Webster University, St. Louis, Missouri. He
also holds a Certified Management certificate. He is a graduate from The
School of Banking of the South at Louisiana State University in 1995. Mr.
Townson has completed several banking courses with the American Bankers
Association and the Tennessee and Alabama Bankers Association. His civic
activities include Chairman of the Finance Committee of the Chambers County
Industrial Development Authority, and he serves on the Executive Committee of
the Alabama Bankers Association. He is a member of Chattanooga Golf and
Country Club and the Highland Country Club, and he attends Spring Road
Christian Church. Mr. Townson serves as Board Member of Skinner Corporation, a
retail furniture stores chain based in Lanett, Alabama.

Kerri C. Newton, (28) is currently the Senior Vice President, Chief
Financial Officer, and Secretary of VNC. Ms. Newton is a Certified Public
Accountant and has 5 years of banking experience. A 1991 magna cum laude
graduate of Lander College in Greenwood, South Carolina with a Bachelor of
Science degree in Accounting, she started her career in public accounting and
entered banking in May of 1993 with The County Bank in Greenwood, South
Carolina. She left The County Bank as Vice President and Financial Officer in
January 1997 to join Valley National Bank as a Senior Vice President and Chief
Financial Officer and remains in that position today.

After the Merger, the seven directors of Frontier will include six directors
who already are directors of either VNC or FNSC, and as a result, information
is included on these directors under MANAGEMENT OF VNC--DIRECTORS AND
EXECUTIVE OFFICERS AND MANAGEMENT OF FNSC--DIRECTORS AND EXECUTIVE OFFICERS.
In addition, Christopher N. Zodrow will be added as a director of Frontier.
Mr. Zodrow, age 52, is currently a director of VN Bank. His principal
occupation for the last five years is as Vice President and General Counsel of
WestPoint Stevens, Inc., West Point, Georgia.

TRANSACTIONS WITH MANAGEMENT

VNC has and expects to have in the future banking and other business
transactions in the ordinary course of its banking business with directors,
officers, and 10% beneficial owners of VNC and their affiliates, including
members of their families or corporations, partnerships, or other
organizations in which such officers or directors have a controlling interest,
on substantially the same terms (including price, or interest rates and
collateral) as those prevailing at the time for comparable transactions with
unrelated parties. Any such banking transactions will not involve more than
the normal risk of collectibility nor present other unfavorable features to
VNC.

SECURITIES LAW LIMITATIONS

Insofar as indemnification for liabilities arising under the Securities Act,
may be permitted to directors, officers and controlling persons of VNC, VNC
has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.

THE VNC BOARD

Directors of VNC and VN Bank are elected annually and each director holds
office until his or her successor is elected and qualified.

41
<PAGE>

EXECUTIVE OFFICER AND DIRECTOR COMPENSATION

The Summary Compensation Table provides information for the years indicated
about the Chief Executive Officer ("CEO"). No other officers of VNC or VN Bank
received compensation in excess of $100,000 for the year ended December 31,
1997. During 1997, each director received $325 per meeting attended. Directors
are not compensated for committee meetings. The directors per meeting stipend
was increased to $400 as of January 1, 1998.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION($)
------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#) COMPENSATION
- --------------------------- ---- ------- ----- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steven R. Townson....... 1997 $83,135 -0- $8,580 60,000 $3,900
</TABLE>

On August 26, 1996, VN Bank issued stock options to Mr. Townson to purchase
100 shares of VN Bank common stock for $6,000.00 per share. After VNC was
formed and each share of VN Bank was exchanged for 600 shares of VNC, such
options were converted to options to purchase 60,000 shares of VNC for $10.00
per share. On February 3, 1997, VN Bank issued stock options to Kerri C.
Newton to purchase 20 shares of VN Bank common stock for $6,000.00 per share.
After VNC was formed and each share of VN Bank was exchanged for 600 shares of
VNC, such options were converted to options to purchase 12,000 shares of VNC
for $10.00 per share. At December 31, 1997, these options were exercisable but
the exercise price was higher than the market price, so that such options had
no realizable value at that time. Mr. Townson's and Ms. Newton's options for
72,000 shares were exercised on April 13, 1998. No other stock options have
been granted.

OWNERSHIP OF VNC COMMON STOCK

As of April 30, 1998, VNC's records indicated the following number of shares
were beneficially owned by (i) all persons who own beneficially 5% or more of
the Frontier Common, (ii) each person who is a director or a named executive
officer of VNC and (iii) all directors and executive officers as a group.

<TABLE>
<CAPTION>
AMOUNT AND NATURE PRO FORMA
NAME AND ADDRESS OF OF BENEFICIAL OWNERSHIP PERCENT PERCENT
BENEFICIAL OWNER (NUMBER OF SHARES) OF CLASS(1) OF CLASS(2)
- -------------------- ------------------------ ----------- -----------
<S> <C> <C> <C>
Mac H. Langley................ 17,400 2.14% .82%
Lanett, Alabama
Timothy E. McLane............. 19,800 2.43% .93%
West Point, Georgia
Kerri C. Newton............... 12,000 1.50% .56%
Lanett, Alabama
Charles M. Reeves............. 528,000(3) 64.80% 24.82%
West Point, Georgia
Steven R. Townson............. 67,200 8.25% 3.16%
Lanett, Alabama
Christopher N. Zodrow......... 1,800 .22% .08%
West Point, Georgia
Officers and Directors as a 646,200 79.31% 30.46%
Group........................
</TABLE>
- --------
* Less than 1%.
(1)814,800 shares outstanding.
(2)Assuming the exchange ratio in the Merger is 13:1 and 1,312,935 shares are
issued as a result of the Merger
(3)Controlled through the CM/FS Reeves Investments, L.P.

42
<PAGE>

DESCRIPTION OF FRONTIER CAPITAL STOCK

General. The authorized capital stock of Frontier consists of 10,000,000
shares of Class A Common Stock, par value $.001 per share (referred to
throughout this Joint Proxy Statement/Prospectus as "Frontier Common");
10,000,000 shares of Class B Common Stock, par value $.001 per share; 25
shares of Directors' Qualifying Stock, par value $1,000 per share; and
10,000,000 shares of Preferred Stock, par value $.001 per share ("Frontier
Preferred"). As of April 30, 1998, 814,800 shares of Frontier Common were held
by 48 shareholders and no shares of Director's Qualifying Stock were issued
and outstanding. No other Frontier stock is issued and outstanding.

The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of the ABCA and Frontier's Certificate
of Incorporation.

Since Frontier is a holding company, the right of Frontier, and hence the
right of creditors and stockholders of Frontier, to participate in any
distribution of assets of any subsidiary upon its liquidation or
reorganization or otherwise is necessarily subject to the prior claims of
creditors of the subsidiary, except to the extent that claims of Frontier
itself as a creditor of the subsidiary may be recognized.

Holders of Frontier stock are entitled to dividends when, as and if declared
by Frontier's Board of Directors out of funds legally available therefor.
Under Alabama law, Frontier may not pay dividends if, after giving it effect,
the corporation would not be able to pay its debts as they become due in the
usual course of business, or the corporation's total assets would be less than
the sum of its total liabilities plus the amount that would be needed, if the
corporation were to be dissolved at the time of the distribution, to satisfy
the preferential rights upon dissolution of shareholders who have superior
preferential rights upon dissolution. The sources of funds for payment of
dividends by Frontier are its subsidiaries. Because its primary subsidiaries
are banks, payments made by such subsidiaries to Frontier are limited by law
and regulations of the bank regulatory authorities.

There are certain limitations on the payment of dividends to Frontier by VN
Bank. The amount of dividends that a subsidiary national bank like VN Bank may
declare in one year, without approval of the OCC, is the sum of the bank's net
profits for that year and its retained net profits for the preceding two
years. Under the rules of the OCC, the calculation of net profits is more
restrictive under certain circumstances. In addition, the declaration and
payment of dividends by the Frontier Board is subject to the rules and
regulations of the FRB governing the amount of dividends which may be paid to
shareholders, the manner in which dividends are paid, and the methods, if any,
by which capital stock and surplus may be retired and reduced.

Frontier Common Stock. Holders of Frontier Common are entitled to receive
ratable such dividends as may be declared at the discretion of Frontier's
Board of Directors. Payment of dividends depend upon the restrictions on the
payment of dividends by banks as described above, Frontier's earnings and
financial condition and other relevant factors.

Holders of Frontier Common are entitled to one vote per share on all matters
brought before the stockholders. The holders of Frontier Class A and Class B
Common Stock do not have the right to cumulative voting in the election of
directors. Holders of Frontier stock are not entitled to any preemptive rights
to subscribe for any additional securities which may be issued.

In the event of liquidation, holders of the Frontier Common will be entitled
to receive pro rata any assets distributable to stockholders with respect to
the shares held by them, after payment of indebtedness and such preferential
amounts as may be required to be paid to the holders of any Frontier Preferred
or Directors' Qualifying Stock.

Frontier Preferred Stock. Under Frontier's Certificate of Incorporation, the
Frontier Board is authorized without further shareholder action to provide for
the issuance of up to 10,000,000 shares of Frontier Preferred, in one or more
series, by adoption of a resolution or resolutions providing for the issuance
of such series and

43
<PAGE>

determining the relative rights and preferences of the shares of any such
series with respect to the rate of dividend, call provisions, payments on
liquidation, sinking fund provisions, conversion privileges and voting rights
and whether the shares shall be cumulative, non-cumulative or partially
cumulative. The holders of Frontier Preferred would not have any preemptive
right to subscribe for any shares issued by Frontier. Holders Frontier
Preferred do not have any voting rights except as to matters in respect to
which they shall at the time be indefeasibly vested by statute with such
right.

It is not possible to state the actual effect of the authorization and
issuance of Frontier Preferred upon the rights of holders of Frontier Common
unless and until Frontier's Board determines the price and specific rights of
the holders of a series of Frontier Preferred. Such effects might include, (i)
restrictions on dividends on Frontier Common Stock if dividends on Frontier
Preferred have not been paid; (ii) dilution of the voting power of Frontier
Common Stock to the extent that Frontier Preferred has voting rights, or that
any Frontier Preferred series is convertible into Frontier Common; (iii)
dilution of the equity interest of Frontier Common unless the Frontier
Preferred is redeemed by Frontier; and (iv) Frontier Common not being entitled
to share in Frontier's assets upon liquidation until satisfaction of any
liquidation preference granted Frontier Preferred.

The ability of Frontier to issue Frontier Preferred could be used as an
anti-takeover mechanism to impede an attempt by a third party to acquire a
majority of the outstanding voting stock of Frontier.

Directors' Qualifying Stock. Under Frontier's Certificate of Incorporation,
the Board of Directors is authorized without further shareholder action to
provide for the issuance of up to 25 shares of Directors Qualifying Stock with
a par value of $1,000 per share. Only directors of Frontier or its
subsidiaries are eligible to purchase Directors Qualifying Stock. The purchase
price shall be $1,000 per share. Upon the termination of the shareholder's
term as a director of Frontier or subsidiary, Frontier shall redeem all such
shares of Directors Qualifying Stock held by such director for a price of
$1,000 per share. Such shares shall not carry any voting rights except as to
matters in respect to which the shareholder shall at the time be indefeasibly
vested by statute with such rights.

The purpose of issuing the Directors Qualifying Stock is to meet the
requirement of the National Banking Act that all directors of a national bank
own stock with a par value of at least $1,000. The Bank may provide a bonus to
the directors sufficient to acquire such stock.

44
<PAGE>

INFORMATION CONCERNING FNSC

SELECTED FINANCIAL DATA FOR FNSC

The following table presents for FNSC, on a historical basis, selected
financial data and ratios. This information is based on the consolidated
financial statements of FNSC included herein and should be read in conjunction
therewith and with the notes thereto. See, "Index to Consolidated Financial
Statements of First National Sylacauga Corporation."

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
---------------- ----------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------ ------ ------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY INCOME
STATEMENTS:
Interest income......... 3,066 2,618 11,085 8,785 6,180 5,309 4,899
Less interest expense... 1,315 1,077 4,695 3,352 2,076 1,626 1,531
Net interest income..... 1,751 1,541 6,390 5,433 4,104 3,683 3,368
Provision for loan
losses................. 192 121 662 564 (98) 393 32
Net interest income
after provision for
loan losses............ 1,559 1,420 5,728 4,869 4,202 3,290 3,336
Noninterest income...... 332 327 1,222 885 704 614 591
Adjusted gross income
after provision for
loan losses............ 1,891 1,747 6,950 5,754 4,906 3,904 3,927
Noninterest expense..... 1,646 1,251 5,036 4,297 3,315 2,958 2,717
Income before income
taxes.................. 245 496 1,914 1,457 1,591 946 1,210
Applicable income
taxes.................. 166 171 562 410 410 157 257
Net income.............. 79 325 1,352 1,047 1,181 789 953
COMMON STOCK DATA:
Net income per common
share.................. 0.78 3.21 13.38 10.35 11.67 12.91 9.20
Cash dividends declared
per common share....... 1.00 1.00 5.00 5.00 5.00 4.25 4.25
SELECTED AVERAGE
BALANCES:
Total assets............ 135,582 119,633 126,397 101,743 75,055 69,079 68,518
Total loans............. 96,597 84,008 88,559 67,667 42,049 33,787 33,089
Investment securities... 23,650 23,515 23,100 25,789 24,186 26,893 26,335
Earning assets.......... 124,903 108,850 113,484 95,130 67,557 62,156 61,370
Deposits................ 104,244 97,170 97,092 82,597 62,399 57,937 55,770
Shareholders' equity.... 14,079 13,922 14,132 12,186 10,929 10,552 11,222
Shares outstanding
(thousands)............ 101 101 101 101 101 103 108
SELECTED PERIOD-END
BALANCES:
Total assets............ 139,935 121,993 134,966 121,547 79,577 71,783 67,927
Total loans............. 95,293 84,574 96,631 82,874 48,457 36,890 32,733
Investment securities... 29,031 22,911 24,125 25,516 26,591 25,978 27,163
Earning assets.......... 128,056 109,691 123,276 108,437 75,248 63,486 61,870
Deposits................ 105,449 96,670 100,858 94,499 60,487 57,889 56,020
Shareholders' equity.... 14,042 13,175 14,068 13,119 12,666 11,152 11,484
Shares outstanding
(thousands)............ 101 101 101 101 101 102 103
SELECTED RATIOS:
Return on average
equity(1)(2)........... 8.76% 9.47% 9.57% 8.59% 10.81% 7.48% 8.49%
Return on average
assets(1)(2)........... 0.91% 1.10% 1.07% 1.03% 1.57% 1.14% 1.39%
Net interest margin (not
a fully taxable
equivalent)(1)(2)...... 5.69% 5.74% 5.63% 5.71% 6.07% 5.93% 5.49%
Allowance for loan
losses to loans........ 1.20% 1.10% 1.16% 1.11% 0.80% 1.12% 1.50%
Net charge-offs to
average loans(1)(2).... 0.68% 0.56% 0.53% 0.71% -0.56% 1.18% 0.07%
Average equity to
average assets......... 10.38% 11.64% 11.18% 11.98% 14.56% 15.28% 16.38%
</TABLE>
- --------
(1) Information for three months ended March 31, 1998 and 1997 has been
annualized.
(2) One time salary expense of FNSC of $300,000 during the first quarter of
1998. Annualized income was adjusted to reflect this one time expense.
$1,233 was used for annualized income for the period ending March 31,
1998.

45
<PAGE>

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

GENERAL

FNSC's Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the information and
tables which follow. For a discussion of liquidity and the impact of
inflation, see "Capital Resources/Liquidity" below.

SUMMARY

Net income for 1997 was $1,352,000, a 29.13% increase from FNSC's net income
of $1,047,000 in 1996. Net income for 1996 was $1,047,000 or 11.35% lower than
the 1995 net income of $1,181,000. Net income per common share for 1997 was
29.28% higher than in 1996 and in 1996 was 11.31% lower compared to 1995.
Pretax income for 1997 increased $457,000 or 31.37% from 1996 and decreased
$134,000 or 8.42% from 1995 to 1996.

The increase in net income from 1996 to 1997 is primarily due to the overall
increase in total loans. The decrease in net income from 1995 to 1996 was
attributable to the increase in provision for loan losses.

The first three months of 1998, reflect net income of $79,000, or 75.6% less
than the net income for the same period of 1997. This decrease resulted from
the corporation entering into an agreement with a senior executive whereby he
received a lump sum settlement of $300,000. In addition while the loan
portfolio quality has remained adequate, senior management has continued to
contribute additional funds to the Loan Loss Reserve.

For the remainder of 1998, FNSC will continue its objectives of maintaining
asset quality and providing superior service to its customers. Our strategic
plan in the short run will include expanding Frontier Financial Services to
new markets in Alabama as well as providing Internet banking to new and
existing customers. We will continue to be the leader in our market by
providing the best value in deposit services and loan products.

FINANCIAL CONDITION

Earning Assets. Average earning assets in 1997 increased $18,354,000 or
19.29% over 1996 primarily due to increase in loan volume. Average earning
assets in 1996 increased by $27,573,000 or 40.81% over 1995 due primarily to
increase in loan volume.

Loan Portfolio. FNSC's average loans for 1997 were $88,559,000, an increase
of 30.87% over $67,667,000 in average loans for 1996. Loan growth for 1997 was
primarily funded through borrowed funds. Real estate loans increased by
$9,105,000 or 20.5% over 1996. Average loans for 1996 increased by $25,618,000
over 1995, an increase of 60.92%. The increase in ending balance from 1996 to
1997 and 1995 to 1996 was consistent with the increase in average balances.

Investment Portfolio. FNSC's investment securities portfolio decreased by
5.45% or $1,391,000 from 1996 to 1997. The balance in the securities portfolio
decreased in order to fund loan growth. The 1996 investment securities
portfolio decreased by $1,075,000 over 1995, a decrease of 4.04%.

FNSC maintains an investment strategy of seeking portfolio yields within
acceptable risk levels, as well as providing liquidity. FNSC maintains one
classification of investment securities: "Available for Sale." The "Available
for Sale" securities are carried at fair market value. At year end 1997,
unrealized gains in the "Available for Sale" portfolio amounted to $477,000.
At the end of 1996 the unrealized gains in the "Available for Sale" portfolio
amounted to $286,000.

Deposits. FNSC's average deposits increased $14,495,000 or 17.55% from 1996
to 1997. Average deposits increased $20,198,000 or 32.37% from 1995 to 1996.
From year-end 1996 to year-end 1997, total

46
<PAGE>

deposits increased $6,359,000 or 6.73%. The largest portion of growth during
1997 was in interest bearing deposits that increased $5,720,000 or 7.19%. This
is due to an increase in brokered deposits. From 1996 to 1997 interest-bearing
transaction deposits decreased $307,000 or 1.52%, savings deposits decreased
$916,000 or 7.23%, other time deposits of less than $100,000 increased
$3,076,000 or 9.73% and time deposits of $100,000 or more increased $3,866,000
or 25.61%. From 1995 to 1996 interest-bearing transaction deposits increased
$6,773,000 or 50.6%, savings deposits increased $4,076,000 or 47.14%, other
time deposits of less than $100,000 increased $18,021,000 or 91.04%, and time
deposits of $100,000 or more increased by $2,329,000 or 35.43%. This was due
to the purchase of deposits from Citizens Bank of Talladega (successor-in-
interest to Talladega Savings and Loan Association) and the acquisition of
City Bank of Childersburg.

Capital Resources. Stockholders' equity increased $949,000 or 7.23% to
$14,068,000 as of December 31, 1997, compared with $13,119,000 at the end of
1996, and $12,666,000 at year end 1995. Net income for fiscal year ended 1997
accounted for all the increase in stockholders' equity during 1997.

FNSC purchased 120 shares of treasury stock during 1997.

BALANCE SHEET MANAGEMENT

The primary function of asset/liability management is not only to assure
adequate liquidity in order for FNSC to meet the needs of its customer base,
but to maintain an appropriate balance between interest-sensitive assets and
interest-sensitive liabilities so that FNSC can profitably deploy its assets.
Both assets and liabilities are considered sources of liquidity funding and
both are, therefore, monitored on a daily basis.

The liability portion of the balance sheet provides liquidity through
various interest bearing and noninterest bearing deposit accounts. At year
end, FNSC had $10,000,000 of federal funds available and a line of credit from
The Federal Home Loan Bank of which approximately $7,208,000 was available and
unused.

RESULTS OF OPERATIONS

Net interest income for 1997 increased $983,000 or 17.47% over 1996,
$1,286,000 or 29.62% in 1996 over 1995 and $340,000 or 8.50% in 1995 over
1994. The increase in the net interest income from 1996 to 1997 is primarily
due to an increase in total loans. The increase in the net interest income
from 1995 to 1996 was attributable to an increase in total loans.

Interest income increased $2,326,000 or 25.90% in 1997 from 1996, and
increased $2,562,000 or 39.95% in 1996 from 1995. Interest income produced by
the loan portfolio increased $2,517,000 or 36.12% in 1997 from 1996, and
increased $2,521,000 or 56.68% in 1996 from 1995. Interest income on
investment securities decreased $207,000 or 10.78% from 1996 to 1997, and
increased $17,000 or .89% from 1995 to 1996. The decrease in investment income
from 1996 to 1997 is due to a decrease in average investment securities.

47
<PAGE>

Interest income-other increased by $54,000 for the three months ended March
31, 1998 over March 31, 1997. This was due to a $3,329,000 or 251% increase in
the average balance of interest-bearing deposits and federal funds sold as of
March 31, 1998 as compared to March 31, 1997.

Total interest expense increased by $1,343,000 or 40.07% in 1997 from 1996,
and increased $1,276,000 or 61.46% in 1996 from 1995. The interest expense
increase from 1996 to 1997 is primarily due to an increase in borrowed funds
and brokered CD's.

The trend in net interest income is commonly evaluated in terms of average
rates using the net interest margin and the interest rate spread. The net
interest margin, or the net yield on earning assets is computed by dividing
fully taxable equivalent net interest income by average earning assets. This
ratio represents the difference between the average yield on average earning
assets and the average rate paid for all funds used to support those earning
assets. The net interest margin decreased 10 basis points in 1997 to 5.82%.
The net cost of funds, defined as interest expense divided by average-earning
assets, increased 62 basis point from 3.52% in 1996 to 4.14% in 1997. The
yield on earning assets increased 52 basis points to 9.96% in 1997 from 9.44%
in 1996.

The interest rate spread measures the difference between the average yield
on earning assets and the average rate paid on interest bearing sources of
funds. The interest rate spread eliminates the impact of noninterest bearing
funds and gives a direct perspective on the effect of market interest rate
movements. During recent years, the net interest margins and interests rate
spreads have been under intense pressure to maintain historical levels, due in
part to tax laws that discouraged investment in tax-exempt securities and
intense competition for funds with non-bank institutions. As a result of
higher market interest rates during 1997, the interest rate spread increased
17 basis points from 1996 to 1997. Lower market interest rates during 1996
resulted in an interest rate spread decrease of 39 basis points on a tax
equivalent basis from 1995.

Senior management makes recommendations monthly to the board of directors as
to charge-offs. Senior management reviews the allowance for possible loan
losses on a monthly basis. FNSC's policy is to discontinue interest accrual
when payment of principal and interest is 90 days or more in arrears.

While it is FNSC's policy to charge off in the current period the loans in
which a loss is considered probable, there are additional risks of future
losses which cannot be quantified precisely or attributed to particular loans
or classes of loans. Because these risks include the state of the economy,
management's judgment as to the adequacy of the allowance is necessarily
approximate and imprecise.

Management believes that the $1,148,000 for March 31, 1998 and $1,120,000
for December 31, 1997 in the allowance for loan losses was adequate to absorb
known risks in the portfolio. No assurance can be given, however, that adverse
economic circumstances will not result in increased losses in the loan
portfolio, and require greater provisions for possible loan losses in the
future.

48
<PAGE>

Nonperforming Assets. Nonperforming assets include nonperforming loans and
foreclosed real estate held for sale. Nonperforming loans include loans
classified as nonaccrual or renegotiated. FNSC's policy is to place a loan on
nonaccrual status when it is contractually past due 90 days or more as to
payment of principal or interest. At the time a loan is placed on nonaccrual
status, interest previously accrued but not collected is reversed and charged
against current earnings. Recognition of any interest after a loan has been
placed on nonaccrual is accounted for on a cash basis.

FNSC had nonperforming assets at March 31, 1998 of $983,000 and $850,000 as
of December 31, 1997.

Noninterest Income. Noninterest income consists of revenues generated from a
broad range of financial services and activities including fee-based services
and profits and commissions earned through credit life insurance sales and
other activities. In addition, gains or losses realized from the sale of
investment portfolio securities are included in noninterest income. Total
noninterest income increased by $5,000 or 1.53% for the three months ended
March 31, 1998 as compared to 1997. Total noninterest income increased
$337,000 or 38.08% in 1997 compared to 1996. Noninterest income for 1996
showed an increase of $181,000 or 25.71% from 1995.

Fee income from service charges on deposit accounts increased $215,000 or
29.25% in 1997 following a $113,000 or 18.17% decrease in 1996. Increased
insufficient fund fees associated with totally free checking accounts resulted
in an increase in service charge income in 1996 and 1997. Nonrecurring items
of noninterest income include sales of investment portfolio securities.
Included in other noninterest income are gains on sales of securities of
$8,000 and $25,000 in 1997 and 1996. In 1997 FNSC had $169,000 of income from
earnings in cash surrender value of various life insurance policies. There
were no gains in 1996.

Noninterest Expenses. Noninterest expense for 1997 increased $739,000 or
17.2% from 1996 and increased $982,000 or 29.62% in 1996 from 1995 and
increased $357,000 or 12.07% in 1995 from 1994. Salaries and employee benefits
in 1997 increased $344,000 or 19.47% from 1996 to a total of $2,111,000 at
year-end 1997. Salaries and employee benefits in 1996 increased $315,000 or
21.69% from 1995. The increase in 1997 and 1996 was due to the acquisition of
City Bank of Childersburg which brought an additional 22 employees to the
Bank.

Occupancy expense increased by $44,000 or 19.47% in 1997 following an
increase of $54,000 or 31.40% in 1996. Occupancy expense was higher in 1997
due to the addition of additional fixed assets through the acquisition of City
Bank.

All other noninterest expenses increased by $352,000 or 15.28% in 1997
following a $611,000 or 36.11% increase in 1996. Included in all other
noninterest expense is printing, telephone, postage and legal and audit fees.
The increase in 1997 and 1996 was due to the acquisition of City Bank.

EFFECTS OF INFLATION AND CHANGING PRICES

Inflation generally increases the cost of funds and operating overhead, and
to the extent loans and other assets bear variable rates, the yields on such
assets. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on the performance of
a financial institution than the effects of general levels of inflation.
Although interest rates do not necessarily move in the same direction or to
the same extent as the prices of goods and services, increases in inflation
generally have resulted in increased interest rates. At the beginning of 1996,
the Federal Reserve Board decreased interest rates 75 basis points in an
effort to enhance growth in the economy through monetary policy. The prime
rate remained unchanged through 1996. Until March of 1997, the prime rate was
8.25%, but at that time it increased to 8.50% where it remains today. In
addition, inflation affects financial institutions' cost of goods and services
purchased, the cost of salaries and benefits, occupancy expense and similar
items. Inflation and related increases in interest rates generally decrease
the market value of investments and loans held and may adversely affect
liquidity, earnings and stockholders' equity. Mortgage originations and
refinancings tend to slow as interest rates increase and can reduce FNSC's
earnings from such activities and the income from the sale of residential
mortgage loans in the secondary market.

49
<PAGE>

NET INTEREST INCOME

The following table sets forth weighted yields earned by FNSC on its earning
assets and the weighted average rates paid on its deposits and other interest-
bearing liabilities for the years indicated and certain other information:

<TABLE>
<CAPTION>
1997 1996
---------------------------- ----------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELDS/ AVERAGE INCOME/ YIELDS/
BALANCE EXPENSE RATES BALANCE EXPENSE RATES
-------- --------- -------- -------- --------- --------
(FULLY TAXABLE EQUIVALENT) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Loans................. 88,559 9,486 10.71% 67,667 6,969 10.30%
U.S. Treasury and
other U.S. government
agencies............. 14,314 930 6.50% 16,105 1,060 6.58%
Other debt and equity
securities........... 1,199 93 7.76% 1,504 104 6.91%
States and
municipalities....... 7,587 690 9.09% 8,180 756 9.24%
Interest bearing
balance.............. 208 11 5.29% 167 8 4.79%
------- ------ ----- ------- ----- -----
Federal funds sold.... 1,617 95 5.88% 1,507 82 5.44%
======= ====== ===== ======= ===== =====
Total interest-
earning
assets/interest
income............. 113,484 11,305 9.96% 95,130 8,979 9.44%
Cash and due from
banks.................. 4,792 -- -- 4,718 -- --
Other assets............ 9,209 -- -- 2,606 -- --
Allowance for loan
losses................. (1,088) -- -- (711) -- --
------- ------ ----- ------- ----- -----
Total assets........ 126,397 11,305 8.94% 101,743 8,979 8.83%
======= ====== ===== ======= ===== =====
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Interest-bearing
liabilities:
Demand deposits....... 21,229 625 2.94% 17,242 494 2.87%
Savings............... 9,919 239 2.41% 8,924 230 2.58%
Time deposits......... 50,389 2,887 5.73% 41,604 2,251 5.41%
Other borrowings...... 14,473 944 6.52% 6,076 377 6.20%
------- ------ ----- ------- ----- -----
Total interest-
bearing
liabilities/interest
expense............ 96,010 4,695 4.89% 73,846 3,352 4.54%
======= ====== ===== ======= ===== =====
Non-interest-bearing
demand deposits........ 15,555 -- -- 14,827 -- --
Other liabilities....... 700 -- -- 884 -- --
Shareholders' equity.... 14,132 -- -- 12,186 -- --
------- ------ ----- ------- ----- -----
Total liabilities
and shareholders'
equity............. 126,397 4,695 3.71% 101,743 3,352 3.29%
======= ====== ===== ======= ===== =====
Net interest earnings... -- 6,610 -- -- 5,627 --
Net interest on
interest-earning
assets................. -- -- 5.82% -- -- 5.92%
Taxable equivalent
adjustment:
Investment
securities........... -- 167 -- -- 178 --
Loans................. -- 53 -- -- 16 --
</TABLE>

50
<PAGE>

<TABLE>
<CAPTION>
AVERAGE VOLUME CHANGE IN VOLUME AVERAGE RATE
--------------------- ------------------- -------------------
1997 1996 1995 1997-96 1996-95 1997 1996 1995
------- ------ ------ -------- -------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans................... 88,559 67,667 42,049 20,892 25,618 10.71% 10.30% 10.58%
U.S. government agen-
cies................... 14,314 16,105 13,854 (1,791) 2,251 6.50% 6.58% 6.33%
Other debt and equity
securities............. 1,199 1,504 975 (305) 529 7.76% 6.91% 5.44%
States and municipali-
ties................... 7,587 8,180 9,357 (593) (1,177) 9.09% 9.24% 9.95%
Federal funds sold...... 1,617 1,507 898 110 609 5.88% 5.44% 5.68%
Interest bearing bal-
ances................. 208 167 424 41 (257) 5.29% 4.79% 3.54%
Total Interest Income.. 113,484 95,130 67,557 18,354 27,573 9.96% 9.44% 9.50%
Interest-bearing liabil-
ities:
Demand deposits......... 21,229 17,242 12,979 3,987 4,263 2.94% 2.87% 2.60%
Savings................. 9,919 8,924 7,336 995 1,588 2.41% 2.58% 2.69%
Time certificates....... 50,389 41,604 28,426 8,785 13,178 5.73% 5.41% 5.29%
Other borrowings........ 14,473 6,076 622 8,397 5,454 6.52% 6.20% 5.95%
Total interest-bearing
liabilities........... 96,010 73,846 49,363 22,164 24,483 4.89% 4.54% 4.21%
</TABLE>

<TABLE>
<CAPTION>
INCOME/EXPENSE VARIANCE 1997 1996
------------------ --------------- ----------------- -----------------
1997 1996 1995 1997-96 1996-95 VOLUME RATE MIX VOLUME RATE MIX
------ ----- ----- ------- ------- ------ ---- --- ------ ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest bearing assets:
Loans................... 9,486 6,969 4,448 2,517 2,521 2,152 279 86 2,710 (117) (72)
U.S. government agen-
cies................... 930 1,060 919 (130) 141 (118) (14) 2 142 (7) 6
Other debt & equity..... 93 104 53 (11) 51 (21) 13 (3) 29 14 8
States and municipali-
ties................... 690 756 931 (66) (175) (55) (12) 1 (117) (66) 8
Federal funds sold...... 95 82 51 13 31 6 7 0 35 (2) (1)
Interest Bearing
DDA(2)................. 11 8 15 3 (7) 2 1 0 (9) 5 (3)
Total interest-earning
assets................ 11,305 8,979 6,417 2,326 2,562 1,966 273 87 2,790 (173) (55)
Interest-bearing liabil-
ities:
Demand deposits......... 625 494 336 131 158 114 14 3 111 36 11
Savings................. 239 230 198 9 32 26 (15) (2) 43 (9) (2)
Time certificates....... 2,887 2,251 1,505 636 746 475 133 28 697 33 16
Other borrowings........ 944 377 37 567 340 521 19 27 325 2 14
Total interest-bearing
liabilities........... 4,695 3,352 2,076 1,343 1,276 1,006 259 79 1,175 62 39
Net interest earnings... 6,610 5,627 4,341 983 1,286 960 14 9 1,615 (235) (94)
</TABLE>

LIABILITY AND ASSET MANAGEMENT

The asset/liability committee, which consists of the president and one other
director and certain other officers is charged with monitoring the liquidity
and funds position of FNA Bank. The Committee regularly reviews (a) the rate
sensitivity position on a three-month, six-month, and one-year time horizon;
(b) loans to deposit ratios; and (c) average maturity for certain categories
of liabilities.

51
<PAGE>

The following table represents an interest sensitivity profile for FNSC as
of December 31, 1997 The table represents a static point in time and does not
consider other variables, such as changing spread relationships or interest
rate levels. "Net repricing gap" is the difference between total earning
assets and total interest bearing liabilities repricing in any given period
and "cumulative gap" is the sum of the net repricing gap from period to
period.

Since interest-bearing demand deposits and savings accounts do not reprice
on a regular basis, these balances have been included in the "After 5 years
and non-rate sensitive" category.

<TABLE>
<CAPTION>
AFTER 5 YEARS
WITHIN AFTER 3 MONTHS AFTER 12 MONTHS AND NON-RATE
3 MONTHS WITHIN 12 MONTHS WITHIN 5 YEARS SENSITIVE TOTAL
-------- ---------------- ---------------- -------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans................... 23,428 10,358 32,701 30,144 96,631
Investment securities... 47 1,121 6,140 16,817 24,125
Federal funds sold--
interest bearing DDA... 2,520 2,520
Total earning
assets............. 25,995 11,479 38,841 46,961 123,276
INTEREST-BEARING
LIABILITIES:
Interest-bearing
deposits............... 13,875 21,027 21,093 29,468 85,463
Other borrowed funds.... 0 8,250 7,950 592 16,792
Total interest-
bearing
liabilities........ 13,875 29,277 29,043 30,060 102,255
RATE SENSITIVITY GAP:
Net repricing gap....... 12,120 (17,798) 9,798 16,901 21,021
Net repricing gap as a
percentage of total
earning assets......... 9.83% (14.44)% 7.94% 13.71% 17.05%
Cumulative gap.......... 12,120 (5,678) 4,120 21,021 21,021
Cumulative gap as a
percentage of total
earning assets......... 9.83% (4.61)% 3.34% 17.05% 17.05%
</TABLE>

DEPOSITS

FNSC's primary sources of funds are interest bearing deposits. The following
table sets forth FNSC's deposit structure at December 31, in each of the last
two years.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------- ------
(IN THOUSANDS)
<S> <C> <C>
Non interest-bearing deposits:
Individuals, partnerships and corporations....................... 15,505 14,410
U. S. Government and states and political subdivisions........... 65 131
Certified and official checks.................................... 17 406
Total non-interest-bearing deposits............................ 15,587 14,947
Interest-bearing deposits:
Interest-bearing demand accounts................................. 19,853 20,160
Saving accounts.................................................. 11,757 12,673
Certificates of deposit, less than $100,000...................... 34,701 31,625
Certificates of deposit, more than $100,000...................... 18,960 15,094
Total interest-bearing deposits................................ 85,271 79,552
Total deposits................................................. 100,858 94,499
</TABLE>

52
<PAGE>

The following table presents a breakdown by category of the average amount
of deposits and the average rate paid on deposits for the periods indicated:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Non interest-bearing deposits...................... 15,555 0 14,827 0
Savings deposits................................... 9,919 2.41% 8,924 2.58%
Time deposits...................................... 50,389 5.73% 41,604 5.41%
Interest-bearing demand deposits................... 21,229 2.94% 17,242 2.87%
Total deposits................................... 97,092 3.86% 82,597 3.60%
</TABLE>

At December 31, 1997, time deposits greater than $100,000 aggregated
approximately $18,960,000. The following table indicates, as of December 31,
1997, the dollar amount of $100,000 or more by the time remaining until
maturity (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------
3 MONTHS 3 TO 12 1 TO 5 OVER 5
OR LESS MONTHS YEARS YEARS
-------- ------- ------ ------
<S> <C> <C> <C> <C>
Time certificates............................. 5,788 7,791 5,381 0
</TABLE>

ASSETS

The management of FNSC considers many criteria in managing assets, including
creditworthiness, diversification and structural characteristics, maturity and
interest rate sensitivity. The following table sets forth FNSC's interest-
earning assets by category at December 31, in each of the last two years.

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Interest-bearing deposits with banks............................ 480 47
Investment securities........................................... 24,125 25,516
Federal funds sold.............................................. 2,040 0
Loans:
Real estate................................................... 53,509 44,404
Commercial and other.......................................... 43,122 38,470
Total loans................................................. 96,631 82,874
Interest-earning assets......................................... 123,276 108,437
</TABLE>

53
<PAGE>

INVESTMENT PORTFOLIO

FNSC has classified all investment securities as available for sale. The
classification of certain investment securities as available for sale is
consistent with FNSC's investment philosophy of maintaining flexibility to
manage the portfolio. Approximately $293,000 of unrealized gain was included
in shareholders' equity related to the available for sale investment
securities as of 12/31/97.

At year end 1997, obligations of the United States Government or its
agencies and obligations of states and political subdivisions, including
Fannie Mae, Freddie Mac, Ginnie Mae and Small Business Administration loans
represented approximately 93.55% of the total investment portfolio. The
following table presents the carrying amounts of FNSC's investment portfolio
at December 31, in each of the last two years.

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
AVAILABLE FOR SALE:
U.S. Government agencies...................................... 11,678 15,691
States and political subdivisions............................. 10,890 7,996
Other securities.............................................. 1,557 1,829
Total available for sale.................................... 24,125 25,516
Total investment portfolio.................................. 24,125 25,516
</TABLE>

The following table presents the maturity distribution of the carrying value
and estimated market value of FNSC's investment portfolio at December 31,
1997. The weighted average yields on these instruments are presented based on
final maturity. Yields on obligations of states and political subdivisions
have not been adjusted to a fully-taxable equivalent basis.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------
ESTIMATED WEIGHTED
CARRYING VALUE MARKET VALUE AVERAGE YIELD
-------------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
AVAILABLE FOR SALE:
U.S. Government agencies:
Due within 1 year.................. 47 47 8.15%
Due after 1 year but within 5
years............................. 1,413 1,413 6.11%
Due after 5 years but within 10
years............................. 7,674 7,674 6.48%
Due after 10 years................. 2,544 2,544 6.50%
Total............................ 11,678 11,678 6.45%
States and political subdivisions:
Due within 1 year.................. 126 126 6.42%
Due after 1 year but within 5
years............................. 1,759 1,759 7.94%
Due after 5 years but within 10
years............................. 3,553 3,553 7.13%
Due after 10 years................. 5,452 5,452 5.42%
Total............................ 10,890 10,890 6.43%
Other:
Due after 10 years................. 1,557 1,557 7.50%
Total investments available for
sale............................ 24,125 24,125 6.51%
</TABLE>

INVESTMENT POLICY

The objective of FNSC's investment policy is to invest funds not otherwise
needed to meet the loan demand of FNA Bank's market area to earn the maximum
return for FNA Bank, yet still maintain sufficient liquidity to

54
<PAGE>

meet fluctuations in FNA Bank's loan demand and deposit structure. In doing
so, FNSC balances the market and credit risk against the potential investment
return, makes investments compatible with the pledge requirements of FNA
Bank's deposits of public funds, maintains compliance with regulatory
investment requirements, and assists the various public entities with their
financing needs. The Board of Directors is ultimately responsible for
investment policy and oversight of all security transactions, but day to day
responsibility for execution rests with the Chairman and/or the designated
Investment Officer. All investment transactions occurring since the previous
board of directors' meeting are reviewed by the board at its next monthly
meeting. Significant limitations on the investment officer's authority are
imposed through the policy and all investment activity is confined to the
parameters as set out under the Code of Federal Regulations, Title 12. The
investment policy allows portfolio holdings to include short-term securities
purchased to provide FNA Bank's needed liquidity and longer term securities
purchased to generate stable income for FNA Bank during periods of interest
rate fluctuations.

LOAN PORTFOLIO

The following table sets forth the composition of FNSC's loan portfolio at
December 31 in each of the past two years (in thousands).

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1997 1996
------ ------
<S> <C> <C>
Real estate loans:
Construction and land development............................... 9,819 9,505
Secured by residential properties .............................. 43,690 34,899
Total real estate loans....................................... 53,509 44,404
Commercial and industrial loans................................. 14,616 13,333
Other consumer loans.............................................. 27,157 23,627
All other loans................................................... 1,349 1,510
Total loans................................................... 96,631 82,874
Less:
Allowance for loan losses......................................... 1,120 924
Net loans..................................................... 95,511 81,950
</TABLE>

The following table summarizes certain information concerning FNSC's loan
portfolio (dollars in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------
% OF
AMOUNT TOTAL LOANS
------ -----------
<S> <C> <C>
Real estate loans:
Construction and land development.......................... 9,819 10.16%
Secured by residential properties.......................... 43,690 45.21%
Total real estate loans.................................. 53,509 53.37%
Commercial and industrial loans.............................. 14,616 15.13%
Other consumer loans......................................... 27,157 28.10%
All other loans.............................................. 1,349 1.40%
Total loans.............................................. 96,631 100.00%
Less:
Allowance for loan losses.................................... 1,120 (1.16%)
Net loans................................................ 95,511 98.84%
</TABLE>

55
<PAGE>

The following table sets forth maturities of the loan portfolio and the
sensitivity to interest rate changes of FNSC's loan portfolio (in thousands).

<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------
MATURITY RANGE
--------------------------------------
ONE YEAR ONE THROUGH OVER
OR LESS FIVE YEARS FIVE YEARS TOTAL
-------- ----------- ---------- ------
<S> <C> <C> <C> <C>
Loan maturity:
Real estate construction loans........ 5,807 0 0 5,807
Real estate mortgage loans............ 843 5,674 41,185 47,702
Commercial and industrial loans....... 10,219 3,221 286 13,726
All other loans....................... 3,624 24,783 989 29,396
Total loans......................... 20,493 33,678 42,460 96,631
Loan interest rate sensitivity:
Selected loans with:
Predetermined interest rates.......... 7,057 28,554 21,607 57,218
Floating or adjustable interest
rates................................ 28,946 4,486 5,981 39,413
Total............................... 36,003 33,040 27,588 96,631
</TABLE>

LOAN POLICY

All lending activities of FNA Bank are under the direct supervision and
control of the FNSC Board with secondary authority vested in the Executive
Committee. The Senior Loan Committee, which consists of the chairman, the
president, three other directors, one of which is the senior lending officer,
enforces loan authorizations for each officer, decides on loans exceeding such
limits, services all requests for officer credits to the extent allowable
under current laws and regulations, administers all problem credits, and
determines the allocation of funds for each lending division. The loan
portfolio consists primarily of real estate, commercial, small business,
residential construction and consumer installment loans. Maturity of term
loans is normally limited to 15 years. Conventional real estate loans may be
made up to 80% of the appraised value or purchase cost of the real estate for
no more than a 30-year term. Installment loans are based on the earning
capacity and vocational stability of the borrower.

The FNA Bank board at its regularly scheduled meetings reviews all new loans
made the preceding month. Loans which are 30 days or more past due are
reviewed monthly.

The Loan Committee of FNA Bank periodically reviews the loan portfolio,
particularly nonaccrual and renegotiated loans. Each loan officer is
responsible for monitoring and collecting his or her own loan portfolio. Loan
Committee review may result in a determination that a loan should be placed on
a nonaccrual status for income recognition, subject to FNSC Board approval. In
addition, to the extent that management identifies potential losses in the
loan portfolio and reduces the book value of such loans through charge-offs,
to their estimated collectible value, FNSC's policy is to classify as
nonaccrual any loan on which payment of principal or interest is 90 days or
more past due, where there is adequate collateral to cover principal and
accrued interest and the loan is in the process of collection. No concessions
are granted and late fees are collected. In addition, a loan will be
classified as nonaccrual if, in the opinion of the Loan Committee, based upon
a review of the borrower's or guarantor's financial condition, collateral
value or other factors, payment is questionable, even though payments are not
90 days or more past due.

56
<PAGE>

The large number of consumer installment loans and the relatively small
dollar amount of each makes an individual review impracticable. It is FNSC's
policy to charge off any consumer installment loan which is past due 120 days
or more.

CREDIT RISK MANAGEMENT AND RESERVE FOR LOAN LOSSES

Credit risk and exposure to loss are inherent parts of the banking business.
Management seeks to manage and minimize these risks through its loan and
investment policies and loan review procedures. Management establishes and
continually reviews lending and investment criteria and approval procedures
that it believes reflect the risk sensitive nature of FNSC. The loan review
procedures are set to monitor adherence to the established criteria and to
ensure that on a continuing basis such standards are enforced and maintained.

Management's objective in establishing lending and investment standards is
to manage the risk of loss and to provide for income generation through
pricing policies.

The loan portfolio is regularly reviewed and management determines the
amount of loans to be charged-off. In addition, such factors as FNSC's
previous loan loss experience, prevailing and anticipated economic conditions,
industry concentrations and the overall quality of the loan portfolio are
considered. While management uses available information to recognize losses on
loans and real estate owned, future additions to the allowance may be
necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the allowances for losses on loans and real estate owned.
Such agencies may require FNSC to recognize additions to the allowances based
on their judgments about information available at the time of their
examinations. In addition, any loan or portion thereof which is classified as
a "loss" by regulatory examiners is charged-off.

<TABLE>
<CAPTION>
<S> <C>
Real Estate Loans................................................ $ 10,000
Commercial and industrial loans.................................. 20,000
All other loans.................................................. 640,558
--------
Total.......................................................... $670,558
========
</TABLE>

Management's estimate of charge-offs for 1998 is based upon historical data as
well as the composition of the loan portfolio at December 31, 1997. Management
believes the allowance for loan losses is adequate to absorb such anticipated
charge-offs.

Rules and formulas relative to the adequacy of the reserve, although useful
as guidelines to management, are not rigidly applied. The reserve for loan
losses was $1,148,000 as of March 31, 1998 or 1.20% of loans

57
<PAGE>

outstanding. The reserve for loan losses was $1,120,000 at year end 1997, or
1.16% of loans outstanding compared to $924,000, or 1.11%, and $387,000, or
.80% at year ends 1996 and 1995, respectively. The following table presents
data related to FNSC's reserve for loan losses for the periods indicated
(dollars in thousands).

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR-TO-DATE
------------------ --------------
MARCH 31, 1998 1997 1996
------------------ ------ ------
<S> <C> <C> <C>
Total loans:
Average outstanding during the period..... 96,597 88,559 67,667
Allowance for loan losses:
Balance at beginning period............... 1,120 924 388
Charge-offs:
Real estate loans......................... 0 0 157
Installment loans......................... 214 494 363
Credit cards and related plans............ 9 48 50
Commercial and all other loans............ 0 223 53
Recoveries:
Real estate loans......................... 0 2 6
Installment loans......................... 54 256 96
Credit cards and related plans............ 3 11 0
Commercial................................ 2 30 34
Net charge-offs............................. 164 466 487
Provision charged to income................. 192 662 564
Adjustment due to City Bank acquisition..... 459
Balance at end of period.................... 1,148 1,120 924
Net charge-offs to average loans outstand-
ing........................................ .17% .53% .71%
Allowance for loan losses to average loans
outstanding................................ 1.19% 1.26% 1.36%
Allowance for loan losses to net charge-
offs....................................... 7.0 2.40 1.90
</TABLE>

The following table sets forth information with respect to nonperforming
loans of FNSC on the dates indicated. Accrual of interest is discontinued when
there is reasonable doubt as to the full, timely collections of interest or
principal. When a loan becomes contractually past due ninety (90) days with
respect to interest or principal, it is reviewed and a determination is made
as to whether it should be placed on nonaccrual status. When a loan is placed
on nonaccrual status, all interest previously accrued but not collected is
reversed against current period interest income. Income on such loans is then
recognized only to the extent that cash is received and where the future
collection of principal is probable. Interest accruals are resumed on such
loans only when they are brought fully current with respect to principal and
interest and when, in the judgment of management, the loans are estimated to
be fully collectible as to principal and interest. Restructured loans are
those loans on which concessions in terms have been granted because of a
borrower's financial difficulty. Interest is generally accrued on such loans
in accordance with the new terms. The information provided below is as of
March 31, 1998 and as of December 31 for the years indicated (dollars in
thousands).

<TABLE>
<CAPTION>
DECEMBER 31,
THREE MONTHS ENDED ---------------
MARCH 31, 1998 1997 1996
------------------ ------ -------
<S> <C> <C> <C>
Nonaccrual loans.......................... 983 850 1,108
Restructured loans........................ 0 0 0
Loans past due 90 days...................... 335 748 396
Nonperforming loans as a percentage of net
loans before allowance for loan losses..... 1.03% .88% 1.33%
Allowance for loan losses as a percentage of
nonperforming loans........................ 117% 132% 83%
</TABLE>

58
<PAGE>

CAPITAL RESOURCES/LIQUIDITY

Liquidity. Of primary importance to depositors, creditors and regulators is
the ability to have readily available funds sufficient to repay fully maturing
liabilities. FNSC's liquidity, represented by cash and cash due from banks, is
a result of its operating, investing and financing activities. In order to
insure funds are available at all times, FNSC devotes resources to projecting
on a monthly basis the amount of funds which will be required and maintains
relationships with a diversified customer base so funds are accessible.
Liquidity requirements can also be met through short-term borrowings or the
disposition of short-term assets which are generally matched to correspond to
the maturity of liabilities.

FNSC has a formal liquidity policy, and in the opinion of management, its
liquidity levels are considered adequate. Neither FNSC nor FNA Bank is subject
to any specific regulation liquidity requirements imposed by regulatory
authorities. FNA Bank is subject to general FDIC guidelines which do not
require a minimum level of liquidity. Management believes its liquidity ratios
meet or exceed these guidelines. Management does not know of any trends or
demands which are reasonably likely to result in liquidity increasing or
decreasing in any material manner.

The following table sets forth liquidity ratios for the periods indicated:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Average loans to average deposits.......................... 91.21% 81.92% 67.39%
</TABLE>

CAPITAL ADEQUACY

Capital adequacy refers to the level of capital required to sustain asset
growth over time and to absorb losses. The objective of FNSC's management is
to maintain a level of capitalization that is sufficient to take advantage of
profitable growth opportunities while meeting regulatory requirements. This is
achieved by improving profitability through effectively allocating resources
to more profitable businesses, improving asset quality, strengthening service
quality, and streamlining costs. The primary measures used by management to
monitor the results of these efforts are the ratios of average equity to
average assets, average tangible equity to average tangible assets, and
average equity to net loans. The Federal Reserve Board has adopted capital
guidelines governing the activities of bank holding companies. These
guidelines require the maintenance of an amount of capital based on risk-
adjusted assets so that categories of assets with potentially higher credit
risk will require more capital backing than assets with lower risk. In
addition, banks and bank holding companies are required to maintain capital to
support, on a risk-adjusted basis, certain off-balance sheet activities such
as loan commitments.

59
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
(DOLLARS IN
THOUSANDS)
<S> <C>
CAPITAL:
Tier I capital:
Stockholders' equity............................................ 15,062
Less disallowed intangibles..................................... 1,504
Total Tier I capital.......................................... 13,558
Tier II capital:
Qualifying debt
Qualifying allowance for loan losses
Total Tier II capital......................................... 1,120
Total capital................................................. 14,678
Risk-adjusted assets.............................................. 96,069
Quarterly average assets.......................................... 133,787
RATIOS:
Tier I capital to risk-adjusted assets............................ 14.11%
Tier II capital to risk-adjusted assets........................... 1.17%
Total capital to risk-adjusted assets............................. 15.28%
Leverage--Tier I capital to quarterly average assets less
disallowed intangibles........................................... 10.25%
</TABLE>

<TABLE>
<CAPTION>
TOTAL RISK- TIER I RISK-
BASED BASED LEVERAGE
CAPITAL RATIO CAPITAL RATIO RATIO
------------- ------------- ------------
<S> <C> <C> <C>
Well-capitalized....................... 10% or above 6% or above 5% or above
Adequately capitalized................. 8% or above 4% or above 4% or above
Undercapitalized....................... Less than 8% Less than 4% Less than 4%
Significantly undercapitalized......... Less than 6% Less than 3% Less than 3%
Critically undercapitalized............ -- -- 2% or less
</TABLE>

On March 31, 1998, FNSC exceeded the regulatory minimums and qualified as a
well-capitalized institution under the regulations.

60
<PAGE>

BUSINESS OF FNSC

GENERAL

FNSC, incorporated in Delaware, is a bank holding company that commenced
operations in 1984. Its principal asset is the capital stock of FNA Bank. At
March 31, 1998, FNSC had total assets of $140 million and stockholders' equity
of $14 million. FNA Bank, FNSC's wholly-owned subsidiary, is a national
banking association. FNA Bank provides a variety of banking and financial
services to businesses and individuals. FNA Bank's headquarters is located at
43 North Broadway, Sylacauga, Alabama 35150. In addition, FNA Bank has 2 bank
branches located in Sylacauga and Childersburg in Talladega County and 7
finance company offices located in Sylacauga, Pell City, Ashland, Oxford,
Lanett, Gadsden and Tallahassee.

EMPLOYEES

As of March 31, 1998, FNSC and its subsidiaries had approximately 84 full-
time employees. The employees are not represented by a collective bargaining
unit. FNSC believes its relationship with its employees to be good.

CUSTOMERS

It is the opinion of management that there is no single customer or
affiliated group of customers whose deposits, if withdrawn, would have a
materially adverse effect on the business of FNSC.

PROPERTIES

FNSC has its principal offices in its headquarters building at 43 North
Broadway, Sylacauga, Alabama 35150, which is owned and occupied by FNA Bank.
FNA Bank also operates two branches located in Sylacauga and Childersburg. FNA
Bank owns one of these branch locations and leases its supermarket branch
inside of Bruno's.

LEGAL PROCEEDINGS

The nature of its business generates a certain amount of litigation against
FNSC and FNA Bank involving matters arising in the ordinary course of
business. None of the legal proceedings currently pending or threatened to
which FNSC or FNA Bank is a party or to which any of their properties are
subject will have, in the opinion of management of FNSC, a material effect on
the business or financial condition of FNSC or FNA Bank.

One such matter is an action filed on December 5, 1997, against Frontier
Financial Services, Inc., a subsidiary of FNA Bank, in the Circuit Court of
Talladega County, Alabama, styled Betty Swain, individually, and on behalf of
herself and all others situated vs. Frontier Financial Services, Inc., Case
Number CV 97-539. The Complaint alleges that Frontier violated the Alabama
Mini-Code provisions relating to permissible finance charges. It states an
alternative theory of unjust enrichment or conversion with regard to the
alleged excessive finance charges. Finally, the Complaint contains a count
seeking class certification.

The company's attorneys have moved to dismiss the allegations made in the
Complaint. The Motion to Dismiss has not yet been ruled upon. In addition, the
company acknowledged receipt of the Complaint as notice under Alabama Code
Section 5-19-19(a)(1)(ii) (1975, as amended), and responded to said Complaint
as a request for refund for finance charges assessed in an amount in excess of
the amounts authorized by the Alabama Mini-Code. The company researched the
claims made in the above referenced lawsuit, and it appeared that a non-
systemic error occurred with regard to Ms. Swain's account and that as a
result, she was charged an excess finance charge of $4.78. This unintentional
overcharge has been credited to Ms. Swain's account together with interest
thereon at the contract rate. In an effort to address any other unintentional
financing errors, the company reviewed all of their open accounts and
determined a total overcharge of $204.94, which the company has already
credited to customer accounts together with interest. The company's attorneys
have shared this information with opposing counsel and requested that opposing
counsel dismiss this litigation as their client, the named plaintiff

61
<PAGE>

Ms. Swain, and their potential clients, the purported class, have no damages.
To date, opposing counsel has been unwilling to dismiss this lawsuit. It is
too early to predict the potential liability, if any, in the case since it has
only recently been filed. However, the company will vigorously defend all
claims against it in this action.

We are currently defending an action filed on April 13, 1998, against FNA
Bank in the Circuit Court of Talladega County, Alabama, styled Willie F.
Datcher, Jr., Dorothy Jean Datcher, Nettie L. Datcher, Marvin Datcher, Marcus
Datcher, Willie E. Datcher, Elton Datcher, and Victor Datcher vs. City Bank of
Childersburg; First National Bank of Childersburg; Jimmy Clark Taylor. Case
Number CV 98-160. The Complaint alleges that beginning in May 1990,
defendants, by and through their officers, agents and employees, including
Jimmy Clark Taylor, engaged in a series of fraudulent acts and
misrepresentations designed to defraud the plaintiffs out of considerable
monies. It also alleges that Jimmy Clark Taylor created notes payable on the
"Datcher accounts" and converted monies to his own use. It is too early to
predict the potential liability, if any, in the case since it has only
recently been filed. All internal investigations into this matter show no
proof of the allegations. A request has been sent to City Bank of
Childersburg's insurance company requesting coverage by the insurance that was
in place prior to FNA Bank's acquiring City Bank of Childersburg.

BANKING

FNA Bank conducts its business as a commercial bank, with special emphasis
in retail banking, including the acceptance of checking and savings deposits,
and the making of commercial, real estate, personal, home improvement,
automobile and other installment and term loans. It also offers collections,
notary public services, and other customary bank services to its customers.

FINANCIAL SERVICES

FNSC provides ancillary financial services through two wholly-owned
subsidiaries of FNA Bank. Frontier Financial Services, Inc., an Alabama
corporation, formed in 1993, is a consumer finance company located in seven
Alabama cities. The Frontier Agency, Inc. is an insurance agency that was
recently formed and will operate out of the Childersburg Branch of FNA Bank.
Childersburg has a population of under 5,000.

COMPETITION

All phases of FNSC's banking activities are highly competitive. FNA Bank
competes actively with five regional and community banks, as well as finance
companies, credit unions and other financial institutions located in its
service area.

SUPERVISION AND REGULATION

The discussion of SUPERVISION AND REGULATION UNDER BUSINESS OF VNC is also
applicable to FNSC and FNA Bank.

EFFECT OF GOVERNMENTAL POLICIES

The discussion of EFFECT OF GOVERNMENTAL POLICIES UNDER BUSINESS OF VNC is
also applicable to FNSC and FNA Bank.

62
<PAGE>

MANAGEMENT OF FNSC

DIRECTORS AND EXECUTIVE OFFICERS

The following table provides certain information regarding directors of
FNSC.

<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION FOR
NAME AGE POSITIONS SINCE PREVIOUS 5 YEARS
---- --- ------------------- --------- ------------------------------------
<S> <C> <C> <C> <C>
Harry I. Brown, Jr...... 50 President, CEO, 1986 Banker
Director (President
and CEO of FNA
Bank)
Harry I. Brown, Sr...... 77 Chairman of the 1950 Banker
Board, (Chairman of
the Board of FNA
Bank)
Jule D. Beasley......... 79 Director 1967 Chairman of the Board, President and
Treasurer of Floyd & Beasley
Transfer Co.
Wesley L. Bowden, Jr.... 62 Director 1982 President, Bowden Oil Co.
William A. Edwards...... 74 Director 1972 Retired
Mark A. Payne........... 33 Director (Executive 1996 Banker
VP of FNA Bank)
Wanda Presley........... 43 (Senior VP of FNA N/A Banker
Bank)
James T. Pursell........ 68 Director 1987 Chairman and CEO Pursell
Technologies, Inc.
Ruby W. Phillips........ 81 Director 1981 Retired
Dr. Shirley K. Spears... 55 Director 1994 Library Director, B.B. Comer
Memorial Library
Raymond C. Styres....... 60 Director 1987 President, Talco Yarns, Inc.
Horace Roger White...... 76 Director 1966 Retired
</TABLE>

No director of FNSC is related to any other director except Mr. Brown, Jr.
who is the son of Mr. Brown, Sr. No director of FNSC is a director or
executive officer of another bank holding company, bank, savings and loan
association, or credit union. The following is a brief description of the
business experience of the executive officers of FNSC.

Harry I. Brown, Jr., age 50, is currently president and chief executive
officer of FNA Bank and FNSC. He is a fourth generation banker, his great-
grandfather having started the bank in 1901. Mr. Brown's banking career began
in 1974 with what is now Regions Bank in Montgomery, Alabama, and he has
worked with FNA Bank since 1977. He is licensed as a life insurance agent as
well as a general securities representative (series 7 and 63). A graduate of
The University of Alabama in 1970 with a bachelors degree in banking, he
returned to the University in 1973 after a two year tour as an officer in the
U.S. Army. In 1974 he was awarded a master of arts in advertising and public
relations and subsequently started his banking career with Regions. While
living in Montgomery, he continued his education with Auburn University at
Montgomery and earned an MBA in 1977. Banking schools attended include Stonier
at Rutgers University, and the BAI Graduate School of Banking at the
University of Wisconsin.

63
<PAGE>

Since returning to Sylacauga in 1977, Mr. Brown has been quite active in
community and church work. He continues to work with local scouting units and
has received the District Award of Merit and the Silver Beaver Award. He is
immediate past president of the Sylacauga Chamber of Commerce and has served
as president of the Sylacauga Rotary Club, is a Paul Harris Fellow and is in
his 20th year of perfect attendance. Since 1991, he has been a board member of
Christian Financial Concepts, a ministry started by nationally known speaker
and author Larry Burkett. Other community activities include, past president
and drive chairman of the Sylacauga United Way, past church assignment
secretary of the Sylacauga Camp of Gideons International, and past president
of the local University of Alabama Alumni Association. In 1981, the Sylacauga
Jaycees named Mr. Brown the Outstanding Young Man of Sylacauga.

Harry I. Brown, Sr., 77, is chairman of the board of both FNSC and First
National--America's Bank. He has been employed by the bank for over 50 years
having been hired upon graduation from the University of Alabama in 1948. Mr.
Brown became president and CEO in 1966 and served in that capacity until
February, 1998, when he was succeeded by his son. He serves on the board of
directors of Brown Insurance Agency, Inc., Central Land Company, and two
subsidiaries of the bank, Frontier Financial Services, Inc. and the Frontier
Agency, Inc. Mr. Brown has served his community as chairman of the
Administrative Board and member of the Board of Trustees for First United
Methodist Church. He has also been an active member of the B.B. Comer Library
Board, United Way of Sylacauga, University of Alabama Alumni Association,
Sylacauga Chamber of Commerce, Willow Point Golf and Country Club and Shoal
Creek Country Club.

Mark A. Payne, age 33, is a board member and the Executive Vice President of
FNA Bank and the President of Frontier Financial Services, Inc., a subsidiary
of FNA Bank. Mr. Payne was employed by the Associates Financial Services, one
of the largest consumer finance companies in the world, from 1987 to 1992
serving in various management assignments. While employed with the Associates
Financial Services, Mr. Payne won several corporate awards including the
Horizon Award given to the manager with the brightest future and was also
awarded membership twice into the President's Club. In 1992, he began working
for FNA Bank as an Assistant vice President and was promoted to Vice President
in 1993, Senior Vice President in 1995, and to Executive Vice President in
1998. In 1994, Mr. Payne founded Frontier Financial Services, Inc., a
subsidiary of FNA Bank, which has now grown to 7 branches with over 10 million
in assets. He is a graduate of Auburn University in Montgomery with a BS in
Finance and has completed several banking courses including the Commercial
Lending School at the University of Oklahoma. His civic activities include
Treasurer of the Sylacauga City Commercial Development Authority; he is
actively involved in Little League and is the past President and Zone Chairman
of the Sylacauga Lions Club. He is a member of the Coola Valley Country Club,
and a member of First United Methodist Church.

Wanda P. Presley, age 43, is the Senior Vice President of Operations and
Finance of FNA Bank She has 25 years of banking experience having begun her
banking career in 1973 as a teller at which is now Colonial Bank in Heflin. In
1986, she became head teller at SouthTrust Bank of Cleburne County until
moving to Sylacauga in 1987. She then worked for SouthTrust Bank of Talladega
County until 1989 when she was offered a job as head teller and assistant vice
president at FNA Bank. She was promoted to Vice president of branch operations
in 1993 and vice president of finance in 1994. In February of 1997, she became
senior vice president of operations and finance. Mrs. Presley has attended
various banking courses with the American Institute of Banking and the Alabama
Bankers Association. She graduated from the BAI School of Banking's three year
Financial Management Program at the University of Wisconsin. Mrs. Presley is a
member of the Sylacauga Service League and a former member of the Sylacauga
Business and Professional Women's Club (BPW). While a member of the BPW, she
served as the corresponding secretary. In 1994, Mrs. Presley was named the
1993-94 Sylacauga Business and Professional Woman of the year.

TRANSACTIONS WITH MANAGEMENT

FNSC has and expects to have in the future banking and other business
transactions in the ordinary course of its banking business with directors,
officers, and 10% beneficial owners of FNSC and their affiliates, including
members of their families or corporations, partnerships, or other
organizations in which such officers or directors

64
<PAGE>

have a controlling interest, on substantially the same terms (including price,
or interest rates and collateral) as those prevailing at the time for
comparable transactions with unrelated parties. Any such banking transactions
will not involve more than the normal risk of collectibility nor present other
unfavorable features to FNSC.

SECURITIES LAW LIMITATIONS

Insofar as indemnification for liabilities arising under the Securities Act,
may be permitted to directors, officers and controlling persons of FNSC, FNSC
has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.

THE FNSC BOARD AND ITS COMMITTEES

Directors of FNSC and FNA Bank are elected annually and each director holds
office until his or her successor is elected and qualified. Committees of the
board of FNA Bank and their members include Executive Committee (Messrs.
Brown, Sr. and Jr., Bowden, Payne and Styres); Senior Loan Committee (Messrs.
Brown, Sr. and Jr., Bowden, Payne and Styres); Assets/Liability Committee
(Messrs. Brown, Sr. and Jr., Payne); Audit Committee (Mr. Pursell, Mrs.
Phillips, Dr. Spear); and Personnel Committee (Board as a whole).

EXECUTIVE COMPENSATION

The Summary Compensation Table provides information for the years indicated
about the Chief Executive Officer ("CEO") and the other four most highly
compensated officers of FNSC and FNA Bank. No other officers of FNSC or FNA
Bank received compensation in excess of $100,000 for the year ended December
31, 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION ($)
--------------------------------------------------------------
OTHER ANNUAL INCENTIVE PLAN ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION PAYOUTS COMPENSATION
- --------------------------- ---- ------- ------ ------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Harry I. Brown, Jr. 1997 114,849 15,431 6,865 150 7,200
President and COO
</TABLE>

COMPENSATION OF DIRECTORS

During 1997, each director received $400 per meeting attended. Each member
of the Executive Loan Committee received an additional $100 for each meeting
attended. Directors are not compensated for committee meetings.

65
<PAGE>

OWNERSHIP OF FNSC COMMON STOCK

As of March 31, 1998, FNSC's records indicated the following number of shares
were beneficially owned by (i) all persons who own beneficially 5% or more of
the FNSC Common Stock, (ii) each person who is a director or a named executive
officer of FNSC and (iii) all directors and executive officers as a group.

<TABLE>
<CAPTION>
AMOUNT AND NATURE PRO FORMA
NAME AND ADDRESS OF OF BENEFICIAL OWNERSHIP PERCENT PERCENT OF
BENEFICIAL OWNER (NUMBER OF SHARES) OF CLASS (1) CLASS (2)
-------------------- ------------------------ ------------- -----------
<S> <C> <C> <C>
Harry I. Brown, Sr..........
Sylacauga, Alabama 14,899(3) 14.75% 9.11%
Jule D. Beasley.............
Sylacauga, Alabama 2,222 2.20% 1.36%
Wesley L. Bowden, Jr. ......
Sylacauga, Alabama 714 *% *%
Harry I. Brown, Jr. ........
Sylacauga, Alabama 904(4) *% *%
William A. Edwards..........
Sylacauga, Alabama 1,000 *% *%
Mark A. Payne...............
Sylacauga, Alabama 100 *% *%
Ruby W. Phillips............
Sylacauga, Alabama 4,737 4.69% 2.89%
James T. Pursell............
Sylacauga, Alabama 100 *% *%
Dr. Shirley K. Spears.......
Sylacauga, Alabama 110 *% *%
Raymond C. Styres...........
Sylacauga, Alabama 100 *% *%
Horace Roger White..........
Sylacauga, Alabama 400 *% *%
Officers and Directors as a
Group...................... 25,286 25.03% 15.45%
</TABLE>
- --------
* Less than 1%.
(1) 100,995 shares outstanding
(2)Assuming the exchange ratio in the Merger is 13:1 and 1,312,935 shares are
issued as a result of the Merger.
(3) Controlled through the Harry I. Brown Sr. Family, LLC.
(4) Includes 80 shares controlled as Custodian of Minor.

66
<PAGE>

DESCRIPTION OF FNSC CAPITAL STOCK

FNSC is authorized by its charter (the "Charter") to issue a maximum of
200,000 shares of common stock, $10.00 par value (the "FNSC Common") of which
100,995 were outstanding at March 31, 1998.

Common. The holders of FNSC Common are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders. Cumulative
voting is not allowed. Holders of FNSC Common are entitled to receive ratably
such dividends, if any, as may be declared by the FNSC Board out of funds
legally available therefore and, in the event of liquidation, dissolution or
winding up of FNSC, will be entitled to share ratably in all assets remaining
after payment of liabilities. Holders of FNSC Common have no preemptive
rights. Holders of FNSC Common have no right to convert their Common into any
other securities. All outstanding shares of FNSC are fully paid and
nonassessable.

Holders of FNSC Common are entitled to receive ratably such dividends, if
any, as may be declared by the Board from funds legally available whether in
cash or stock; provided, however, that the declaration and payment of
dividends by the FNSC Board shall be subject to the rules and regulations of
the FRB governing the amount of dividends which may be paid to shareholders,
the manner in which dividends are paid, and the methods, if any, by which
capital stock and surplus may be retired and reduced.

EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS

FNSC is a Delaware corporation subject to the provisions of the DGCL.
Frontier is an Alabama corporation subject to the provisions of the ABCA.
Shareholders of FNSC, whose rights are governed by FNSC's Certificate of
Incorporation and Bylaws and the DGCL, will, upon consummation of the Merger,
become shareholders of Frontier. As shareholders of Frontier, their rights
will then be governed by Frontier's Articles of Incorporation and Bylaws and
ABCA.

Except as set forth below, there are no material differences between the
rights of a Frontier shareholder under Frontier's Articles of Incorporation
and Bylaws and ABCA and the rights of a FNSC shareholder under FNSC's
Certificate of Incorporation and Bylaws and the DGCL. The following is a
summary and does not purport to be a complete discussion of, and is qualified
in its entirety by reference to, the ABCA and DGCL and the Certificate of
Incorporation or Articles of Incorporation, as the case may be, and Bylaws of
each corporation.

AUTHORIZED CAPITAL STOCK

Frontier's Articles of Incorporation authorize the issuance of up to
10,000,000 shares of Class A Common Stock ($0.01 par value each), 10,000,000
shares of Class B Common Stock ($0.0001 par value each), 10,000,000 shares of
Preferred Stock ($0.0001 par value each), and 25 shares of Director's
Qualifying stock ($1,000 par value each), of which 814,800 shares of Class A
Common Stock ("Frontier Common") and no shares of Director's Qualifying Stock
were issued and outstanding as of the Frontier Record Date.

FNSC's Certificate of Incorporation authorizes the issuance of up to 200,000
shares of FNSC Common Stock ($10.00 par value each) ("FNSC Common"), of which
100,995 shares were issued and outstanding as of the FNSC Record Date.

SPECIAL MEETINGS OF SHAREHOLDERS

FNSC's Bylaws provide that special meetings of shareholders may be called
for any purpose at any time by the President, a majority of the FNSC Board, or
a majority of the shareholders.

Under Frontier's Bylaws, special meetings of the shareholders may be called
at any time by the President, a majority of the Board of Directors, the
Chairman of the Board, or by the holders of at least ten percent of all votes
entitled to be cast on any issue proposed to be considered at such meeting.

67
<PAGE>

AMENDMENT OF BYLAWS

FNSC's Bylaws provide that they may be amended by the directors or the
shareholders at any regular or special meeting if notice of such amendment is
included in notice of the meeting. Frontier's Bylaws provide that they may be
amended by majority vote of the Board of Directors; provided, however, that
the Frontier Board cannot amend what constitutes a quorum, or change any
provision with respect to the removal of Directors or the filling of vacancies
in the Board resulting from the removal of a director by the Shareholder.

VOTING REQUIREMENTS

Under the ABCA, mergers or share exchanges, and the sale of substantially
all assets outside the ordinary course of business must be approved by the
affirmative vote of not less than two-thirds (2/3) of the outstanding shares
entitled to vote on a matter, unless the Articles of Incorporation
specifically provide for a lesser percentage. Alabama law further provides
that no shareholder vote is required to approve a merger (i) by the parent if
an 80% subsidiary is merged into the parent or (ii) by the surviving
corporation, if the securities to be issued in the merger comprise less than
20% of the class outstanding immediately prior to the merger, the shares to be
issued are not superior in rights to any class of outstanding securities of
the surviving corporation and the Articles of Incorporation will not be
amended. The Articles of Incorporation of Frontier do not provide for a lesser
majority for approval of a merger, sale or exchange.

Unless the Articles of Incorporation provide for a greater majority, the
approval of an amendment of the Articles of Incorporation of an Alabama
corporation requires the affirmative vote of a majority of the outstanding
shares entitled to vote on the matter. The Articles of Incorporation of
Frontier do not provide for a percentage greater than a majority for approval
of an amendment.

If more than one class of stock is entitled to vote on a matter certain
provisions of the ABCA relating to voting groups may become applicable.

Under the Alabama Constitution, the issuance of preferred stock and the
increase in stock or bonded indebtedness of an Alabama corporation requires
approval of the shareholders. The issuance of preferred stock, generally,
requires approval of two-thirds (2/3) of the outstanding shares. The increase
in stock or bonded indebtedness of an Alabama corporation requires approval of
persons holding the larger amount in value of the outstanding stock after 30
days written notice.

Frontier's Bylaws provide that director's elections will be decided by
plurality vote and that all other questions not governed by the Articles of
Incorporation, the Alabama Constitution or the ABCA will be decided by the
affirmative vote of the majority of shares represented at the meeting and
entitled to vote on the matter.

By comparison, the Delaware law requires only the affirmative vote of a
majority of all outstanding voting shares to effect a merger, an amendment to
the Certificate of Incorporation or the sale of substantially all assets.
Delaware law includes provisions similar to the Alabama statute that exempt
surviving corporations from obtaining shareholder approval of a merger of a
subsidiary into a parent (except that Delaware requires 90% ownership by the
parent) and a merger involving the issuance of less than 20% of the
outstanding stock of the surviving corporation. Delaware law has no comparable
provisions requiring shareholder approval for the issuance of preferred stock
or bonded indebtedness.

In general, FNSC's Bylaws require approval of a majority of the stock
represented at the meeting and entitled to vote on the question.

APPRAISAL AND DISSENTERS' RIGHTS

Both Alabama and Delaware law provide rights of appraisal for shareholders
who desire to dissent from the terms of a merger or consolidation. Alabama law
also provides appraisal rights for a share exchange, a sale of all or
substantially all of the corporate assets other than in the regular course of
business, and certain amendments

68
<PAGE>

to a corporation's Articles of Incorporation. Under these statutes, a
shareholder who properly dissents from the terms of a transaction in which he
has appraisal rights may demand that the corporation pay him: (i) in Delaware,
the fair value of the shares exclusive of any element of value arising from
the accomplishment or expectation of the transaction; or (ii) in Alabama, the
value of the shares immediately prior to the effectuation of the corporate
action on which the vote was taken, excluding any appreciation or depreciation
in anticipation of such corporate action unless exclusion would be
inequitable. The procedures for perfecting appraisal rights are different for
Alabama and Delaware corporations. For a description of appraisal rights under
DGCL and dissenters' rights pursuant to ABCA, see "The Merger--Dissenter's
Rights."

NOTICE OF SHAREHOLDER MEETING

Under Delaware and Alabama law, shareholders are generally entitled to
written notice of a shareholders' meeting not less than ten (10) days nor more
than sixty (60) days prior to the meeting. Meetings called to vote on the
merger, consolidation or sale of substantially all of the assets of the
corporation, require advance written notice of not less than twenty (20) days
under Delaware law and meetings which are called to vote on the increase of
bonded indebtedness of an Alabama corporation require at least thirty (30)
days advance written notice.

DIVIDENDS

The legal ability of the Board of Directors to declare and pay dividends on
the outstanding common stock is different for Alabama and Delaware
corporations. Delaware corporations may pay dividends to the extent of its
surplus (retained earnings and paid in capital) and if no surplus is
available, dividends may be paid to the extent of the net profits of the
corporation for the current and/or preceding fiscal year, if there is no
deficiency in the amount of capital represented by all outstanding classes of
preferred stock.

Alabama, on the other hand, tests the legality of a distribution on the
effect it has on the solvency of the corporation. A distribution may not be
made if after giving it effect: (i) the corporation would not be able to pay
its debts as they become due in the ordinary course of business; or (ii) the
corporation's total assets would be less than the sum of its total liabilities
plus (unless the articles of incorporation permit otherwise) the amount that
would be needed, if the corporation were to be dissolved at the time of
distribution, to satisfy preferential rights that are superior in dissolution
to those receiving the distribution.

SHAREHOLDER CONSENTS

Both Alabama and Delaware law, unless otherwise provided in the Article or
Certificate of Incorporation, allow shareholders to act without a meeting or
notice of a meeting by written consent. While Delaware law provides for such
written consent signed by the shareholders of at least the minimum number of
votes which would be necessary to authorize such action at a meeting of all
eligible shareholders, Alabama law requires unanimous written consent. FNSC's
and Frontier's Bylaws authorize action by written consent.

LIMITATION OF LIABILITY OF DIRECTORS

Both Alabama and Delaware law permit the Articles or Certificate of
Incorporation or Bylaws to include a provision which, subject to certain
exceptions described below, eliminates the liability of a director to the
shareholders for monetary damages for any breach of duty as a director. This
provision does not, however, eliminate liability of such director (i) for
violations of his duty of loyalty to the corporation or its shareholders, (ii)
for acts or omissions not in good faith or involving intentional misconduct or
a knowing violation of law, (iii) for unlawful dividends and distributions, or
(iv) for any transactions from which the director derived an improper personal
benefit. The Articles of Incorporation of Frontier include such a provision
and the Bylaws of FNSC include such a provision.

69
<PAGE>

REMOVAL OF DIRECTORS

Frontier's Bylaws provide that any or all directors may be removed, with or
without cause, by majority vote of the shareholders at a special meeting
called for that purpose. FNSC's Bylaws contain no such provision for the
removal of directors.

VALIDITY OF COMMON STOCK

A legal opinion to the effect that the shares of Frontier Common when issued
in accordance with the Merger Agreement, will be validly issued, fully paid
and nonassessable, has been rendered by Baker, Donelson, Bearman & Caldwell, a
Professional Corporation, Nashville, Tennessee, counsel to Frontier.

EXPERTS

The Consolidated Financial Statements for December 31, 1997 and 1996, of
Valley National Corporation included herein have been so included in reliance
on the report of Schauer, Taylor, Cox & Edwards, P.C., independent certified
public accountants, and for December 31, 1995 and 1994, in reliance on the
report of Brantley, Stephens & Boucher, independent certified public
accountants, given on the authority of said firms as experts in auditing and
accounting.

The Consolidated Financial Statement of First National Sylacauga Corporation
included herein have been so included in reliance on the report of Jackson
Thornton & Co., P.C., independent certified public accountants, given on the
authority of said firm as experts in auditing and accounting.

70
<PAGE>

INDEX TO FINANCIAL INFORMATION

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pro Forma Financial Information (December 31, 1997)....................... F-2
Consolidated Financial Statement of Valley National Corporation (December
31, 1997 and 1996)....................................................... F-5
Consolidated Financial Statement of Valley National Corporation (December
31, 1995 and 1994)....................................................... F-29
Consolidated Financial Statements of First National Sylacauga Corporation
(December 31, 1997 and 1996)............................................. F-45
</TABLE>

F-1
<PAGE>

VALLEY NATIONAL CORPORATION

PRO FORMA BALANCE SHEET--PARENT COMPANY ONLY

DECEMBER 31, 1997

The following unaudited pro forma balance sheet sets forth the assets,
liabilities and stockholders' equity of Valley National Corporation on a pro
forma basis as if the proposed transaction had been made as of December 31,
1997. This statement should be read in conjunction with other financial
statements appearing elsewhere herein.

<TABLE>
<CAPTION>
PRO FORMA
BALANCE PROPOSED TRANSACTION BALANCE
SHEET DEBIT CREDIT SHEET
------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Cash.................................. 0 280(1) 950
720(3) 50(5)
Investment in subsidiary.............. 7,778 15,355(1) 23,133
Goodwill (discount of acquired compa-
ny).................................. 374(6) (374)
Receivable from subsidiary............ 877(1) 877
Organizational costs (5 yr amortiza-
tion)................................ 11 50(5) 61
Dividends receivable.................. 341 341
Other assets.......................... 0 52(1) 52
----- ------ ------ ------
Total Assets........................ 8,130 17,334 424 25,040
===== ====== ====== ======
Long-term debt........................ 0 2,250(1) 2,250
Dividends payable..................... 341 341
Other liabilities..................... 11 246(1) 257
Common stock--Class A................. 1 1,200(1) 2,128
927(4)
Capital surplus....................... 7,173 1,009(1) 19,167
11,192(2)
720(3)
927(4)
Retained earnings..................... 461 12,976(1) 461
1,410(2)
11,566(6)
Treasury stock at cost................ 1,410(1) 0
1,410(2)
Unrealized gains (losses) on available
for sale securities net of tax....... 143 293(1) 436
----- ------ ------ ------
Total Liabilities and Stockholders'
Equity............................. 8,130 15,313 32,223 25,040
===== ====== ====== ======
32,647 32,647
====== ======
</TABLE>
- --------
(1) Historical balances of acquired holding company--parent only
(2) Retirement of treasury stock of acquired company (19,005 shares)
(3) Effect of stock option exercise; 72,000 shares at $10 per share.
(4) Adjustment of stock to reflect 13:1 swap of acquiring company stock at
book value equivalent shares (1,312,935 shares)
<TABLE>
<S> <C>
(Adjusted Book value per share of
Valley National Corporation........ 8,498,330/814,800 = 10.43 per share)
(Book value per share of First
National Sylacauga Corporation..... 14,067,818/100,995 = 139.29 per share)
(5) Payment of estimated merger costs
(6) Purchase method accounting adjustments. Record fair value discount of
acquired company equal to $373,682
</TABLE>

F-2
<PAGE>

VALLEY NATIONAL CORPORATION

PRO FORMA STATEMENT OF CONDITION--CONSOLIDATED

DECEMBER 31, 1997

The following unaudited pro forma consolidated statement of condition sets
forth the assets, liabilities and stockholders' equity of Valley National
Corporation assuming consummation of the merger as of December 31, 1997. The
acquisition is recorded using the pooling of interests method of accounting
for assets acquired and liabilities assumed. See the Notes to Pro Forma
Consolidated Statement of Condition.

<TABLE>
<CAPTION>
PRO FORMA
CONSOLIDATED CONSOLIDATED
BALANCE PROPOSED TRANSACTION BALANCE
SHEET DEBIT CREDIT SHEET
------------ -------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks...... 3,497 720(3) 9,625
5,458(1) 50(5)
Investment securities........ 26,694 24,126(1) 50,820
Federal funds sold........... 553 1,480(1) 2,033
Loans, net................... 41,750 95,534(1) 137,284
Premises and equipment, net.. 2,261 2,255(1) 4,516
Intangibles
Organizational cost (5 yr.
amort.)................... 11 50(5) 61
Premium on purchased depos-
its (15 yr. amort.)....... 0 220(1) 220
Goodwill (15 yr. amort).... 0 1,284(1) 1,284
Goodwill (15 yr. accre-
tion)..................... 374(6) (374)
Other assets................. 744 4,777(1) 5,521
------ ------- ------- -------
Total Assets............. 75,510 135,904 424 210,990
====== ======= ======= =======
LIABILITIES AND EQUITY
Total deposits............... 61,015 100,864(1) 161,879
FHLB borrowings.............. 5,230 16,792(1) 22,022
Other short-term borrowed
funds....................... 510 510
Dividends payable............ 341 202(1) 543
Other liabilities............ 636 958(1) 1,594
Long-term debt............... 0 2,250(1) 2,250
Common stock of Valley Na-
tional...................... 1 2,127(4) 2,128
Common stock of First Nation-
al.......................... 1,200(1) 0
1,200(4)
Capital surplus.............. 7,173 1,009(1) 19,167
720(3)
11,192(6)
927(4)
Retained earnings............ 461 12,976(1) 461
1,410(2)
11,566(6)
Treasury stock............... 0 1,410(1) 0
1,410(2)
Unrealized gains (losses) on
available for sale
securities net of tax....... 143 293(1) 436
------ ------- ------- -------
Total Liabilities and Eq-
uity.................... 75,510 16,513 151,993 210,990
====== ======= ======= =======
152,417 152,417
======= =======
</TABLE>
- --------
(1) Historical balances of acquired company--consolidated
(2) Retirement of treasury stock of acquired company (19,005 shares)
(3) Effect of stock option exercise; 72,000 shares at $10 per share.
(4) Adjustment of stock to reflect 13:1 swap of acquiring company stock at
book value equivalent shares (1,312,935 shares)
<TABLE>
<S> <C>
(Adjusted Book value per share of
Valley National Corporation........ 8,498,330/814,800 = 10.43 per share)
(Book value per share of First
National Sylacauga Corporation..... 14,067,818/100,995 = 139.29 per share)
</TABLE>
(5) Payment of estimated merger costs
(6) Purchase method accounting adjustments. Record fair value discount of
acquired company equal to $373,682.
See notes to Pro Forma Consolidated Statement of Condition

F-3
<PAGE>

VALLEY NATIONAL CORPORATION

CAPITAL RATIOS--CONSOLIDATED

DECEMBER 31, 1997

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
---------- ----------- ------------
<S> <C> <C> <C>
Total Adjusted Average Assets.............. 74,361 132,283 206,644
====== ======= =======
Total Risk-Weighted Assets................. 40,533 96,330 136,863
====== ======= =======
Tier 1 Capital............................. 7,624 12,271 19,845
Tier 2 Capital............................. 416 1,120 1,536
------ ------- -------
Total Capital.............................. 8,040 13,391 21,381
====== ======= =======
Tier 1 Capital to Risk-Weighted Assets..... 18.81% 12.74% 14.50%
====== ======= =======
Total Risk-Based Capital to Risk-Weighted
Assets.................................... 19.84% 13.90% 15.62%
====== ======= =======
Tier 1 Capital (Leverage) to Adjusted As-
sets...................................... 10.25% 9.28% 9.60%
====== ======= =======
Total Debt to Equity Capital Ratio......... 0.00% 18.34% 11.34%
====== ======= =======
</TABLE>

F-4
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996

F-5
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996

<TABLE>
<S> <C>
Independent Auditors' Report............................................... F-7
Consolidated Statements of Financial Condition............................. F-8
Consolidated Statements of Income.......................................... F-9
Consolidated Statements of Shareholders' Equity............................ F-10
Consolidated Statements of Cash Flows...................................... F-11
Notes to Consolidated Financial Statements................................. F-12
</TABLE>

F-6
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Valley National Corporation and Subsidiary
Lanett, Alabama

We have audited the accompanying consolidated statements of financial
condition of Valley National Corporation and Subsidiary as of December 31,
1997 and 1996, and the related statements of income, shareholders' equity, and
cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Valley
National Corporation and Subsidiary as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.

Schauer, Taylor, Cox & Edwards P. C.

Birmingham, Alabama
February 19, 1998

F-7
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks................................ $ 3,233,613 $ 2,386,518
Interest-bearing deposits with banks................... 262,788 31,589
Federal funds sold..................................... 553,000 4,500,000
Securities available-for-sale.......................... 26,693,882 24,098,138
Loans.................................................. 42,172,595 37,524,701
Less: Unearned income.................................. 6,504 50,423
Allowance for loan losses............................ 416,430 390,546
----------- -----------
Net Loans............................................ 41,749,661 37,083,732
Premises and equipment, net............................ 2,261,182 1,328,564
Accrued interest and dividends......................... 565,131 620,495
Other real estate...................................... -0- 31,510
Other assets........................................... 190,462 102,640
----------- -----------
Total Assets....................................... $75,509,719 $70,183,186
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest-bearing................................. $10,684,994 $ 8,077,118
Interest-bearing.................................... 50,329,740 50,071,984
----------- -----------
Total Deposits..................................... 61,014,734 58,149,102
Short-term borrowings................................ 510,227 625,892
Accrued interest..................................... 350,026 324,799
Dividends payable.................................... 340,500 -0-
Long-term debt....................................... 5,229,415 -0-
Other liabilities.................................... 286,487 246,204
----------- -----------
Total Liabilities.................................. 67,731,389 59,345,997
Shareholders' Equity
Common stock--par value $0.001 per share, 10,000,000
shares authorized, 742,800 issued and outstanding
for 1997; par value $100 per share, 1,750 shares
authorized, issued and outstanding for 1996 (See
Note 9)............................................. 743 175,000
Capital surplus...................................... 7,173,363 175,000
Retained earnings.................................... 461,381 10,413,546
Net unrealized holding gains on securities available-
for-sale, net of deferred income taxes.............. 142,843 73,643
----------- -----------
Total Shareholders' Equity......................... 7,778,330 10,837,189
----------- -----------
Total Liabilities and Shareholders' Equity......... $75,509,719 $70,183,186
=========== ===========
</TABLE>

See notes to consolidated financial statements

F-8
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Interest Income
Interest and fees on loans.............................. $3,540,703 $3,034,756
Interest and dividends on investment securities:
Taxable securities..................................... 1,473,307 1,405,592
Tax-exempt securities.................................. 133,074 137,420
Interest on federal funds sold.......................... 110,058 163,787
Interest on deposits in banks........................... 3,431 1,267
---------- ----------
Total Interest Income................................. 5,260,573 4,742,822
---------- ----------
Interest Expense..........................................
Interest on deposits.................................... 2,178,857 2,109,179
Interest on short-term borrowings....................... 13,743 11,506
Interest on long-term borrowings........................ 181,250 -0-
---------- ----------
Total Interest Expense................................ 2,373,850 2,120,685
---------- ----------
Net interest income....................................... 2,886,723 2,622,137
Provision for loan losses................................. 89,751 -0-
---------- ----------
Net Interest Income After Provision For Loan Losses....... 2,796,972 2,622,137
Noninterest Income
Service charges on deposits............................. 493,590 441,004
Investment security gains............................... 1,405 3,351
Other operating income.................................. 107,220 60,716
---------- ----------
Total Noninterest Income.............................. 602,215 505,071
---------- ----------
Noninterest Expenses
Salaries and employee benefits.......................... 1,317,035 1,434,350
Occupancy and equipment expense......................... 331,580 238,391
Other operating expenses................................ 654,510 633,431
---------- ----------
Total Noninterest Expenses............................ 2,303,125 2,306,172
---------- ----------
Income before income taxes................................ 1,096,062 821,036
Provision for income taxes................................ 294,181 282,264
---------- ----------
Net Income................................................ $ 801,881 $ 538,772
========== ==========
Basic earnings per common share........................... $ 1.00 $ .51
Basic weighted average shares outstanding................. 804,240 1,050,000
Earnings per common share assuming dilution............... $ 1.00 $ .51
Weighted average shares outstanding assuming dilution..... 804,561 1,050,000
</TABLE>

See notes to consolidated financial statements

F-9
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
UNREALIZED
GAINS
COMMON CAPITAL RETAINED ON
STOCK SURPLUS EARNINGS SECURITIES TOTAL
--------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... $ 175,000 $ 175,000 $10,049,774 $140,123 $10,539,897
Cash dividends--
Common--$100 per
share................. (175,000) (175,000)
Net change in unrealized
gains on securities.... (66,480) (66,480)
Net income--1996........ 538,772 538,772
--------- ---------- ----------- -------- -----------
Balance at December 31,
1996................... 175,000 175,000 10,413,546 73,643 10,837,189
Stock redemption--512
shares at $7,010.625
per share.............. (51,200) (3,538,240) (3,589,440)
Business combination--
December, 1997......... (123,057) 6,998,363 (6,875,306) -0-
Cash dividends
declared--
Common--$.46 per
share.................. (340,500) (340,500)
Net change in unrealized
gains on securities.... 69,200 69,200
Net income--1997........ 801,881 801,881
--------- ---------- ----------- -------- -----------
Balance at December 31,
1997................... $ 743 $7,173,363 $ 461,431 $142,843 $ 7,778,330
========= ========== =========== ======== ===========
</TABLE>

See notes to consolidated financial statements

F-10
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Cash Flows From Operating Activities
Net income........................................ $ 801,881 $ 538,772
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses........................ 89,752 -0-
Depreciation, amortization, and accretion, net... 236,972 176,656
Deferred tax provision........................... 7,000 27,328
Realized investment security gains............... (1,405) (3,351)
Loss on disposition of other real estate......... 6,000 12,569
Gain on disposition of premises and equipment.... (3,000) -0-
Decrease in accrued interest receivable.......... 55,364 85,717
Increase in accrued interest payable............. 25,227 7,413
Other, net....................................... (106,274) 192,541
------------ -----------
Net Cash Provided By Operating Activities....... 1,111,517 1,037,645
------------ -----------
Cash Flows From Investing Activities
Purchases of investment securities available-for-
sale............................................. (10,519,523) (1,009,100)
Proceeds from maturities of investment securities
available-for-sale............................... 7,887,032 6,095,857
Proceeds from sales of investments securities
available-for-sale............................... 1,500 -0-
Net (increase) decrease in interest-bearing
deposits in other banks.......................... (231,199) 68,806
Net increase in loans to customers................ (4,733,671) (4,781,815)
Purchases of premises and equipment............... (1,012,003) (46,352)
Proceeds from disposition of premises and
equipment........................................ 3,000 -0-
Proceeds from sale of other real estate........... 3,500 2,000
------------ -----------
Net Cash Provided By (Used In) Investing
Activities..................................... (8,601,364) 329,396
------------ -----------
Cash Flows From Financing Activities
Net increase in demand deposits, NOW accounts, and
savings accounts................................. 2,842,360 1,657,946
Net increase in certificates of deposit........... 23,272 1,410,061
Issuance of long-term debt........................ 5,229,415 -0-
Net decrease in short-term borrowings............. (115,665) (88,658)
Cash dividends.................................... -0- (175,000)
Stock redemption.................................. (3,589,440) -0-
------------ -----------
Net Cash Provided By Financing Activities....... 4,389,942 2,804,349
------------ -----------
Net Increase (Decrease) in Cash and Cash
Equivalents........................................ $ (3,099,905) $ 4,171,390
Cash and Cash Equivalents at Beginning of Year...... 6,886,518 2,715,128
------------ -----------
Cash and Cash Equivalents at End of Year............ $ 3,786,613 $ 6,886,518
============ ===========
Supplemental Disclosures
Cash paid during the year for interest............ $ 2,348,623 $ 2,113,272
Cash paid during the year for income taxes........ 277,912 121,623
Loans transferred to foreclosed real estate during
the year......................................... 19,000 7,510
Proceeds from sales of foreclosed real estate
financed through loans........................... 20,510 26,930
Net increase (decrease) in unrealized gains on
securities available-for-sale.................... 93,674 (110,783)
Dividends declared not paid....................... 340,500 -0-
</TABLE>

See notes to consolidated financial statements

F-11
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The consolidated financial statements include the accounts of Valley
National Corporation (the "Company") and its wholly-owned subsidiary: Valley
National Bank (the "Bank"). Prior to December 5, 1997, Valley National Bank
operated as an independent bank. The Company was formed in 1997 for the
purpose of acquiring all the outstanding stock of Valley National Bank, and
operating as a bank holding company. On December 5, 1997 Valley National Bank
became a wholly-owned subsidiary of the Company. The acquisition was accounted
for as a pooling of interests. Net income of the subsidiary has been included
for all prior periods. Unless otherwise indicated herein, the financial
results of the Company refer to the Company and the Bank on a consolidated
basis. References to the Company relating to the period prior to the
consolidation on December 5, 1997 relate to Valley National Bank as an
independent entity.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans and the
valuation of foreclosed real estate. In connection with the determination of
the estimated losses on loans and foreclosed real estate, management obtains
independent appraisals for significant properties.

While management uses available information to recognize losses on loans and
foreclosed real estate, further reductions in the carrying amounts of loans
and foreclosed assets may be necessary based on changes in local economic
conditions. In addition, regulatory agencies, as an integral part of their
examination process, periodically review the estimated losses on loans and
foreclosed real estate. Such agencies may require the Bank to recognize
additional losses based on their judgements about information available to
them at the time of their examination. Because of these factors, it is
reasonably possible that the estimated losses on loans and foreclosed real
estate may change materially in the near term. However, the amount of the
change that is reasonably possible cannot be estimated.

Investment Securities

Trading Securities: Securities that are held for short-term resale are
classified as trading account securities and recorded at their fair values.
Realized and unrealized gains and losses on trading account securities are
included in other income.

Securities Held-to-Maturity: Government, Federal agency, and corporate debt
securities that management has the positive intent and ability to hold to
maturity are reported at cost, adjusted for amortization of premiums and
accretion of discounts that are recognized in interest income using methods
approximating the interest method over the period to maturity. Mortgage-backed
securities represent participating interest in pools of long-term first
mortgage loans originated and serviced by issuers of the securities. Mortgage-
backed securities are carried at unpaid principal balances, adjusted for
unamortized premiums and unearned discounts. Premiums and discounts are
amortized using methods approximating the interest method over the remaining
period to contractual maturity, adjusted for anticipated prepayments.

F-12
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997 AND 1996

Securities Available-for-Sale: Available-for-sale securities consist of
investment securities not classified as trading securities nor as held-to-
maturity securities. Unrealized holding gains and losses, net of tax, on
available-for-sale securities are reported as a net amount in a separate
component of shareholders' equity until realized. Gains and losses on the sale
of available-for-sale securities are determined using the specific-
identification method. The amortization of premiums and the accretion of
discounts are recognized in interest income using methods approximating the
interest method over the period of maturity.

Declines in the fair value of individual held-to-maturity and available-for-
sale securities below their cost that are other than temporary result in
write-downs of the individual securities to their fair value. The related
write-downs are included in earnings as realized losses.

The Company and its subsidiary have no trading or held-to-maturity
securities.

Loans

Loans are stated at unpaid principal balances, less the allowance for loan
losses and net deferred loan fees and unearned discounts.

Unearned discounts on installment loans are recognized as income over the
term of the loans using a method that approximates the interest method.

Loan origination and commitment fees, as well as certain direct origination
costs, when material, are deferred and amortized as a yield adjustment over
the lives of the related loans using the interest method. Amortization of
deferred loan fees is discontinued when a loan is placed on non-accrual
status.

Interest income generally is not recognized on specific impaired loans
unless the likelihood of further loss is remote. Interest payments received on
such loans are applied as a reduction of the loan principal balance. Interest
income on other impaired loans is recognized only to the extent of interest
payments received.

The allowance for loan losses is maintained at a level which, in
management's judgment, is adequate to absorb credit losses inherent in the
loan portfolio. The amount of the allowance is based on management's
evaluation of the collectably of the loan portfolio, including the nature of
the portfolio, credit concentrations, trends in historical loss experience,
specific impaired loans, economic conditions and other risks inherent in the
portfolio. Allowances for impaired loans are generally determined based on
collateral values or the present value of the estimated cash flows. The
allowance is increased by a provision for loan losses, which is charged to
expense, and reduced by charge-offs, net of recoveries.

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation.
Expenditures for additions and major improvements that significantly extend
the useful lives of the assets are capitalized. Expenditures for repairs and
maintenance are charged to expense as incurred. The carrying values of assets
traded in are used to adjust the carrying values of the new assets acquired by
trade. Assets which are disposed of are removed from the accounts and the
resulting gains or losses are recorded in operations.

Depreciation is provided generally by accelerated and straight-line methods
based on the estimated useful lives of the respective assets.

F-13
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997 AND 1996

Foreclosed Real Estate

Foreclosed real estate includes both formally foreclosed property and in-
substance foreclosed property. In-substance foreclosed properties are those
properties for which the institution has taken physical possession, regardless
of whether formal foreclosure proceedings have taken place.

At the time of foreclosure, foreclosed real estate is recorded at the lower
of the carrying amount or fair value less cost to sell, which becomes the
property's new basis. Any write-downs based on the asset's fair value at date
of acquisition are charged to the allowance for loan losses. After
foreclosure, these assets are carried at the lower of their new cost basis or
fair value less cost to sell. Costs incurred in maintaining foreclosed real
estate and subsequent adjustments to the carrying amount of the property are
included in income (loss) on foreclosed real estate.

Short-Term Borrowings

Short-term borrowings generally consist of federal funds purchased, the U.
S. Treasury Tax and Loan Note Option account and securities sold under
agreements to repurchase.

Income Taxes

Income taxes are provided for the tax effects of the transactions reported
in the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the basis of available-for-sale
securities, allowance for loan losses, estimated losses on foreclosed real
estate, accumulated depreciation, and accrued employee benefits for financial
and income tax reporting. The deferred tax assets and liabilities represent
the future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled. Deferred tax assets and liabilities are reflected at income tax rates
applicable to the period in which the deferred tax assets or liabilities are
expected to be realized or settled. As changes in tax laws or rates are
enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.

The Company and its subsidiary file a consolidated federal income tax
return. The subsidiary provides for income taxes on a separate return basis,
and remits to the Company amounts determined to be currently payable.

Earnings Per Common Share

Basic earnings per common share are computed by dividing earnings available
to stockholders by the weighted average number of common shares outstanding
during the period adjusted retroactively for the effects of the acquisition of
the Bank by the Company. Diluted earnings per share reflect per share amounts
that would have resulted if dilutive potential common stock had been converted
to common stock, as prescribed by SFAS No. 128, Earnings per Share. The
following reconciles the weighted average number of shares outstanding:

<TABLE>
<CAPTION>
1997 1996
------- ---------
<S> <C> <C>
Weighted average of common shares outstanding............. 804,240 1,050,000
Effect of dilutive options................................ 321 -0-
------- ---------
Weighted average of common shares outstanding effected for
dilution................................................. 804,561 1,050,000
======= =========
</TABLE>

Retirement Plan

The Bank has adopted a 401(k) Plan which covers substantially all of its
employees. Contributions to the plan are from employees' elective deferrals,
employer matching and discretionary amounts.

F-14
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997 AND 1996

Intangibles

Intangibles consist primarily of legal organizational costs related to the
formation of the Company. Intangibles are being amortized over periods of five
to fifteen years using the straight-line method.

Off-Balance Sheet Financial Instruments

In the ordinary course of business the Bank has entered into off-balance
sheet financial instruments consisting of commitments to extend credit,
commitments under credit card arrangements, commercial letters of credit and
standby letters of credit. Such financial instruments are recorded in the
financial statements when they become payable.

The Bank has available as a source of short-term financing the purchase of
federal funds from another commercial bank in the amount of $2,000,000. In
addition to the purchase of federal funds, the Bank has a Master Repurchase
Agreement with another commercial bank whereby the Bank can obtain short-term
borrowings by selling securities under agreements to repurchase. The Bank also
has available a line of credit of $10,000,000 from the Federal Home Loan Bank
of Atlanta.

Cash Flow Information

The Bank considers all cash and amounts due from depository institutions and
federal funds sold to be cash equivalents for purposes of the statement of
cash flows.

Reclassifications

Certain amounts in 1996 have been reclassified to conform with the 1997
presentation.

Recently Issued Accounting Standards

In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." This statement 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 long-lived assets and certain
identifiable intangibles to be disposed of. SFAS No. 121 requires that long-
lived assets and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of the assets described
above is measured by a comparison of the carrying amount of the asset to
future undiscounted cash flows expected to be generated by the asset. If such
assets are considered impaired, the amount of impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell. Adoption of SFAS No.
121 in 1996 did not have a material impact on the Company's consolidated
financial statements.

In May 1995, the FASB also issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights." This statement amends certain provisions of SFAS No. 65 to
substantially eliminate the accounting distinction between rights to service
mortgage loans for others that are acquired through loan origination
activities and those acquired through purchase transactions. The statement
requires an allocation of the total cost of mortgage loans held for sale to
mortgage servicing rights and mortgage loans held for sale (without mortgage
servicing rights) based on their relative fair values. The adoption of SFAS
No. 122 in 1996 did not have a material impact on the Company's consolidated
financial statements.

F-15
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997 AND 1996

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which defines a fair value based method of accounting for an
employee stock option plan. This statement establishes financial accounting
and reporting standards for stock-based employee compensation plans and stock-
based non-employee compensation. These transactions must be accounted for
based on the fair value of the consideration received or the fair value of the
equity instruments issued, whichever is more reliably measured. Under the fair
value based method, compensation is measured at the grant date based on the
value of the award and is recognized over the service period, which is usually
the vesting period. However, SFAS No. 123 allows an entity to continue to
measure compensation costs for those plans using the intrinsic value based
method of accounting as prescribed by APB Opinion No. 25, "Accounting for
Stock Issued to Employees." The adoption of this statement did not have a
material effect on the Company's consolidated financial statements.

In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No.
125 was amended by SFAS No. 127, which defers the effective date of certain
provisions of SFAS No. 125 until January 1, 1998. SFAS No. 125 is to be
applied prospectively to transfers and servicing of financial assets and
extinguishments of liabilities after December 31, 1996. This statement
utilizes the financial-components approach that focuses on control. Under that
approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. Management does not believe that
adoption of SFAS No. 125 will have a material impact on the Company's
consolidated financial statements.

Effective for fiscal years ending after December 15, 1996, SFAS No. 126,
"Exemption from Certain Required Disclosures about Financial Instruments for
Certain Nonpublic Entities," was issued by the FASB which amends SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments." This statement allows
an entity to be exempt from the SFAS No. 107 disclosures if the following
criteria are met: the entity is a nonpublic entity, the entity's total assets
are less than $100 million on the date of the financial statements, and the
entity has not held or issued any derivative financial instruments, as defined
in SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair
Value of Financial Instruments," other than loan commitments, during the
reporting period. The adoption of this statement allowed the Company to be
exempt from the disclosed requirements of SFAS No. 107.

Effective for years ending after December 15, 1997, SFAS No. 128, "Earnings
Per Share" was issued by FASB which simplifies previous standards for
reporting earnings per share. Under SFAS No. 128, earnings per share is stated
on the income statement based on two separate measurements: basic and diluted.
Basic earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number or common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that shared in the earnings of the entity. The
adoption of this statement did not have a material effect on the Company's
consolidated financial statements.

Effective for years beginning after December 15, 1997, SFAS No. 130,
"Reporting Comprehensive Income" was issued by FASB which establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. The
Statement requires that an enterprise classify items of other comprehensive
income by their nature in the financial statement and display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid in capital in the equity section of a statement of financial
position. Comprehensive income is generally defined as the change in equity of
a business enterprise during a period from transactions and other events and

F-16
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997 AND 1996

circumstances from nonowner sources. It includes all changes in equity during
a period except those resulting from investments by owners and distributions
to owners. Management does not believe that the adoption of SFAS No. 130 will
have a material impact on the Company's consolidated financial statements.

Effective for years beginning after December 15, 1997, SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits" was
issued by FASB which standardizes the disclosure requirements for pensions and
other postretirement benefits to the extent practicable, requires additional
information on changes in the benefits obligations and fair values of plan
assets that will facilitate financial analysis, and eliminates certain other
disclosures previously required. Management does not believe that the adoption
of SFAS No. 132 will have a material impact on the Company's consolidated
financial statements.

NOTE 2--RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS

The Bank is required to maintain average reserve balances either in vault
cash or on deposit with the Federal Reserve. The average amount of those
reserves required at December 31, 1997 and 1996 was approximately $440,000 and
$464,000, respectively.

NOTE 3--INVESTMENT SECURITIES

The carrying amounts of investment securities as shown in the statement of
financial condition and their approximate fair values at December 31, 1997 and
1996 were as follows:

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-
SALE:
December 31, 1997:
U. S. Government and
agency securities........ $ 13,109,642 $ 22,769 $ 27,696 $ 13,104,715
State and municipal secu-
rities................... 2,113,872 113,607 -0- 2,227,479
Collateralized mortgage
obligations.............. 8,627,093 37,678 -0- 8,664,771
Mortgage-backed securi-
ties..................... 2,183,446 70,071 -0- 2,253,517
Equity securities......... 443,400 -0- -0- 443,400
------------ --------- -------- ------------
$ 26,477,453 $ 244,125 $ 27,696 $ 26,693,882
============ ========= ======== ============
December 31, 1996:
U. S. Government and
agency securities........ $ 19,536,514 $ 5,123 $ 83,593 $ 19,458,044
State and municipal secu-
rities................... 1,822,571 115,289 -0- 1,937,860
Collateralized mortgage
obligations.............. 1,000,000 4,181 -0- 1,004,181
Mortgage-backed securi-
ties..................... 1,391,498 81,755 -0- 1,473,253
Equity securities......... 224,800 -0- -0- 224,800
------------ --------- -------- ------------
$ 23,975,383 $ 206,348 $ 83,593 $ 24,098,138
============ ========= ======== ============
</TABLE>

F-17
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997 AND 1996

The contractual maturities of securities available-for-sale at December 31,
1997, are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
SECURITIES AVAILABLE-FOR-SALE:
Due in one year or less........................... $ 14,888 $ 14,888
Due after one year through five years............. 13,947,054 13,993,767
Due after five years through ten years............ 2,815,649 2,879,917
Due after ten years............................... 9,256,462 9,361,910
Equity securities................................. 443,400 443,400
----------- -----------
$26,477,453 $26,693,882
=========== ===========
</TABLE>

Mortgage-backed securities have been included in the maturity tables based
upon the guaranteed payoff date of each security.

Equity securities include a restricted investment in Federal Home Loan Bank
stock which must be maintained to secure the available line of credit. The
amount of investment in this stock amounted to $434,400 and $214,300 at
December 31, 1997 and 1996, respectively.

Dispositions of securities available-for-sale through calls, maturities and
paydowns resulted in net gains of $1,405 and $3,351 at December 31, 1997 and
1996, respectively.

Investment securities pledged to secure public funds on deposit and for
other purposes as required by law amounted to approximately $14,743,000 and
$9,720,000 at December 31, 1997 and 1996, respectively.

NOTE 4--LOANS

The Bank grants loans to customers primarily in Chambers County of East
Central Alabama and the West Central area of Georgia.

The major classifications of loans as of December 31, 1997 and 1996 are as
follows:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Commercial, financial and agricultural.............. $ 6,074,236 $ 932,600
Real estate--construction........................... 824,537 -0-
Real estate--mortgage............................... 29,389,948 29,088,393
Consumer............................................ 5,688,744 7,382,314
Other............................................... 195,130 121,394
----------- -----------
42,172,595 37,524,701
Unearned income..................................... 6,504 50,423
Allowance for loan losses........................... 416,430 390,546
----------- -----------
Net loans........................................... $41,749,661 $37,083,732
=========== ===========
</TABLE>

F-18
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997 AND 1996

Certain directors, executive officers and principal shareholders including
their immediate families and associates were loan customers of the Bank during
1997 and 1996. Such loans are made in the ordinary course of business at
normal credit terms, including interest rates and collateral and do not
represent more than a normal risk of collection. Total loans to these persons
at December 31, 1997 and 1996, amounted to approximately $1,203,000 and
$1,073,000, respectively.

As of December 31, 1997 and 1996, there were no loans which the Bank had
specifically classified as impaired. Other non-accrual loans at December 31,
1997 and 1996 amounted to approximately $115,000 and $55,000, respectively.

For the years ended December 31, 1997 and 1996, the difference between gross
interest income that would have been recorded in such period if non-accruing
loans had been current in accordance with their original terms and the amount
of interest income on those loans that was included in such period's net
income was negligible.

NOTE 5--ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses for the years ended December 31,
1997 and 1996 were as follows:

<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Balance at beginning of year............................ $ 390,546 $386,803
Charge-offs............................................. (100,912) (49,656)
Recoveries.............................................. 37,044 53,399
--------- --------
Net (charge-offs) recoveries............................ (63,868) 3,743
Provision for loan losses............................... 89,752 -0-
--------- --------
Balance at end of year.................................. $ 416,430 $390,546
========= ========
</TABLE>

NOTE 6--PREMISES AND EQUIPMENT

Premises and equipment as of December 31, 1997 and 1996 is as follows:

<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Land.................................................. $ 449,235 $ 449,235
Buildings............................................. 1,490,681 1,469,796
Land improvements..................................... 123,709 123,709
Leasehold improvements................................ 287,278 -0-
Furniture and equipment............................... 1,744,171 1,013,071
Automobiles........................................... 16,915 16,915
---------- ----------
4,111,989 3,072,726
Less allowance for depreciation....................... 1,850,807 1,744,162
---------- ----------
$2,261,182 $1,328,564
========== ==========
</TABLE>

The provision for depreciation charged to occupancy and equipment expense
for the years ended December 31, 1997 and 1996 was $106,646 and $74,613,
respectively.

F-19
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997 AND 1996

NOTE 7--DEPOSITS

The major classifications of deposits as of December 31, 1997 and 1996 were
as follows:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Noninterest-bearing demand.......................... $10,684,994 $ 8,077,118
NOW accounts........................................ 12,739,917 12,716,887
Savings............................................. 7,373,816 7,162,362
Time................................................ 25,387,763 25,838,727
Certificates of deposit of $100,000 or more......... 1,928,244 1,454,008
Time deposits open.................................. 2,900,000 2,900,000
----------- -----------
$61,014,734 $58,149,102
=========== ===========
</TABLE>

The maturities of time certificates of deposit and other time deposits of
$100,000 or more issued by the Bank at December 31, 1997 are as follows:

<TABLE>
<S> <C>
Three months or less............................................. $3,945,283
Over three through twelve months................................. 647,584
Over one year through three years................................ 235,377
----------
$4,828,244
==========
</TABLE>

NOTE 8--LONG-TERM DEBT

At December 31, 1997, the Bank had a line of credit with the Federal Home
Loan Bank of Atlanta in the amount of $10,000,000 of which $5,229,415 was
outstanding. This line bears interest at an adjustable rate (6.05% at December
31, 1997) and matures on May 28, 2002.

NOTE 9--SHAREHOLDERS' EQUITY

At December 31, 1997 and 1996, shareholders' equity of the Company consisted
of the following:

Common Stock: At December 31, 1997, 10,000,000 shares authorized, 742,800
issued and outstanding with a par value of $0.001 per share. At December 31,
1996, 1,750 shares authorized, issued and outstanding with a par value of $100
per share. Voting rights equal to one vote per share.

Capital Surplus: Represents the funds received in excess of par value upon
the issuance of stock, net of issuance costs.

Retained Earnings: Represents the accumulated net earnings of the Company as
reduced by dividends paid to shareholders.

Net Unrealized Gains on Securities: Represents the net unrealized gains or
losses on securities available-for-sale, net of deferred taxes at December 31,
1997 and 1996. This account adjusts as the market values of the related
investment securities change.

NOTE 10--STOCK REDEMPTION AGREEMENT

On August 26, 1996, the Board of Directors approved a Stock Redemption
Agreement (the "Agreement") with several shareholders of the Bank. The
Agreement provided for the purchase of 512 shares of the Bank's

F-20
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997 AND 1996

common stock at a price of $7,010.625 per share for a total cost to the Bank
of $3,589,440. The agreement was executed on March 14, 1997.

NOTE 11--REGULATORY CAPITAL MATTERS

The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possible additional discretionary actions
by regulators, that if undertaken, could have a direct material effect on the
Bank and the financial statements. Under regulatory capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines involving quantitative measures of the
Bank's assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification under the prompt corrective guidelines are also subject to
qualitative judgements by the regulators about components, risk weightings,
and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total risk-based
capital and Tier I capital to risk-weighted assets (as defined in the
regulations), and Tier I capital to adjusted total assets (as defined).
Management believes, as of December 31, 1997, that the Bank meets all capital
adequacy requirements to which it is subject.

As of March 31, 1997, the most recent notification from the Office of the
Comptroller of the Currency, the Bank was categorized as well capitalized
under the regulatory framework for prompt corrective action. To remain
categorized as well capitalized, the Bank will have to maintain minimum total
risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as disclosed in the
table below. There are no conditions or events since the most recent
notification that management believes have changed the Bank's prompt
corrective action category.

<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED
UNDER PROMPT
FOR CAPITAL CORRECTIVE ACTION
ACTUAL ADEQUACY PURPOSES PROVISIONS
------------- ------------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ---------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997:
Total Risk-Based Capital
(to Risk-Weighted
Assets)................ $ 8,052 19.96% $ 3.227 8.0% $ 4.033 10.0%
Tier 1 Capital (to Risk-
Weighted Assets)....... 7.636 18.93 1.613 4.0 2.420 6.0
Tier 1 Capital (to Ad-
justed Total Assets)... 7.636 10.27 2.974 4.0 3.718 5.0
AS OF DECEMBER 31, 1996:
Total Risk-Based Capital
(to Risk-Weighted
Assets)................ $11,155 32.58% $ 2,739 8.0% $ 3,424 10.0%
Tier 1 Capital (to Risk-
Weighted Assets)....... 10,764 31.44 1,370 4.0 2,054 6.0
Tier 1 Capital (to Ad-
justed Total Assets)... 10,764 15.48 2,781 4.0 3,476 5.0
</TABLE>

F-21
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997 AND 1996

NOTE 12--OTHER OPERATING EXPENSES

The major components of other operating expenses included in noninterest
expense at December 31, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Supplies................................................ $ 81,787 $ 72,185
Advertising............................................. 69,484 70,829
Insurance............................................... 70,020 59,373
Professional fees....................................... 64,185 67,037
Postage................................................. 45,062 46,532
Education and training.................................. 44,321 38,482
Director and committee fees............................. 44,000 64,575
Bank service charges.................................... 35,685 39,486
Examination and assessment.............................. 34,308 28,377
Dues and subscriptions.................................. 14,012 19,958
Contributions........................................... 11,367 18,973
Other................................................... 134,384 107,624
--------- ---------
$ 648,615 $ 633,431
========= =========
</TABLE>

[The remainder of this page intentionally left blank]

F-22
<PAGE>

VALLEY NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

NOTE 13--STOCK OPTION PLAN

On August 26, 1996 the Company issued a total of 60,000 options to purchase
its common shares to its President. On February 3, 1997, the Company issued a
total of 12,000 options to purchase its common shares to its Chief Financial
Officer. Each of the stock option agreements contains an option price of $10
per share, the market value of the shares at the time of issuance. The options
vest on an equal incremental basis over periods of three years beginning
August 26, 1996 and February 3, 1997, respectively, for each of the issues. No
options were exercisable at December 31, 1997.

The following sets forth certain information regarding stock options for the
years ended December 31, 1997 and 1996.

<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ -------- ------ --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year............. 60,000 $10.00 -0- $ -0-
Granted...................................... 12,000 10.00 60,000 10.00
Exercised.................................... -0- .00 -0- .00
Forfeited.................................... -0- .00 -0- .00
------ ------ ------ ------
Outstanding at end of year................... 72,000 $10.00 60,000 $10.00
====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
------------------------------------------ -------------------------
EXERCISE NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
PRICE OF AVERAGE AVERAGE OF AVERAGE
PER SHARE OPTIONS EXERCISE PRICE REMAINING LIFE OPTIONS EXERCISE PRICE
- --------- ------- -------------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C>
$10.00 72,000 $10.00 8.74 years 20,000 $10.00
</TABLE>

In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, Accounting and Disclosure of Stock-Based Compensation ("SFAS No.
123".) SFAS No. 123 is effective for years beginning after December 15, 1995,
and allows for the option of continuing to follow Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and the related
Interpretations or selecting the minimum value method of expense recognition
as described in SFAS No. 123. The Company has elected to apply APB Opinion No.
25 in accounting for its incentive stock options, accordingly, no compensation
cost has been recognized by the Company.

The Company's net income and earnings per share would have been reduced to
the pro forma amounts indicated below had compensation cost for the Company's
stock option plan been determined based on the fair value ("minimum value
method") at the grant date for options under the plan.

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net Income................................................
As reported............................................. $801,881 $538,772
Pro forma............................................... 782,294 532,923
Basic Earnings Per Share..................................
As reported............................................. $ 1.00 $ 0.51
Pro forma............................................... 0.97 0.51
Diluted Earnings Per Share................................
As reported............................................. $ 1.00 $ 0.51
Pro forma............................................... 0.97 0.51
</TABLE>

F-23
<PAGE>

VALLEY NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

These options are assumed to be exercised in the calculation of diluted
average common shares outstanding, causing the equivalent average number of
shares outstanding on a diluted basis to be 321 greater than that used to
calculate basic earnings per share for 1997. The dilutive effect on earnings
per share for the years ended December 31, 1997 and 1996 was negligible.

The Company's options outstanding have a weighted average contractual life
of 8.74 years. The weighted-average fair value of options granted in 1997 and
1996 was $1.28 and $1.40 per share under option, respectively. The fair value
of each grant is estimated using the minimum value method with the following
assumptions used for grants in 1997 and 1996: expected option life of 10
years; no expected volatility; and a risk free interest rate of 7.00%.

The effects of applying SFAS No. 123 for providing proforma disclosures are
not likely to be representative of effects on reported earnings for future
years, nor are the dividend estimates representative of commitments on the
part of the Company's Board.

NOTE 14--INCOME TAXES

Federal and state income taxes payable as of December 31, 1997 and 1996
included in other liabilities were as follows:

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Current
Federal............................................. $ 51,430 $ 22,270
========= =========
State............................................... $ 16,711 $ 36,602
========= =========

The components of the net deferred income tax liability included in other
liabilities as of December 31, 1997 and 1996 are as follows:

Deferred tax asset:
Federal............................................. $ 72,361 $ 43,660
State............................................... 13,116 8,192
--------- ---------
Total deferred income tax asset................... 85,477 51,852
--------- ---------
Deferred tax liability:
Federal............................................. (204,947) (138,405)
State............................................... (23,116) (24,559)
--------- ---------
Total deferred income tax liability............... (228,063) (162,964)
--------- ---------
Net deferred tax liability............................ $(142,586) $(111,112)
========= =========

The tax effects of each type of income and expense item that gave rise to
deferred taxes at December 31, 1997 and 1996 are:

Depreciation........................................ $(154,107) $(106,688)
Allowance for loan losses........................... 85,131 51,365
Net unrealized gain on securities available for
sale............................................... (73,586) (49,112)
Other............................................... (24) (6,677)
--------- ---------
Net deferred tax liability.......................... $(142,586) $(111,112)
========= =========
</TABLE>

F-24
<PAGE>

VALLEY NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

The components of income tax expense for the years ended December 31, 1997
and 1996 were as follows:

<TABLE>
<S> <C> <C>
Current
Federal................................................ $270,470 $218,444
State.................................................. 16,711 36,492
Deferred
Federal................................................ 6,000 23,529
State.................................................. 1,000 3,799
-------- --------
$294,181 $282,264
======== ========

There was no material tax effect of securities transactions for the years
ended December 31, 1997 and 1996.

The principal reasons for the difference in the effective tax rate and the
federal statutory rate are as follows for the years ended December 31, 1997 and
1996:

<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Statutory federal income tax rate........................ 34.0% 34.0%
Effect on rate of:
Tax-exempt securities.................................. (4.1) (5.7)
Tax-exempt loan income................................. (4.5) (.4)
Interest expense disallowance.......................... 0.8 1.0
State income tax, net of federal tax benefit........... 1.1 3.4
Other.................................................. (.5) 2.1
-------- --------
Effective income tax rate................................ 26.8% 34.4%
======== ========
</TABLE>

NOTE 15--RETIREMENT PLAN

The Bank established a 401(k) plan in 1988. The Plan covers substantially
all employees, subject to eligibility requirements. Employees may defer up to
ten percent of their compensation, subject to maximum limitations, with a one
hundred percent matching employer contribution of up to five percent of
compensation. The Bank may also make discretionary contributions on an annual
basis. Total retirement expense included in salary and benefits for the years
ended December 31, 1997 and 1996 was $27,169 and $39,587, respectively.

NOTE 16--COMMITMENTS AND CONTINGENCIES

The Company's consolidated financial statements do not reflect various
commitments and contingent liabilities which arise in the normal course of
business and which involve elements of credit risk, interest rate risk and
liquidity risk. These commitments and contingent liabilities are commitments
to extend credit, commercial letters of credit and standby letters of credit.
Generally accepted accounting principles recognize these transactions as
contingent liabilities and, accordingly, they are not reflected in the
accompanying financial statements.

F-25
<PAGE>

VALLEY NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

A summary of the Company's commitments and contingent liabilities at
December 31, 1997 and 1996, is as follows:

<TABLE>
<CAPTION>
CONTRACT OR
NOTIONAL AMOUNT
-------------------
1997 1996
---------- --------
<S> <C> <C>
Commitments to extend credit............................ $2,357,000 $517,000
========== ========
</TABLE>

Commitments to extend credit, credit card arrangements, commercial letters
of credit, and standby letters of credit all include exposure to some credit
loss in the event of nonperformance of the customer. The Company's credit
policies and procedures for credit commitments and financial guarantees are
the same as those for extension of credit that are recorded on the statement
of financial condition. Because these instruments have fixed maturity dates,
and because many of them expire without being drawn upon, they do not
generally present any significant liquidity risk to the Company.

Management conducts regular reviews of these instruments on an individual
customer basis, and the results are considered in assessing the adequacy of
the allowance for loan losses. Management does not anticipate any material
losses as a result of these commitments.

NOTE 17--CONCENTRATIONS OF CREDIT

All of the Bank's loans, commitments, and commercial and standby letters of
credit have been granted to customers in the Bank's market area. The
concentrations of credit by type of loan are set forth in Note 4.

The bank maintains its cash accounts at various commercial banks in Alabama
and Georgia. The total cash balances in commercial banks are insured by the
FDIC up to $100,000. There were no uninsured balances held at commercial banks
at December 31, 1997. Total unsecured balances held at commercial banks at
December 31, 1996 amounted to $40,881.

NOTE 18--RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS OR ADVANCES

Dividends paid by the Bank are the primary source of funds available to the
Company for debt repayment, payment of dividends to its shareholders and other
needs. The Bank is subject to dividend restrictions set forth by its
regulators. Under such restrictions, the Bank may not, without the prior
approval of its regulators, declare dividends in excess of the sum of the
current year's earnings plus the retained earnings from the prior two years.
The dividends as of December 31, 1997, that the Bank could declare, without
the approval of its regulators, amounted to approximately $1,242,846.

NOTE 19--LEASES

The Bank entered into an operating lease on October 30, 1996 for the lease
of a Financial Service Facility in a local Wal-Mart. The lease commenced on
May 15, 1997 and has a term of five years, providing for two renewal terms.
The lease requires the Bank to provide for repairs, maintenance and insurance
of the facility.

The Bank also holds a noncancellable operating lease for equipment which
expires July, 1998.

For the years ended December 31, 1997 and 1996, rental expense for these
operating leases was $22,106 and $2,080, respectively.

F-26

<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997 AND 1996

Future minimum lease payments under these operating lease agreements at
December 31, 1997 are as follows:

<TABLE>
<S> <C>
Years Ending December 31,
1998............................................................. $ 26,560
1999............................................................. 25,000
2000............................................................. 25,000
2001............................................................. 25,000
2002............................................................. 9,375
--------
Total minimum lease payments....................................... $110,935
========
</TABLE>

NOTE 20--LITIGATION

While the Company is party to various legal proceedings arising from the
ordinary course of business, management believes after consultation with legal
counsel that there are no proceedings threatened or pending against the
Company that will, individually or in the aggregate, have a material adverse
effect on the business or consolidated financial condition of the Company.

NOTE 21--BUSINESS COMBINATION

On December 5, 1997, the Company effected a business combination with Valley
National Bank by exchanging 742,800 shares of its common stock for all the
outstanding common stock of Valley National Bank. The combination has been
accounted for as a pooling of interests.

NOTE 22--SUBSEQUENT EVENTS

On February 24, 1998, the Company entered into a Merger Agreement with First
National Sylacauga Corporation ("FNSC"). FNSC is a bank holding company which
owns 100% of First National-America's Bank ("FNA Bank"), a national bank of
approximately $136 million in assets. The Merger Agreement calls for FNSC to
merge into the Company and for each shareholder of FNSC to receive 13.3 shares
of the Company's common stock for each share of FNSC's common stock
outstanding.

The exchange ratio is to be determined based upon the adjusted book values
of each entity as of the closing date of the merger. The merger agreement
expires August 30, 1998. The merger will be accounted for under the pooling-
of-interests method of accounting and will be subject to normal regulatory
approvals.

[The remainder of this page intentionally left blank]

F-27
<PAGE>

VALLEY NATIONAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997 AND 1996

NOTE 23--CONDENSED PARENT COMPANY INFORMATION

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
STATEMENT OF FINANCIAL CONDITION
Assets
Cash and due from banks...................................... $ 40
Investment in and amounts due from subsidiary (equity
method)--eliminated upon consolidation...................... 7,778,380
Dividends receivable......................................... 340,500
Other assets................................................. 10,850
----------
Total Assets............................................... $8,129,770
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Dividends payable............................................ $ 340,500
Other liabilities............................................ 10,940
----------
Total Liabilities.......................................... 351,440
Shareholders' Equity........................................... 7,778,330
----------
Total Liabilities and Shareholders' Equity................. $8,129,770
==========
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
STATEMENT OF INCOME
Income
From subsidiary--eliminated upon consolidation
Dividends.................................................. $ 340,500
Expenses....................................................... 50
----------
Income before equity in undistributed earnings of subsidiary... 340,450
Equity in undistributed earnings of subsidiary................. 461,431
----------
Net Income..................................................... $ 801,881
==========
STATEMENT OF CASH FLOWS
Cash Flows From Operating Activities
Net income................................................... $ 801,881
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in undistributed income of subsidiary............... (461,431)
Dividends receivable....................................... (340,500)
Other...................................................... 90
----------
Net Cash Provided By Operating Activities.................. 40
----------
Net Increase in Cash and Cash Equivalents...................... 40
Cash and Cash Equivalents at Beginning of Year................. -0-
----------
Cash and Cash Equivalents at End of Year....................... $ 40
==========
SUPPLEMENTAL DISCLOSURES
Dividends declared not paid in 1997.......................... $ 340,500
</TABLE>

F-28
<PAGE>

VALLEY NATIONAL BANK

FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1995 AND 1994

F-29
<PAGE>

VALLEY NATIONAL BANK

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Title Page................................................................. F-29
Table of Contents.......................................................... F-30
Report of Independent Auditors............................................. F-31
Statements of Financial Condition.......................................... F-32
Statements of Income....................................................... F-33
Statements of Change in Stockholders' Equity............................... F-34
Statements of Cash Flows................................................... F-35
Notes to Financial Statements.............................................. F-36
</TABLE>

F-30
<PAGE>

BRANTLEY, STEPHENS & BOUCHER

CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITOR'S REPORT

Board of Directors
Valley National Bank
Lanett, Alabama

We have audited the accompanying statements of financial condition of Valley
National Bank as of December 31, 1995 and 1994, and the related statements of
income, changes in stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Valley National Bank at
December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.

/s/ Brantley, Stephens & Boucher

Opelika, Alabama
January 30, 1996

F-31
<PAGE>

VALLEY NATIONAL BANK

STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks.............................. $ 2,713,538 $ 2,914,347
Interest-earning deposits in other banks............. 100,395 100,936
Federal funds sold................................... 0 1,000,000
Securities:
Held-to-maturity (market value $215,700 and
$215,700)......................................... 215,700 215,700
Available-for-sale................................. 29,178,669 29,507,739
Loans (net of unearned income: $50,958 and $30,818).. 32,666,339 29,494,221
Allowance for loan losses............................ (386,803) (381,829)
Other real estate owned.............................. 65,500 79,639
Premises and equipment............................... 1,356,826 1,279,141
Accrued interest receivable.......................... 702,148 720,794
Other assets......................................... 53,593 659,039
----------- -----------
Total assets..................................... $66,665,905 $65,689,727
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand (non-interest bearing)........................ $ 6,964,431 $ 6,759,993
Time and savings (interest bearing).................. 48,076,281 49,284,193
----------- -----------
Total Deposits................................... 55,040,712 56,044,186
Accrued interest payable............................. 317,386 238,150
Demand notes issued to U.S. Treasury................. 139,550 317,655
Federal funds purchased.............................. 575,000 0
Other liabilities.................................... 53,910 68,870
----------- -----------
Total current liabilities........................ 56,126,558 56,668,861
----------- -----------
Stockholders' equity:
Common stock (par value $100,000 per share;
authorized 1,750 shares, issued and outstanding
1,750 shares...................................... 175,000 175,000
Surplus.............................................. 175,000 175,000
Retained earnings.................................... 10,049,224 9,631,581
Net unrealized gain (loss) on securities available-
for-sale (net of taxes)............................. 140,123 (960,715)
----------- -----------
Total stockholders' equity....................... 10,539,347 9,020,866
----------- -----------
Total liabilities and stockholders' equity....... $66,665,905 $65,689,727
=========== ===========
</TABLE>

See accompanying summary of significant account policies and notes to financial
statements.

F-32
<PAGE>

VALLEY NATIONAL BANK

STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Interest income:
Interest and fees on loans........................... $2,725,232 $2,370,411
Interest on federal funds sold....................... 49,837 95,161
Interest on time deposits in other banks............. 8,208 12,030
Interest on mortgage-backed securities............... 178,399 225,027
Interest on investment securities:
Taxable interest income............................ 1,453,624 1,580,047
Tax-exempt interest income......................... 164,457 197,298
---------- ----------
Total interest income............................ 4,579,757 4,479,974
---------- ----------
Interest expense:
Interest on deposits................................. 1,962,694 1,562,494
Interest on short-term borrowings.................... 19,339 10,565
---------- ----------
Total interest expense........................... 1,982,033 1,573,059
---------- ----------
Net interest income.............................. 2,597,724 2,906,915
Provision for loan losses.............................. 0 0
---------- ----------
Net interest income after provisions for loan
losses.......................................... 2,597,724 2,906,915
---------- ----------
Non-interest income:
Service charges on deposit accounts.................. 429,970 400,375
Securities gains..................................... 57,302 101,246
Gain (loss) on sale of other assets.................. (25) (367)
Other income......................................... 61,742 88,332
---------- ----------
Total non-interest income........................ 548,989 589,586
---------- ----------
Non-interest expense:
Salaries and employee benefits....................... 1,552,373 1,493,542
Expenses of premises and fixed assets................ 230,496 257,960
Other expenses....................................... 553,896 583,718
---------- ----------
Total non-interest expense....................... 2,336,765 2,335,220
---------- ----------
Income before income taxes....................... 809,948 1,161,281
Applicable income taxes................................ 217,305 360,812
---------- ----------
Net income....................................... $ 592,643 $ 800,469
========== ==========
Average number of shares outstanding................... 1,750 1,750
========== ==========
Net income per share............................. $ 338.65 $ 457.41
========== ==========
Cash dividends declared.......................... $ 100.00 $ 100.00
========== ==========
</TABLE>

See accompanying summary of significant account policies and notes to financial
statements.

F-33
<PAGE>

VALLEY NATIONAL BANK

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>
NET UNREALIZED GAIN
(LOSS) ON SECURITIES
COMMON RETAINED AVAILABLE-FOR-SALE
STOCK SURPLUS EARNINGS NET OF TAXES TOTAL
-------- -------- ----------- -------------------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1993................... $175,000 $175,000 $ 9,006,112 $ 0 $ 9,356,112
Net change in unrealized
loss on securities
available-for-sale, net
of taxes............... (960,715) (960,715)
Net income--1994........ 800,469 800,469
Cash dividends
declared--$100.00 per
share.................. (175,000) (175,000)
-------- -------- ----------- ---------- -----------
BALANCE AT DECEMBER 31,
1994................... 175,000 175,000 9,631,581 (960,715) 9,020,866
Net change in unrealized
gain on securities
available-for-sale, net
of taxes............... 1,100,838 1,100,838
Net income--1995........ 592,643 592,643
Cash dividends
declared--100.00 per
share.................. (175,000) (175,000)
-------- -------- ----------- ---------- -----------
BALANCE AT DECEMBER 31,
1995................... $175,000 $175,000 $10,049,224 $ 140,123 $10,539,347
======== ======== =========== ========== ===========
</TABLE>

See accompanying summary of significant account policies and notes to financial
statements.

F-34
<PAGE>

VALLEY NATIONAL BANK

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................... $ 592,643 $ 800,469
Adjustments to reconcile net income to net cash
provided by operating activities:
Recovery of loan losses.......................... 38,982 0
Provision for depreciation and amortization...... 92,712 115,570
Amortization and accretion of investment security
discounts and premiums.......................... 107,722 55,517
Realized investment security (gains) losses...... (57,302) (101,246)
Realized loss on sales of REO and other assets... 25 367
Net change in:
Interest receivable and other assets........... (99,501) 146,070
Interest payable and other liabilities......... 64,276 (110,050)
----------- -----------
Net cash provided by operating activities.... 739,557 906,697
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in:
Interest-bearing deposits in other banks......... 541 100,913
Federal funds sold............................... 1,100,000 0
Loans............................................ (3,191,987) 254,468
Proceeds from maturities of securities held-to-
maturity...................................... 0 204,000
Purchases of securities to be held to
maturity...................................... 0 (205,200)
Proceeds from maturities of securities
available-for-sale............................ 2,103,056 4,959,318
Proceeds from sales of securities available for
sale.......................................... 0 5,573,906
Purchases of securities available for sale..... 0 (8,915,188)
Proceeds from sales of REO and other assets.... 0 145,123
Proceeds from sale of fixed assets............. 0 2,000
Purchases of premises and equipment............ (170,397) (16,885)
----------- -----------
Net cash used by investing activities........ (158,787) 2,102,455
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in:
Non-interest bearing demand deposits............. 204,438 (199,014)
Time and savings deposits........................ (1,207,912) (2,071,641)
Short-term borrowings--U.S. Treasury............... (178,105) (83,058)
Federal funds purchased............................ 575,000 0
Cash dividends paid................................ (175,000) (175,000)
----------- -----------
Net cash used by financing activities........ (781,579) (2,528,713)
----------- -----------
Increase (decrease) in cash and cash
equivalents................................. (200,809) 480,439
Cash and cash equivalents at beginning of year....... 2,914,347 2,433,908
----------- -----------
Cash and cash equivalents at end of year............. $ 2,713,538 $ 2,914,347
=========== ===========
Supplemental schedule of cash flow information:
Cash paid during the year for:
Interest........................................... $ 1,963,387 $ 1,581,468
Income Taxes....................................... $ 285,929 $ 316,000
Transfers from loans to REO.......................... $ 31,084 $ 144,327
Transfers from REO to loans.......................... $ 45,223 $ 144,327
</TABLE>

See accompanying summary of significant account policies and notes to financial
statements.

F-35
<PAGE>

VALLEY NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies of Valley National Bank
(Valley National or Bank), which have been consistently followed in preparing
the accompanying financial statements, is presented to assist the reader in
better understanding the financial statements and other data contained in this
report. Valley National operates within the financial services industry,
providing a full range of banking and bank-related services to individual and
corporate customers in East Alabama and West Georgia through its offices in
Lanett and Valley, Alabama. The Bank is subject to intense competition from
other financial institutions and is also subject to the regulations of certain
government agencies and undergoes periodic examinations by those regulatory
authorities.

Financial Statement Presentation and Basic Accounting Policy

The accounting and reporting policies of Valley National conform with
generally accepted accounting principles and with general practices of the
banking industry. In preparing the financial statements in accordance with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period. Actual
results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change
relate to the determination of the reserve for loan losses; the valuation of
real estate acquired in connection with foreclosures or in satisfaction of
loans; and the disclosures for contingent assets and liabilities. In
connection with the determination of the reserve for loan losses and the
valuation of other real estate, management obtains independent appraisals for
significant properties and properties collateralizing impaired loans.

Investment Securities

Valley National classifies its securities into two categories: held to
maturity and available for sale. Held to maturity securities are those
securities for which Valley National has the ability and intent to hold until
maturity. All other securities not included in held to maturity are classified
as available for sale.

Securities available for sale are stated at estimated fair value, with
unrealized gains and losses, net of the related tax effect, reported as a
separate component of shareholders' equity until realize. Held to maturity
securities are recorded at amortized cost, adjusted for the amortization of
premiums and accretion of discounts to maturity.

A decline in the market value of any available for sale or held to maturity
below cost that is deemed other than temporary results in a charge to earnings
resulting in the establishment of a new cost basis for the security.

Premiums and discounts are amortized and accumulated over the life of the
related security as an adjustment to the yield using the effective interest
method. Dividends and interest income are recognized when earned. Realized
gains and losses for securities classified as available for sale and held to
maturity are included in earnings and are derived using the specific
identification method for determining the amortized cost of securities sold.

Management determines the appropriate classification of the security at the
time of purchase and reevaluates such designations as of the date of each
statement of condition.

F-36
<PAGE>

VALLEY NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED DECEMBER 31, 1995 AND 1994

Statements of Cash Flows

In the statements of cash flows, cash and cash equivalents consist of those
amounts included in the balance sheet caption, cash and due from banks.

Loans

Loans are reported at principal amounts outstandings, less unearned income
and reserve for loan losses.

Interest on loans is accrued based upon the principal amount outstanding
except for interest on some installment loans which is generally credited to
income based upon the sum-of-the-months digits method which generally
approximates the interest method of income recognition.

Loans on which the accrual of interest has been discontinued are designated
as nonaccrual loans. Accrual of interest on loans is discontinued when in the
opinion of management reasonable doubt exists that the borrower may be unable
to meet payments of interest or principal when they become contractually due.
When a loan is placed on non accrual status, previously accrued interest is
charged to interest income on loans. Interest payments received on nonaccrual
loans are applied as a reduction of principal. Loans are returned to accruing
status only when they are brought fully current with respect to interest and
principal and when, in the judgment of management, the loans are estimated to
be fully collectible as to both principal and interest. Such interest, when
ultimately collected, is recorded as interest income in the period received.
Interest on accruing impaired loans is recognized as long as such loans do not
meet the criteria for nonaccrual classifications.

Reserve for Loan Losses

Valley National adopted the provisions of Statement of Financial Accounting
Standard (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan" as
amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan--
Income Recognition and Disclosures", on January 1, 1995. Management,
considering current information and events regarding the borrowers ability to
repay their obligations, considers a loan to be impaired when the ultimate
collectibility of all amounts due, according to the contractual terms of the
loan agreement, is in doubt. When a loan is considered to be impaired, the
amount of impairment is measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate. If the loan is
collateral-dependent, the fair value of the collateral is used to determine
the amount of impairment. Impairment losses are included in the reserve for
loan losses through a charge to the provision for losses on loans. Subsequent
recoveries are added to the reserve for loan losses. Prior periods have not
been restated.

SFAS No. 114 applies to all loans, except for large pools of smaller balance
homogeneous loans that are collectively evaluated for impairment, loans that
are measured at fair value or at the lower of cost of fair value, and debt
securities. The reserve for loan losses for large pools of smaller balance
homogeneous loans is established through consideration of such factors as
changes in the nature and value of the portfolio, overall portfolio quality,
adequacy of the underlying collateral, loan concentrations, historical charge-
off trends, and economic conditions that may affect the borrowers' ability to
pay. Loans are charged against the reserve for loan losses when management
believes that the collection of principal is unlikely.

Management believes that the reserve for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the reserve for loan losses may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as an integral
part of their examination process, review the reserve for loan losses. Such
agencies may require the Bank to recognize

F-37
<PAGE>

VALLEY NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED DECEMBER 31, 1995 AND 1994

additions to the reserve for loan losses based on their judgments about
information available to them at the time of their examination.

Premises and Equipment

Premises, equipment, and leasehold improvements are reported at cost, less
accumulated depreciation and amortization. The provision for depreciation is
computed using the straight-line or accelerated methods over the estimated
useful lives of the assets.

Estimated useful lives generally are as follows:

<TABLE>
<S> <C>
Premises and leasehold improvements............................ 10-40 years
Furniture and equipment........................................ 5-12 years
</TABLE>

Expenditures for maintenance and repairs are charged against income as
incurred. Costs of major additions and improvements are capitalized. The asset
account is relieved of the cost of the item and the allowance for depreciation
and amortization is charged with accumulated depreciation or amortization when
property is disposed of or retired.

Income Taxes

Valley National accounts for income taxes in accordance with the provisions
of SFAS No. 109, "Accounting for Income Taxes". Under the asset and liability
method of SFAS No. 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.

Other Real Estate Owned

Other real estate owned, consisting of properties obtained through
satisfaction of indebtedness (foreclosure), is included on the balance sheet
at the lower of cost or fair market value at date of acquisition.

Disclosure About the Fair Value of Financial Instruments

SFAS No. 107, "Disclosures About Fair Value of Financial Instruments",
requires all entities to disclose the fair value of financial instruments,
both assets and liabilities (on- and off-balance sheets), for which it is
practicable to estimate fair value.

Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale, at one time, Banks' entire holding of a particular
financial instrument. Because no market exists for a portion of Banks'
financial instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

F-38
<PAGE>

VALLEY NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED DECEMBER 31, 1995 AND 1994

Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not
considered financial instruments. Significant assets and liabilities that are
not considered financial instruments include deferred tax accounts and
premises and equipment. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect
on fair value estimates and have not been considered in any of the estimates.

The following summarizes the fair value of financial instruments at December
31, 1995.

<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
---------- ----------
<S> <C> <C>
Cash and due from banks............................... $2,713,538 $2,713,535
Interest earning deposits in other banks.............. 100,395 100,395
Securities held to maturity........................... 215,700 215,700
Securities available for sale......................... 28,945,131 29,178,669
Loans, net unearned income............................ 32,666,339 34,833,970
Deposits.............................................. 55,040,712 58,040,782
Demand note issued to U.S. Treasury................... 139,550 139,550
Federal funds purchased............................... 575,000 575,000
Commitments........................................... 0 1,050,000
</TABLE>

NOTE B--RESTRICTIONS ON CASH AND DUE FROM BANKS

The Bank is not required to maintain a reserve balance with the Federal
Reserve Bank due to adequate cash reserves on hand.

F-39
<PAGE>

VALLEY NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED DECEMBER 31, 1995 AND 1994

NOTE C--INVESTMENT SECURITIES

The carrying amounts of investment securities as shown in the balance sheets
of the Bank and their approximate full values at December 31 were as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY
December 31, 1995:
U.S. Government
Corporations............... $ 215,700 $ 0 $ 0 $ 215,700
----------- -------- ---------- -----------
$ 215,700 $ 0 $ 0 $ 215,700
=========== ======== ========== ===========
December 31, 1994:
U.S. Government
Corporations............... $ 215,700 $ 0 $ 0 $ 215,700
----------- -------- ---------- -----------
$ 215,700 $ 0 $ 0 $ 215,700
=========== ======== ========== ===========
SECURITIES AVAILABLE FOR SALE
December 31, 1995:
U.S. Treasury securities.... $ 3,922,455 $ 0 $ 5.708 $ 3,916,747
Federal agency securities... 21,018,075 14,527 103,600 20,929,002
Mortgage-backed securities.. 1,764,369 97,910 63 1,862,216
State and municipal
securities................. 2,240,232 230,472 0 2,470,704
----------- -------- ---------- -----------
$28,945,131 $342,909 $ 109,371 $29,178,669
=========== ======== ========== ===========
December 31, 1994:
U.S. Treasury securities.... $ 4,003,501 $ 0 $ 306,118 $ 3,697,383
Federal agency securities... 22,296,233 1,223 1,422,660 20,874,796
Mortgage-backed securities.. 2,148,434 55,006 3,301 2,200,139
State and municipal
securities................. 2,650,439 84,982 0 2,735,421
----------- -------- ---------- -----------
$31,098,607 $141,211 $1,732,079 $29,507,739
=========== ======== ========== ===========
</TABLE>

Investment securities having a fair value of $7,811,681 and $6,637,195 were
pledged to secure public deposits and other purposes required or permitted by
law at December 31, 1995 and 1994, respectively.

The fair values of investment securities are established with the assistance
of an independent pricing service. They are based on available market data
which often reflects transactions of relatively small size and are not
necessarily indicative of the prices at which large amounts of particular
issues could be readily sold or purchased.

Cash proceeds from the sales and maturity of held-to-maturity securities
during 1995 and 1994 were $1,717,302 and $5,573,906 respectively. Net gains
from securities sold in 1995 and 1994 were $57,302 (gross gains $57,302 and
gross losses $-0-) and $101,246 gross gains of $101,246 and gross losses
$-0-), respectively.

F-40
<PAGE>

VALLEY NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED DECEMBER 31, 1995 AND 1994

The scheduled maturity of securities to be held-to-maturity and securities
available-for-sale at December 31, 1995 were as follows:

<TABLE>
<CAPTION>
SECURITIES TO BE SECURITIES
HELD-TO-MATURITY AVAILABLE-FOR-SALE
------------------ -----------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less.......... $ 0 $ 0 $ 5,100,376 $ 5,088,170
Due from one year to five years.. 0 0 15,747,624 15,721,048
Due from five years to ten
years........................... 0 0 5,909,742 5,937,447
Due after ten years(a) .......... 215,700 215,700 2,187,389 2,432,004
-------- -------- ----------- -----------
$215,700 $215,700 $28,945,131 $29,178,669
======== ======== =========== ===========
</TABLE>

________
(a) Securities with no stated maturity are included with securities with
remaining maturity of ten years or more.

NOTE D--LOANS

Loans at December 31, 1995 and 1994 are summarized as follows:

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Real estate loans.................................. $26,840,856 $24,820,668
Commercial loans................................... 5,254,939 4,050,503
Installment loans.................................. 621,502 653,868
----------- -----------
Total loans...................................... 32,717,297 29,525,039
Unearned income and deferred fees/cost............. (50,958) (30,818)
----------- -----------
$32,666,339 $29,494,221
=========== ===========
</TABLE>

Fair value of loans is estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type, such as commercial,
real estate, and other consumer loans. Loans are segmented into fixed and
adjustable rate interest terms. The fair value of loans, is calculated by
using estimated market discount rates which reflect the credit and interest
rate risk inherent in the loan.

The following table presents information for the fair value of loans as of
December 31, 1995.

<TABLE>
<CAPTION>
1995
-----------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
----------- -----------
<S> <C> <C>
Adjustable rate loans, net of unearned income....... $17,900,540 $20,018,451
Fixed rate loans, net of unearned income............ 14,765,799 14,815,519
</TABLE>

NOTE E--ALLOWANCE FOR LOAN LOSSES

An analysis of the allowance for loan losses is as follows:

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Balance at beginning of year............................. $381,829 $393,978
Provision charged to income............................ 0 0
Loans charge off....................................... (34,008) (71,331)
Recoveries............................................. 38,982 59,182
-------- --------
Balance at end of year................................... $386,803 $381,829
======== ========
</TABLE>

F-41
<PAGE>

VALLEY NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED DECEMBER 31, 1995 AND 1994

NOTE F--PREMISES AND EQUIPMENT

A summary of premises and equipment follows:

<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Land.................................................. $ 572,944 $ 378,647
Buildings............................................. 1,440,634 1,440,634
Furniture and fixtures................................ 1,192,069 1,181,587
Leasehold improvements................................ 0 51,297
Automobiles........................................... 16,915 0
---------- ----------
3,222,562 3,052,165
Less: Accumulated depreciation & amortization......... 1,865,736 1,773,024
---------- ----------
Total............................................... $1,356,826 $1,279,141
========== ==========
</TABLE>

The allowance for depreciation and amortization charged to operating expense
in 1995 and 1994 amounts to $92,712 and $115,570 respectively.

NOTE G--DEPOSITS

The following schedule presents a comparative summary of the interest-
bearing deposit:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
----------- -----------
<S> <C> <C>
Interest-bearing checking accounts................... $12,954,939 $14,043,360
Savings accounts..................................... 5,732,436 6,185,567
Money market savings accounts........................ 1,356,232 1,650,920
Certificates of deposit (under $100,000)............. 24,854,674 23,605,346
Certificates of deposit ($100,000 or more)........... 1,028,000 1,649,000
Time deposits ($100,000 or more)..................... 2,150,000 2,150,000
----------- -----------
Totals............................................. $48,076,281 $49,284,193
=========== ===========
</TABLE>

In accordance with SFAS No. 107, the fair value of deposits with no stated
maturity, such as non-interest bearing demand accounts, interest bearing
demand deposits, money market accounts, and savings accounts, is equal to the
amount payable on demand as of that respective date. The fair value of time
deposits is based on the discounted value of contractual cash flows. The
discount rate is estimated using the rates currently offered for deposits of
similar remaining maturities. The following table represents fair value
information on deposits as of December 31, 1995.

<TABLE>
<CAPTION>
1995
-----------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
----------- -----------
<S> <C> <C>
Non-interest bearing demand deposits................ $ 6,964,431 $ 6,964,431
Interest bearing demand deposits.................... 12,954,939 12,954,939
Money market accounts............................... 1,356,232 1,356,232
Savings accounts.................................... 5,732,436 5,732,436
Time deposits....................................... 28,032,674 31,032,744
----------- -----------
$55,040,712 $58,040,782
=========== ===========
</TABLE>

F-42
<PAGE>

VALLEY NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED DECEMBER 31, 1995 AND 1994

A comparative summary of interest expense on deposit accounts are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
---------- ----------
<S> <C> <C>
Savings accounts...................................... $ 150,270 $ 136,124
NOW and money market accounts......................... 400,367 284,767
Certificates.......................................... 1,292,799 1,056,887
Time deposits......................................... 119,258 84,716
---------- ----------
Totals.............................................. $1,962,694 $1,562,494
========== ==========
</TABLE>

NOTE H--PENSION PLANS

The Bank established a profit sharing plan January 1, 1985 and a 401(k)
matching contributions plan in 1988. Employees with one year of service may
defer a maximum of 10% of their salary of which the first 5% deferred will be
matched by the Bank. Pension expense was $49,195 in 1995 and $55,080 in 1994.

NOTE I--INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Components of Valley
National's deferred tax liabilities and assets as of December 31, 1995 are
listed below:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
------- ---------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation............................ $95,882 $ 97,891
Accretion of bond discount............................ 5,262 2,801
Deferred loan fees/cost............................... 5,414 11,321
------- ---------
Total deferred tax liabilities...................... 106,558 112,013
------- ---------
Deferred tax assets:
Net unrealized loss on securities available-for-sale.. (93,415) 640,477
Loan loss provision................................... 71,886 71,290
------- ---------
Total deferred tax assets........................... (21,529) 711,767
------- ---------
Net deferred tax asset (tax liability).............. $85,029 $(599,754)
======= =========
</TABLE>

Applicable income taxes for financial reporting purposes differ from the
amount computed by applying the statutory federal income tax rate of 34% for
1995 and 1994 for the reasons noted below:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Tax computed at statutory federal income rate........ $ 275,382 $ 394,836
Increase (decreases) in taxes resulting from:
Tax exempt income.................................. (61,577) (67,081)
State excise tax, net of federal tax benefit....... 17,221 45,613
Other, net......................................... (13,721) (12,556)
---------- ----------
Totals........................................... $217,305 $360,812
========== ==========
Effective tax rate................................... 26.8% 31.0%
========== ==========
</TABLE>

F-43
<PAGE>

VALLEY NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEARS ENDED DECEMBER 31, 1995 AND 1994

The components of income taxes were as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Currently payable:
Federal........................................ $197,355 $328,290
State.......................................... 26,093 45,613
Deferred:
Federal........................................ (5,235) (11,127)
State.......................................... (908) (1,964)
------------ ------------
Totals....................................... $217,305 $360,812
============ ============
</TABLE>

NOTE J--RELATED PARTY TRANSACTIONS

As of December 31, 1995 and 1994, the Bank's officers and directors and
their related parties are loan and deposit customers in the ordinary course of
business. Total loans to these persons (excluding loans which in the aggregate
do not exceed $60,000 to any such person) at December 31, 1995 and 1994 were
approximately $2,676,053 and $2,228,559, respectively. These loans were made
in the ordinary course of business and on substantially the same terms
including interest rates and collateral, as those prevailing at the same time
for comparable transactions with other persons and involve no unusual risk of
collectibility.

NOTE K--FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Bank is party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financial needs of its customers.
These financial instruments include loan commitments and standby letters of
credit and involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the financial statements.

The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for loan commitments and standby
letters of credit is represented by the contractual amount of those
instruments. The Bank has no significant concentrations of credit risk with
any individual counterparty to originate loans. The total amounts of financial
instruments with off-balance sheet risk as of December 31, 1995 are as
follows:

<TABLE>
<S> <C>
Loan commitments.................. $1,050,000
Standby letters of credit......... $ 0
</TABLE>

Both loan commitments and standby letters of credit have credit risk
essentially the same as that involved in extending loans to customers and are
subject to normal credit approval procedures and policies. Collateral is
obtained based on management's credit assessment of the customers.

F-44
<PAGE>

FIRST NATIONAL SYLACAUGA
CORPORATION AND SUBSIDIARIES

SYLACAUGA, ALABAMA

DECEMBER 31, 1997

F-45
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

SYLACAUGA, ALABAMA

INDEX

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent auditors' report............................................... F-47
Consolidated statements of financial condition............................. F-48
Consolidated statements of changes in stockholders' equity................. F-49
Consolidated statements of income.......................................... F-50
Consolidated statements of cash flows...................................... F-51
Notes to consolidated financial statements................................. F-53
</TABLE>

F-46
<PAGE>

JACKSON THORNTON & CO.
A PROFESSIONAL CORPORATION
CERTIFIED PUBLIC ACCOUNTANTS
MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
MONTGOMERY, ALABAMA
DOTHAN . PRATTVILLE . WETUMPKA . GREENVILLE

INDEPENDENT AUDITORS' REPORT

To the Stockholders
First National Sylacauga Corporation
Sylacauga, Alabama

We have audited the accompanying consolidated statements of financial
condition of First National Sylacauga Corporation and subsidiaries as of
December 31, 1997 and 1996 and the related consolidated statements of income,
changes in stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First National Sylacauga
Corporation and subsidiaries as of December 31, 1997 and 1996, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.

Jackson Thornton & Co., P.C.

Montgomery, Alabama
March 6, 1998

F-47
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

SYLACAUGA, ALABAMA

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks............................ $ 4,892,409 $ 5,755,747
Securities available for sale...................... 24,125,028 25,516,113
Federal funds sold................................. 2,040,000
Loans receivable, net.............................. 95,511,201 81,949,748
Accrued interest receivable........................ 864,137 855,897
Premises and equipment, net........................ 2,259,006 2,425,817
Cash value of life insurance....................... 3,030,465 2,877,512
Intangible assets acquired, net of accumulated
amortization
of $126,438 and $64,583 respectively.............. 1,450,925 1,547,402
Other assets....................................... 792,963 618,885
------------ ------------
Total assets................................... $134,966,134 $121,547,121
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest bearing............................. $ 15,586,562 $ 14,947,400
Interest bearing................................ 85,271,218 79,551,167
------------ ------------
Total deposits................................. 100,857,780 94,498,567
Federal funds purchased.......................... 3,440,000
Notes payable.................................... 19,042,000 9,692,000
Accrued interest and other liabilities........... 998,536 797,952
------------ ------------
Total liabilities.............................. 120,898,316 108,428,519
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $10 par value; 120,000 shares
authorized and issued; 100,995 and 101,115
shares outstanding, respectively................ 1,200,000 1,200,000
Additional paid-in capital....................... 1,008,739 1,008,739
Retained earnings................................ 12,975,719 12,129,008
Treasury stock, at cost (19,005 and 18,885
shares, respectively)........................... (1,409,957) (1,394,957)
Unrealized gain on securities available for sale,
net............................................. 293,317 175,812
------------ ------------
Total stockholders' equity..................... 14,067,818 13,118,602
------------ ------------
Total liabilities and stockholders' equity..... $134,966,134 $121,547,121
============ ============
</TABLE>

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

F-48
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ON
SECURITIES
ADDITIONAL AVAILABLE TOTAL
COMMON PAID-IN RETAINED TREASURY FOR STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK SALE, NET EQUITY
---------- ---------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1994, as previously
reported............... $1,200,000 $1,002,800 $10,789,953 $(1,327,987) $(635,444) $11,029,322
Adjustment for
overstatement of prior
years' allowance for
loan losses (net of
applicable taxes of
$77,000)............... 123,000 123,000
---------- ---------- ----------- ----------- --------- -----------
BALANCE AT DECEMBER 31,
1994, as restated...... 1,200,000 1,002,800 10,912,953 (1,327,987) (635,444) 11,152,322
Net income for 1995, as
restated............... 1,181,339 1,181,339
Cash dividends paid or
declared ($5 per
share)................. (506,515) (506,515)
Purchase of 715 shares
of treasury stock...... (73,570) (73,570)
Net change in unrealized
gain on securities
available for sale, net
of taxes of $571,118... 912,329 912,329
---------- ---------- ----------- ----------- --------- -----------
BALANCE AT DECEMBER 31,
1995................... 1,200,000 1,002,800 11,587,777 (1,401,557) 276,885 12,665,905
Net income for 1996..... 1,046,806 1,046,806
Cash dividends paid or
declared ($5 per
share)................. (505,575) (505,575)
Sale of 100 shares of
treasury stock......... 5,939 6,600 12,539
Net change in unrealized
gain on securities
available for sale, net
of taxes of $63,272.... (101,073) (101,073)
---------- ---------- ----------- ----------- --------- -----------
BALANCE AT DECEMBER 31,
1996................... 1,200,000 1,008,739 12,129,008 (1,394,957) 175,812 13,118,602
Net income for 1997..... 1,351,806 1,351,806
Cash dividends paid or
declared ($5 per
share)................. (505,095) (505,095)
Purchase of 120 shares
of treasury stock...... (15,000) (15,000)
Net change in unrealized
gain on securities
available for sale, net
of taxes of $73,558.... 117,505 117,505
---------- ---------- ----------- ----------- --------- -----------
BALANCE AT DECEMBER 31,
1997................... $1,200,000 $1,008,739 $12,975,719 $(1,409,957) $ 293,317 $14,067,818
========== ========== =========== =========== ========= ===========
</TABLE>

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

F-49
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1997, 1996
AND 1995

<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Loans receivable........................... $9,433,096 $6,952,351 $4,431,537
Securities available for sale.............. 1,545,405 1,750,663 1,697,306
Federal funds sold......................... 106,717 82,363 50,763
---------- ---------- ----------
Total interest income.................... 11,085,218 8,785,377 6,179,606
---------- ---------- ----------
INTEREST EXPENSE:
Deposits................................... 3,750,979 2,973,831 2,039,972
Federal funds purchased and securities sold
under repurchase agreements............... 25,536 114,256 29,594
Notes payable.............................. 918,278 263,479 6,643
---------- ---------- ----------
Total interest expense................... 4,694,793 3,351,566 2,076,209
---------- ---------- ----------
NET INTEREST INCOME.......................... 6,390,425 5,433,811 4,103,397
PROVISION FOR LOAN LOSSES.................... 662,155 564,389 (98,468)
---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISON FOR LOAN
LOSSES...................................... 5,728,270 4,869,422 4,201,865
---------- ---------- ----------
OTHER INCOME:
Service charges and other fees............. 950,401 735,371 621,659
Securities gains........................... 8,075 24,845 41,852
Commission income.......................... 63,176 43,596 29,845
Other...................................... 199,822 80,503 10,832
---------- ---------- ----------
Total other income....................... 1,221,474 884,315 704,188
---------- ---------- ----------
OTHER EXPENSES:
Salaries................................... 2,111,181 1,767,172 1,451,780
Pensions and other employees benefits...... 511,410 394,602 329,649
Occupancy expense.......................... 269,666 225,953 171,732
Premises and equipment expense............. 654,534 552,979 478,684
Other operating expenses................... 1,489,089 1,355,816 883,198
---------- ---------- ----------
Total other expenses..................... 5,035,880 4,296,522 3,315,043
---------- ---------- ----------
OTHER BEFORE INCOME TAXES.................... 1,913,864 1,457,215 1,591,010
PROVISIONS FOR INCOME TAXES.................. 562,058 410,409 409,671
---------- ---------- ----------
NET INCOME................................... $1,351,806 $1,046,806 $1,181,339
========== ========== ==========
EARNINGS PER COMMON SHARE.................... $ 13.38 $ 10.35 $ 11.67
========== ========== ==========
</TABLE>

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

F-50
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997,1996, AND 1995

INCREASE (DECREASE) IN CASH AND DUE FROM BANKS

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM (USED FOR) OPERATING
ACTIVITIES:
Net income............................ $ 1,351,806 $ 1,046,806 $ 1,181,339
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation........................ 514,321 401,844 331,127
Amortization........................ 134,311 95,355 10,387
Provision for loan losses........... 662,155 564,389 (98,468)
Loss on disposal of assets.......... 1,320 11,972 4,999
Accretion of investment securities'
discounts.......................... (15,641) (25,685) (51,719)
Deferred income taxes............... (109,630) (78,092) 73,420
Increase in cash value over premiums
paid............................... (152,953) (37,512)
Realized gain on securities
available for sale................. (8,075) (24,845) (41,852)
(Gain) loss on the sale of
foreclosed real estate............. 28,384 (5,000) 35,799
Decrease (increase) in operating
assets and increase (decrease) in
operating liabilities:
Accrued interest receivable....... (8,240) (220,407) (65,932)
Accrued expenses and other
liabilities...................... 200,824 66,949 277,714
Other assets............................ (197,307) 60,624 (8,756)
----------- ----------- -----------
Net cash from operating activities...... 2,401,275 1,856,398 1,648,058
----------- ----------- -----------
CASH FLOWS FROM (USED FOR) INVESTING
ACTIVITIES:
Proceeds from sales and maturities of
securities available for sale........ 8,360,089 17,283,060 8,392,718
Purchase of securities available for
sale................................. (6,761,497) (7,946,055) (7,020,406)
Federal funds sold, net............... (2,040,000)
Loans made to customers, net.......... (12,851,682) (18,294,400) (10,120,046)
Purchases of premises and equipment... (330,297) (512,215) (319,699)
Proceeds from sale of foreclosed real
estate............................... 170,153 60,000 115,872
Payment for purchase of assets of
Hometown Financial Services.......... (1,560,257)
Premium paid for purchase of deposits
of Citizens Bank of Talladega........ (229,939)
Payment for purchase of City Banc
Corporation, net of cash acquired.... (2,256,502)
Payment of officers' life insurance
premium.............................. (2,840,000)
----------- ----------- -----------
Net cash used for investing
activities..................... (15,013,491) (14,736,051) (8,951,561)
----------- ----------- -----------
</TABLE>

F-51
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

INCREASE (DECREASE) IN CASH AND DUE FROM BANKS

<TABLE>
<CAPTION>
1997 1996 1995
---------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM (USED FOR) FINANCING AC-
TIVITIES:
Net increase (decrease) in noninterest
bearing deposits....................... $ 639,162 $(3,487,848) $ 936,242
Net increase in interest bearing
deposits............................... 5,720,051 5,868,921 1,665,986
Net increase (decrease) in federal funds
purchased.............................. (3,440,000) (310,000) 1,450,000
Proceeds from sale of treasury stock.... 12,539
Purchases of treasury stock............. (15,000) (73,570)
Dividends paid.......................... (505,335) (505,375) (431,648)
Deposits purchased from Citizens Bank of
Talladega.............................. 8,492,204
Proceeds from notes payable............. 9,600,000 7,500,000 2,000,000
Payments on notes payable............... (250,000) (1,500,000) (250,000)
---------- ----------- ----------
Net cash from financing activities.... 11,748,878 16,070,441 5,297,010
---------- ----------- ----------
NET INCREASE (DECREASE) IN CASH AND DUE
FROM BANKS............................... (863,338) 3,190,788 (2,006,493)
CASH AND DUE FROM BANKS AT BEGINNING OF
YEAR..................................... 5,755,747 2,564,959 4,571,452
---------- ----------- ----------
CASH AND DUE FROM BANKS AT END OF YEAR.... $4,892,409 $ 5,755,747 $2,564,959
========== =========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION:
Cash payments for:
Interest paid to depositors............ $3,616,804 $ 2,838,819 $1,987,322
Interest paid on federal funds
purchased and securities sold under
repurchase agreements................. 25,536 114,256 29,594
Interest paid on notes payable......... 773,839 263,479 6,643
Income taxes........................... 817,532 476,464 256,072
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Other real estate acquired in settlement
of loans............................... $ 169,798 $ 27,670
</TABLE>

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

F-52
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997, 1996 AND 1995

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of consolidation--The accompanying consolidated financial
statements include the accounts of First National Sylacauga Corporation and
its wholly owned subsidiaries: First National-America's Bank (formerly known
as First National Bank in Sylacauga) (Bank), and Frontier Financial Services
Corporation. These entities are collectively referred to herein as the
Company. All significant intercompany transactions and balances have been
eliminated in consolidation.

Nature of business--The First National-America's Bank, a subsidiary of First
National Sylacauga Corporation, is a commercial bank which operates branches
in Talladega County, Alabama. The Bank's primary source of revenue is
providing loans to customers, who are predominately small and middle-market
businesses and middle-income individuals. Frontier Financial Services
Corporation, a subsidiary of First National-America's Bank, makes small
consumer loans and has seven offices located in north and central Alabama.

Basis of financial statement presentation and accounting estimates--The
accounting and reporting policies of the Company conform to generally accepted
accounting principles. In preparing the accompanying financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the financial
statements and the reported amounts of revenue and expenses for the reporting
period. Actual results could differ from those estimates.

Cash and cash equivalents--For the purpose of reporting cash flows, cash and
due from banks includes cash on hand and amounts due from banks (including
cash items in process of clearing). Cash flows from loans originated by the
Bank, deposits, and federal funds purchased and sold are reported net.

Securities available for sale--Securities classified as available for sale
are those debt securities that the Bank intends to hold for an indefinite
period of time, but not necessarily to maturity. Any decision to sell a
security classified as available for sale would be based on various factors,
including significant movements in interest rates, changes in the maturity mix
of the Bank's assets and liabilities, liquidity needs, regulatory capital
considerations, and other similar factors.

Securities available for sale are reported at fair value with unrealized
gains or losses reported as a separate component of stockholders' equity, net
of the related deferred tax effect. The amortization of premiums and accretion
of discounts, computed by the interest method over their contractual lives,
are recognized in interest income.

Realized gains or losses, determined on the basis of the cost of specific
securities sold, are included in earnings.

Loans receivable--Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or pay-off are
stated at the amount of unpaid principal, reduced by unearned discount and
fees and an allowance for loan losses.

Unearned interest on discounted loans is amortized to income over the life
of the loans, using the interest method. For all other loans, interest is
accrued daily on the outstanding balances. For impaired loans, accrual of
interest is discontinued on a loan when management believes, after considering
collection efforts and other factors, that the borrower's financial condition
is such that collection of interest is doubtful. Cash collections on impaired
loans are credited to the loan receivable balance, and no interest income is
recognized on those loans until the principal balance has been collected.

A loan is impaired when it is probable the Bank will be unable to collect
all contractual principal and interest payments due in accordance with the
terms of the loan agreement. Impaired loans are measured based

F-53
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997, 1996 AND 1995

on the present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the loan's observable
market price or the fair value of collateral if the loan is collateral
dependent. The amount of impairment, if any, and any subsequent changes are
included in the allowance for loan losses.

The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb estimated losses on existing loans, based on an evaluation of the
collectibility of loans and prior loss experience. This evaluation also takes
into consideration such factors as changes in the nature and volume of the
loan portfolio, overall portfolio quality, review of specific problem loans,
and current economic conditions that may affect the borrower's ability to pay.
While management uses the best information available to make its evaluation,
future adjustments to the allowance may be necessary if there are significant
changes in economic conditions.

Premises and equipment--Premises and equipment are carried at cost, less
accumulated depreciation. Depreciation is computed on both straight-line and
accelerated methods over the following estimated useful lives:

<TABLE>
<S> <C>
Buildings and improvements....................................... 10-40 years
Furniture and equipment.......................................... 3-10 years
</TABLE>

Other real estate owned--Other real estate owned (OREO) represents
properties acquired through foreclosure or other proceedings and is initially
recorded at fair value at the date of foreclosure, which establishes a new
cost. After foreclosure, OREO is held for sale and is carried at the lower of
cost or fair value less estimated costs of disposal. Any write-down to fair
value at the time of transfer to OREO is charged to the allowance for loan
losses. Property is evaluated regularly to ensure the recorded amount is
supported by its current fair value. Valuation allowances are recorded as
necessary in order to reduce the carrying amount to the fair value less
estimated costs to dispose. Revenue and expense from the operations of OREO
and changes in the valuation allowance are included in other income and
expense.

Income taxes--Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their
tax bases. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.

The Company files a consolidated federal income tax return. Each subsidiary
provides for income taxes based on its contribution to income taxes (benefit)
of the consolidated group.

Employee benefit plans

Profit sharing plan--The Company has a profit sharing plan which covers
substantially all regular, full-time employees who have completed one year of
service. Annual contributions are set by the Company's Board of Directors. The
Company's contributions to the plan were $18,576, $9,351 and $46,300 in 1997,
1996 and 1995, respectively.

401(k) plan--During 1994, the Company established a 401(k) plan. The plan
covers substantially all regular, full-time employees. Each employee
designates the amount they will contribute. The Company makes

F-54
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997, 1996 AND 1995

matching contributions up to a maximum amount. The Company's contributions to
the plan in 1997, 1996 and 1995 were $85,360, $77,280 and $73,013,
respectively.

Deferred compensation plan--During 1996, the Company established a deferred
compensation plan for certain key executives and certain directors. The
present value of the plan's accrued benefits amounted to $125,175 and $24,387
at December 31, 1997 and 1996, respectively. The plan is financed through life
insurance policies owned by the Company and provides monthly income to the
covered individuals if they remain employed until age 65 by the Company.
(Reduced amounts are payable if employment terminates prior to age 65.) The
Company's expense of the plan was $100,788 and $24,387 in 1997 and 1996,
respectively.

Fair values of financial instruments--Financial Accounting Standards Board
Statement No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available,
fair values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. Statement No. 107 excludes certain financial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Company.

The following methods and assumptions were used by the Company in estimating
the fair value of its financial instruments:

Cash and short-term instruments--The carrying amounts reported in the
balance sheet for cash and due from banks, interest bearing deposits, and
federal funds sold approximate their fair values.

Securities available for sale--Fair values for securities are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments. The carrying values of restricted equity securities approximate
their fair values.

Loans receivable--For variable rate loans that reprice frequently and have
no significant change in credit risk, fair values are based on carrying
values. The fair value of fixed rate loans is estimated using discounted cash
flow analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. Fair values for impaired
loans are estimated using discounted cash flow analyses or underlying
collateral values, where applicable.

Deposit liabilities--The fair values disclosed for deposits with no defined
maturities are equal to their carrying amounts which represent the amount
payable on demand. The carrying amounts for variable-rate, fixed term money
market accounts and certificates of deposit approximate their fair values at
the reporting date. Fair values of fixed-rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of aggregated expected
monthly maturities on time deposits.

Short-term borrowings--The carrying amounts of federal funds purchased and
other short-term borrowings approximate their fair values.

Notes payable--The fair values of the Company's notes payable are estimated
using discounted cash flow analyses based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.

F-55
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997, 1996 AND 1995

Accrued interest--The carrying amounts of accrued interest approximate their
fair values.

Off-balance-sheet instruments--The fair value for off-balance-sheet lending
commitments is based on fees currently charged to enter into similar
agreements taking into account the remaining terms of the agreements and the
counterparties' credit standing. This fee income was not material to the
Company's financial statements at December 31, 1997, 1996 and 1995.
Consequently, the fair value of these instruments is not presented.

Earnings per common share--Earnings per common share are determined on the
basis of the weighted-average number of common shares outstanding.

Trust assets--Assets of the trust department, other than trust cash on
deposit at the Bank, are not included in these financial statements because
they are not assets of the Bank.

NOTE 2--RESTRICTIONS ON CASH AND DUE FROM BANKS:

The Bank is required to maintain reserve balances in cash or on deposit with
the Federal Reserve Bank, based on a percentage of deposits. The total of
those reserve balances was approximately $673,000 and $652,000 at December 31,
1997 and 1996, respectively.

NOTE 3--ACQUISITIONS:

On May 17, 1996, the Bank acquired certain deposit liabilities of Citizens
Bank of Talladega (formerly known as Talladega Federal Savings and Loan
Association) for $8,262,265. The total of the deposit liabilities assumed was
$8,492,204 resulting in a premium of $229,939 which the Bank is amortizing
over a 15-year period.

The Company acquired the stock of City Banc Corporation, the parent holding
company of City Bank of Childersburg (City Bank) on June 30, 1996 for
$4,471,988. The purchase price was allocated to assets acquired and
liabilities assumed as follows:

<TABLE>
<S> <C>
Assets acquired:
Cash.......................................................... $ 2,215,486
Securities.................................................... 8,206,008
Loans, net.................................................... 16,180,103
Premises and equipment........................................ 690,145
Deferred tax asset............................................ 192,302
Other assets.................................................. 462,550
-----------
Total assets acquired....................................... 27,946,594
===========
Liabilities assumed:
Noninterest bearing deposits.................................. 5,074,862
Interest bearing deposits..................................... 18,054,819
Other liabilities............................................. 1,771,270
-----------
Total liabilities assumed................................... 24,900,951
-----------
Net assets acquired............................................. 3,045,643
Consideration................................................... 4,471,988
-----------
Goodwill........................................................ $ 1,426,345
===========
</TABLE>

F-56
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997, 1996 AND 1995

The goodwill is being amortized by the Company over a 15-year period.
Certain legal and other expenses incurred in connection with the acquisition
amounting to $74,900 are being amortized over a 5-year period. The acquisition
has been accounted for as a purchase with costs allocated to assets acquired
and liabilities assumed based on estimated fair market values for City Bank.
Results of operations since the date of acquisition are included in the
consolidated financial statements.

On December 26, 1997, Frontier Financial Services, Inc. purchased the assets
of Hometown Financial Services, Inc. for $1,560,257. The assets purchased
consisted of loans receivable of $1,541,724 and furniture and fixtures of
$18,533.

NOTE 4--CONSOLIDATED PRO FORMA RESULTS (UNAUDITED):

Summarized below are the consolidated results of operations on an unaudited
pro forma basis as if the City Bank acquisition had occurred as of the
beginning of the years presented. The pro forma information gives effect to
certain pro forma adjustments and is based on the Company's and City Bank's
historical consolidated results of operations for the periods presented.

The pro forma financial information does not purport to be indicative of
results of operations that would have occurred had the transactions occurred
on the basis assumed above, nor are they indicative of the results of future
operations of the combined enterprises.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Total interest income.............................. $9,910,355 $8,497,998
========== ==========
Net income......................................... $1,145,263 $1,275,507
========== ==========
Earnings per weighted average common share:
Net income....................................... $ 11.33 $ 12.60
========== ==========
</TABLE>

F-57
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997, 1996 AND 1995

NOTE 5--SECURITIES:

Debt and equity securities have been classified in the consolidated
statements of financial condition according to management's intent. The
carrying amount of securities and their approximate fair values are as
follows:

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
December 31, 1997:
U.S. Government agencies
and corporations.......... $ 5,574,896 $ 39,008 $ 6,342 $ 5,607,562
State and political subdi-
visions................... 10,473,664 418,121 1,879 10,889,906
Mortgage-backed securi-
ties...................... 6,042,931 55,760 27,731 6,070,960
Equity securities.......... 1,556,600 1,556,600
----------- -------- -------- -----------
Totals.................... $23,648,091 $512,889 $ 35,952 $24,125,028
=========== ======== ======== ===========
December 31, 1996:
U.S. Government agencies
and corporations.......... $ 9,485,153 $ 57,649 $110,023 $ 9,432,779
State and political subdi-
visions................... 7,619,979 376,942 718 7,996,203
Mortgage-backed securi-
ties...................... 6,295,728 41,928 79,905 6,257,751
Equity securities.......... 834,400 834,400
Corporate securities....... 994,980 994,980
----------- -------- -------- -----------
Totals.................... $25,230,240 $476,519 $190,646 $25,516,113
=========== ======== ======== ===========
</TABLE>

The amortized cost and fair value of securities available for sale as of
December 31, 1997 by contractual maturity are shown below. Maturities may
differ from contractual maturities in mortgage-backed securities because the
mortgages underlying the securities may be called or repaid without any
penalties. Therefore, these securities are not included in the maturity
categories in the following maturity schedule:

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Due in one year or less............................. $ 124,615 $ 125,897
Due from one year to five years..................... 2,820,262 2,903,712
Due from five years to ten years.................... 7,233,585 7,452,716
Due after ten years................................. 5,870,098 6,015,143
Mortgage-backed securities.......................... 6,042,931 6,070,960
Equity securities................................... 1,556,600 1,556,600
----------- -----------
Totals.......................................... $23,648,091 $24,125,028
=========== ===========
</TABLE>

Gross realized gains and losses from the sale of securities available for
sale for the years ended December 31 are as follows:

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Realized gains................................. $ 32,487 $ 61,174 $109,147
Realized (losses).............................. (24,412) (36,329) (67,295)
</TABLE>

F-58
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997, 1996 AND 1995

Securities available for sale with a carrying amount of $11,890,000 and
$12,742,692 at December 31, 1997 and 1996, respectively, were pledged as
collateral on certain public deposits and for other purposes as required or
permitted by law.

NOTE 6--LOANS RECEIVABLE:

The composition of net loans receivable as of December 31 is as follows:

<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Commercial......................................... $ 15,380,669 $14,156,343
Commercial real estate............................. 9,822,442 9,509,715
Agricultural....................................... 713,150 841,096
Residential real estate............................ 43,689,831 34,899,278
Consumer installment............................. 32,448,562 26,995,885
Credit cards....................................... 613,878 624,445
Overdrafts......................................... 27,816 46,273
------------ -----------
Subtotals...................................... 102,696,348 87,073,035
Less:
Unearned interest............................... 6,065,135 4,198,846
Allowance for loan losses....................... 1,120,012 924,441
------------ -----------
Loans receivable, net.......................... $ 95,511,201 $81,949,748
============ ===========
</TABLE>

Changes in the allowance for loan losses for years ended December 31 are as
follows:

<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
Balance at January 1....................... $ 924,441 $ 387,040 $ 252,776
Amounts charged off........................ (868,449) (507,623) (181,796)
Recoveries of amounts charged off.......... 401,865 118,057 414,528
---------- --------- ---------
457,857 (2,526) 485,508
Provision charged to operating expense..... 662,155 564,389 (98,468)
Addition due to acquisition................ 362,578
---------- --------- ---------
Balance at December 31..................... $1,120,012 $ 924,441 $ 387,040
========== ========= =========
</TABLE>

Information about impaired loans as of and for the years ended December 31
is as follows:

<TABLE>
<CAPTION>
1997 1996 1995
-------- ---------- --------
<S> <C> <C> <C>
Loans receivable for which there is a related
allowance for credit losses determined in
accordance with FASB Statement No. 114, as
amended....................................... $316,258 $ 229,307 $252,135
Other impaired loans........................... 240,605 844,290
-------- ---------- --------
Total impaired loans....................... $556,863 $1,073,597 $252,135
======== ========== ========
Average monthly balance of impaired loans
(based on month-end balances)................. $815,230 $1,088,291 $252,135
======== ========== ========
Related allowance for credit losses............ $ 34,334 $ 29,557 $ 10,316
======== ========== ========
Interest income recognized on impaired loans... $ 77,139 $ 62,842 $ 16,545
======== ========== ========
</TABLE>

F-59
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997, 1996 AND 1995

NOTE 7--PREMISES AND EQUIPMENT:

Components of premises and equipment included in the consolidated statements
of financial condition at December 31 are as follows:

<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Land and improvements................................. $ 387,383 $ 414,998
Buildings and improvements............................ 1,886,372 1,799,642
Furniture and equipment............................... 2,811,457 2,548,141
---------- ----------
5,085,212 4,762,781
Less: Accumulated depreciation........................ 2,826,206 2,336,964
---------- ----------
Premises and equipment, net......................... $2,259,006 $2,425,817
========== ==========
</TABLE>

NOTE 8--DEPOSITS:

The composition of deposits is as follows:

<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Demand deposits, noninterest bearing............... $ 15,586,562 $14,947,400
NOW and money market accounts...................... 19,853,357 20,160,053
Savings deposits................................... 11,756,858 12,673,398
Time certificates, $100,000 or more................ 9,151,392 8,903,168
Other time certificates............................ 44,509,611 37,814,548
------------ -----------
Totals......................................... $100,857,780 $94,498,567
============ ===========
</TABLE>

At December 31, 1997, the scheduled maturities of time certificates are as
follows:

<TABLE>
<S> <C>
1998............................................................. $34,949,289
1999............................................................. 10,966,198
2000............................................................. 3,592,177
2001............................................................. 3,262,287
Thereafter....................................................... 891,052
-----------
Total........................................................ $53,661,003
===========
</TABLE>

NOTE 9--NOTES PAYABLE:

Notes payable consisted of the following for years ended December 31:

<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Federal Home Loan Bank (FHLB)........................ $16,792,000 $7,192,000
National Bank of Commerce (NBC)...................... 2,250,000 2,500,000
----------- ----------
Totals........................................... $19,042,000 $9,692,000
=========== ==========
</TABLE>

The FHLB advances bear interest at rates ranging from 5.32% to 5.67%. The
advances are payable at various maturities through April, 2014. The note is
secured by all 1-4 family residential mortgages held by the Bank. Terms of the
note provide for significant penalties in the event of early repayment.

F-60
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997, 1996 AND 1995

The NBC note bears interest at the LIBOR Base Rate and is adjustable
quarterly at each interest payment date. Principal payments are made in equal
annual installments of $250,000 through July, 2005 and one final installment
in July, 2006 of all remaining outstanding principal. The note is secured by
61,200 shares of stock in First National Bank. The stock certificate is
maintained at NBC and will be returned upon final payment of the note amount.
Terms of the note state there are no penalties in the event of early
repayment.

Scheduled maturities on notes payable are as follows:

<TABLE>
<S> <C>
1998............................................................. $10,500,000
1999............................................................. 1,500,000
2000............................................................. 1,100,000
2001............................................................. 350,000
2002............................................................. 5,000,000
Thereafter....................................................... 592,000
-----------
Total........................................................ $19,042,000
===========
</TABLE>

NOTE 10--INCOME TAXES:

The net cumulative effects of the primary temporary differences are shown in
the following table:

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses........................... $ 263,924 $ 190,079
Other real estate owned............................. 68,530 68,530
Deferred compensation............................... 50,879 15,047
Other............................................... 19,345 22,633
--------- ---------
Total deferred tax assets......................... 402,678 296,289
Deferred tax liabilities:
Net unrealized gain on securities available for
sale............................................... (183,621) (110,060)
Accumulated depreciation............................ (58,658) (71,826)
Other............................................... (9,927)
--------- ---------
Total deferred tax liabilities.................... (252,206) (181,886)
Net deferred tax assets........................... $ 150,472 $ 114,403
========= =========
</TABLE>

The provision for income taxes charged to operations for the years ended
December 31 consists of the following:

<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Current:
Federal...................................... $ 599,645 $431,724 $269,198
State........................................ 72,043 56,777 67,053
Deferred....................................... (109,630) (78,092) 73,420
--------- -------- --------
Totals..................................... $ 562,058 $410,409 $409,671
========= ======== ========
</TABLE>

F-61
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997, 1996 AND 1995

The income tax provision differs from the amount of income tax determined by
applying the federal income tax rate to pretax income for the years ended
December 31 due to the following:

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Computed "expected" tax expense............ $ 650,714 $ 495,453 $ 540,943
Increase (decrease) in income taxes
resulting from:
Tax-exempt interest income (net of
disallowed expenses).................... (126,677) (113,718) (140,895)
State income taxes, net of federal
benefits................................ 72,043 56,777 67,053
Other.................................... (34,022) (28,103) (57,430)
--------- --------- ---------
Totals................................. $ 562,058 $ 410,409 $ 409,671
========= ========= =========
</TABLE>

NOTE 11--COMMITMENTS AND CONTINGENCIES:

Financial instruments with off-balance-sheet risk:

The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. They involve, to varying degrees, elements of credit risk
in excess of the amount recognized in the balance sheets.

The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments. A summary
of the Bank's commitments is as follows:

<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Commitments to extend credit......................... $7,302,947 $ 9,016,118
Credit card commitments.............................. 1,231,192 1,264,351
Standby letters of credit............................ 157,880 10,000
---------- -----------
Totals............................................. $8,692,019 $10,290,469
========== ===========
</TABLE>

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
Bank evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank upon extension
of credit, is based on management's credit evaluation of the party. Collateral
held varies, but may include accounts receivable, crops, livestock, inventory,
property and equipment, residential real estate and income-producing
commercial properties.

Credit card commitments are unsecured.

Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers.

F-62
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997, 1996 AND 1995

Lease commitments:

The Company leases office space and certain equipment under various
operating leases. Future minimum rental payments due under these leases are as
follows:

<TABLE>
<S> <C>
Years ending December 31,
1998............................................................. $ 63,765
1999............................................................. 58,465
2000............................................................. 18,847
--------
$141,077
========
</TABLE>

Rental expense was $125,868 in 1997, $127,201 in 1996 and $100,665 in 1995.

Contingencies:

In the normal course of business, the Bank and Frontier Financial Services
Corporation are involved in various legal proceedings. In the opinion of
management, any liability resulting from such proceedings would not have a
material adverse effect on the Company's financial statements.

Financial instruments with concentration of credit risk:

Concentration by geographic location:

Most of the Bank's lending activity is with customers located in central
Alabama. The Bank generally originates single-family residential loans within
its primary lending area. The Bank's underwriting policies require such loans
to be 80% loan to value based upon appraised values. These loans are secured
by the underlying properties. The Bank is also active in originating secured
consumer installment loans to its customers, primarily automobile and home
equity loans.

Concentration by institution:

The Bank has a concentration of funds on deposit with a correspondent bank
at December 31, 1997 as follows:

<TABLE>
<S> <C>
The Banker's Bank:
Federal funds sold............................................. $2,040,000
Noninterest-bearing accounts................................... 4,267
----------
Total deposits............................................... $2,044,267
==========
</TABLE>

Concentration of investments:

Investments in state and municipal securities are primarily with
governmental entities within the State of Alabama.

NOTE 12--RESTRICTIONS ON RETAINED EARNINGS AND REGULATORY MATTERS:

The approval of regulatory authorities is required if the total of all
dividends declared by the Bank in any calendar year exceeds the Bank's net
income as defined for that year combined with its retained net income for the
preceding two calendar years. The Bank obtained regulatory approval as
applicable for the payment of dividends in 1996. The Bank had approximately
$238,000 of retained earnings available for dividend declaration

F-63
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997, 1996 AND 1995

without regulatory approval at December 31, 1997. In January, 1998, the Bank
requested permission from the Office of the Comptroller of Currency (OCC) to
pay a special dividend of $2,300,000 to the Company in order to pay off the
note payable to National Bank of Commerce (see Note 9). The Bank received
permission from the OCC on February 9, 1998, to pay the special dividend and
the Company then paid in full the note payable to NBC.

The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory--and possibly additional discretionary--actions
by regulators that, if undertaken, could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and classification
are also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes the Bank meets all capital
adequacy requirements to which it is subject as of December 31, 1997.

As of December 31, 1997, the most recent notification from the OCC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank must
maintain minimum total risk-based, Tier I risk-based and Tier I leverage
ratios as set forth in the table below. There are no conditions or events
since that notification that management believes have changed the Bank's
category.

The Bank's actual capital amounts and ratios are also presented in the
table.

<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED
FOR CAPITAL UNDER PROMPT
ADEQUACY CORRECTIVE ACTION
ACTUAL PURPOSES PROVISIONS
------------- ------------ ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- ------ ----- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
As of December 31,1997:
Total Capital (to Risk
Weighted Assets).......... $14,678 15.28% $7,685 8.0% $ 9,607 10.0%
Tier I Capital (to Risk
Weighted Assets).......... 13,558 14.11% 3,843 4.0% 5,764 6.0%
Tier I Capital (to Average
Assets)................... 13,558 10.13% 5,351 4.0% 6,689 5.0%
As of December 31,1996:
Total Capital (to Risk
Weighted Assets).......... $14,314 17.23% $6,647 8.0% $ 8,309 10.0%
Tier I Capital (to Risk
Weighted Assets).......... 13,390 16.12% 3,323 4.0% 4,985 6.0%
Tier I Capital (to Average
Assets)................... 13,390 11.51% 4,653 4.0% 5,817 5.0%
</TABLE>

NOTE 13--RELATED PARTIES:

The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with directors, significant
stockholders, principal officers, their immediate families and affiliated
companies in which they are principal stockholders (commonly referred to as
related parties).

F-64
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997, 1996 AND 1995

Aggregate loan transactions with related parties for the years ended
December 31, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Balance at January 1................................. $4,176,954 $3,068,169
New loans.......................................... 1,025,603 1,907,373
Repayments......................................... (2,949,210) (798,587)
---------- ----------
Balance at December 31............................... $2,253,347 $4,176,955
========== ==========
Maximum balance during the year...................... $2,576,241 $4,246,836
========== ==========
</TABLE>

NOTE 14--FAIR VALUES OF FINANCIAL INSTRUMENTS AND INTEREST RATE RISK:

The estimated fair values of the Company's financial instruments were as
follows at:

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks
and federal funds
sold................... $ 4,892,409 $ 4,892,409 $ 5,755,747 $ 5,755,747
Securities available for
sale................... 24,125,028 24,125,028 25,516,113 25,516,113
Federal funds sold...... 2,040,000 2,040,000
Loans receivable........ 95,511,201 94,120,000 81,949,748 81,808,000
Accrued interest
receivable............. 864,137 864,137 855,897 855,897
Financial liabilities:
Deposits................ $100,857,780 $101,063,000 $94,498,567 $94,988,000
Notes payable and other
borrowing.............. 19,042,000 19,319,000 13,132,000 13,310,000
Accrued interest
payable................ 672,956 672,956 394,341 394,341
</TABLE>

The estimated fair values of the unused commitments to extend credit and
standby letters of credit at December 31, 1997 and 1996 are insignificant.

The Bank assumes interest rate risk (the risk that general interest rate
levels will change) as a result of its normal operations. As a result, the
fair values of the Bank's financial instruments will change when interest rate
levels change and that change may be either favorable or unfavorable to the
Bank. Management attempts to match maturities of assets and liabilities to the
extent believed necessary to minimize interest rate risk. However, borrowers
with fixed rate obligations are more likely to prepay in a rising rate
environment and less likely to prepay in a falling rate environment.
Conversely, depositors who are receiving fixed rates are more likely to
withdraw funds before maturity in a rising rate environment and less likely to
do so in a falling rate environment. Management monitors rates and maturities
of assets and liabilities and attempts to minimize interest rate risk by
adjusting terms of new loans and deposits and by investing in securities with
terms that mitigate the Bank's overall interest rate risk.

NOTE 15--SUBSEQUENT EVENTS:

On February 17, 1998, the shareholders and Board of Directors of the Company
approved resolutions approving a Plan of Merger with Valley National
Corporation contingent on regulatory approval. The merger

F-65
<PAGE>

FIRST NATIONAL SYLACAUGA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1997, 1996 AND 1995

will consolidate the companies into a new bank holding company under the name
of Frontier National Corporation which will own 100% of First National-
America's Bank and Valley National Bank. Under the terms of the merger, the
common shares of stock of the Company will be converted into common shares of
stock of Valley National Corporation on an exchange rate based on the relative
book values of the two companies' stock as of the closing date.

NOTE 16--PRIOR PERIOD ADJUSTMENT:

Certain errors resulting in an overstatement of previously reported
allowance for loan losses was discovered during the current year. Accordingly,
an adjustment of $200,000 was made to reclassify a portion of the credit
amount of provision for loan losses in 1995 to prior periods. Also, the
provision for income taxes for 1995 was reduced $77,000 to record the deferred
income tax benefit associated with the above adjustment. A corresponding entry
was made to increase previously reported retained earnings by $123,000.

F-66
<PAGE>

APPENDIX A

MERGER AGREEMENT AND PLAN OF MERGER

BETWEEN

VALLEY NATIONAL CORPORATION

AND

FIRST NATIONAL SYLACAUGA CORPORATION

A-1
<PAGE>

MERGER AGREEMENT

This Merger Agreement (the "Agreement") is made and entered into this 24th
day of February, 1998, between FIRST NATIONAL SYLACAUGA CORPORATION, a
Delaware corporation ("FNSC"), whose principal offices are at 43 North
Broadway, Sylacauga, Alabama 35150, and VALLEY NATIONAL CORPORATION, an
Alabama corporation ("VNC"), whose principal offices are at 1011 North Lanier
Avenue, Lanett, Alabama 36863-0682.

WITNESSETH:

Whereas, it is the intent of the parties to consolidate their bank holding
companies into a new bank holding company under the name Frontier National
Corporation which will own 100% of both First National-America's Bank ("FNA
Bank"), currently a subsidiary of FNSC, and Valley National Bank ("VN Bank"),
currently a subsidiary of VNC; and

Whereas, the authorized capital stock of FNSC consists of 200,000 shares of
Common Stock ("FNSC Stock"), $10.00 par value, of which 120,000 shares of FNSC
Stock are issued and 100,995 shares are outstanding; and

Whereas, the authorized capital stock of VNC consists of 10,000,000 shares
of Class A Common Stock having a par value of $.001 per share (the "VNC
Stock"), 10,000,000 shares of Class B Common Stock having a par value of $.001
per share, 10,000,000 shares of Preferred Stock having a par value of $.001
per share, and 25 shares of Director's Qualifying Stock having a par value of
$1,000 per share; and as of the date hereof, only 814,800 shares of VNC Stock
and 12 shares of Director's Qualifying Stock were issued and outstanding; and

Whereas, the respective Boards of Directors of FNSC and VNC deem it
advisable and in the best interest of FNSC and VNC and their respective
shareholders, subsidiaries, customers, officers and employees that FNSC be
merged with and into VNC (the "Merger"), and, by resolutions duly adopted,
have approved and adopted this Agreement and directed that it be submitted to
the respective shareholders of FNSC and VNC for their approval.

Now, Therefore, in consideration of the premises, mutual covenants and
agreements herein contained, and for the purpose of stating the method, terms
and conditions of the Merger provided for herein, the mode of carrying the
same into effect, the manner and basis of converting and exchanging the shares
of FNSC Stock as hereinafter provided, and such other provisions relating to
the Merger as the parties deem necessary or desirable, the parties hereto
agree as follows:

Section 1. Merger.

Subject to the satisfaction or waiver of all of the conditions to the
obligations of each of the parties to this Agreement, at the Effective Time
(as defined in the Plan and Agreement of Merger attached as Appendix A), FNSC
shall be merged with and into VNC (the "Merger"), which latter corporation
(the "Surviving Corporation") shall survive the Merger, pursuant to the Plan
of Merger attached as Appendix A hereto (the "Plan") with the Surviving
Corporation changing its name to Frontier National Corporation.

Section 2. Description of Transaction.

(a) Satisfaction of Conditions to Closing. After the transactions
contemplated hereby have been approved by the shareholders of FNSC and VNC,
and each other condition to the obligations of the parties hereto has been
satisfied or waived by the party or parties entitled to the benefits thereof,
other than those conditions which are to be satisfied by delivery of documents
by any party to any other party, a closing (the "Closing") will be held on the
date (the "Closing Date") and at the time of day and place referred to in
Section 11(a). At the Closing, the parties will use their respective best
efforts to deliver the certificates, letters, and opinions which

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constitute conditions to the Merger and each party will provide the other
parties with such proof or indication of satisfaction of the conditions of
such parties to consummate the Merger as such other parties may reasonably
require. If all conditions to the obligations of each of the parties have been
satisfied or waived by the party entitled to the benefits thereof, the parties
shall, at the Closing, duly execute Articles of Merger in the form attached as
Appendix B for filing with the Alabama Secretary of State and promptly
thereafter, FNSC and VNC shall take all steps necessary or desirable to
consummate the Merger in accordance with all applicable laws, rules, and
regulations and the Plan. The parties shall thereupon take such other and
further actions as may be required by law or this Agreement to consummate the
transactions contemplated herein.

(b) Effective Time of the Merger. Upon the satisfaction of all conditions to
closing, the Merger shall become effective on the date and at the time of
filing of the Articles of Merger with the Alabama Secretary of State or at
such later date and/or time as may be agreed upon by the parties and set forth
in the Plan.

(c) Shares of VNC Stock Shall Remain Outstanding. Subsequent to the
Effective Time of the Merger, each share of VNC Stock then issued and
outstanding shall remain as the issued and outstanding common stock of VNC as
the Surviving Corporation.

(d) Shares of FNSC Stock Shall be Converted to VNC Stock. Upon the terms and
conditions described in the Plan, the shares of FNSC Stock shall be converted
into shares of VNC Stock based on an exchange ratio based on the relative book
values of the VNC Stock and FNSC Stock on the Closing Date (the "Purchase
Price") subject to adjustment as defined in Section 6(h) and 7(h) below. No
fractional shares shall be issued so any fractions will be paid in cash based
upon a price of $139.29 per share of FNSC Stock. For example, based upon a
book value for book value exchange basis as of December 31, 1997, before being
adjusted for extraordinary items, the exchange ratio would have been 13.3
shares of VNC Stock for each share of FNSC Stock. If the adjusted financial
statements as of the Closing Date as agreed to by the parties reflect a change
in these figures, a proportional change will be made in the Purchase Price.

(e) Stock Transfer Books. At the Effective Time of the Merger, the stock
transfer books of FNSC shall be closed and no transfer of FNSC Stock shall be
made thereafter.

(f) Effects of the Merger. As of the Effective Time of the Merger, the
separate existence of FNSC shall cease, and FNSC shall be merged with and into
VNC which, as the Surviving Corporation, shall thereupon and thereafter
possess all of the assets, rights, privileges, appointments, powers, licenses,
permits and franchises of the two merged corporations, whether of a public or
a private nature, and shall be subject to all of the liabilities,
restrictions, disabilities and duties of both FNSC and VNC.

(g) Transfer of Assets. At the Effective Time, all rights, assets, licenses,
permits, franchises and interests of FNSC and VNC in and to every type of
property, whether real, personal, or mixed, whether tangible or intangible,
and to chooses in action shall be deemed to be vested in VNC as the Surviving
Corporation by virtue of the Merger and without any deed or other instrument
or act of transfer whatsoever.

(h) Assumption of Liabilities. At the Effective Time, the Surviving
Corporation shall become and be liable for all debts, liabilities, obligations
and contracts of FNSC as well as those of the Surviving Corporation, whether
the same shall be matured or unmatured; whether accrued, absolute, contingent
or otherwise; and whether or not reflected or reserved against in the balance
sheets, other financial statements, books of account or records of FNSC or the
Surviving Corporation.

(i) Dissenting Shareholders' Rights. Any holder of FNSC Stock or VNC Stock
who shall comply strictly with the provisions of Section 262 of the Delaware
General Corporation Law and Section 10-2B-13.01 et seq. of the Alabama
Business Corporation Act shall be entitled to dissent from the Merger and to
seek those appraisal remedies afforded by those laws. Such a shareholder is
referred to herein as a "Dissenting Shareholder." However, the parties shall
not be obligated to consummate the Merger if shareholders owning more than 10%
of the shares of FNSC Stock or VNC Stock issued and outstanding immediately
prior to the Effective Time shall

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have perfected their dissenters' rights in accordance with the Alabama
Business Corporation Act and the perfected status of said dissenters' rights
shall have continued to the time of Closing.

(j) Expenses. Each party to the Merger shall pay its own expenses in
connection with the transactions contemplated by this Agreement.

Section 3. Representations and Warranties of VNC.

As an inducement to FNSC to enter into this Agreement, VNC hereby represents
and warrants to FNSC that:

(a) Corporate Organization, Standing, and Authority of VNC. VNC is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended, and is duly organized, validly existing and in good standing under
the laws of the State of Alabama as are all other direct or indirect nonbank
subsidiaries of VNC which are listed in Section 3(a) of the VNC Schedule of
Exceptions attached as Appendix C, and they all have the corporate power and
possess all licenses and authorizations necessary for each of them to conduct
their businesses as presently conducted (excepting any licenses and
authorizations the absence of which in the aggregate would not have a material
adverse effect upon the financial condition or operations of VNC and its
subsidiaries considered as a single enterprise). VNC and its subsidiaries are
each qualified to do business in the State of Alabama and in all other states
where they are required to be so qualified. VNC has the corporate power and
authority to execute and deliver this Agreement and, upon obtaining the
requisite regulatory approval, will have the corporate power and authority to
consummate the transactions and perform its obligations as specified in this
Agreement. The Board of Directors of VNC, at a lawfully convened meeting, has
unanimously approved the Merger and the execution and delivery of this
Agreement and will have taken all other such action as may be required by law
or by VNC's Articles of Incorporation and Bylaws in approving and adopting
this Agreement, and consummating the transactions contemplated herein and
therein, including recommending approval of same by VNC's shareholders.

(b) Corporate Organization, Standing, and Authority of VN Bank. VN Bank is a
national banking association duly organized, validly existing and in good
standing under the laws of the United States and has all corporate powers and
possesses all licenses and authorizations necessary to conduct its businesses
as presently conducted (excepting any licenses and authorizations the absence
of which would not have a material adverse effect upon the financial condition
or operations of VN Bank). VN Bank is qualified to do business in the State of
Alabama and in all other states where the nature of its operations requires it
to be so qualified. The Articles of Association and Bylaws of VN Bank will not
be amended hereafter, and are complete and correct as of the date hereof. VN
Bank has the corporate power and authority to execute and deliver this
Agreement and has the corporate power and authority to perform its obligations
specified and undertaken in this Agreement.

(c) Binding Effect of Agreement. This Agreement constitutes the valid and
binding obligation of VNC and is enforceable in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect which affect creditors' rights generally, and by legal and equitable
limitations on the availability of injunctive relief, specific performance and
other equitable remedies which are available only in the discretion of a
court).

(d) No Breach. Neither the execution and delivery of this Agreement,
assuming regulatory approval, nor the consummation of the transactions
contemplated hereby will: (i) violate any provision of the Certificate of
Incorporation or Bylaws of VNC, VN Bank or of any subsidiary of VNC or VN
Bank; (ii) violate or cause a default or termination of any rights or any
obligations under any contracts or agreements; or (iii) require the consent or
approval of any third party other than regulatory authorities and agencies and
the shareholders. Section 3(d) of the VNC Schedule of Exceptions attached as
Appendix C contains a listing and brief description of all material leases,
investments, contracts and other agreements to which either VNC, VN Bank, or
any of their subsidiaries are a direct or indirect party and which cannot be
terminated upon less than 30 days notice.

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(e) Capitalization of VNC. All of the outstanding VNC Stock is validly
issued, fully paid, and nonassessable and has not been issued in violation of
any preemptive rights of any VNC shareholder. Except as disclosed in Section
3(e) of the VNC Schedule of Exceptions, VNC owns 100% of VN Bank Common Stock
free and clear of any liens, security interests, charges, or other
encumbrances (such disclosure to include the amount and nature of the
encumbrance). Except as disclosed in Section 3(e) of the VNC Schedule of
Exceptions, VN Bank owns all of the outstanding equity securities of each of
its nonbank subsidiaries and interests free and clear of any liens, charges,
or encumbrances of any nature whatsoever. Except as disclosed in Section 3(e)
of the VNC Schedule of Exceptions, as of the date hereof, there are no
outstanding securities or other obligations which are convertible into VNC
Stock or into any other equity security of VNC or any of its subsidiaries, and
there are no outstanding options, warrants, rights, calls or other commitments
of any nature which would entitle the holder, upon exercise thereof, to be
issued VNC Stock or any other equity security of VNC or any of its or their
subsidiaries.

(f) Financial Statements. VNC has delivered and, to the extent reference is
made to financial statements not yet available or capable of development, will
deliver to FNSC true and complete copies of: (i) its, or its subsidiary's for
years prior to VNC's existence, audited or compiled consolidated annual
financial statements and related notes thereto, for the years ended December
31, 1997, 1996, and 1995 and (ii) its unaudited consolidated financial
statements for each of the calendar quarters in 1998 as well as for all
quarters ending thereafter prior to the Effective Date. Such financial
statements and the notes thereto present fairly, or will present fairly when
issued, in all material respects, the consolidated financial position of VNC
and/or VN Bank at the respective dates thereof, and its consolidated results
of operations and consolidated changes in financial position or cash flow, for
the periods indicated, in each such case in conformity with generally accepted
accounting principles, consistently applied subject in the case of unaudited
statements to normal year-end adjustments and full footnote disclosure.

(g) Absence of Changes. Except as described in Section 3(g) of the VNC
Schedule of Exceptions or the notes to the audited financial statements of VN
Bank as of December 31, 1997, 1996, or 1995, since December 31, 1994: (i) VNC
and all of its subsidiaries have continued actively in the conduct of their
respective businesses in the ordinary course; (ii) there has been no material
adverse change in the consolidated financial condition of VNC or any of its
subsidiaries; (iii) there has been no transfer, sale, pledge or mortgage of
any properties or assets of VNC or any of its subsidiaries except in the
ordinary course of business or except as previously authorized in writing by
VNC; and (iv) neither VNC nor any of its subsidiaries has incurred, assumed or
guaranteed any borrowing or issued any letters of credit, except in each case
in the ordinary course of business.

(h) Regulatory Filings. Except as described in Section 3(h) of the VNC
Schedule of Exceptions, as of the date of this Agreement, (i) VNC and VN Bank
have filed and will continue to file all required reports with applicable
financial institution regulatory agencies, (ii) neither VNC nor VN Bank has
received oral or written notification from any regulatory agency that any such
required filings were deficient in any material respect as to form or content,
and VNC has no knowledge of the existence of any fact or circumstance which
might be expected to cause any regulatory agency to so regard such filings,
and (iii) VNC will promptly notify FNSC of any oral or written notification
from any regulatory agency that any required filings are deficient in any
material respect as to form or content.

(i) Regulatory Compliance. Except as described in Section 3(i) to the VNC
Schedule of Exceptions, to the best of the knowledge and belief of VNC, since
December 31, 1994, VNC and its subsidiaries have been in material compliance
with law and the regulations of all appropriate regulatory agencies and no
reports, letters, orders or other communications have been received by VNC or
VN Bank from the Federal Reserve Board, the FDIC, the OCC, or any other
federal or state financial institution regulatory authority, or the designated
representatives of any of them, which has questioned or criticized in any
material respect compliance with such laws or regulations; and VNC and VN Bank
will take no actions which will cause VNC or VN Bank not to be in compliance
with the laws and regulations of any appropriate regulatory agency. VNC will
promptly notify FNSC

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<PAGE>

of any report, letter, order or other communication from any appropriate
regulatory agency which questions or criticizes in any material respect
compliance with such laws or regulations.

(j) Sole Agreement to Merge or Sell. Neither VNC, VN Bank, nor their
subsidiaries have been, is, will become, or will be allowed to become, a party
to any merger or business combination agreement, letter of intent, agreement
of sale, or other agreement obligating VNC, VN Bank, or any of their
subsidiaries to sell or authorize the sale or transfer of VNC Stock, or VN
Bank capital stock or any of VNC's other subsidiaries, or to allow VNC or any
of its subsidiaries to merge or consolidate with, or to be acquired in any
other manner by, any entity or person other than FNSC.

(k) Litigation and Claims. Except as specifically described in its financial
statements or related notes delivered to FNSC or in Section 3(k) of the VNC
Schedule of Exceptions: (i) there is no material litigation, proceeding, or
governmental investigation pending or, to the knowledge of VNC threatened
against, or relating to, VNC, VN Bank, or their subsidiaries, or to their
material properties or businesses, or to the transactions contemplated by this
Agreement, which would have a material impact on, or act to materially
inhibit, the transactions contemplated by this Agreement; (ii) there is no
reasonable basis for any such material litigation, proceeding or governmental
investigation (including, without limitation, violations of federal or state
banking, antitrust, environmental or securities laws, RICO laws or probate
laws); and (iii) neither VNC nor VN Bank nor any other VNC subsidiary or
shareholder or affiliate is a party to, or subject to the provisions of any
judicial decree, judgment or order of any governmental agency the performance
or enforcement of which would materially adversely affect its business or
financial condition or the ability of VNC, VN Bank, or their subsidiaries to
consummate the transaction described in this Agreement.

(l) Tax Returns. Except for liabilities with respect to taxes, interest, and
penalties thereon, to which reference is made in Section 3(l) of VNC's
Schedule of Exceptions or in VNC's consolidated financial statements and the
related notes thereto, as referred to in Section 3(f), the provision for taxes
therein is sufficient for the payment of all accrued and unpaid federal,
state, county and local taxes of VNC and its subsidiaries (including any
penalties or interest payable in respect of such taxes), whether or not
disputed, for the period ended December 31, 1997, and for all taxable years
prior thereto, and VNC has, or will have prior to the Effective Date, fully
reserved for all taxes on gains and income of VN Bank or its subsidiaries
which have or will have been recognized from the sale of securities and assets
occurring after December 31, 1997, and prior to the Effective Time of the
Merger. VN Bank's federal income tax returns, its Alabama franchise and excise
tax returns, and all other tax returns required to be filed by VNC, VN Bank,
or any subsidiary have been duly filed for all years open for assessment to
and including the year ended December 31, 1996, income or loss has been
properly reflected therein in all material respects, and all material taxes
that have become due and payable have been paid or are reflected as a
liability on said financial statements.

(m) Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by VNC or VN Bank or by
the officers of VNC without the intervention of any broker or other person
representing VNC, VN Bank, or their subsidiaries in such manner as to give
rise to any valid claim against VNC for a finder's fee, brokerage commission,
or other similar payment.

(n) Stock Records. The stock transfer books and stock ledgers of VNC and VN
Bank are in good order, complete, accurate and up to date, and with all
necessary signatures on the assignments of certificates representing shares
previously transferred, and set forth all stock and securities issued,
transferred and surrendered. Except as described in Section 3(n) of the VNC
Schedule of Exceptions, no transfer has been made without surrender of the
proper certificate, duly endorsed, or the completion of a lost certificate
affidavit, and all certificates so surrendered have been duly canceled and are
attached thereto.

(o) Employee Plans.

(1) Section 3(o)(1) and Section 3(e) of the VNC Schedule of Exceptions sets
forth a true and complete list of all employment contracts, all pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, retainer, consulting, bonus, group insurance, incentive, welfare
or any other

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<PAGE>

contracts, plans or arrangements providing for employee compensation or
benefits (the "Employee Plans"), and all trust agreements related thereto, to
which VNC or any subsidiary is a party or to which it contributes or by which
it is bound. The only Employee Plans which would, individually or
collectively, constitute an "employee pension benefit plan" as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended, ("ERISA") are so identified in Section 3(o)(1) of the VNC Schedule of
Exceptions and are hereinafter referred to as the "Pension Plans." No Employee
Plan constitutes a "multiemployer plan" as defined in Section 413(f) of ERISA.

(2) Each Employee Plan which is intended to be qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended, (the "Code") is so
qualified and each trust forming a part thereof is exempt from tax pursuant to
Section 501(a) of the Code. Requests for determination letters relating to
amendments required to cause such Employee Plans to be in compliance with the
federal tax law were timely filed and have been received or are currently
pending.

(3) Each Employee Plan has been maintained in substantial compliance with
the requirements prescribed by all statutes, orders, rules and regulations
including, but not limited to, ERISA and the Code, which are applicable to
such Employee Plans. No "accumulated funding deficiency" within the meaning of
ERISA has been incurred with respect to any pension plan, whether or not
waived. No "reportable event" [as described in Section 4043(b) of ERISA] has
occurred with respect to any Employee Plan. No Employee Plan or any trust
created thereunder, nor any trustee or administrator thereof, has engaged in a
"prohibited transaction," as such term is defined in Section 4975 of the Code,
which could subject such Employee Plans or any of them, any such trust or any
such trustee or administrator thereof, or any party dealing with such employee
benefit plans or any such trust, trustee or administrator to any material tax
liability or penalty on prohibited transactions imposed by such Section 4975.
As of December 31, 1997, the fair market value of the assets of any Pension
Plan which is subject to Title IV of ERISA (excluding for these purposes any
accrued but unpaid contributions) exceeded the present value of all benefits
accrued under any such Employee Plan, determined on a termination basis using
the assumptions established by the Pension Benefit Guaranty Corporation as in
effect on such date. VNC has not incurred any liability under Title IV of
ERISA arising in connection with the termination of, or complete or partial
withdrawal from, any Employee Plan covered or previously covered by Title IV
of ERISA.

(4) Except as set forth in Section 3(o)(4) of the VNC Schedule of
Exceptions, there has been no amendment to, written interpretation or
announcement (whether or not written) relating to, or change in employee
participation or coverage under any Employee Plan which would increase
materially the expense of maintaining such Employee Plan above the level of
expense incurred with respect thereto for the twelve-month period ended
December 31, 1997.

(p) Franchises, Patents, Trademarks, and Other Rights. VNC and its
subsidiaries have all licenses and all other material franchises, permits,
licenses, patents, trademarks, etc. and other authority as are necessary to
enable them to conduct their businesses as now being conducted and as proposed
to be conducted, and they are not in default under any of such franchises,
permits, licenses or other authority.

(q) Contracts of VNC and VN Bank in Full Force. All contracts to which VNC,
VN Bank or any other subsidiary is a party and which are in the aggregate
material to the operations or business of any of them, are in full force and
effect; are not subject to defenses arising from improper performance thereof;
and neither VNC, VN Bank nor any other subsidiary is in default thereunder.

(r) Environmental Matters. Except as set forth in VNC's Schedule of
Exceptions, Section 3(r):

(i) to the best knowledge of VNC, no release, discharge, spillage or
disposal of any Hazardous Substance (as hereinafter defined) and no soil or
water contamination by any Hazardous Substance has occurred or is occurring
in or on any real property owned or leased by, or pledged as collateral on
any loan

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<PAGE>

to, VNC, VN Bank, or their subsidiaries (the "Real Property"), nor is such
property used for the handling, treatment, storage or disposal of any
Hazardous Substance which is contaminated therefrom;

(ii) VNC, VN Bank, or their subsidiaries have complied with all known
reporting requirements under any applicable federal, state or local
environmental laws and permits, and so far as VNC, VN Bank and their
subsidiaries know, there are no existing violations by VNC, VN Bank, or
their subsidiaries, and to the best knowledge of VNC, VN Bank, or their
subsidiaries, there are no existing violations on property pledged as
collateral to VNC, VN Bank, or their subsidiaries of any such environmental
law or permits; and

(iii) there are no claims, actions, suits, proceedings or investigations
related to the presence, release, discharge, spillage or disposal of any
Hazardous Substance or contamination of soil or water by any Hazardous
Substance pending or threatened with respect to the Real Property or
otherwise against VNC, VN Bank, or their subsidiaries and to the best
knowledge of VNC, VN Bank, or their subsidiaries, against the owner of any
property pledged as collateral to VNC, VN Bank, or their subsidiaries in
any court or before any state, federal or other governmental agency or
private arbitration tribunal, and there is no basis for any such claim,
action, suit, proceeding or investigation.

For the purpose of this Agreement, "Hazardous Substance" shall mean any
hazardous or toxic substance or wastes as those terms are defined by any
applicable federal or state law or regulation including, without limitation,
the Comprehensive Environmental Recovery Compensation and Liability Act, 42
U.S.C. 9601 et seq., and the Resource Conservation and Recovery Act, 42 U.S.C.
9601 et seq.) and petroleum, petroleum products, and oil.

(s) Certain Interests. Except in arm's length transactions pursuant to
standard commercial terms and conditions or as set forth in VNC's Schedule of
Exceptions, no officer or director of VNC, VN Bank, or their subsidiaries has
any material interest in any property, real or personal, tangible or
intangible, used in or pertaining to the business of VNC, VN Bank, or their
subsidiaries. Except for the normal rights of a shareholder of VNC, no such
person is indebted to VNC, VN Bank, or their subsidiaries except for normal
business advances; VNC, VN Bank, or their subsidiaries are not indebted to any
such person except for amounts due under normal salary or reimbursement of
ordinary business expenses.

(t) Effective Dates of Warranties, Representations, and Covenants. Each
warranty, representation, and covenant of VNC set forth in this Agreement
shall be deemed to be made on the date hereof and on the Effective Date and
shall survive the closing for a period of one (1) year from the Date of
Closing, except as to tax matters which shall survive for the period of time
necessary for state and federal statutes of limitations to run on the filing
of the state and federal tax returns of VNC, VN Bank, or their subsidiaries
for the year ended December 31, 1997. All of the VNC's Schedules of Exceptions
hereto will be updated as necessary to make them true and correct as of the
Effective Time. Notwithstanding anything in this Agreement to the contrary,
all representations and warranties of their subsidiaries therein are limited
to their subsidiaries' actual knowledge, information and belief, after
reasonable inquiry.

Section 4. Representations and Warranties of FNSC.

As an inducement to VNC to enter into this Agreement, FNSC hereby makes the
same representations and warranties to VNC about FNSC and FNA Bank as VNC made
to FNSC in Section 3 about VNC and VN Bank. All references to Schedule of
Exceptions required in this Section 4 to disclose exceptions to the
representations and warranties, similar to the manner used in Section 3, shall
refer to the same Section numbers as in Section 3 except with a designation of
"4( )" and shall be attached as Appendix D.

Section 5. Mutual Covenants.

(a) Consents and Approvals. VNC covenants with FNSC, and FNSC covenants with
VNC, that prior to the Effective Time they will take such steps or cause such
steps to be taken as may be reasonably necessary, and use their respective
best efforts to obtain any consents, approvals, permits or authorizations
which are required to be obtained in order to complete the Merger under any
applicable federal or state laws or regulations, or

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<PAGE>

otherwise, and they each will perform such other acts and execute and deliver
such other documents necessary to consummate the Merger as contemplated under
this Agreement at the earliest practicable time and without any unnecessary
delay; provided, however, that the obligation to use best efforts, whether in
regard to this Section 5(a) or any other Section of this Agreement, shall not
require any party to engage in any conduct which, in its, his or her
reasonable judgment or in the reasonable judgment of its, his or her legal
counsel, may be in violation of any applicable law, regulation, rule or
regulatory guideline, or of any material contract, indenture or lease to which
such party may be obligated; and provided further, that the obligations of any
of the parties to use their respective best efforts shall not require such
party to accept or agree to the imposition of any term or condition as a
condition precedent to obtaining such required consents, approvals, permits or
authorizations if such party shall reasonably deem such requirement, term or
condition to be unsatisfactory or unreasonable. VNC will prepare and make, and
the other parties will cooperate in the making of, all regulatory and other
filings required to be made to effect the Merger. Provided, however, that
nothing contained in this Agreement shall be deemed to require any party to
waive any condition to its obligation to consummate the Merger.

(b) Confidentiality. All parties covenant with each other that, prior to the
Effective Time, because of the confidential nature of the negotiations
surrounding the Merger, without first obtaining the written consent of the
others, there will be no public disclosure as to the terms and conditions of
this Agreement, or the transactions reflected herein, except for such public
announcements as may be jointly approved by them, such disclosures as may be
required incidental to obtaining the prior approval of any regulatory agency
or official or third person to the consummation of the transactions described
herein, and such disclosures as may be required in order to comply with
applicable federal and state laws and regulations and the orders of courts of
competent jurisdiction. Except for such disclosures as counsel for FNSC or VNC
deem necessary to comply with applicable federal and state securities laws, if
any, all matters pertaining to the parties, their investments and operations,
agreements with regulators, employees, loans, earnings and operating ratios or
similar information will be held and maintained in the strictest confidence.
It is intended that this Section 5(b) will survive regardless of whether the
Merger is consummated.

(c) Investigation; Access to Records. Each party shall have the right to
conduct any reasonable investigation of the business, records or properties of
the other party (and their subsidiaries') financial and legal condition as
each may deem necessary or advisable to familiarize itself and its advisers
with such business, properties, and other matters. Any such investigation
shall be conducted so as not to interfere with the business of either party
(or their subsidiaries) being investigated. The parties shall use their best
efforts to cause their accountants, counsel, and other representatives to
maintain the confidentiality of all information furnished to them by the other
party hereto concerning their business, operations, and financial condition,
and shall not use such information for any purpose except as necessary to
effect the transactions contemplated by this Agreement. If this Agreement
should be terminated prior to the Effective Time, the parties shall, upon
request, promptly return all documents, work papers and other materials
(including copies made thereof) received from the other party or their
representatives in connection with this Agreement or the transactions
contemplated herein, and will return or destroy any such materials containing
any confidential information supplied in connection therewith, and the parties
will maintain the confidentiality of all information delivered in connection
with such transactions except for any such information that is readily
ascertainable from public or published information or trade sources; provided,
however, that one set of such materials may be retained for the legal files of
each party.

(d) Certificate of Incorporation and Bylaws. Prior to the Effective Time,
the parties will not change, alter, amend or vote to amend their Articles of
Incorporation or Bylaws or any of their subsidiaries' corresponding chartering
documents or bylaws.

(e) Notice of Actual or Threatened Breach. The parties will promptly give
written notice to each other upon becoming aware of any pending or threatened
occurrence of any event which would cause or constitute a breach of any of the
representations, warranties or covenants made in this Agreement, or which
would materially alter or threaten consummation of the transactions
contemplated herein, and will use their reasonable best efforts to prevent or
to promptly remedy the same. They will promptly give written notice to each
other upon becoming

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aware of any breach by any party of any of their representations, warranties
or covenants in this Agreement, which notice shall specify the facts
constituting such breach.

(f) No Capital Changes. Other than as contemplated in this Agreement, the
parties will not allow themselves or any of their subsidiaries to make any
change in their authorized capital stock; issue, sell, purchase, or retire any
of their capital stock other than the purchase of any director's qualifying
shares, if any; grant any option, warrant, call, or any other right to
purchase or to convert any obligation into any of their capital stock; issue
or sell or agree to issue or sell any other equity security or issue or sell
any debt security other than: the taking of deposits and/or sale of deposit
instruments, the purchase or sale of federal funds, the sale of securities
under agreements to repurchase, and the sale of similar debt instruments, in
each case only in the ordinary course of business.

(g) No Distributions. The parties will not prior to the Effective Time
declare or pay any dividend, or to authorize or make any redemption or to make
or declare any other distribution of their or other subsidiaries' assets,
except dividends paid in the ordinary course of business.

(h) Ordinary Course of Business. Except as may otherwise be required by
regulatory authorities or by law, or requested and approved in writing by the
other party, the parties will or will cause their subsidiaries to carry on
their respective businesses in, and only in, the usual, regular and ordinary
course, and in substantially the same manner as heretofore conducted and, to
the extent consistent with such businesses and with past practice, they will
use their reasonable efforts to preserve intact their present business
organizations and its subsidiaries, keep available their services and their
subsidiaries' present officers and employees, and preserve their and their
subsidiaries' relationships with customers, depositors, creditors,
correspondents, suppliers and others having business dealings with them and/or
their subsidiaries; provided, however, that this Section shall not require the
parties or any of their subsidiaries to offer special incentives to officers,
employees, customers, depositors, creditors, correspondents, suppliers and
others.

(i) Employee Matters.

(i) With respect to each employee benefit plan and/or insurance plan
made available to Affected Employees (and, if applicable, to their
dependents), that shall be offered to Affected Employees on or after the
Closing Date, the parties shall to the extent permissible under the benefit
plans (i) cause there to be waived any waiting period and any restrictions and
limitations for pre-existing conditions or insurability (so long as the
Affected Employees are not still subject to a waiting period for preexisting
conditions or insurability under current plans), and (ii) give effect, in
determining any deductible and maximum out-of-pocket limitations, to claims
incurred and amounts paid by, and amount reimbursed to, such Affected
Employees under similar plans maintained for their benefit immediately prior
to the Closing Date.

(ii) The parties shall recognize the length of service with the current
employers of Affected Employees for purposes of determining participation
and vesting in all employee benefit plans including but not limited to any
defined benefit or defined contribution plans. The foregoing sentence shall
not be interpreted to provide the Affected Employees with any accrued
benefits under any other party's employee benefit plans.

(iii) The parties will not allow themselves or their other subsidiaries
to enter into, agree to or amend any employment contract or bonus, stock
option, ESOP, profit-sharing, Pension Plan, Employee Plan, retirement,
incentive or other similar arrangement, except as may be required by law or
as consented to by the other party in writing.

(j) Governmental or Regulatory Filings. True and correct copies of all
reports filed by the parties from the date hereof through the Effective Time
with any applicable governmental or regulatory agencies shall be delivered or
transmitted to the other party contemporaneously with the filing thereof with,
or transmittal for filing to, the appropriate governmental or regulatory
agency.

(k) Proxy Statement; Form S-4. As soon as practicable following the date
hereof, VNC and FNSC shall file with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934, as

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amended ("Exchange Act"), and each shall use its best efforts to have cleared
by the SEC, a joint proxy statement (the "Proxy Statement") with respect to
the meeting of VNC's and FNSC's shareholders to approve the Merger. In
connection therewith, as soon as practicable after the date hereof, the
Parties shall file with the SEC a Registration Statement on Form S-4 (the
"Form S-4") to register the VNC Stock under the Securities Act of 1933, as
amended (the "Securities Act"), which Form S-4 shall incorporate the Proxy
Statement. Each of the Parties shall use its reasonable best efforts to have
the Form S-4 declared effective by the SEC as promptly as practicable. Each of
the Parties hereto shall provide the other with the information concerning it
required to be included in the Form S-4, all of which shall be accurate and
complete in all material respects. The Parties shall also use their reasonable
best efforts to comply, prior to the Effective Date, with all applicable
requirements of "Blue Sky" and state securities laws in connection with the
Merger and the issuance of the VNC Stock.

Section 6. Conditions Precedent to VNC's Obligations to Consummate the
Merger.

Unless waived by VNC in writing, the obligations of VNC to consummate the
Merger shall be subject to the prior satisfaction of the following conditions:

(a) Representations and Warranties True. The representations and warranties
of FNSC set forth herein shall be true and correct in all material respects as
of the date hereof and as of the Effective Time.

(b) Covenants Observed. The covenants set forth herein to be performed by
FNSC prior to the Effective Time shall have been complied with and performed
in all material respects.

(c) Corporate Action. The Board of Directors and the shareholders of FNSC
shall have taken all corporate and/or other action necessary to be taken by
them to approve and consummate the Merger, and shall have furnished VNC with
certified copies of resolutions duly adopted by FNSC's Boards of Directors and
FNSC's shareholders evidencing the same in the form attached as Appendix E.

(d) Opinion of Counsel. FNSC shall have delivered to VNC, dated as of the
Effective Date, an opinion of legal counsel, in form and substance similar to
Appendix F and reasonably satisfactory to VNC.

(e) Governmental Approvals. All necessary approvals and authorizations by,
filing and registrations with, and notifications to, all federal and state
authorities required for the consummation of the Merger and the prevention of
the termination of any licenses, permits or authorizations of FNSC, FNA Bank,
or their subsidiaries, the termination of which would materially impair the
conduct of their business, shall have been duly obtained or made and shall not
have been canceled or rescinded and all required waiting periods shall have
expired.

(f) No Injunction or Other Legal Proscription. No injunction, restraining
order, stop order, bankruptcy proceeding, receivership, or other order or
action of any federal or state court or agency in the United States which
specifically and materially enjoins or otherwise prevents the consummation of
the Merger in the opinion of VNC shall be in effect, and no action shall have
been taken, and no statute, rule or regulation shall have been enacted, by any
state or federal government or government agency which makes unlawful the
consummation of the Merger.

(g) Timely Completion. The Effective Time must occur on or before August 30,
1998, unless delayed on account of awaiting Federal Reserve Board or
Securities and Exchange Commission approval.

(h) Pre-Merger Review. VNC together with such other employees, agents,
accountants, advisors and attorneys of VNC as VNC shall deem necessary, shall
have been allowed access to the books and records of FNSC, FNA Bank, and each
of FNSC's or FNA Bank's other subsidiaries for the purpose of conducting a
pre-merger review and due diligence examination. Such pre-merger review shall
be conducted within sixty (60) days of the execution of this Agreement (or
such longer period as may be necessary to obtain an audit of FNSC's financial
statements from an independent certified public accountant) and any
adjustments to the loan loss reserve or shareholder's equity of FNSC requested
to be made by VNC shall be made within twenty (20) days after the sixty (60)
day period has expired. Such adjustments also shall be made as appropriate to
the Purchase Price. If such adjustments requested by VNC are not made within
such period, VNC shall then have twenty (20) days to terminate this Agreement.
If VNC does not terminate the Agreement within this period, this condition
shall be waived by VNC.

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(i) Employment Agreement. The Surviving Corporation shall have entered into
an employment Agreement with Steven R. Townson acceptable in terms with VNC.

Section 7. Conditions to the Obligations of FNSC to Consummate the Merger.

Unless waived by FNSC, its obligation to consummate the Merger shall be
subject to prior satisfaction of the following conditions:

(a) Representations and Warranties True. The representations and warranties
of VNC set forth herein shall, taken as a whole, be true and correct in all
material respects as of the date hereof and as of the Effective Time.

(b) Covenants Observed. The covenants set forth herein to be performed by
VNC prior to the Effective Time shall have been complied with and performed in
all material respects.

(c) Corporation Action. The Boards of Directors and shareholders of VNC
shall have taken all corporate action necessary to be taken by them to approve
the Merger and authorize this Agreement, and VNC shall have furnished FNSC
with certified copies of resolutions duly adopted by the Board of Directors
and shareholders of VNC evidencing the same in the form attached as Appendix
E.

(d) Opinion of Counsel. VNC shall have delivered to FNSC, dated as of the
Effective Date, an opinion of legal counsel, in form and substance similar to
Appendix F and reasonably satisfactory to FNSC.

(e) Government Approvals. All necessary approvals and authorizations by,
filing and registrations with, and notifications to, all federal and state
authorities required for the consummation of the Merger and the prevention of
the termination of any licenses, permits or authorizations of VNC, VN Bank, or
their subsidiaries the termination of which would materially impair the
conduct of their business, shall have been duly obtained or made and shall not
have been canceled or rescinded and all required waiting periods shall have
expired.

(f) No Injunction or Other Legal Proscription. No injunction, restraining
order, stop order, bankruptcy proceeding, receivership, or other order or
action of any federal or state court or agency in the United States which
specifically and materially enjoins or otherwise prevents the consummation of
the Merger in the opinion of FNSC shall be in effect, and no action shall have
been taken, and no statute, rule or regulation shall have been enacted, by any
state or federal government or government agency which makes unlawful the
consummation of the Merger.

(g) Timely Completion. The Effective Time must occur on or before August 30,
1998, unless delayed on account of awaiting Federal Reserve Board or
Securities and Exchange Commission approval.

(h) Pre-Merger Review. FNSC together with such other employees, agents,
accountants, advisors and attorneys of FNSC as FNSC shall deem necessary,
shall have been allowed access to the books and records of VNC, VN Bank, and
each of VNC's or VN Bank's other subsidiaries for the purpose of conducting a
pre-merger review and due diligence examination. Such pre-merger review shall
be conducted within sixty (60) days of the execution of this Agreement and any
adjustments to the loan loss reserve or shareholder's equity of VNC requested
to be made by FNSC shall be made within twenty (20) days after the sixty (60)
day period has expired. Such adjustments also shall be made as appropriate to
the Purchase Price. If such adjustments requested by FNSC are not made within
such period, FNSC shall then have twenty (20) days to terminate this
Agreement. If FNSC does not terminate the Agreement within this period, this
condition shall be waived by FNSC.

(i) Employment Agreement. The Surviving Corporation shall have entered into
an employment Agreement with Harry I. Brown, Jr. acceptable in terms with
FNSC.

Section 8. Abandonment of Merger; Impossibility of Performance; Breach;
Termination.

(a) Abandonment. Anything herein to the contrary notwithstanding, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time, by mutual agreement of the Boards of Directors of FNSC and
VNC. Upon such abandonment, all obligations of the parties hereunder shall
terminate, except those set forth in Section 5(b) and in the last two
sentences of Section 5(c), and each party shall bear its own expenses in
connection with the Merger except as otherwise may be expressly provided
herein.

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(b) Impossibility of Performance. If the Merger is not consummated due to
failure to obtain regulatory approval, or any other event or condition
rendering performance of the Merger impossible, which arises or exists without
the fault of any party, then this Agreement shall terminate, except that the
following provisions shall survive any such termination: those set forth in
Section 5(b), in the last two sentences of Section 5(c) and in Section 8(c),
and each party shall bear its own expenses except as otherwise may be
expressly provided herein.

(c) Breach. In the event of a material breach of any representation,
warranty, agreement or covenant contained in this Agreement by a party, the
other party or parties, shall, if the breaching party fails to correct same
promptly after receipt of written notice thereof, and if such other party or
parties, if appropriate, is not itself in material breach of any
representation, warranty, agreement or covenant contained in this Agreement,
be entitled to terminate this Agreement (which termination shall have the
effect provided in Section 8(b) with respect to a termination under that
Section) and/or seek all legal and equitable remedies to which such party or
parties, if appropriate, may be entitled, including specific performance of
the provisions hereof. If any party willfully causes a material breach of any
representation, warranty, covenant or agreement hereunder and fails promptly
to correct same as soon as reasonably practicable after receipt of written
notice thereof, such party shall pay the other party's or parties' expenses
arising from the negotiation and preparation of, or preparation for, filings
and solicitations with respect to, this Agreement, including accounting fees,
legal fees, filing fees, travel expenses, together with other damages
recoverable at law or in equity.

(d) Termination. If the Merger shall not have been consummated on or before
August 30, 1998 (unless delayed on account of awaiting Federal Reserve Board
or Securities and Exchange Commission approval, which if actively being
pursued, shall extend such date), or such later date as may be agreed upon in
writing by the parties, any party may, if it is not itself in breach of a
representation, warranty, covenant or agreement hereunder, and if any
condition to the obligation of a party to consummate the Merger is impossible
to be satisfied by April 30, 1998, or such other date as may be agreed upon by
the Parties, terminate this Agreement (except those surviving provisions
referred to in Section 8(b)) upon written notice to the other parties. In no
event shall a party or person be entitled to the remedies provided in Section
8(c), whether termination is made pursuant to Section 8(b), 8(c), 8(d), 8(e)
or otherwise, if such party or person was, at the time of termination, in
material breach of any of its covenants or agreements herein.

Section 9. Indemnification.

(a) Indemnification of Parties. FNSC shall indemnify and hold harmless VNC,
and VNC shall indemnify and hold harmless FNSC, against all loss, liability,
damage, or expense (including reasonable fees and expenses of counsel) a party
may suffer, sustain, or become subject to as a result of any breach by the
other party of any warranties, covenants, or other agreements contained in
this Agreement; any misrepresentation or as a result of any of the warranties
or representations not being true and correct as of the time of the Closing;
or a claim by a third party which, without regard to the merits of the claim,
would constitute such a breach of misrepresentation (subject to compliance
with the provisions of Section 9(b) below).

(b) Third Party Claims. The obligations and liabilities of the parties under
this Agreement with respect to, relating to, caused (in whole or in part) by
or arising out of claims of third parties (individually, a "Third Party Claim"
and collectively "Third Party Claims"), shall be subject to the following
terms and conditions:

(i) The party or parties entitled to be indemnified hereunder (the
"Indemnified Party") shall give the party or parties obligated to provide
the indemnity (the "Indemnifying Party") prompt notice of any Third Party
Claim, and the Indemnifying Party may undertake the defense of that claim
by representatives chosen by it. Any such notice of a Third Party Claim
shall identify with reasonable specificity the basis for the Third Party
Claim, the facts giving rise to the Third Party Claim, and the amount of
the Third Party Claim (or, if such amount is not yet known, a reasonable
estimate of the amount of the Third Party Claim). The Indemnified Party
shall make available to the Indemnifying Party copies of all relevant
documents and records in its possession.

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(ii) If the Indemnifying Party, within a reasonable time after notice of
any such Third Party Claim, fails to assume the defense in accordance with
Section 9(b)(i), the Indemnified Party shall (upon further notice to the
Indemnifying Party) have the right to undertake the defense, compromise or
settlement of the Third Party Claim, subject to the right of the
Indemnifying Party to assume the defense of such Third Party Claim at any
time prior to settlement, compromise or final determination thereof;
provided, however, that at the time of the assumption of defense the
Indemnifying Party shall reimburse the Indemnified Party for its
reasonable, actual, documented out-of-pocket expenses incurred prior to the
assumption of defense by the Indemnifying Party.

(iii) Anything in this Section 9 to the contrary notwithstanding, the
Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any Third Party Claim or consent to
the entry of judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnified
Party of an unconditional release from all liability in respect of the
Third Party Claim; and, if there is a reasonable probability that a claim
may materially and adversely affect the Indemnified Party other than as a
result of money damages or other money payments, the Indemnified Party
shall have the right, at its own cost and expense, to participate in the
defense of the Third Party Claim (control of the defense to remain with the
Indemnifying Party).

(c) Limitations. Notwithstanding anything herein to the contrary, no claim
shall be made against any party based on any claim for misrepresentation,
breach of any warranty hereunder, or for indemnity made pursuant to this
Section unless and until and except to the extent that the aggregate of such
claims shall exceed $10,000 over and above any amounts reserved in the balance
sheets and permitted exceptions herein.

(d) Third Party Claims. In any case where an Indemnified Party recovers from
third parties all or any part of any amount paid to it by an Indemnifying
Party pursuant to this Section 9, such Indemnified Party shall promptly pay
over to the Indemnifying Party the amount so recovered (after deducting
therefrom the full amount of the expenses incurred by it in procuring such
recovery). The Indemnified Party shall be obligated to prosecute diligently
and in good faith any claim with any applicable insurer prior to collecting an
indemnification payment under this Section 9. However, an Indemnified Party
shall be entitled to collect an indemnification payment under this Section 9
if such Indemnified Party has not received reimbursement from an applicable
insurer within one year after it has given such insurer written notice of this
claim. In such event, the Indemnified Party shall assign to the Indemnifying
Party its rights against such insurer.

Section 10. General.

(a) Closing. The closing of the transactions contemplated by this Agreement
shall take place at a place and on a date and at a time to be agreed upon by
the parties or, if they cannot agree, on the date of which any party shall
give at least five (5) days' advance notice to the other parties following
satisfaction of the conditions to consummation of the Merger that may not, as
a matter of law, be waived. Notwithstanding anything herein to the contrary,
no party shall be required to waive a condition that is within its power under
the terms of the Agreement not to waive. VNC or FNSC may, at or prior to the
Closing, delay the Closing for up to thirty (30) days by notice to the other
parties specifying the delayed date of the Closing, if necessary to permit
satisfaction of any condition to the obligations of the other parties that
cannot be satisfied at the Closing as originally scheduled and the
satisfaction of which by the delayed Closing date is not impossible.

(b) Amendment. The parties may, by mutual agreement of their respective
Boards of Directors, amend, modify or supplement this Agreement or any
Appendix to the Agreement in such manner as may be agreed upon by them in
writing, at any time before or after approval of the Merger and the
transactions contemplated thereby by the shareholders of VNC and FNSC,
provided that no such amendment, modification or supplement shall be made
which reduces the Purchase Price without the further approval of the FNSC's
and VNC's shareholders. This Agreement may be amended at any time and, as
amended, restated by the President of the parties, without the necessity for
approval by their respective Boards of Directors or shareholders, to correct
typographical errors or to change erroneous references or cross-references, or
to make such other changes which are immaterial to

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the substance of the transactions contemplated hereby. This Agreement may not
be otherwise amended except by an instrument in writing signed on behalf of
all the parties hereto.

(c) Extensions and Waivers. At any time prior to the Effective Time, the
parties hereto, by action taken by their respective Boards of Directors or
duly authorized officers, may: (i) extend the time for the performance of any
of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other parties
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the covenants or agreements of the other parties or
with any of the conditions to the obligations of the waiving party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. No such waiver or extension shall imply any further
waiver or extension.

(d) Counterparts. For the convenience of the parties and to facilitate the
filing of this Agreement with regulatory authorities, any number of
counterparts hereof may be executed, and each such counterpart shall be deemed
to be an original instrument, but all such counterparts together shall
constitute but one agreement.

(e) Notices. All notices, requests, consents, and other communications
hereunder shall be in writing, and shall be personally delivered, delivered by
facsimile, or mailed certified or registered mail, return receipt requested,
postage prepaid, to the addresses indicated above. Notices shall be deemed to
have been received when delivered personally or faxed or, if mailed, the date
of such signed receipt.

(f) Entire Agreement. This Agreement: (i) constitutes the entire Agreement
between the parties hereto and supersedes all other prior agreements and
undertakings, both written and oral, of the parties, or any of them, with
respect to the subject matter hereof; (ii) is not intended to confer upon any
other person or entity any rights or remedies hereunder; and (iii) shall not
be assigned except by operation of law.

(g) Governing Law; Submission to Jurisdiction. Except where controlled by
federal law, this Agreement and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the
internal laws of the State of Alabama, without reference to choice or conflict
of law principles thereof. Any legal action or proceeding with respect to this
Agreement against any party shall be brought only in a court of record of, or
in any federal court located in the State of Alabama, which shall have
exclusive jurisdiction and venue for such purpose. By execution and delivery
of this Agreement, the parties hereby accept for themselves, and in respect of
their property, generally and unconditionally, the jurisdiction and venue of
the aforesaid courts and waive any objection to the laying of venue on the
grounds of forum non conveniens which they may now or hereafter have to the
bringing or maintaining of any such action or proceeding in such jurisdiction.

(h) Headings. The headings of the Sections and subsections of this Agreement
are for convenience of reference only and shall not be taken into account in
the interpretation of this Agreement.

In Witness Whereof, the parties have caused this instrument to be executed
and delivered as of the day and year first above written, such execution
having been duly authorized by the respective Boards of Directors of VNC and
FNSC.

VALLEY NATIONAL CORPORATION

/s/ Steven R. Townson
By:__________________________________
Title: President and CEO

FIRST NATIONAL SYLACAUGA CORPORATION

/s/ Harry I. Brown, Jr.
By:__________________________________
Title: President and CEO

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LIST OF APPENDICES

A -- Plan of Merger
B -- Articles of Merger
C -- VNC's Schedule of Exceptions
D -- FNSC's Schedule of Exceptions
E -- Board and Shareholder Resolution Certifications
F -- Legal Opinion

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APPENDIX A

PLAN OF MERGER

This Plan of Merger (the "Plan") is made and entered into this day of
, 1998, between FIRST NATIONAL SYLACAUGA CORPORATION, a Delaware
corporation ("FNSC"), whose principal offices are at 43 North Broadway,
Sylacauga, Alabama 35150, and VALLEY NATIONAL CORPORATION, an Alabama
corporation ("VNC"), whose principal offices are at 1011 North Lanier Avenue,
Lanett, Alabama 36863-0682.

WITNESSETH:

Whereas, FNSC and VNC are parties to the Merger Agreement dated ,
1998 (the "Merger Agreement"); and

Whereas, the authorized capital stock of FNSC consists of 200,000 shares of
Common Stock ("FNSC Stock"), $10.00 par value, of which 120,000 shares are
issued and 100,995 shares are outstanding; and

Whereas, the respective Boards of Directors and shareholders of FNSC on
February 17, 1998, and February 24, 1998, respectively, and VNC on , 1998,
and , 1998, respectively, have approved that FNSC be merged with and into
VNC (the "Merger") and, by resolutions duly adopted, have approved and adopted
this Plan.

ARTICLE I

Merger

Subject to the terms and conditions of this Plan and the Merger Agreement,
at the Effective Time (as hereinafter defined), FNSC shall be merged with and
into VNC pursuant to the provisions of, and with the effect provided in,
Alabama Code (S) 10-2B-11.06 and the Delaware General Corporation Law, Section
252 (said transaction being hereinafter referred to as the "Merger"). At the
Effective Time, the separate existence of FNSC shall cease and VNC, as the
surviving entity, shall continue unaffected and unimpaired by the Merger (VNC
as existing at and after the Effective Time, being sometimes referred to as
the "Surviving Corporation"). At the Effective Time, the Surviving Corporation
shall succeed to, without other transfer, and shall possess and enjoy, all the
rights, privileges, immunities, powers and franchises both of a public and a
private nature, and be subject to all the restrictions, disabilities and
duties of each of the constituent corporations. All the rights, privileges,
immunities, powers and franchises of each of the constituent corporations and
all property, real, personal and mixed, and all debts due to either of said
constituent corporations on whatever account, for stock descriptions as well
as for all other things in action or belonging to each of said corporations,
shall be vested in the Surviving

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Corporation. All property, rights, privileges, immunities, powers and
franchises and all and every other interest shall be thereafter the property
of the Surviving Corporation as they were of the respective constituent
corporations. The title to any real estate vested by deed or otherwise in
either of said constituent corporations shall not revert or be in any way
impaired by reason of the Merger; provided, however, that all rights of
creditors and all liens upon any property of either of said constituent
corporations shall be preserved unimpaired, limited in lien to the property
affected by such liens at the effective time of the Merger, and all debts,
liabilities and duties of said constituent corporations, respectively, shall
thenceforth attach to the Surviving Corporation and may be enforced against it
to the same extent as if said debts, liabilities and duties had been incurred
or contracted by the Surviving Corporation.

ARTICLE II

Articles of Incorporation, Bylaws, and Name

Upon and after the Effective Time, the Articles of Incorporation and Bylaws
of VNC in effect immediately prior to the Effective Time shall be the Articles
of Incorporation and Bylaws of the Surviving Corporation, in each case until
further amended in accordance with applicable law. THE ARTICLES OF
INCORPORATION OF THE SURVIVING CORPORATION IS HEREBY AMENDED TO CHANGE ITS
NAME TO FRONTIER NATIONAL CORPORATION.

ARTICLE III

Board Of Directors And Officers

As of the Effective Time, the Board of Directors and officers of the
Surviving Corporation shall consist respectively of the following persons
until their successors are elected and qualified:

Harry I. Brown, Jr. -- Chairman of the Board, CEO
Steven R. Townson -- Vice Chairman of the Board, President, COO
Harry I. Brown, Sr. -- Director
Charles M. Reeves, Jr. -- Director
Wesley L. Bowden, Jr. -- Director
Raymond C. Styres -- Director
Christopher N. Zodrow -- Director
Kerri C. Newton -- Secretary (non-director)

ARTICLE IV

Capital

Each share of capital stock of VNC issued and outstanding immediately prior
to the Effective Time shall, at the Effective Time, continue to be issued and
outstanding.

ARTICLE V

Conversion and Exchange of FNSC Shares

1. As of the Effective Time of the Merger, each share of FNSC Stock issued
and outstanding immediately prior to the Effective Time shall, by virtue of
the Merger becoming effective and without any action on the part of anyone, be
canceled and converted as provided in Section 2 hereof.

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2. Subject to the provisions of Section 5 of this Article V, the shares of
FNSC Stock shall be converted into shares of VNC Stock based on an exchange
ratio of 13.3 shares of VNC Stock for each share of FNSC Stock held (the
"Purchase Price") subject to adjustment as defined in Section 6(h) and 7(h) of
the Merger Agreement. No fractional shares shall be issued so any fractions
will be paid in cash based upon a price of $139.29 per share of FNSC Stock.
This Purchase Price has been based upon on a book value for book value
exchange basis on the date of Closing adjusted for extraordinary items as
agreed by the parties. If the adjusted financial statements as of such date as
agreed to by the parties reflect a change in these figures, a proportional
change will be made in the Purchase Price.

3. As soon as reasonably practicable after the Effective Time of the Merger,
each registered holder of the outstanding FNSC Stock and VNC Stock shall
deliver, or cause to be delivered, to Frontier National Corporation (the
"Exchange Agent"), the certificates evidencing and representing all shares of
FNSC Stock and VNC Stock which were validly issued and outstanding and held by
such holder immediately prior to the Effective Time of the Merger, and the
Exchange Agent shall take prompt action to process such certificates
evidencing and representing FNSC Stock and VNC Stock received by it (including
the prompt return of defective submissions with instructions as to those
actions which may be necessary to remedy such defects). Upon receipt of the
proper submission of the certificates formerly representing and evidencing
FNSC Stock and VNC Stock, the Exchange Agent shall, on or prior to the 30th
day after the Effective Time of the Merger, mail to the former FNSC and VNC
shareholders in exchange for FNSC Stock and VNC Stock formerly owned by them,
stock certificates of Frontier National Corporation and/or a check evidencing
and representing fractional shares. After the Effective Time of the Merger and
until properly surrendered to the Exchange Agent, each outstanding certificate
or certificates which formerly evidenced and represented the FNSC Stock,
subject to the provisions of this Section, shall be deemed for all corporate
purposes to represent and evidence a right to receive the portion of the
Purchase Price into which such holder's FNSC Stock were converted and
aggregated at the Effective Time of the Merger. Unless and until the
outstanding certificate or certificates, which immediately prior to the
Effective Time evidenced and represented the holder's FNSC Stock, shall have
been surrendered as provided above, no interest or other payment payable to
the holders of record of FNSC Stock as of the Effective Date shall be paid.
The shareholders of FNSC will be responsible for all federal, state and local
taxes incurred by them on account of their receipt of any cash portion of the
Purchase Price pursuant to the Merger. The registered holder of any
certificate(s) representing FNSC Stock and VNC Stock which shall have been
lost or destroyed may be subject to the provisions of this Section, obtain his
or her new certificates provided that such shareholder(s) shall deliver to the
Exchange Agent: (i) a sworn statement certifying such loss or destruction and
specifying the circumstances thereof and (ii) an indemnity or lost instrument
bond in form satisfactory to the Exchange Agent which has been duly executed
by a corporate surety satisfactory to the Exchange Agent, indemnifying the
Surviving Corporation, and the Exchange Agent (and their respective
successors) to their satisfaction against any loss or expense which any of
them may incur as a result of such lost or destroyed certificates being
thereafter presented. Any costs or expenses which may arise from such
procedure, including the premium on the lost instrument bond, shall be for the
account of the shareholder.

4. At the Effective Time of the Merger, the stock transfer books of FNSC
shall be closed and no transfer of FNSC Stock shall be made thereafter.

5. Notwithstanding anything to the contrary herein, any holder of FNSC Stock
or VNC Stock who shall comply strictly with the provisions Section 262 of the
Delaware General Corporation Law or of 10-2B-13.01 et seq. of the Alabama
Business Corporation Act shall be entitled to dissent from the Merger and to
seek those appraisal remedies afforded by the Act.

6. In the event that prior to the Effective Time, the outstanding shares of
FNSC Stock shall have been increased, decreased, or changed into or exchanged
for a different number or kind of shares or securities by reorganization,
recapitalization, reclassification, stock dividend, stock split, or other like
changes in FNSC's capitalization, all without FNSC receiving consideration
therefor, then an appropriate and proportionate adjustment shall be made in
the price paid for each share of FNSC Stock thereafter delivered pursuant to
this Plan although the total Purchase Price shall not change.

A-19
<PAGE>

ARTICLE VI

Effective Time Of The Merger

The Merger shall be effective at the time and on the date that this Plan is
filed with the Alabama and Delaware Secretaries of State pursuant to and
together with the other documents specified in Alabama Code Section 10-2B-
11.05 and the Delaware General Corporation Law Section 252 or such later time
and date as the parties may agree and cause to be set forth in the following
space in this Plan as so filed: (such date and time being herein
referred to as "Effective Time").

ARTICLE VII

Conditions Precedent

The obligations of FNSC and VNC to effect the Merger as herein provided
shall be subject to satisfaction, unless duly waived, of the conditions set
forth in the Merger Agreement, including without limitation, the approval of
the Federal Reserve Board and the approval of the shareholders of FNSC and VNC
in accordance with Alabama law.

ARTICLE VIII

Termination

Anything contained in this Plan to the contrary notwithstanding, and
notwithstanding adoption hereof by the shareholders of FNSC and VNC, this Plan
may be terminated and the Merger abandoned as provided in the Merger
Agreement.

ARTICLE IX

Service of Process

The Surviving Corporation agrees that is may be served with process in the
State of Delaware in any proceeding for enforcement of any obligation of FNSC
as well as for the enforcement of any obligation of the Surviving Corporation
arising from the merger, including any suit or other proceeding to enforce the
right of any shareholder as determined in appraisal proceedings pursuant to
the provisions of Section 262 of the Delaware Business Corporation Law.

ARTICLE X

Miscellaneous

1. This Plan may be amended or supplemented at any time by mutual agreement
of FNSC and VNC. Any such amendment or supplement must be in writing and
approved by their respective Boards of Directors and shall be subject to the
provisions of Section 10(b) of the Merger Agreement.

2. Any notice or other communication required or permitted under this Plan
shall be given, and shall be effective, in accordance with the provisions of
the Merger Agreement.

3. The headings of the several Articles herein are inserted for convenience
of reference only and are not intended to be a part of or to affect the
meaning or interpretation of this Plan.

A-20
<PAGE>

4. This Plan may be executed in several counterparts, each of which shall be
deemed the original, but all of which together shall constitute one and the
same instrument.

5. This Plan shall be governed by and construed in accordance with the laws
of the State of Alabama applicable to agreements made and entirely to be
performed in such state, except to the extent federal law may be applicable.

In Witness Whereof, the parties hereto have caused this Plan to be executed
in counterparts by their duly authorized officers and their corporate seals to
be hereunto affixed and attested by their officers thereunto duly authorized,
all as of the day and year first above written.

ATTEST:
VALLEY NATIONAL CORPORATION

By:___________________________________
_________________________________ Title:
Secretary

FIRST NATIONAL SYLACAUGA CORPORATION
ATTEST:

By:__________________________________
_________________________________ Title:
Secretary

A-21

<PAGE>

APPENDIX B

ARTICLES AND CERTIFICATE OF MERGER
OF DOMESTIC CORPORATION INTO VALLEY NATIONAL CORPORATION
(NAME CHANGED TO FRONTIER NATIONAL CORPORATION)

Pursuant to the provisions of Section 10-2B-11.01 et seq. of the Alabama
Code Annotated and Sections 252 of the Delaware General Corporation Law, the
undersigned corporations adopt the following articles of merger for the
purpose of merging into a single corporation:

I. The name and state of incorporation of each of the constituent
corporations are:

(a) First National Sylacauga Corporation, a Delaware corporation; and

(b) Valley National Corporation, an Alabama corporation.

II. A Merger Agreement and the attached Plan of Merger was approved by each
of the undersigned corporations in the manner prescribed by the Alabama
Business Corporation Act and the Delaware General Corporation Law. The name of
the surviving corporation is Frontier National Corporation, and it will be
governed by the laws of the State of Alabama. The certificate of incorporation
of Valley National Corporation shall be the certificate of incorporation of
the Surviving Corporation.

III. As to Valley National Corporation, the Plan was duly adopted at a
meeting of the shareholders of Class A Common Stock on , 1998, where
undisputed votes were cast for the Plan of Merger, such amount being
sufficient for approval by that voting group. The only outstanding shares are
814,800 shares of Class A Common Stock which represent a like number of votes
to be cast.

IV. As to First National Sylacauga Corporation, the Plan was duly adopted at
a meeting of the shareholders of common stock on , 1998, where
undisputed votes were cast for the Plan of Merger, such amount being
sufficient for approval by that voting group. The only outstanding shares are
100,995 shares of common stock which represent a like number of votes to be
cast.

V. The Articles of Incorporation of Valley National Corporation are filed
in Marshall County, Alabama, and for First National Sylacauga Corporation in the
State of Delaware.

VI. The effective date of these Articles of Merger is , 1998.

VII. The executed Merger Agreement is on file at the principal place of
business of Valley National Corporation at 1011 North Lanier Avenue, Lanett,
Alabama, 36863.

VIII. A copy of the Merger Agreement will be furnished by Valley National
Corporation, on request and without cost, to any stockholder of First National
Sylacauga Corporation, or Valley National Corporation.

IX. The Surviving Corporation hereby agrees that it may be served with
process in Delaware in any proceeding for enforcement of any obligation of
First National Sylacauga Corporation, as well as for enforcement of any
obligation of Valley National Corporation arising from the merger, including
any suit or other proceeding to enforce the right of any stockholders as
determined in appraisal proceedings pursuant to 8 Del. C. (S) 262, and the
Surviving Corporation hereby irrevocably appoints the Secretary of State of
the State of Delaware as its agent to accept service of process in any such
suit or other proceedings and a copy of such process shall be mailed by the
Secretary of State to Valley National Corporation at the address above.

VALLEY NATIONAL CORPORATION

Dated:_____________________, 1998 By:__________________________________
Title:

ATTEST:

FIRST NATIONAL SYLACAUGA CORPORATION
_________________________________
Secretary

ATTEST: By:__________________________________
Title:

_________________________________
Secretary

A-22
<PAGE>

APPENDIX C

VNC'S SCHEDULE OF EXCEPTIONS

3(a) Nonbank subsidiaries:

None

3(d) Material contracts which cannot be terminated in 30 days:

Walmart branch lease

3(e) Minority interests in subsidiaries, encumbrances on bank stock, options,
warrants, or rights to buy stock:

Steven R. Townson has options to purchase 60,000 shares of Class A Common
Stock.

Kerri Newton has options to purchase 12,000 shares of Class A Common Stock.

3(g) Non-ordinary transactions, material adverse change:

VN Bank redeemed 512 shares of its stock at $7,010.63 per share for a total
of $3,589,440 in 1997 prior to a split of the shares.

VNC was formed as a one bank holding company in 1997.

3(h) Delinquent regulatory filings:

None

3(i) Material regulatory noncompliance:

3(k) Litigation:

None

3(l) Taxes:

None

3(n) Stock transfer noncompliance:

None

3(o) (1) Employee plans:

--Stock options described above

--Golden Parachute and Deferred Compensation agreements for Steven R.
Townson

--Kerri Newton--2 year employment upon change of control

--401(k) Plan

--Medical, dental, disability and life insurance

(4) Amendments:

None

3(r) Environmental Matters:

None

A-23

<PAGE>

APPENDIX D

FNSC'S SCHEDULE OF EXCEPTIONS

4(a) Non-bank subsidiaries:

Frontier Financial Services, Inc.

The Frontier Agency, Inc.

4(d) Material contracts which cannot be terminated in 30 days:

Leases on subsidiary properties

Bruno's grocery store branch lease

Maintenance agreements for equipment

4(e) Minority interest in subsidiaries, encumbrances on bank stock, options,
warrants or rights to buy stock:

National Bank of Commerce holds 50% of the FNA Bank stock as collateral to
secure a loan to FNSC in the principal amount of $2,250,000

4(g) Nonordinary transactions, material adverse changes:

In 1996, FNSC incurred a loan in the principal amount of $2,250,000 from
National Bank of Commerce to purchase Citibank in Childersburg.

FNSC redeemed 120 shares of FNSC stock at $125.00 per share for a total of
$15,000.00 in 1997.

4(h) Delinquent regulatory filings:

None

4(k) Litigation:

Frontier Financial Services, Inc. is the defendant in a lawsuit filed in
the Circuit Court of Talladega County, Alabama (Civil Action No. CV 97 539)
where Betty Swain, and others, are suing for violations of the Mini-Code.
4(l) Taxes:

None

4(n) Stock Transfer Non-Compliance:

None

4(o) (1) Employee Benefit Plans:

Incentive Plan for Board of Directors

Bonus Plans for particular employees

First National-America's Bank 401(k) Plan

First National-America's Bank Profit Sharing Retirement Plan

Cafeteria Plan

Medical, disability, and life insurance

Employment Agreement with Robert J. Mitchum

Deferred Compensation Agreement with certain employees

4(o) (4) Amendments:

None

4(r) Environmental Matters:

None

A-24

<PAGE>

APPENDIX E

BOARD RESOLUTION CERTIFICATION

VALLEY NATIONAL CORPORATION ("VNC")

As Secretary of VNC, I hereby certify that the following actions were taken
by the Board of Directors of VNC as of February 24, 1998:

Resolved, that there has been presented to this Board of Directors a Merger
Agreement whereby First National Sylacauga Corporation (FNSC) would merge into
Valley National Corporation (VNC) and the shareholders of FNSC would receive
shares of VNC based upon the respective adjusted shareholders' equity of FNSC
and VNC, and such Merger Agreement is advisable and generally to the advantage
and for the benefit of this company and its stockholders and is hereby
approved; and

Be it Further Resolved, that said Merger Agreement be submitted for approval
and adoption by the stockholders of this company at a special meeting to be
held in Lanett, Alabama, as determined by the President of the Corporation
after all necessary approvals to hold the meeting and submit proxy materials
to the stockholders have been obtained; and all necessary or appropriate
notices be given to the stockholders and that said Merger Agreement is to be
acted upon by them at such meeting; and that the close of business as
determined by the President and the bylaws is hereby fixed as the record date
for the determination of stockholders entitled to notice of and to vote at
such special meeting or any adjournment or adjournments thereof; and,

Be it Further Resolved, that the officers of the VNC be, and they hereby
are, authorized, to include in the proxy material to be submitted to the
stockholders in connection with said special meeting, all of the material
which they consider necessary and desirable to give the stockholders an
adequate explanation and all pertinent information regarding the proposed
merger, the financial condition of the two companies, to the end that they may
be enabled to judge the desirability and expediency of the contemplated
action; all such material to be in form approved by counsel for the VNC; and,

Be it Further Resolved, that the officers of the VNC hereby are authorized
and empowered to take all necessary steps which may be required of them or
which may be in the best interest of the VNC, to complete all transactions
necessary or deemed necessary by the officers of the VNC with regard, but not
limited, to the filing of all necessary regulatory applications, the
negotiation of the final terms of the Merger Agreement or any other necessary
agreements and all other legal, regulatory, and other steps that may become
necessary in order to implement the purposes of these resolutions.

In Witness Whereof, I hereby have set my hand this 24th day of February,
1998.

/s/ Kerri C. Newton
_____________________________________
Secretary

A-25
<PAGE>

BOARD RESOLUTION CERTIFICATION

FIRST NATIONAL SYLACAUGA CORPORATION ("FNSC")

As secretary of FNSC, I hereby certify that the following actions were taken
by the Board of Directors of FNSC as of February 17, 1998:

Be it Further Resolved, that said Merger Agreement be submitted for approval
and adoption by the stockholders of this company at a special meeting to be
held in Sylacauga, Alabama, as determined by the President of the Corporation
after all necessary approvals to hold the meeting and submit proxy materials
to the stockholders have been obtained; and all necessary or appropriate
notices be given to the stockholders and that said Merger Agreement is to be
acted upon by them at such meeting; and that the close of business as
determined by the President and the bylaws is hereby fixed as the record date
for the determination of stockholders entitled to notice of and to vote at
such special meeting or any adjournment or adjournments thereof; and,

Be it Further Resolved, that the officers of the FNSC be, and they hereby
are, authorized, to include in the proxy material to be submitted to the
stockholders in connection with said special meeting, all of the material
which they consider necessary and desirable to give the stockholders an
adequate explanation and all pertinent information regarding the proposed
merger, the financial condition of the two companies, to the end that they may
be enabled to judge the desirability and expediency of the contemplated
action; all such material to be in form approved by counsel for the FNSC; and,

Be it Further Resolved, that the officers of the corporation hereby are
authorized and empowered to take all necessary steps which may be required of
them or which may be in the best interest of the corporation, to complete all
transactions necessary or deemed necessary by the officers of the corporation
with regard, but not limited, to the filing of all necessary regulatory
applications, the negotiation of the final terms of the Merger Agreement or
any other necessary agreements, and all other legal, regulatory, and other
steps that may become necessary in order to implement the purposes of these
resolutions.

In Witness Whereof, I hereby have set my hand this 18th day of February,
1998.

/s/ Robert J. Mitchem
_____________________________________
Secretary

A-26
<PAGE>

SHAREHOLDER RESOLUTION CERTIFICATION

VALLEY NATIONAL CORPORATION ("VNC")

As secretary of VNC, I hereby certify that the following actions were taken
by the shareholders as of , 1998.

Be it Resolved, that the Board of Directors of the VNC have determined that
the merger of First National Sylacauga Corporation into VNC, upon the terms
and conditions set forth in the Plan of Merger, the Articles of Merger, and
the Merger Agreement submitted to the shareholders, copies of which are
attached hereto and made a part of these minutes, is advisable and generally
to the advantage and for the benefit of the VNC and its stockholders; and

Be it Further Resolved, that the Merger Agreement presented to the meeting
and the merger therein provided for be and the same are hereby approved, and
the execution of said Agreement by the members of the Board of Directors and
by proper officers of the VNC is hereby approved and authorized; and,

Be It Further Resolved, that the proper officers of the VNC, be and they
hereby are, authorized and directed to execute, in the name and on behalf of
the VNC and under its corporate seal or otherwise, and to deliver any and all
agreements, certificates, applications or other instrument, an to take from
time to time any and all such other action necessary or desirable to carry out
the purposes of the foregoing resolutions.

In Witness Whereof, I hereby have set my hand this day of , 1998.

_____________________________________
Secretary

A-27
<PAGE>

SHAREHOLDER RESOLUTION CERTIFICATION

FIRST NATIONAL SYLACAUGA CORPORATION ("FNSC")

As Secretary of FNSC, I hereby certify that the following actions were taken
by the shareholders as of , 1998:

Be it Resolved, that the Board of Directors of the FNSC have determined that
the merger of this Company into Valley National Corporation, upon the terms
and conditions set forth in the Plan of Merger, the Articles of Merger, and
the Merger Agreement submitted to the Shareholder, copies of which are
attached hereto and made a part of these minutes, is advisable and generally
to the advantage and for the benefit of the FNSC and its stockholders; and,

Be it Resolved, that the Merger Agreement presented to the meeting and the
merger therein provided for be and the same are hereby approved, and the
execution of said Agreement by the members of the Board of Directors and by
proper officers of the FNSC is hereby approved and authorized; and,

Be it Further Resolved, that the proper officers of the FNSC, be and they
hereby are, authorized and directed to execute, in the name and on behalf of
the FNSC and under its corporate seal or otherwise, and to deliver any and all
agreements, certificates, applications or other instruments, and to take from
time to time any and all such other action necessary or desirable to carry out
the purposes of the foregoing resolutions.

In Witness Whereof, I hereby have set my hand this day of , 1998.

_____________________________________
Secretary

A-28
<PAGE>

APPENDIX F

LEGAL OPINION

We have acted as legal counsel to (the "Company") in connection with
the Merger Agreement entered into on , 1998, between the Company and the
Valley National Corporation/First National Sylacauga Corporation (the "Other
Company"). This is the opinion contemplated by Section 6/7(d) of the
Agreement. All capitalized terms used in the opinion without definition have
the respective meanings given to them in this Agreement or the Accord referred
to below.

This opinion letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the American Bar Association
Section of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this
opinion letter should be read in conjunction therewith.

By your acceptance and use of this letter, you agree that none of its
contents will be quoted, paraphrased, or otherwise disclosed, either tangibly,
verbally, or otherwise, to any other person or entity, or used for any other
purpose except to the extent provided in the Accord, without the explicit
prior written consent of a partner of this Firm.

To render this Opinion, we have made the investigation described below. We
have not independently verified information obtained from third persons,
except as set forth below. As to matters of fact, we have made inquiry as
stated herein, and have relied solely upon:

(a) our Actual Knowledge;

(b) the information obtained from public officials and public records
that is set forth below; and

(c) representations contained in the Agreement and the representations of
responsible officers of the Company contained in the certificates
identified below.

In the course of our representation of the Company, nothing has come to our
attention which would lead us to believe that any of the factual matters upon
which this Opinion is premised are inaccurate in any material respect.

In so acting, and with your permission, we have based our Opinion upon a
review of the following documents, and such other documents as we deemed
necessary or advisable as a basis for the opinion expressed:

A. The Agreement and all exhibits thereto.

B. Copies of the Articles of Incorporation and Bylaws of Company and its
subsidiaries certified to us by the Alabama Secretary of State, OCC, and/or
representatives of Company to be true and correct copies of such Articles
of Incorporation and Bylaws.

C. Minutes of the Board of Directors and shareholders of Company
approving the Agreement and certified to us by representatives of Company
to be true, correct and complete.

D. Certificate of Existence of Company issued by the Secretary of State
of Alabama, dated , 1998.

E. The Officers' Certificate of Company dated as of this date.

A-29
<PAGE>

In addition to the General Qualifications of the Accord, the Opinions
rendered herein are, with your consent, subject to the following assumptions,
limitations, qualifications and exceptions:

(1) The Opinions and other representations contained herein are limited to
the effects of the presently existing Laws and the constitutional laws of the
State of Alabama and its subordinate counties and municipalities, and of the
United States of America. Otherwise, with respect to any matter addressed
herein which may be governed by, other than Alabama or federal Law, we assume,
but disclaim any Opinion, that such other law is sufficiently similar such
that its application would produce the same conclusion as may be set forth
herein.

(2) Except with respect to the Company, we have assumed, without
investigation or duty to investigate, (i) the due-execution and delivery of
all documents where due execution and delivery are pre-requisite to the
effectiveness thereof; and (ii) that the representations of fact made in the
Agreement are not untrue, incorrect, or incomplete.

(3) We express no Opinion as to the Company's Financial Statements, and no
inference should be drawn that we have expressed any Opinion on matters
relating to the ability of the Company to perform its obligations with respect
to the Financial Statements under the transactions described herein.

Under the laws of the United States of America and the State of Alabama, all
as presently in effect, it is our opinion, subject to the assumptions,
limitations, qualifications and exceptions set forth herein, that:

(a) Company and its subsidiaries are corporations organized, validly
existing, and in good standing under the laws of the State of Alabama or
the United States. Company and its subsidiaries have the corporate power
and authority to own or lease all of their properties and assets and to
carry on their business and are duly qualified to do business and are in
good standing in each jurisdiction in which the nature of such business
conducted by them or the character or location of the properties and assets
owned or leased by them makes such qualification necessary, except where
the failure to be so qualified or in good standing would not have a
material adverse effect on the business, operations, assets or financial
condition of Company and its subsidiaries.

(b) The Agreement has been duly authorized, executed and delivered by
Company and, to the extent it has been duly authorized, executed and
delivered by Other Company, constitutes the valid and binding obligation of
Company enforceable in accordance with its terms, except that the
enforceability of the obligations of Company may be limited by bankruptcy,
fraudulent conveyance, insolvency, moratorium, or other laws heretofore or
hereafter enacted relating to or affecting the rights of creditors
generally, and by equitable principles limiting the right to obtain
specific performance or other similar equitable relief (regardless of
whether such enforceability is considered in a proceeding in equity or at
law). In addition, certain remedial and other provisions of the Agreement
may be limited by implied covenants of good faith, fair dealing, and
commercially reasonable conduct, by judicial discretion in the instance of
equitable remedies, and by applicable public policies and laws.

(c) The execution and delivery of the Agreement and the consummation of
the transactions contemplated thereby will not (i) conflict with or violate
any provision of, or result in the breach of any provision of, the Articles
of Incorporation or the bylaws of Company; (ii) to the best of our
knowledge, conflict with or violate in any material respect or result in a
material breach or violation of the terms or provisions of, or constitute a
material default under, or result in or entitle any party to the
acceleration of (whether upon or after the giving of notice or lapse of
time or both) any obligation under, any agreement, instrument, judgment,
order, arbitration award or decree to which Company or any of its
subsidiaries is a party or by which Company is bound; or (iii) cause
Company to violate any statute, rule, regulation or order known to us
applicable to Company or its subsidiaries, except such as in the aggregate
will not have a material adverse effect on the ability of Company or its
subsidiaries to consummate this transaction.

(d) All actions required by law, the Articles of Incorporation of Company
or its bylaws to be taken by the directors and stockholders of Company to
authorize the execution, delivery and performance of the Agreement and the
actions contemplated thereby have been duly taken.

A-30
<PAGE>

(e) All approvals, authorizations, consents or other actions required to
be obtained by Company ("Approvals") in order to permit the execution and
delivery of the Agreement and the performance of the transactions
contemplated therein have been obtained. No Approval of any other party or
entity (other than Other Company and Approvals required to be obtained by
Other Company) is required in connection with the execution, delivery and
performance by Company of its obligations under the Agreement except for
Approvals not required or necessary to be obtained on the date hereof, and
except for approvals the failure to obtain which individually or in the
aggregate will not have a material adverse effect on the business,
operations, assets or financial condition of Company and its subsidiaries,
taken as a whole, and which will not prevent or delay the consummation of
the transactions contemplated by the Agreement.

In rendering their opinion, such counsel may rely, (A) as to matters
involving the application of laws of any jurisdiction other than the United
States, to the extent such counsel deems proper and specifies in such opinion,
upon the opinion of other counsel of good standing believed by such counsel to
be reliable (providing that such counsel states that Other Company is
justified in relying upon such specified opinion or opinions) and (B) as to
matters of fact, on certificates of responsible officers of Company and public
officials. Such counsel may assume that any agent is a valid and binding
obligation of any parties to such agreement other than Company. Such counsel
may also rely, as to facts, upon the representations and warranties made by
Company in the Agreement and on the genuineness of signatures and the
authenticity of copies.

Our Opinions are as of the date hereof and are subject to future changes of
law or fact. We expressly disclaim any duty to update our Opinions or to
advise you as to the effect of future events or any change in facts upon which
these Opinions are based.

Very truly yours,

A-31
<PAGE>

OFFICERS' CERTIFICATE

This Certificate is made and delivered to ("Counsel") in connection
with the delivery of that law firm's legal opinion (the "Opinion") pursuant to
the Merger Agreement (the "Agreement") dated , 1998, between (the
"Company") and the Valley National Corporation/First National Sylacauga
Corporation (the "Other Company"). All capitalized terms used in the opinion
without definition have the respective meanings given to them in this
Agreement or the Accord referred to below.

The undersigned, as the indicated officer of Company, does hereby certify as
follows:

1. All representations and warranties of Company set out in the Agreement
are true and correct on and as of this date.

2. No event has occurred and is continuing, or would result from the
transactions provided for in the Agreement, which has or would constitute a
breach by Company of any of the terms of the Agreement.

3. The undersigned has reviewed the contents of the representations and
warranties contained in the Agreement, and the content and substance of the
Opinion to be rendered by Counsel, and nothing came to the attention of the
undersigned which would, or could under any foreseeable circumstances,
invalidate or bring into serious question the accuracy of such
representations and warranties or the contents of the Opinion.

4. The undersigned officer of Company is familiar with the conduct of
Company's business, the execution and the contents of their contracts, loan
agreements, indentures, mortgages, deeds of trust, and other such
agreements and instruments, and the existence and contents of any
judgments, orders, writs, injunctions, decrees, rules or regulations of any
court or governmental department, commission, board, agency or
instrumentality applicable to Company.

5. In the course of the review of the Agreement and the Opinion, no facts
or circumstances have come to the attention of the undersigned, nor are the
undersigned aware of any circumstances or facts which, while to their
knowledge would not invalidate any of the above statements, might warrant
further investigation as to whether or not such matters might have a
bearing on the accuracy or validity of such statements.

6. This Certificate is given after due consideration of the matters
stated herein and the purpose for which this Certificate has been
requested.

In consideration for the issuance of the Opinion, Company agrees to
indemnify and hold harmless and each of the lawyers who practice with
the firm from and against all loss, damage, and expense, including, but not
limited to, any attorney's fees, which may be sustained from any
representations made by Company and relied upon by in making its
opinion. This agreement shall be binding upon and shall inure to the benefit
of the parties, their legal representatives, successors and assigns.

Dated: , 1998.

_____________________________________

By:__________________________________
President

A-32
<PAGE>

APPENDIX B

PROVISIONS OF

DELAWARE GENERAL CORPORATION LAW

GOVERNING

APPRAISAL RIGHTS

B-1
<PAGE>

DELAWARE STATUTORY LAW RELATING TO APPRAISAL RIGHTS

SECTION 262 OF THE
DELAWARE GENERAL CORPORATION LAW

Section 262 Appraisal Rights. (a) Any shareholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to 228 of this title shall be entitled
to an appraisal by the Court of Chancery of the fair value of his shares of
stock under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "shareholder" means a holder of
record of stock in a stock corporation and also a member of record of a
nonstock corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest of
a member of a nonstock corporation; and the words "depository receipt" mean a
receipt or other instrument issued by a depository representing an interest in
one or more shares, or fractions thereof, solely of stock of a corporation,
which stock is deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to 251 (other than a merger effected pursuant to 251(g)
of this title), 252, 254, 257, 258, 263 or 264 of this title:

(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the shareholders entitled to receive notice of and to vote at the
meeting of shareholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holder of the surviving corporation as
provided in subsection (f) of 251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to 251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:

a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;

b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;

c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or

d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.

(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of

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incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
shareholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its shareholders who has such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each shareholder
electing to demand the appraisal of such holder's shares shall deliver to
the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such holder's shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the shareholder and that the shareholder intends thereby to
demand the appraisal of such holder's shares. A proxy or vote against the
merger or consolidation shall not constitute such a demand. A shareholder
electing to take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
shareholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or

(2) If the merger or consolidation was approved pursuant to 228 or 253 of
this title, each constituent corporation, either before the effective date
of the merger or consolidation or within 10 days thereafter, shall notify
each of the holders of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock
of a constituent corporation that are entitled to appraisal rights. Such
notice may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such shareholders of the effective date
of the merger or consolidation. Any shareholder entitled to appraisal
rights may, within 20 days after the date of mailing of the notice, demand
in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the shareholder and that the
shareholder intends thereby to demand the appraisal of such holder's
shares. If such notice did not notify shareholders of the effective date of
the merger or consolidation, either (i) each such constituent corporation
shall send a second notice before the effective date of the merger or
consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of
the effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders
on or within 10 days after such effective date; provided, however, that if
such second notice is sent more than 20 days following the sending of the
first notice, such second notice need only be sent to each shareholder who
is entitled to appraisal rights and who has demanded appraisal of such
holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the shareholders entitled
to receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.

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(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any shareholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such shareholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any shareholder shall have the right to withdraw such
holder's demand for appraisal and to accept the terms offered upon the merger
or consolidation. Within 120 days after the effective date of the merger or
consolidation, any shareholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the shareholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.

(f) Upon the filing of any such petition by a shareholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all shareholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the shareholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.

(g) At the hearing on such petition, the Court shall determine the
shareholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the shareholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any shareholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such shareholder.

(h) After determining the shareholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate
of interest which the surviving or resulting corporation would have had to pay
to borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any shareholder entitled to
participate in the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial upon
the appraisal prior to the final determination of the shareholder entitled to
an appraisal. Any shareholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this section
and who has submitted his certificates of stock to the Register in Chancery,
if such is required, may participate fully in all proceedings until it is
finally determined that he is not entitled to appraisal rights under this
section.

(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the shareholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such shareholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation

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of the certificates representing such stock. The Court's decree may be
enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of
any state.

(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a shareholder, the Court may order all or a portion of the
expenses incurred by any shareholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and the fees and expenses of experts, to be charged pro rata against the
value of all the shares entitled to an appraisal.

(k) From and after the effective date of the merger or consolidation, no
shareholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to shareholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such shareholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of his section or thereafter with
the written approval of the corporation, then the right of such shareholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any shareholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.

(l) The shares of the surviving or resulting corporation to which the shares
of such objecting shareholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.

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APPENDIX C

PROVISIONS OF

ALABAMA BUSINESS CORPORATION ACT

GOVERNING

DISSENTERS' RIGHTS

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ALABAMA CODE ANNOTATED
TITLE 10. CORPORATIONS, PARTNERSHIPS AND ASSOCIATIONS
CHAPTER 2B. BUSINESS CORPORATIONS
ARTICLE 13. DISSENTERS' RIGHTS

SEC. 10-2B-13.01. DEFINITIONS.

(a) "Corporate action" means the filing of articles of merger or share
exchange by the probate judge or Secretary of State, or other action
giving legal effect to a transaction that is the subject of dissenters'
rights.

(b) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.

(c) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under Section 10-2B-13.02 and who exercises that right when and in
the manner required by Sections 10-2B-13.20 through 10-2B-13.28.

(d) "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.

(e) "Interest" means interest from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans, or, if none, at a rate that is
fair and equitable under all circumstances.

(f) "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.

(g) "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.

(h) "Shareholder" means the record shareholder or the beneficial shareholder.

SEC. 10-2B-13.02. RIGHT TO DISSENT.

(a) A shareholder is entitled to dissent from, and obtain payment of the fair
value of his or her shares in the event of, any of the following corporate
actions:

(1) Consummation of a plan of merger to which the corporation is a party (i)
if shareholder approval is required for the merger by Section 10-2B-
11.03 or the articles of incorporation and the shareholder is entitled
to vote on the merger or (ii) if the corporation is a subsidiary that is
merged with its parent under Section 10-2B-11.04;

(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;

(3) Consummation of a sale or exchange by all, or substantially all, of the
property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;

(4) To the extent that the articles of incorporation of the corporation so
provide, an amendment of the articles of incorporation that materially
and adversely affects rights in respect to 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;

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(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, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights;
or

(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 Section 10-2B-6.04; or

(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 shares under this
chapter may not challenge the corporate action creating his or her
entitlement unless the action is unlawful or fraudulent with respect to
the shareholder or the corporation.

SEC. 10-2B-13.03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.

(a) A record shareholder may assert dissenters' rights as to fewer than all of
the 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
the corporation in writing of the name and address of each person on whose
behalf he or she asserts dissenters' rights. The rights of a partial
dissenter under this subsection are determined as if the shares to which
he or she dissents and his or her other shares were registered in the
names of different shareholders.

(b) A beneficial shareholder may assert dissenters' rights as to shares held
on his or her behalf only if:

(1) He or she 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 or she does so with respect to all shares of which he or she is the
beneficial shareholder or over which he or she has power to direct the
vote.

SEC. 10-2B-13.20. NOTICE OF DISSENTERS' RIGHTS.

(a) If proposed corporate action creating dissenters' rights under Section 10-
2B-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 Section 10-2B-13.02
is taken without a vote of shareholders, the corporation shall (1) notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken; and (2) send them the dissenters' notice described in
Section 10-2B-13.22.

SEC. 10-2B-13.21. NOTICE OF INTENT TO DEMAND PAYMENT.

(a) If proposed corporate action creating dissenters' rights under Section 10-
2B-13.02 is submitted to a vote at a shareholder's meeting, a shareholder
who wishes to assert dissenters' rights (1) must deliver to the
corporation before the vote is taken written notice of his or her intent
to demand payment or his or her shares if the proposed action is
effectuated; and (2) must not vote his or her 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 or her shares under this article.

SEC. 10-2B-13.22. DISSENTERS' NOTICE.

(a) If proposed corporate action creating dissenters' rights under Section 10-
2B-13.02 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Section 10-2B-13.21.

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(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;

(2) Inform holders of 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 delivered; and

(5) Be accompanied by a copy of this article.

SEC. 10-2B-13.23. DUTY TO DEMAND PAYMENT.

(a) A shareholder sent a dissenters' notice described in Section 10-2B-13.22
must demand payment in accordance with the terms of the dissenters'
notice.

(b) The shareholder who demands payment retains all other rights of a
shareholder until those rights are canceled or modified by the taking of
the proposed corporate action.

(c) A shareholder who does not demand payment by the date set in the
dissenters' notice is not entitled to payment for his or her shares under
this article.

(d) A shareholder who demands payment under subsection (a) may not thereafter
withdraw that demand and accept the terms offered under the proposed
corporate action unless the corporation shall consent thereto.

SEC. 10-2B-13.24. SHARE RESTRICTIONS.

(a) Within 20 days after making a formal payment demand, each shareholder
demanding payment shall submit the certificate or certificates
representing his or her shares to the corporation for (1) notation thereon
by the corporation that such demand has been made and (2) return the
shareholder by the corporation.

(b) The failure to submit his or her shares for notation shall, at the option
of the corporation, terminate the shareholders' rights under this article
unless a court of competent jurisdiction, for good and sufficient cause,
shall otherwise direct.

(c) If shares represented by a certificate on which notation has been made
shall be transferred, each new certificate issued therefor shall bear
similar notation, together with the name of the original dissenting holder
of such shares.

(d) A transferee of such share shall acquire by such transfer no rights in the
corporation other than those which the original dissenting shareholder had
after making demand for payment of the fair value thereof.

SEC. 10-2B-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 Section 10-2B-13.23 the amount the corporation estimates to
be the fair value of his or her shares, plus accrued interest.

(b) The offer of payment must be accompanied by:

(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of the offer, an income
statement 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 Section
10-2B-13.28; and

(5) A copy of this article.

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(c) Each dissenter who agrees to accept the corporation's offer of payment in
full satisfaction of his or her demand must surrender to the corporation
the certificate or certificates representing his or her shares in
accordance with terms of the dissenters' notice. Upon receiving the
certificate or certificates, the corporation shall pay each dissenter the
fair value of his or her shares, plus accrued interest, as provided in
subsection (a). Upon receiving payment, a dissenting shareholder ceases to
have any interest in the shares.

SEC. 10-2B-13.26. FAILURE TO TAKE CORPORATE ACTION.

(a) If the corporation does not take the proposed action within 60 days after
the date set for demanding payment, the corporation shall release the
transfer restrictions imposed on shares.

(b) If, after releasing transfer restrictions, the corporation takes the
proposed action, it must send a new dissenters' notice under Section 10-
2B-13.22 and repeat the payment demand procedure.

SEC. 10-2B-13.27. RESERVED.

SEC. 10-2B-13.28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH OFFER OF PAYMENT.

(a) A dissenter may notify the corporation in writing of his or her own
estimate of the fair value of his or her shares and amount of interest
due, and demand payment of his or her estimate, or reject the
corporation's offer under Section 10-2B-13.25 and demand payment of the
fair value of his or her shares and interest due, if:

(1) The dissenter believes that the amount offered under Section 10-2B-
13.25 is less than the fair value of his or her shares or that the
interest due is incorrectly calculated;

(2) The corporation fails to make an offer under Section 10-2B-13.25 within
60 days after the date set for demanding payment; or

(3) The corporation, having failed to take the proposed action, does not
release the transfer restrictions imposed on shares within 60 days
after the date set for demanding payment.

(b) A dissenter waives his or her right to demand payment under this section
unless he or she notifies the corporation or his or her demand in writing
under subsection (a) within 30 days after the corporation offered payment
for his or her shares.

SEC. 10-2B-13.30. COURT ACTION.

(a) If a demand for payment under Section 10-2B-13.28 remains unsettled, the
corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the
proceeding within the 60 day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.

(b) The corporation shall commence the proceeding in the circuit court of the
county where the corporation's principal office (or, if none in this
state, its registered office) is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of
the domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.

(c) The corporation shall 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 under the Alabama Rules of Civil
Procedure.

(d) After service is completed, the corporation shall deposit with the clerk
of the court an amount sufficient to pay unsettled claims of all
dissenters party to the action in an amount per share equal to its prior
estimate of fair value, plus accrued interest, under Section 10-2B-13.25.

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(e) 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 dissenters are
entitled to the same discovery rights as parties in other civil
proceedings.

(f) Each dissenter made a party to the proceeding is entitled to judgment for
the amount the court finds to be the fair value of his or her shares, plus
accrued interest. If the court's determination as to the fair value of a
dissenter's shares, plus accrued interest, is higher than the amount
estimated by the corporation and deposited with the clerk of the court
pursuant to subsection (d), the corporation shall pay the excess to the
dissenting shareholder. If the court's determination as to fair value,
plus accrued interest, of a dissenter's shares is less than the amount
estimated by the corporation and deposited with the clerk of the court
pursuant to subsection (d), then the clerk shall return the balance of
funds deposited, less any costs under Section 10-2B-13.31, to the
corporation.

(g) Upon payment of the judgment, and surrender to the corporation of the
certificate or certificates representing the appraised shares, a
dissenting shareholder ceases to have any interest in the shares.

SEC. 10-2B-13.31. COURT COSTS AND COUNSEL FEES.

(a) The court in an appraisal proceeding commenced under Section 10-2B-13.30
shall determine all costs of the proceeding, including compensation and
expenses of appraisers appointed by the court. The court shall assess the
costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Section 10-
2B-13.28.

(b) The court may also assess the reasonable 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 Sections 10-2B-13.20 through 10-2B-13.28; or

(2) Against either the corporation or a dissenter, in favor of 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 chapter.

(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 benefitted.

SEC. 10-2B-13.32. STATUS OF SHARES AFTER PAYMENT.

Shares acquired by a corporation pursuant to payment of the agreed value
therefore or to payment of the judgment entered therefor, as in this chapter
provided, may be held and disposed of by such corporation as in the case of
other treasury shares, except that, in the case of a merger or share exchange,
they may be held and disposed of as the plan of merger or share exchange may
otherwise provide.

C-6
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Alabama Business Corporation Act (the "ABCA") gives Alabama corporations
broad powers to indemnify their present and former directors and officers
against expenses incurred in the defense of any lawsuit to which they are made
parties by reason of being or having been such directors or officers. In
general, the ABCA requires indemnification of directors and officers who
successfully defend actions and permits indemnification in most other
situations at the option of the corporation, if certain statutory standards
are met. The ABCA also authorizes Alabama corporations to buy directors' and
officers' liability insurance.

Frontier has in effect a directors' and officers' liability policy with The
Fidelity and Deposit Companies Insurance in the amount of $5,000,000. This
policy provides for indemnification of Frontier's officers and directors
against losses arising from claims asserted against them in their capacities
as officers and directors, subject to the limitations and conditions set forth
in the policy.

In general, the ABCA will allow indemnification if the director 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.
Frontier's Bylaws require a written finding of independent legal counsel, or
other disinterested persons, selected and compensated by Frontier's Board of
Directors, that such director or officer met the standards of conduct
discussed above before indemnification is allowed, unless the director or
officer has been successful in defending the proceeding. The ABCA provides
that, if the officer or director is successful in defending the proceeding,
indemnification is mandatory without reference to any standard of conduct. On
the other hand, indemnification is not permitted with respect to litigation
brought by or in the right of the corporation in which the officer or director
is adjudged liable to the corporation or in connection with any proceeding in
which the officer or director is adjudged liable on the basis that personal
benefit was improperly received by him. This restriction does not apply,
however, to the extent that the court in which the action is brought
determines that such officer or director is entitled to indemnity for
particular expenses.

Frontier's Articles of Incorporation, limit a director's liability to the
corporation or its shareholders for money damages to the full extent permitted
by the ABCA; provided that the director's liability will not be limited with
regard to: (i) any financial benefit received by a director to which he is not
entitled; (ii) an intentional infliction of harm on the corporation or the
shareholders; (iii) unlawful payments of dividends; (iv) an intentional
violation of criminal law; or (v) a breach of the director's duty of loyalty.

In addition, Frontier's Bylaws provide that Frontier employees or agents who
are not officers or directors may be indemnified, at the option of the Board
of Directors, to the extent authorized by the ABCA. The ABCA, generally,
provides that employees and agents may be indemnified to the same extent as
officers and directors.

II-1
<PAGE>

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
2 Merger agreement and Plan of Merger between Valley National Corporation
and First National Sylacauga Corporation dated February 24, 1998
(included as Appendix "A" to the Joint Proxy Statement/Prospectus)
3.1 Articles of Incorporation of Valley National Corporation
3.2 Bylaws of Valley National Corporation
4 Form of Common Stock Certificate
Opinion of Baker, Donelson, Bearman and Caldwell, P.C. Regarding
5 Legality
10.1 Form of Employment Agreement with Steven R. Townson
10.2 Form of Employment Agreement with Harry I. Brown, Jr.
21 Subsidiaries of the Registrant
23.1 Consent of Jackson Thornton & Co., P.C.
23.2 Consent of Schauer, Taylor, Cox & Edwards, P.C.
23.3 Consent of Brantley, Stephens & Boucher
23.4 Consent of Baker, Donelson, Bearman & Caldwell included in Exhibits 5
Power of Attorney (contained on signature page of this Registration
24 Statement)
27 Financial Data Schedules
Form of Proxy for Annual Meeting of Shareholders of Valley National
99.1 Corporation
Form of Proxy for Special Meeting of Shareholders of First National
99.2 Sylacauga Corporation
</TABLE>

(b) Financial Statement Schedules: Not applicable

ITEM 22. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.

(b) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (a) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes 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.

II-2

<PAGE>

(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 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
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant for 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 Act
and will be governed by the final adjudication of such issue.

(d) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus files as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective.

The undersigned Registrant hereby further undertakes that, for purposes of
determining liability under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration 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.

(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy Statement-
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.

(f) The undersigned 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.

II-3
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF LANETT,
STATE OF ALABAMA ON MAY 12, 1998.

Valley National Corporation

/s/ Steven R. Townson
By: _________________________________
STEVEN R. TOWNSON PRESIDENT AND
CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Steven R. Townson and Kerri C. Newton,
his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact
and agent, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:

NAME POSITION DATE

/s/ Steven R. Townson President, Chief May 12, 1998
- ------------------------------------- Executive Officer
STEVEN R. TOWNSON and Director

/s/ Kerri C. Newton Chief Financial May 12, 1998
- ------------------------------------- Officer
KERRI C. NEWTON

/s/ Charles M. Reeves Chairman and May 12, 1998
- ------------------------------------- Director
CHARLES M. REEVES

/s/ Timothy E. McLane Director May 12, 1998
- -------------------------------------
TIMOTHY E. MCLANE

/s/ Mac H. Langley Director May 12, 1998
- -------------------------------------
MAC H. LANGLEY

II-4

<PAGE>

EXHIBIT 3.1
-----------

ARTICLES OF INCORPORATION

VALLEY NATIONAL CORPORATION

TO THE HONORABLE JUDGE OF PROBATE

OF MARSHALL COUNTY, ALABAMA

THE UNDERSIGNED natural persons, having capacity to contract and acting as
the incorporator of a corporation pursuant to the provisions of the Code of
Alabama, adopt the following Articles of Incorporation for such corporation:

I. Name. The name of the Corporation is:
----

VALLEY NATIONAL CORPORATION

II. Duration. The duration of the Corporation is perpetual.
--------

III. Purpose. The Corporation is for profit, and the purpose or purposes for
-------
which the Corporation is organized are:

To operate as a bank holding company under the laws of the State of Alabama
and the United States and do every act and thing covered under the Alabama
Business Corporation Act permitted for corporations located in Alabama through
any form of contract, trust or other agreement, and in connection therewith, or
in aid thereof.

To purchase, subscribe for, or otherwise acquire and own, hold, use, sell,
assign, transfer, mortgage, pledge, exchange, create security interests in, or
otherwise dispose of real and personal property of every kind and description,
including good will, trade names, rights and franchises, and including shares of
stock, certificates or other interests in voting trust for shares of stock, or
any bonds, debentures, notes, evidences of indebtedness or other securities,
contracts or obligations of any banking or other corporation or corporations,
association or associations, organized under the laws of the State of Alabama or
the United States of America or any other state or district or country, nation
or government, and to pay therefor in whole or in part in cash or by exchanging
therefor, stocks, bonds or other evidences of indebtedness or securities of this
or any other corporation, and while the owner or holder of any such real or
personal property, stock, bonds, debentures, notes, evidences of indebtedness or
other securities, contracts, or obligations, to receive, collect and dispose of
the interest, dividends and income arising therefrom and to possess and exercise
in respect thereof,

1
<PAGE>

all of the rights, powers and privileges of ownership, including all voting
powers on any stocks, voting trust certificates, or other securities so owned;
and in connection with any acquisition, disposition, pledge or other act of
ownership with regard to any such stocks, securities or other property, whether
tangible or intangible, to assume or guarantee performance of any liabilities,
obligations or contracts of any persons, firms, corporations or associations;

To carry on any business whatsoever that this corporation may deem proper
or convenient in connection with any of the foregoing purposes or otherwise, or
that it may deem calculated, directly or indirectly, to improve the interests of
this Corporation, and to do all things specified in the Code of Alabama, and to
have and to exercise all powers conferred by the laws of the State of Alabama on
corporations formed under the laws pursuant to which and under which this
corporation is formed, as such laws are now in effect or may at any time
hereafter be amended and to do any and all things hereinabove set forth to the
same extent and as fully as natural persons might or could do, either alone or
in connection with other persons, firms, associations or corporations, and in
any part of the world.

The foregoing statement of purposes shall be construed as a statement of
both purposes and powers, shall be liberally construed in aid of the powers of
this Corporation, and the powers and purposes stated in each clause shall,
except where otherwise stated, be in nowise limited or restricted by any term or
provision of any other clause, and shall be regarded not only as independent
purposes, but the purposes and powers stated shall be construed distributively
as each object expressed, and the enumeration as to specific powers shall not be
construed as to limit in any manner the aforesaid general powers, but are in
furtherance of, and in addition to and not in limitation of said general powers.

IV. Stock. The maximum number of shares of Common Stock which the Corporation
-----
shall have the authority to issue is Ten Million (10,000,000) shares of Class A
Common Stock and Ten Million (10,000,000) shares of Class B Common Stock, both
having a par value of One Tenth of One Cent ($.001) per share. The maximum
number of Directors Qualifying Stock which the Corporation shall have the
authority to issue is Twenty-Five (25), having a par value of One Thousand
Dollars ($1,000.00) per share. The maximum number of shares of Preferred Stock
which the Corporation shall have the authority to issue is Ten Million
(10,000,000) shares, having a par value of One Tenth of One Cent ($.001) per
share. No holder of any share of stock shall be entitled as a matter of right
to subscribe for or purchase any part of any new or additional shares or
securities convertible into shares of any kind whatsoever, whether now or
hereafter authorized and whether issued for cash, property, services by way of
dividends or otherwise.

Each holder of Class A and B Common Stock shall have one (1) vote in
respect of each share of such stock held by him. No holder of the Directors
Qualifying Stock or Preferred Stock shall have any vote in respect of each share
of Directors Qualifying Stock or Preferred Stock held by him except as to
matters in respect to which he shall at the time be indefeasibly vested by
statute with such right.

2
<PAGE>

The holders of each class of stock shall be entitled to receive out of any
funds legally available for the purpose, when and as declared by the Board of
Directors or as established by further amendment to the Articles of
Incorporation, such dividends payable in cash, stock or otherwise as may be
determined by the Board of Directors and without regard to the payment of any
dividends to shareholders of any other classes of stock.

Only directors of the Corporation or its subsidiaries shall be eligible to
purchase Directors Qualifying Stock. The purchase price shall be $1,000.00 per
share. Upon the termination of the holders term as a director of the
Corporation or subsidiary, the Corporation shall redeem all such shares of
Directors Qualifying Stock held by such director for a price of $1,000.00 per
share.

The Board of Directors is authorized to issue Preferred Stock from time to
time in one or more classes or series and to provide for the designation,
preferences, limitations and relative rights (within the limits set forth in the
Alabama Business Corporation Act) of the shares of each class or series by the
adoption Articles of Amendment to the Articles of Incorporation of the
Corporation setting forth:

(i) the maximum number of shares in the class or series and the designation
of the class or series, which designation shall distinguish the shares
thereof from the shares of any other class or series;

(ii) whether shares of the class or series are redeemable or convertible
(A) at the option of the Corporation, a shareholder or another person or
upon the occurrence of a designated event, (B) for cash, indebtedness,
securities or other property and (C) in a designated amount or in an amount
determined in accordance with a designated formula or by reference to
extrinsic data or events;

(iii) any right of holders of shares of the class or series to
distributions, calculated in any manner, including the rate or rates of
dividends, and whether dividends shall be cumulative, non-cumulative or
partially cumulative;

(iv) the amount payable upon the shares of the class or series in the event
of voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation;

(v) any preference of the shares of the class or series over the shares of
any other class or series or class with respect to distributions, including
dividends, and with respect to distributions upon the liquidation,
dissolution or winding up of the affairs of the Corporation; and

(vi) any other preferences, limitations or specified rights (including a
right that no transaction of a specified nature shall be consummated while
any shares of such class or series remain outstanding except upon the
assent of all or a specified portion of such

3
<PAGE>

shares) now or hereafter permitted by the laws of the State of Alabama and
not inconsistent with the provisions of this Article.

All shares of a series of Preferred Stock shall have preferences,
limitations, and relative rights identical with those of other shares of the
same series and, except to the extent otherwise provided in the description of
the series, of those of other series of the same class. Before the issuance of
any shares of a class or series, Articles of Amendment establishing such class
or series shall be filed with and made effective by the Secretary of State of
Alabama, as required by law.

In the event of the voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, the holders of outstanding
Preferred Stock shall be entitled to be paid out of the net assets of the
Corporation before any distribution or payment shall be made to the holders of
the Common Stock or Directors Qualifying Stock but, after payment to the holders
of the outstanding Preferred Stock of the amount to which they are respectively
entitled, the balance of such assets, if any, shall be paid to the holders of
the Directors Qualifying Stock up to the par value of the shares held and then
to the holders of the outstanding Common Stock according to their respective
rights. For purposes of this Article, neither the consolidation of the
Corporation with nor the merger of the Corporation into any other corporation,
nor the sale, lease or other disposition of all or substantially all of the
Corporation's properties or assets shall, without further corporate action, be
deemed a liquidation, dissolution or winding up of the Corporation.

V. Registered Office. The mailing address of the initial registered office of
-----------------
the Corporation in the State of Alabama shall be 1011 North Lanier Avenue,
Lanett, Alabama 36863-0682. The location of the initial registered office is
1011 North Lanier Avenue, Lanett, Alabama 36863-0682.

VI. Registered Agent. The name of the initial registered agent, located at the
----------------
address of the initial registered office, is Steven R. Townson.

VII. Board of Directors. The property, affairs and business of the Corporation
------------------
shall be managed by a Board of Directors. The number of directors shall be as
specified in the By-laws of the Corporation. The initial Board of Directors
shall consist of five (5) members. The name and address of each person who
shall serve as a member of the initial Board until the first annual meeting of
shareholders or until a successor or successors are elected and have qualified
is as follows:

Steven R. Townson, 1011 North Lanier Avenue, Lanett, Alabama 36863-0682
Timothy E. McLane, 3240 Georgia Highway, West Point, Georgia 31833
Mac H. Langley, 1808 Morgan Cantey Drive, Lanett, Alabama 36863
William A. Price, 1703 Malco Drive, West Point, Georgia 31833
Charles M. Reeves, 108 Francolyn Terrace, West Point, Georgia 31833

4
<PAGE>

In furtherance and not in limitation of the powers conferred by the laws of
the State of Alabama the Board of Directors is expressly authorized and
empowered:

A. To make, alter, amend and repeal the By-laws, subject to the power of
the stockholders to alter or repeal the By-laws made by the Board of Directors;

B. To authorize and issue, without stockholder consent, obligations of the
Corporation, secured and unsecured, under such terms and conditions as the Board
in its sole discretion may determine, and to pledge or mortgage as security
therefor any real or personal property of the Corporation, including after
acquired property;

C. To determine whether any and, if so, what part of the earned surplus of
the Corporation shall be paid in dividends to the stockholders, and to direct
and determine other use and disposition of any such earned surplus;

D. To establish bonus, profit sharing, stock option, or other types of
incentive compensation plans for the employees, including officers and directors
of the Corporation; to fix the amount of profits to be shared or distributed;
and to determine the persons who participate in any such plans and the amount of
their respective participations;

E. To designate by resolution or resolutions passed by a majority of the
whole Board one or more committees, each consisting of two (2) or more
directors, which, to the extent permitted by law and authorized by the
resolution or the Bylaws, shall have and may exercise the powers of the Board;

F. To provide for the reasonable compensation of its own members in the
By-laws and to fix the terms and conditions upon which such compensation will be
paid;

G. In addition to the powers and authority hereinbefore or by statute
expressly conferred upon it, the Board of Directors may exercise all such powers
and do all such acts and things as may be exercised or done by the Corporation,
subject nevertheless to the provisions of the laws of the State of Alabama,
these Articles of Incorporation, and the By-laws of the Corporation.

VIII. Liability. Directors shall not have personal liability to the
---------
corporation or the corporation=s shareholders for money damages to the full
extent as permitted by Division E. Indemnification of the Alabama Business
---------------
Corporation Act. This limitation shall not eliminate or limit the liability
for: (A) the amount of a financial benefit received by a director to which he or
she is not entitled; (B) an intentional infliction of harm on the corporation or
the shareholders; (C) a violation of Section 10-2B-8.33; (D) an intentional
violation of criminal law; or (E) a breach of the director's duty of loyalty to
the corporation or its shareholders.

5
<PAGE>

XIX. Incorporators. The name and address of each person who is an incorporator
-------------
of the Corporation is as follows:

Steven J. Eisen, Esq., 1700 Nashville City Center, 511 Union Street,
Nashville, Tennessee 37219

X. Powers. The Corporation shall have and exercise all powers necessary or
------
convenient to effect any and all of the purposes for which the Corporation is
organized and shall likewise have the powers provided by the Code of Alabama or
as the same shall hereafter be amended.

XI. Amendment. The provisions of these Articles of Incorporation may be
---------
amended, altered, or repealed from time to time to the extent, and in the manner
prescribed by the laws of the State of Alabama and by the By-laws. All rights
herein conferred on the directors, officers, and stockholders are granted
subject to this reservation.

DATED THIS 14TH DAY OF FEBRUARY, 1997.

/s/ Steven J. Eisen
-------------------------
Steven J. Eisen

This Instrument Prepared By:

BAKER, DONELSON, BEARMAN & CALDWELL,
A Professional Corporation
1700 Nashville City Center
511 Union Street
P. O. Box 190613
Nashville, Tennessee 37219
(615) 726-5600

<PAGE>

EXHIBIT 3.2
-----------

BY-LAWS
OF
VALLEY NATIONAL CORPORATION

ARTICLE 1. - OFFICES
--------------------

The principal office of the Corporation in the State of Alabama shall be
located in the City of Lanett, County of Chambers. The Corporation may have
such other offices, either within or without the State of incorporation as the
Board of Directors may designate or as the business of the Corporation may from
time to time require.

ARTICLE 2. - STOCKHOLDERS
-------------------------

(a) ANNUAL MEETING.

The annual meeting of the stockholders shall be set annually by the Board
of Directors each year, beginning with the year 1998, for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday, such meeting shall be held on the next succeeding business day.

(b) SPECIAL MEETINGS.

Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the Chairman of the Board,
the President, or by the Board of Directors, and shall be called by the
President at the request of the holders of not less than ten percent (10%) of
all the outstanding shares of the Corporation entitled to vote at the meeting
and pursuant to further conditions described in the Alabama Business
Corporation Act.

The Board of Directors may designate any place, either within or without
the State unless otherwise prescribed by statute, as the place of meeting for
any annual meeting or for any special meeting called by the Board of Directors.
A waiver of notice signed by all stockholders entitled to vote at a meeting may
designate any place, either within or without the State unless otherwise
prescribed by statute, as the place for holding such meeting. If no designation
is made, or if a special meeting be otherwise called, the place of meeting
shall be the registered office of the Corporation.

(d) NOTICE OF MEETING.

Written or printed notice stating the place, date and hour of the meeting,
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called and the person or persons

1
<PAGE>

calling the meeting, shall be delivered either personally or by mail by or at
the direction of the Chairman of the Board, President, Secretary, officer,
person or persons calling the meeting, to each stockholder entitled to vote at
the meeting. Such notice shall be delivered not less than ten (10) nor more than
sixty (60) days before the date of the meeting, and shall be deemed to be
delivered when deposited in the United States Mail addressed to the shareholder
at his address as it appears on the stock transfer or membership books of the
Corporation, with postage thereon pre-paid. A certificate of the Secretary or
other person giving the notice, or of a transfer agent of the Corporation, that
the notice required by this section has been given, in the absence of fraud,
shall be prima facie evidence of the facts therein stated.

(e) WAIVER OF NOTICE.

A stockholder, either before or after a stockholders' meeting, may waive
notice of the meeting; and his waiver shall be deemed the equivalent of giving
notice. Attendance at a stockholders' meeting, either in person or by proxy,
of a person entitled to notice, shall constitute a waiver of notice of the
meeting unless he attends for the express purpose of objecting to the
transaction of business on the ground that the meeting was not lawfully called
or convened.

(f) CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.

For the purpose of determining stockholders entitled to notice of or
entitled to vote at any meeting of stockholders or any adjournment thereof, or
stockholders entitled to receive payment of any dividend, or in order to make a
determination of stockholders for any other proper purpose, the Board of
Directors of the Corporation may provide that the stock transfer books shall be
closed for a stated period but not to exceed, in any case, seventy (70) days.
If the stock transfer books shall be closed for the purpose of determining
stockholders entitled to notice of or to vote at a meeting of stockholders,
such books shall be closed for at least ten days immediately preceding such
meeting. In lieu of closing the stock transfer books, the Board may fix in
advance a date as the record date for any such determination of stockholders,
such date in any case to be not more than seventy (70) days and, in the case of
a meeting of stockholders, not less than ten (10) days prior to the date on
which the particular action requiring such determination of stockholders is to
be taken. If the stock transfer books are not closed and no record date is
fixed for the determination of stockholders entitled to notice of or to vote at
a meeting of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
stockholders. When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof except where the
determination has been made through the closing of the stock transfer books and
the stated period of closing has expired.

2
<PAGE>

(g) VOTING LISTS.

The officer or agent having charge of the stock transfer books for shares
of the Corporation shall make a complete list of the stockholders entitled to
vote at such meeting, or any adjournment thereof, arranged in alphabetical
order, with the address of and the number of shares held by each, which list,
for a period beginning two (2) business days after notice of the meeting is
given for which the list was prepared and continuing through the meeting, shall
be kept on file at the principal office of the Corporation and shall be subject
to inspection by any stockholder making written request at any time during usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any stockholder
during the whole time of the meeting. The original stock transfer book shall be
prima facie evidence as to who are the stockholders entitled to examine such
list or transfer books or to vote at the meeting of stockholders.

(h) QUORUM AND ADJOURNMENTS.

At any meeting of stockholders a majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than the required
number of the outstanding shares are represented at a meeting, a majority of the
shares so represented may adjourn the meeting from time to time. Notice of the
adjourned meeting or of the business to be transacted there, other than by
announcement at the meeting at which the adjournment is taken, shall not be
necessary. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. The stockholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.

(i) PROXIES.

At all meetings of stockholders, a stockholder may vote by proxy executed
in writing by the stockholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the Corporation before or at the time
of the meeting. A proxy shall not be valid after eleven (11) months from the
date of its execution unless a longer period is expressly stated in it.

(j) VOTING.

Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these by-laws shall be
entitled to one (1) vote, in person or by proxy, for each share of stock
entitled to vote standing in his name on the books of the Corporation. Upon
the demand of any stockholder, the vote for directors and upon any question
before the meeting shall be by ballot. All elections for directors shall be
decided by plurality vote; all other questions shall be decided by affirmative
vote of the majority of shares represented at the meeting and entitled to vote
on the subject matter except as otherwise provided by the Articles of
Incorporation, the Constitution of Alabama, or by the laws of this State.

3
<PAGE>

(k) ORDER OF BUSINESS.

The order of business at all meetings of the stockholders, shall be as
follows:

(i) Proof of notice of meeting or waiver of notice.

(ii) Reading of minutes of preceding meeting.

(iii) Reports of Officers.

(iv) Election of Directors.

(v) Unfinished Business.

(vi) New Business.

(l) INFORMAL ACTION BY STOCKHOLDERS.

Unless otherwise provided by law, any action required to be taken at a
meeting of the stockholders, or any other action which may be taken at a
meeting of the stockholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
stockholders entitled to vote with respect to the subject matter thereof. Such
consent shall have the same effect as a unanimous vote of the stockholders.

ARTICLE 3. - BOARD OF DIRECTORS
-------------------------------

(a) GENERAL POWERS.

The business and affairs of the Corporation shall be managed by its Board
of Directors. The directors shall in all cases act as a Board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the Corporation, as they may deem proper, not inconsistent with
these By-laws, the Articles of Incorporation, and the laws of this State.

(b) NUMBER, TENURE AND QUALIFICATIONS.

The number of directors of the Corporation shall be at least one and not
more than twenty-five (25) as fixed by the directors. Each director shall hold
office until the next annual meeting of stockholders and until his successor
shall have been elected and qualified. Directors shall be natural persons, but
need not be residents of this State or stockholders of the Corporation.

4
<PAGE>

A regular meeting of the directors shall be held without other notice than
this by-law immediately after, and at the same place as, the annual meeting of
stockholders. The directors may provide, by resolution, the time and place for
the holding of additional regular meetings without other notice than such
resolution.

(d) SPECIAL MEETINGS.

Special meetings of the directors may be called by or at the request of
the Chairman of the Board, the President or any two directors. The person or
persons authorized to call special meetings of the directors may fix the place
for holding any special meeting of the directors called by them.

(e) NOTICE.

Notice of any special meeting shall be given at least two (2) days
previously thereto by written notice delivered personally, or by electronic
communication or mailed to each director at his business address. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail so addressed, with postage thereon prepaid. If notice be given by
electronic communication, such notice shall be deemed to be delivered when the
electronic communication is transmitted.

(f) WAIVER OF NOTICE.

A director may waive in writing notice of a special meeting of the Board
either before or after a meeting; and his waiver shall be deemed the equivalent
of giving notice. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.

(g) QUORUM.

At any meeting of the directors a majority of the directors in office
shall constitute a quorum for the transaction of business. If a quorum is
present, the acts of a majority of the directors in attendance shall be the
acts of the Board. If a quorum is present when the meeting is convened, the
directors present may continue to do business, taking action by a vote of a
majority of a quorum as fixed above, until adjournment, notwithstanding the
withdrawal of enough directors to leave less than a quorum.

(h) ADJOURNMENT.

A meeting of the Board of Directors may be adjourned. Notice of the
adjourned meeting or of the business to be transacted there, other than by
announcement at the meeting at which the adjournment is to be taken, shall not
be necessary. At an adjourned meeting at which a quorum is

5
<PAGE>

present, any business may be transacted which could have been transacted at the
meeting originally called.

(i) NEWLY CREATED DIRECTORSHIPS AND VACANCIES.

Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the Board for any reason except the
removal of directors without cause may be filled by a vote of a majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled
by vote of the Stockholders. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office until the next
annual meeting of stockholders or at a special meeting called for that purpose.

(j) REMOVAL OF DIRECTORS.

Any or all of the directors may be removed, with or without cause, by vote
of the holders of a majority of the shares entitled to vote at a special
meeting expressly called for that purpose. At such meeting the stockholders
may then proceed to elect a successor or successors for the unexpired term.

(k) RESIGNATION.

A director may resign at any time by giving written notice to the Board,
the president or the secretary of the Corporation. Unless otherwise specified
in the notice, the resignation shall take effect upon receipt thereof by the
Board or such officer, and the acceptance of the resignation shall not be
necessary to make it effective.

(l) COMPENSATION.

Directors shall not receive a salary for their services as director; but
by resolution of the Board, a fixed sum and expenses for each regular or
special meeting of the Board may be authorized. Nothing herein contained shall
be construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of standing and special
committees of the Board may also be compensated for their services and expenses
for attending committee meetings as the Board may, by resolution, direct.

(m) PRESUMPTION OF ASSENT.

A director of the Corporation who is present at a meeting of the directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the secretary of the meeting before the adjournment
thereof or shall forward

6
<PAGE>

such dissent by registered mail to the secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.

(n) EXECUTIVE AND OTHER COMMITTEES.

The Board, by resolution, may designate from among its members an
executive committee and other committees, each consisting of three or more
directors. The designation of any such committee and the delegation thereto of
authority shall not operate to relieve the Board, or any director, of any
responsibility imposed by law. Each such committee shall serve at the pleasure
of the Board.

(o) INFORMAL ACTION.

Any action required by law to be taken at a meeting of the directors of a
Corporation, or any action which may be taken at a meeting of the directors or
of a committee, may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the directors, or all of
the members of the committee. Such consent shall have the same effect as a
unanimous vote.

ARTICLE 4. - OFFICERS
---------------------

(a) NUMBER.

The only required officer of the Corporation shall be a President, who
shall be elected by the directors. Such other officers and assistant officers
as may be deemed necessary may be elected or appointed by the directors. Any
officer may be, but is not required to be, a director of the Corporation.

(b) ELECTION AND TERM OF OFFICE.

The officers of the Corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided.

Any officer or agent elected or appointed by the directors may be removed
by the directors whenever in their judgment the best interests of the
Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election
or appointment of one officer or agent shall not of itself create contract
rights.

7
<PAGE>

(d) VACANCIES.

A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term.

(e) CHAIRMAN OF THE BOARD (IF ANY).

The Chairman of the Board shall supervise the carrying out of the policies
adopted or approved by the Board. He shall have general executive powers, as
well as the specific power conferred by these By-laws. He shall also have and
may exercise such further powers and duties as from time to time may be
conferred upon, or assigned to him by the Board of Directors.

(f) VICE CHAIRMAN OF THE BOARD (IF ANY).

In the absence of the Chairman of the Board or in the event of his death,
inability or refusal to act, the Vice Chairman of the Board designated by the
Board shall perform the duties of the Chairman of the Board, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the Chairman of the Board. Such Vice Chairman of the Board shall perform
such other duties as from time to time may be assigned to him by the Chairman
of the Board or by the directors.

(g) PRESIDENT.

The president shall be the principal executive officer of the Corporation
and, subject to the control of the directors, shall in general supervise and
control all of the business and affairs of the Corporation. He shall, in the
absence of the Chairman of the Board, preside at all meetings of the
stockholders and of the directors. He may sign, with the secretary or any other
proper officer of the Corporation thereunto authorized by the director,
certificates for shares of the Corporation, any deeds, mortgages, bonds,
contracts, or other instruments which the directors have authorized to be
executed, except in cases where the signing and execution thereof shall be
expressly delegated by the directors or by these by-laws to some other officer
or agent of the Corporation, or shall be required by law to be otherwise signed
or executed; and in general shall perform all duties incident to the office of
president and such other duties as may be prescribed by the directors from time
to time.

(h) VICE-PRESIDENT (IF ANY).

In the absence of the president or in event of his death, inability or
refusal to act, the vice president designated by the Board shall perform the
duties of the president, and when so acting, shall have all the powers of and
be subject to all the restrictions upon the president. Such vice-president or
other vice presidents shall perform such other duties as from time to time may
be assigned to him by the president or by the directors.

8
<PAGE>

(i) SECRETARY (IF ANY).

The secretary shall keep the minutes of the stockholders' and of the
directors' meetings in one or more books provided for that purpose, see that
all notices are duly given in accordance with the provisions of these by-laws
or as required, be custodian of the corporate records and of the seal of the
Corporation and keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have general
charge of the stock transfer books for the Corporation and in general perform
all duties incident to the office of secretary and such other duties as from
time to time may be assigned to him by the president or by the directors.

(j) TREASURER (IF ANY).

If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties
as the directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the Corporation; receive and give
receipts for moneys due and payable to the Corporation from any source
whatsoever, and deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.

(k) SALARIES.

The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the Corporation. The salaries
of other agents or employees of the Corporation may be fixed by the Board of
Directors or by an officer or committee to whom that function has been
delegated by the Board.

(l) DELEGATION OF DUTIES.

Whenever an officer is absent or whenever for any reason the Board of
Directors may deem it desirable, the Board may delegate the powers and duties
of an officer to any other officer or officers or to any director or directors.

ARTICLE 5. - CONTRACTS, LOANS, CHECKS AND DEPOSITS
--------------------------------------------------

(a) CONTRACTS.

The directors may authorize any officer or officers, agent or agents, to
enter into any contract or execute and deliver any instrument in the name of
and on behalf of the Corporation, and such authority may be general or confined
to specific instances.

9
<PAGE>

(b) LOANS.

No loans shall be contracted on behalf of the Corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution
of the directors. Such authority may be general or confined to specific
instances.

All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the Corporation, shall be
signed by such officer or officers, agent or agents of the Corporation and in
such manner as shall from time to time be determined by resolution of the
directors.

(d) DEPOSITS.

All funds of the Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation in such banks, trust
companies or other depositories as the directors may select.

ARTICLE 6. - CERTIFICATES FOR SHARES AND THEIR TRANSFER
-------------------------------------------------------

(a) CERTIFICATES FOR SHARES.

Certificates representing shares of the Corporation shall be in such form
as shall be determined by the directors. Such certificates shall be signed by
the president and by the secretary or by such other officers authorized by law
and by the directors. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the stockholders, the
number of shares and date of issue, shall be entered on the stock transfer books
of the Corporation. All certificates surrendered to the Corporation for transfer
shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the Corporation
as the directors may prescribe.

(b) TRANSFERS OF SHARES.

(1) Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the Corporation which shall be kept at its principal
office.

(2) The Corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof, and, accordingly, shall not be bound to
recognize any equitable or other claim

10
<PAGE>

to or interest in such share on the part of any other person whether or not it
shall have express or other notice thereof, except as expressly provided by the
laws of this State.

ARTICLE 7. - FISCAL YEAR
------------------------

The fiscal year of the Corporation shall begin on the first day of January
in each year.

ARTICLE 8. - DIVIDENDS
----------------------

The directors may from time to time declare, and the Corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions allowed by law.

ARTICLE 9. - SEAL
-----------------

The directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the Corporation, the state of
incorporation, year of incorporation and the words, "Corporate Seal," PROVIDED,
HOWEVER, that the validity of any corporate document shall not be affected by
the absence of the Corporate Seal.

ARTICLE 10 - INDEMNIFICATION
----------------------------

To the extent not inconsistent with the laws of the State of Alabama as in
effect from time to time, every person (and the heirs, executors and
administrators of such person) who is a director or officer of the Corporation
shall in accordance with the provisions of this ARTICLE X be indemnified by the
Corporation against any and all liability and reasonable expense that may be
incurred by him in connection with or resulting from any claim, action, suit or
proceeding; provided, however, that such person (or his heirs, executors, or
--------- --------
administrators) is wholly successful with respect thereto or such director or
officer acted in good faith, in what he reasonably believed to be the best
interest of the Corporation and, in addition, with respect to any criminal
action or proceeding, had no reasonable cause to believe that his conduct was
unlawful. The termination of any claim, action, suit or proceeding, by
judgment, settlement (whether with or without court approval) or conviction or
upon a plea of guilty or of nolo contendere, or its equivalent, shall not
create a presumption that a director or officer did not meet the standards of
conduct set forth in this ARTICLE X.

For the purposes of this ARTICLE X, the following terms shall have the
meanings specified:

a. "claim, action, suit or proceeding" shall include any claim, action,
suit or proceeding (whether brought by or in the right of the Corporation
or any other Corporation or otherwise), civil, criminal, administrative or
investigative, or the threat thereof, in which any person (or the heirs,
executors or administrators of such person) who is or was a director of the
Corporation may become involved as a party or otherwise;

11
<PAGE>

(1) by reason of his being or having been a director or officer of
the Corporation or of any subsidiary Corporation of the Corporation,
or of any other Corporation which he served as such at the request of
the Corporation or of which the Corporation directly or indirectly is
a stockholder or creditor, or in which, or in the stocks, bonds,
securities, or other obligations of which it is in any way
interested; or

(2) by reason of his acting or having acted in any capacity in a
partnership, association, trust or other organization or entity in
which he served as such at the request of the Corporation or of which
the Corporation directly or indirectly is an owner or creditor, or in
which, or in the shares, bonds, securities or other obligations of
which, it is in any way interested;

b. "liability" and "expense" shall include, but shall not be limited to,
counsel fees of, disbursements and amounts of judgments, fines or
penalties against, and amounts paid in settlement by or on behalf of, the
person in question, but shall not in any event include any liability on
account of profits realized by him in the purchase or sale of securities
of the Corporation or any expense incurred in connection with such
liability; and

c. "wholly successful," with respect to any action, suit or proceeding
against the person in question, shall include termination thereof without
any finding of liability or guilt against such person and, with respect to
any claim or threat of an action, suit or proceeding against the person in
question, shall include the expiration of a reasonable period of time
after the making thereof without the institution of the same if no payment
has been made to cause cancellation of such claim or withdrawal of such
threat.

Every person (and the heirs, executors, and administrators of such person)
referred to in the first paragraph of ARTICLE X who has been wholly successful
with respect to any claim, action, suit or proceeding shall be entitled to
indemnification. Every other person claiming indemnification under the first
paragraph of this ARTICLE X (and the heirs, executors and administrators of such
person) shall be entitled to indemnification if independent legal counsel, other
than regular counsel of the Corporation or other disinterested person or
persons, in either case selected and compensated by the Board, whether or not a
disinterested quorum exists (such counsel or person or persons being hereinafter
called a referee), shall deliver to the Corporation his written finding that
such director or officer has met the standards of conduct set forth in the first
paragraph of this ARTICLE X. The person claiming indemnification shall at the
request of the referee appear before him and answer questions which the referee
deems relevant and shall be given ample opportunity to present to the referee
evidence upon which he relies for indemnification. The Corporation shall at the
request of the referee, make available to him facts, opinions or other evidence
in any way relevant for his finding which are within the possession or control
of the Corporation.

Expenses incurred with respect to any claim, action, suit or proceeding
may be advanced by the Corporation (by action of the Board whether or not a
disinterested quorum exists) prior to the

12
<PAGE>

final disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount unless he becomes entitled to indemnification
under this ARTICLE X.

The rights of indemnification provided in this ARTICLE X shall be in
addition to any rights to which any such director or officer may otherwise be
entitled by contract or as a matter of law. Persons who are not directors or
owners of the Corporation, but are or were employees of the Corporation or any
subsidiary (or the heirs, executors and administrators of such person) may be
indemnified to the extent authorized at any time or from time to time by the
Board. Notwithstanding the provisions of this ARTICLE X, the Board may, at any
time or from time to time, provide and maintain insurance on behalf of
directors, officers or other persons, whether or not Corporation would have the
power to indemnify him against such liability under the provisions of Alabama
law, to the full extent permitted by the provisions of the laws of the State of
Alabama at the time in effect, with respect to past transactions.

ARTICLE 11. - VOTING SHARES HELD IN OTHER CORPORATIONS
------------------------------------------------------

In the absence of other arrangements by the Board of Directors, shares of
stock issued by any other Corporation and owned or controlled by this
Corporation, may be voted at any stockholders' meeting of the other Corporation
by the President of this Corporation or, if he is not present at the meeting, by
the Vice President of this Corporation; and in the event neither the President
or the Vice President is to be present at a meeting, the shares may be voted by
such person as the President and Secretary of the Corporation shall by duly
executed proxy designate to represent the Corporation at the meeting.

ARTICLE 12. - CORPORATE TRANSACTIONS IN WHICH
---------------------------------------------
DIRECTORS OR OFFICERS HAVE AN INTEREST
--------------------------------------

(a) Except as otherwise provided by law with reference to provisional
directors and loans to directors, no transaction in which a director or officer
has a personal or an adverse interest shall be void or voidable solely for this
reason or solely because he is present at or participates in the meeting or his
vote is counted if the contract or transaction is fair and reasonable to the
Corporation and if either:

(1) If the material facts as to his interest and as to the
transaction are disclosed or are known to the Board or committee, and the
fact of such interest is noted in the minutes, and the Board or committee
authorizes, approves or ratifies the transaction by a vote sufficient for
such purpose, without counting the vote of the interested director or
directors; or

(2) If the material facts as to his interest and as to the
transaction are disclosed and are known to the stockholders and the
transaction is specifically approved by vote of the stockholders without
counting the votes of any shares owned or controlled by the interested
director or officer.

13
<PAGE>

(b) Except as otherwise provided by law with reference to provisional
directors, common or interested directors may not be counted in determining the
presence of a quorum at a meeting of the Board or of a committee which
authorizes, approves or ratifies a transaction.

ARTICLE 13. - AMENDMENTS
------------------------

The Board of Directors by a majority of the entire Board shall have power
to make, adopt, alter, amend and repeal from time to time, the By-laws of this
Corporation; provided, however, the Board of Directors shall have no power to
alter, amend, or repeal any by-law establishing what constitutes a change
quorum for meetings of stockholders or of the Board of Directors, or to change
any provision of the By-laws with respect to the removal of Directors or the
filling of vacancies in the Board resulting from the removal by the
stockholders.

14
<PAGE>

AMENDMENT TO THE BY-LAWS
OF
VALLEY NATIONAL CORPORATION

Article 3, Section (g), hereby is amended by adding the following
sentence:

The Chairman of the Board shall be counted in determining the
existence of a quorum but shall only vote on matters where otherwise
there is a tie vote.

This amendment was adopted by the Board of Directors on the 15th day of
April, 1998.

/s/ Kerri C. Newton
-------------------
Secretary

<PAGE>

EXHIBIT 4
INCORPORATED UNDER THE LAWS OF THE STATE OF ALABAMA
- --------------------------------------------------------------------------------

VALLEY NATIONAL CORPORATION

SEE REVERSE FOR
CERTAIN DEFINITIONS

10,000,000 SHARES PAR VALUE $.001 EACH
CLASS A COMMON STOCK

This is to Certify that ________________________________________ is the owner of

________________________________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A COMMON STOCK OF
VALLEY NATIONAL CORPORATION

transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this Certificate properly
endorsed. Witness, the seal of the Corporation and the signatures of its duly
authorized officers.

Dated

Secretary President

<PAGE>

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed
as though they were written out in full according to applicable laws or regulations:

<S> <C>
TEN COM- as tenants in common UNIF GIFT MIN ACT-________________ Custodian__________________
TEN ENT- as tenants by the entireties (Cust) (Minor)
JT TEN- as joint tennants with
right of survivorship and under Uniform Gifts to Minors
not as tenants in common
Act____________________________________________________
(State)

Additional abbreviations may also be used though not in the above list.

For value received, ____________________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------------------

__________________________________________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE)

__________________________________________________________________________________________________________________

___________________________________________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and appoint

_________________________________________________________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with full power of substitution in
the premises.

Dated _________________________________ 19____

In presence of _________________________________________________________________________________

____________________________

NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

This security has not been registered with the Securities and Exchange Commission or any other federal or state regulatory agency.
This security may not be offered for sale, sold, transferred, assigned, pledged, or otherwise hypothecated in the absence of an
effective registration statement with respect to the security under any applicable federal or state securities law or an opinion of
counsel that the proposed transaction is exempt under the applicable federal and state securities laws or is otherwise in compliance
with such laws.
</TABLE>

<PAGE>

EXHIBIT 5
---------

[LETTERHEAD OF BAKER, DONELSON, BEARMAN & CALDWELL]

May 12, 1998

Valley National Corporation
1011 North Lanier Avenue
Lanett, Alabama 36863-0682

Attention: Steven R. Townson, President and Chief Executive Officer

RE: Registration Statement on Form S-4
1,312,935 Shares of Common Stock

Dear Gentlemen:

We are counsel to Valley National Corporation, an Alabama corporation (the
"Company"), and have acted as such in the preparation and filing of its
Registration Statement on Form S-4 dated May 12, 1998 with the Securities and
Exchange Commission (the "SEC"), pursuant to the requirements of the Securities
Act of 1933, as amended, and the General Rules and Regulations of the SEC
promulgated thereunder for the registration of 1,312,935 shares of Common Stock
of the Company (the "Common Stock").

In connection with the following opinion, we have examined and have relied
upon such documents, records, certificates, statements and instruments as we
have deemed necessary and appropriate to render the opinion set forth herein.

Based on the foregoing, it is our opinion that, the Company's shares of
Common Stock, when and if issued and exchanged in the manner prescribed by the
Merger Agreement and Plan of Merger between Valley National Corporation and
First National Sylacauga Corporation dated February 24, 1998, and the
Registration Statement, will be legally and validly issued, fully paid and
nonassessable.

The undersigned hereby consents to filing this opinion as EXHIBIT 5 to the
Registration Statement and using its name in the Registration Statement in the
section of the Joint Proxy Statement/Prospectus entitled "Validity of Common
Stock."

Sincerely,

/s/ Baker, Donelson, Bearman & Caldwell
---------------------------------------

<PAGE>

EXHIBIT 10.1
------------

EMPLOYMENT AGREEMENT

THIS AGREEMENT, made effective as of ________________, 1998, by and
between FRONTIER NATIONAL CORPORATION ("Frontier") and STEVEN R. TOWNSON (the
"Executive").

WHEREAS, the Executive has heretofore served as President and Chief
Executive Officer of Valley National Bank (the "Bank") and is experienced in
all phases of the business of the Bank;

WHEREAS, Frontier wishes to be assured of the continued services of the
Executive, and the Executive is willing to serve in the employ of the Bank and
Frontier on a full-time basis; and

NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:

1. Employment. Frontier agrees to employ Executive as Vice Chairman of
----------
the Board, President, and Chief Operating Officer and to cause Bank to continue
the Executive in its employ as President and Chief Executive Officer, and the
Executive agrees to such employment, for the period stated in paragraph 3
hereof and upon the other terms and conditions herein provided.

2. Responsibilities. The Executive agrees to perform such services not
----------------
inconsistent with his position as shall from time to time be assigned to him by
the Board of Directors of Frontier or the Bank.

3. Term and Duties.
---------------

(a) Term of Employment. The initial term of employment under this
------------------
Agreement shall be for the period commencing _______________, 1998, and on the
fifth anniversary of such date. After each year under this Agreement, the
Executive's period of employment shall be extended for one (1) year in addition
to the original term unless 120 days prior to such year period, Frontier gives
notice to the Executive that the term will not be so extended. Any earlier
termination of employment by Frontier, which is subject to terms described
further below, shall require a vote of 3/4ths of the Board of Directors of
Frontier.

(b) Duties. During the period of his employment hereunder and except
------
for illnesses, reasonable vacation periods, and reasonable leaves of absence,
the Executive shall devote his business time, attention, skill, and efforts to
the faithful performance of his duties hereunder; provided, however, the
Executive may, from time to time, serve, or continue to serve, on the boards of
directors, of, and hold any other offices or positions in, companies or

<PAGE>

organizations, which do not present any material conflict of interest with
Frontier or its subsidiaries, or unfavorably affect the performance of the
Executive's duties pursuant to this Agreement, or will not violate any
applicable statute or regulation.

4. Compensation and Reimbursement of Expenses.
------------------------------------------

(a) Compensation. Frontier agrees, or causes the Bank to pay the
------------
Executive during the term of this Agreement a salary at the rate of $118,750
per annum; provided, that the rate of such salary shall be reviewed by the
Board of Frontier not less often than annually, but in no event shall such
salary be less than 5% of the salary paid to Harry I. Brown, Jr. Such rate of
salary, or increased rate of salary, if any, as the case may be, may be further
increased (but not decreased) from time to time in such amounts as the Board of
Frontier in its discretion may decide. Such salary shall be payable in
accordance with the customary payroll practices of Frontier, but in no event
less frequently than monthly.

(b) Bonuses. The Executive shall be entitled to participate in an
-------
equitable manner in any incentive bonus plan or program maintained by Frontier
for senior executives of its subsidiaries. No other compensation provided for
in this Agreement shall be deemed a substitute for the Executive's right to
participate in such incentive bonus plan or program.

(c) Director Fees. To the extent Executive serves as a director of
-------------
Frontier or Bank, he shall also receive the board or committee fees payable to
all board or committee members.

(d) Reimbursement of Expenses. The Bank shall pay or reimburse the
-------------------------
Executive for all reasonable travel and other expenses incurred by the
Executive in the performance of his obligations under this Agreement. Frontier
further agrees, or causes Bank, to provide the Executive with the full-time use
of an automobile of a make and model selected by the Executive, not more than
two years' old and commensurate with his position during his period of
employment (or alternatively, a monthly car allowance of $600) and to reimburse
the Executive for all initiation fees and dues associated with membership in
professional, social, civic and service clubs which the Executive joins or has
joined and which membership, in whole or part, furthers the interests of or
promotes the interest of Frontier or assists the Executive in business
relationships on behalf of Frontier.

5. Participation in Benefit Plans.
------------------------------

(a) Except as otherwise provided in this Agreement, the payments
provided in paragraphs 4, 7, and 9 hereof are in addition to any benefits to
which the Executive may be, or may become, entitled under any general group
hospitalization, health, dental care, or sick leave plan, life or other
insurance or death benefit plan, or workmen's compensation, disability or
social security, travel or accident insurance, or executive contingent
compensation plan, including, without limitation, capital accumulation and
termination pay programs, restricted stock or stock purchase plan, stock option
plan, retirement income, tax-qualified retirement plan, supplemental pension
plan (excess benefit plan), or other present or future group employee benefit
plan or program of the Bank or Frontier for which general employees of the Bank

2
<PAGE>

or Frontier are or shall become eligible, and the Executive shall be eligible
to receive during the period of his employment under this Agreement, and during
any subsequent period for which he shall be entitled to receive payments from
Frontier under paragraph 7 or paragraph 10, all fringe benefits and emoluments
for which executive employees of the Bank and general employees of Frontier are
eligible under every such plan or program to the extent permissible under the
general terms and provisions of such plans or programs and in accordance with
the provisions thereof.

(b) Following his termination of employment (for any reason) with the
Bank and Frontier at any time after attaining age 62, the Executive shall be
entitled to receive all benefits generally provided to retirees by the Bank or
Frontier, including, but not limited to, retiree medical coverage, if any, for
the Executive and his spouse under the Frontier Group Medical Plan on the same
terms as other Frontier retirees but without regard to any "length of service"
requirement to establish eligibility for such retiree medical coverage.

6. Vacation and Sick Leave. At such reasonable times as the Board of
-----------------------
Directors of Frontier shall in its discretion permit, the Executive shall be
entitled, without loss of pay, to absent himself voluntarily from the
performance of his employment under this Agreement, all such voluntary absences
to count as vacation time; provided that:

(a) The Executive shall be entitled to annual vacation in accordance
with the policies as periodically established by the Board of Directors of
Frontier for senior management of Frontier or the Bank, which shall in no event
be less than four weeks per annum.

(b) The Executive shall not be entitled to receive any additional
compensation from Frontier or the Bank on account of his failure to take a
vacation; nor shall he be entitled to accumulate unused vacation from one
fiscal year to the next except to the extent authorized by the Board of
Directors of Frontier.

(c) In addition to the aforesaid paid vacations, the Executive shall
be entitled, without loss of pay, to absent himself voluntarily from the
performance of his employment with Frontier or the Bank for such additional
periods of time and for such valid and legitimate reasons as the Board of
Directors of Frontier in its discretion may determine. Further, the Board may
grant to the Executive a leave or leaves of absence with or without pay at such
time or times and upon such terms and conditions as the Board in its discretion
may determine.

(d) In addition, the Executive shall be entitled to an annual sick
leave as established by the Board of Directors of Frontier or the Bank but in
no event in an amount less than that provided for pursuant to the policy
currently in effect as of the date of this Agreement. In the event any sick
leave time shall not have been used during any year, such leave shall accrue to
subsequent years only to the extent authorized by the Board.

3
<PAGE>

(e) Upon termination of employment, the Executive shall be entitled
to receive additional compensation from Frontier or the Bank for unused sick
leave or vacation time only to the extent provided under the general policies
of Frontier or the Bank.

7. Benefits Payable Upon Disability.
--------------------------------

(a) Primary Disability Benefits. In the event of the Disability (as
---------------------------
hereinafter defined) of the Executive, Frontier shall continue, or cause Bank,
to pay the Executive the monthly compensation provided in paragraph 4 hereof
during the period of his disability provided, however, that in the event the
Executive is disabled for a continuous period exceeding eighteen (18) calendar
months, Frontier may, at its election, terminate the Agreement, in which event
the Executive shall be entitled to receive the benefits described in paragraph
7(b).

As used in this Agreement, the term "disability" shall mean the
complete inability of the Executive to perform his duties under this Agreement
as determined by an independent physician selected with the approval of
Frontier and the Executive.

(b) Secondary Disability Benefits. In the event that Frontier elects
-----------------------------
to terminate this Agreement pursuant to Section 7(a), then in lieu of any other
benefits the Executive would have been entitled to hereunder, Frontier shall
pay, or cause Bank to pay, to the Executive a monthly disability benefit equal
to seventy (70) percent of his monthly salary at the time he became disabled.
Payment of such disability benefit shall commence on the last day of the month
following the month for which the final payment under paragraph 7(a) was made
and cease with the earlier of (i) the payment for the month in which the
Executive dies or (ii) the payment for the month preceding the month in which
the Executive attains age 65.

(c) Disability Benefit Offset. Any amounts payable under paragraph
-------------------------
7(a) or 7(b) shall be reduced by any amounts paid to the Executive under any
other disability program maintained by Frontier in which the Executive
participates; however, such payments shall not be reduced by the amount of any
payments pursuant to social security and workmen's compensation.

(d) Service During Disability. During the period the Executive is
-------------------------
entitled to receive payments under paragraphs 7(a) and (b), the Executive
shall, to the extent that he is physically and mentally able to do so, furnish
information and assistance to the Bank and Frontier.

8. Grant of Stock Options. Upon the effective date of this Agreement,
----------------------
the Executive shall be granted 50,000 options to purchase Frontier Class A
Common Stock (at $10.00 per share which is deemed the fair market value on such
date) under the Frontier Nonqualified Stock Plan ("Stock Plan") or any similar
plan then maintained by Frontier. Such options shall be issued in accordance
with the terms of the Stock Plan and shall be exercisable over a ten-year
period as provided under the Stock Plan, but in any event, such options shall
be fully exercisable no later than the date of the Executive's retirement.
Following the Executive's retirement, such options shall remain exercisable for
a period equal to the greater of (a) ninety (90) days from the date of the

4
<PAGE>

Executive's retirement or (b) the period specified by the Stock Option
Committee of the Board of Directors of Frontier.

9. Payments to the Executive Upon Termination of Employment.
--------------------------------------------------------

(a) Event of Termination. Upon the occurrence of an Event of
--------------------
Termination (as hereinafter defined) during the period of the Executive's
employment under this Agreement, the provisions of this paragraph 9 shall
apply. As used in this Agreement, an "Event of Termination" shall mean the
termination of the Executive's employment hereunder for any reason other than
"cause" or retirement at or after the normal retirement age under any qualified
retirement plan(s) maintained by Frontier or termination pursuant to Paragraph
7. A termination for "cause" shall include termination because of the
Executive's personal dishonesty, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, or material breach or any provision of this
Agreement. In the event of termination for cause the Executive shall have no
right to receive compensation or other benefits for any period after such
termination; provided, however, that, the Executive shall be entitled to
receive all vested benefits as of the date of such termination.

(b) Event of Termination. Upon the occurrence of an Event of
--------------------
Termination, Frontier shall pay, or cause Bank to pay, to the Executive
monthly, or in the event of his subsequent death, to his designated beneficiary
or beneficiaries, or to his estate, as the case may be, as severance pay or
liquidated damages, or both, during the period below described a sum equal to
the highest monthly rate of salary paid to the Executive at any time under this
Agreement. Such payments shall commence on the last day of the month following
the date of said Event of Termination and shall continue until the date this
Agreement would have expired but for said occurrence, with such occurrence
being viewed as a determination by Frontier not to extend the Agreement as
provided for in paragraph 3.

(c) Event of Termination After Change of Control. If, after a
--------------------------------------------
"Change of Control" (as hereinafter defined) of Frontier or the Bank, any of
the parties hereto (including Executive), or their successors or assigns, shall
terminate the employment of the Executive during the period of employment under
this Agreement for any reason other than "cause," as defined in paragraph 9(a),
retirement at or after the normal retirement age under any tax-qualified
retirement plan(s) maintained by Frontier, termination pursuant to paragraph 7,
or nonrenewal, or otherwise change the present capacity or circumstances in
which the Executive is employed as set forth in paragraphs 1 or 2 of this
Agreement or cause a reduction in the Executive's responsibilities or authority
or compensation or other benefits provided under this Agreement without the
Executive's written consent, then the Executive, or his beneficiaries,
dependents and estate, as the case may be, shall be entitled to the following:

(i) The Executive shall receive, in addition to any amount payable
under Section 9(b), a sum equal to the total amount of the present value of
2.99 times the average annual compensation payable under this Agreement and

5
<PAGE>

includible by the Executive in gross income for the most recent five taxable
years ending before the date on which the ownership or control of Frontier or
the Bank changed. Such amount shall be payable to the Executive over the
three (3) years following the occurrence of an Event of Termination under this
paragraph 9(c) in the same manner that his salary was previously paid.

(ii) During the period in which Executive is being paid under
paragraph 9(c), the Executive, his dependents, beneficiaries and estate shall
continue to be covered under all employee benefit plans of the Bank or
Frontier, including, without limitation, any Frontier tax-qualified retirement
plans, as if the Executive was still employed during such period under this
Agreement.

(iii) If and to the extent that benefits or service credit for
benefits provided by paragraph 9(c)(ii) shall not be payable or provided under
any such plans to the Executive, his dependents, beneficiaries and estate, by
reason of his no longer being an employee of Frontier or the Bank, as a result
of termination of employment, Frontier shall itself pay or provide for payment
of such benefits and service credit for benefits to the Executive, his
dependents, beneficiaries and estate. Any such payment relating to retirement
shall commence on a date selected by the Executive which must be a date on
which payments under any Frontier tax-qualified retirement plan(s) may
commence.

(iv) The Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise nor shall any amounts received from other employment or otherwise by
the Executive offset in any manner the obligations of Frontier hereunder.

(d) Change of Control. Paragraph 9(c) shall become operative upon
-----------------
the occurrence of a Change of Control of Frontier or the Bank. For purposes of
this Agreement, "Change of Control" means the sale of substantially all of the
assets of Frontier or the Bank, or the acquisition, whether directly,
indirectly, beneficially (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "Act")), or of record, of securities of
Frontier or the Bank representing twenty-five percent (25%) or more in the
aggregate voting power of Frontier's or the Bank's then-outstanding Common
Stock by any "person" (within the meaning of Sections 13(d) and 14(d) of the
Act), including any corporation or group of associated persons acting in
concert, other than (i) Frontier or its subsidiaries and/or (ii) any tax-
qualified employee stock ownership plan of Frontier or its subsidiaries,
including a trust established pursuant to any such plan; provided, that a
Change of Control will not result from (A) a transfer of voting securities of
Frontier or the Bank by a person who is the beneficial owner, directly or
indirectly, of twenty-five percent (25%) or more of the voting securities of
Frontier or the Bank (a "25 Percent Owner") to (i) a member of such 25 Percent
Owner's lifetime or by will or the laws of descent and distribution; (ii) any
trust as to which the 25 Percent Owner or a member (or members) of his
immediate family (within the meaning of Rule 16a-1(e) of the Act) is the
beneficiary; (iii) any trust as to which the 25 Percent Owner is the settlor
with sole power to revoke; (iv) any entity over which such 25 Percent Owner has
the power, directly or in directly, to direct or cause the direction of the
management and policies of the entity, whether through the ownership of voting
securities, by contract or otherwise; or (v) any charitable trust, foundation

6
<PAGE>

or corporation under Section 501(c)(3) of the Code which is funded by the 25
Percent Owner; or (B) the acquisition of voting securities of Frontier or the
Bank, by either (i) a person who was a 25 Percent Owner on the effective date
of the Agreement or (ii) a person, trust or other entity described in the
foregoing clauses (A)(i)-(v) of this subsection; or (C) the spin-off or other
distribution by Frontier to its shareholders of the capital stock or assets of
Frontier or the Bank.

(e) Suspension and Special Regulatory Rules.
---------------------------------------

If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of Frontier's or the Bank's affairs by a notice
served under section 8(e)(3) or section (g)(1) of the Federal Deposit Insurance
Act ("FDI Act"), the Bank's obligations under this Agreement shall be suspended
as of the date of service of such notice, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank shall (i)
pay the Executive all or part of the compensation withheld while its contract
obligations were suspended and (ii) reinstate in whole or in part any of its
obligations which were suspended.

If the Executive is removed and/or permanently prohibited from
participating in the conduct of Frontier's or the Bank's affairs by an order
issued under section 8(e)(4) or section (g)(1) of the FDI Act, all obligations
Frontier under this Agreement shall terminate as of the effective date of the
order; however, no vested rights of the Executive shall be affected by such
termination.

If Frontier or the Bank is in default (as defined in section 3(x)(1)
of the FDI Act), all obligations under this Agreement shall terminate as of the
date of default; however, no vested rights of the Executive shall be affected
by such termination.

All obligations under this Agreement shall be terminated, except to
the extent that it may be determined that continuation of this Agreement is
necessary for the continued operation of the Bank, (1) by the Federal Reserve
System ("Fed") at the time the Federal Deposit Insurance Corporation ("FDIC")
enters into an agreement to provide assistance to or on behalf of the Bank
under the authority contained in Section 13(c) of the FDI Act; or (2) the Fed
at any time the Fed approves a supervisory merger to resolve problems related
to the operation of Frontier or when Frontier is determined by the Fed to be in
an unsafe or unsound condition. No vested rights of the Executive shall be
affected by such action.

(f) Termination of Employment of, or by, the Executive. The Board of
--------------------------------------------------
Directors of Frontier may terminate the employment of the Executive at any
time; in the event of such termination, the provisions of this paragraph 9
shall fully apply. The Executive may terminate his service under this
Agreement at any time upon three (3) months written notice to Frontier. In the
event of the Executive's voluntary termination of employment under this
paragraph 9(f), the provisions of paragraph 9(a)-(e) shall not apply and the
Executive shall be entitled to receive his salary, bonus, and other employee
benefits through his date of termination and such termination shall be without
prejudice to any other benefits as to which the Executive is vested. For a
period of two (2) years after voluntary termination as stated in this

7
<PAGE>

paragraph, Executive will not, directly or indirectly, individually or in
combination with any other person, (i) enter into the employ of or render any
service to or act in concert with any person, partnership, corporation, or
other entity engaged in any business similar to that of Frontier or its
subsidiaries wholly or partly within a twenty-five (25) mile radius of any
office of Frontier or any of its subsidiaries; (ii) become interested in any of
the businesses described in (i) as a proprietor, partner, shareholder,
director, officer, principal, agent, employee, consultant, or in any other
relationship or capacity (nothing contained in this sentence shall prohibit
Executive from maintaining a stock interest in any company listed on the New
York or American stock exchanges or whose shares are quoted on NASDAQ; or (iii)
entice or induce any employee of Frontier or its subsidiaries to leave the
employ of Frontier or its subsidiaries or to work with Executive or with any
person or entity with whom Executive is or becomes associated.

10. Source of Payments; Frontier Guarantee. Except as to any payments
--------------------------------------
made pursuant to paragraph 9(c), all payments to the Executive under the terms
of any provision of this Agreement shall be paid in cash from the general funds
of Frontier or the Bank, and no special or separate fund shall be established
and no other segregation of assets shall be made to assure payment. The
Executive shall have no right, title, or interest whatever in or to any
investments which Frontier may make to aid the Bank in meeting its obligations
hereunder. Any obligation of the Bank to make any payments or provide any
benefits under this Agreement shall, in all events and without limitation, be
guaranteed by Frontier and its successors and assigns and such guarantee shall
inure to the benefit of the Executive and his successors and assigns.

11. Confidential Information. The Executive shall not, to the detriment
------------------------
of Frontier or the Bank, knowingly disclose or reveal to any authorized person
any confidential information relating to Frontier or the Bank, their
subsidiaries or affiliates, or to any of the businesses operated by them, and
the Executive confirms that such information constitutes the exclusive property
of Frontier. The Executive shall not otherwise knowingly act or conduct
himself (i) to the material detriment of Frontier, or (ii) in a manner which is
inimical or contrary to the interests thereof.

12. Federal Income Tax Withholding. The Bank or Frontier may withhold
------------------------------
from any benefits payable under this Agreement all federal, state, city or
other taxes as shall be required pursuant to any law or governmental regulation
or ruling.

13. Effect of Prior Agreements. This Agreement contains the entire
--------------------------
understanding between the parties hereto and supersedes any prior employment
agreement between the Bank or any predecessor of the Bank and the Executive.

14. Payment of Legal Expenses. The Bank shall pay all legal fees and
-------------------------
expenses (as such fees and expenses are incurred) which the Executive may incur
as a result of any action ultimately found in favor of the Executive contesting
the validity or enforceability of this Agreement, and the Executive shall be
entitled to receive interest thereon for the period of any delay in payment
from the date such payment was due at the rate determined by adding two hundred
basis points to the six month Treasury Bill rate.

8
<PAGE>

15. Consolidation, Merger, or Sale of Assets. Nothing in this Agreement
----------------------------------------
shall preclude Frontier from (i) consolidating or merging into or with, or
causing the Bank from consolidating or merging into or with or (ii)
transferring all or substantially all of its assets or the assets of the Bank
to, another corporation which assumes this Agreement and all obligations and
undertakings of the Frontier and the Bank hereunder.

16. General Provisions.
------------------

(a) Nonassignability. Neither this Agreement nor any right or
----------------
interest hereunder shall be assignable by the Executive, his beneficiaries, or
legal representatives without the Employers' prior written consent; provided,
however, that nothing in this paragraph 16(a) shall preclude (i) the Executive
from designating a beneficiary to receive any benefits payable hereunder upon
his death, or (ii) the Executors, administrators, or other legal
representatives of the Executive or his estate from assigning any rights
hereunder to the person or persons entitled thereto.

(b) No Attachment. Except as required by law, no right to receive
-------------
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process of assignment by operation
of law, and any attempt, voluntary or involuntary, to effect any such action
shall be null, void and of no effect.

(c) Binding Agreement. This Agreement shall be binding upon, and
-----------------
inure to the benefit of, the Executive, the Bank, and Frontier, and their
respective permitted successors and assigns.

(d) Acknowledgment. Executive acknowledges that a similar employment
--------------
agreement in being executed with Steven R. Townson. Executive acknowledges
that Mr. Townson's salary shall be 5% less than Executive's and all other
benefits shall be the same.

17. Modification and Waiver.
-----------------------

(a) Amendment of Agreement. This Agreement may not be modified or
----------------------
amended except by an instrument in writing signed by the parties hereto.

(b) Waiver. No term or condition of this Agreement shall be deemed
------
to have been waived, nor shall there be an estoppel against the enforcement of
any provision of this Agreement, except by written instrument of the party
charged with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than the specifically waived.

(c) Severability. If, for any reason, any provision of this
------------
Agreement is held invalid, such invalidity shall not affect any other provision

9
<PAGE>

of this Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect. If any
provision of this Agreement shall be held invalid in part, such invalidity
shall in no way affect the rest of such provision, together with all other
provisions of this Agreement, shall to the full extent consistent with law
continue in full force and effect.

18. Headings. The headings of paragraph herein are included solely for
--------
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

19. Applicable Law. This Agreement has been executed and delivered in
--------------
the State of Alabama, and its validity, interpretation, performance, and
enforcement shall be governed the laws of said State, except to the extent
Federal law is governing. Any payment to the Executive hereunder shall be
subject to and conditioned upon compliance with 12 U.S.C. (S)1828(k) and any
regulations promulgated thereunder.

20. Arbitration. In the event the executive has a dispute regarding the
-----------
operations of Frontier with other executives with similar employment
contracts, the parties shall in good faith attempt to resolve any such dispute
promptly by negotiation between the executives and members of the Board of
Directors. Any such executive may give the other executive written notice of
any dispute not resolved in the normal course of business. Within fifteen (15)
days after delivery of the notice, the receiving executive shall submit to the
other executive a written response. The notice and the response shall include
(a) a statement of each executive's position and a summary of the arguments
supporting that position, and (b) the name of one board member who will
represent that executive and of any other person who will accompany the
executive. Within thirty (30) days after delivery of the disputing executive's
notice, the executives and their representatives shall meet at a mutually
acceptable time and place, and thereafter as often as they reasonably deem
necessary, to attempt to resolve the dispute. All reasonable requests for
information made by one executive to the other will be honored. If the matter
has not been resolved within sixty (60) days of the disputing executive's
notice, or if the executives fail to meet within thirty (30) days, either
executive may request that the full Board of Directors meet to resolve the
dispute.

IN WITNESS WHEREOF, Frontier has caused this Agreement to be executed by
its officer thereunto duly authorized, and the Executive has signed this
Agreement, all as of the day and year first above written.

FRONTIER NATIONAL CORPORATION

By: ___________________________________

_______________________________________
Steven R. Townson

<PAGE>

EXHIBIT 10.2
------------

EMPLOYMENT AGREEMENT

THIS AGREEMENT, made effective as of ________________, 1998, by and
between FRONTIER NATIONAL CORPORATION ("Frontier") and HARRY I. BROWN, JR. (the
"Executive").

WHEREAS, the Executive has heretofore served as President and Chief
Operating Officer of First National-America's Bank (the "Bank") and is
experienced in all phases of the business of the Bank;

WHEREAS, Frontier wishes to be assured of the continued services of the
Executive, and the Executive is willing to serve in the employ of the Bank and
Frontier on a full-time basis; and

NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:

1. Employment. Frontier agrees to employ Executive as Chairman of the
----------
Board and Chief Executive Officer and to cause Bank to continue the Executive
in its employ as President and Chief Executive Officer, and the Executive
agrees to such employment, for the period stated in paragraph 3 hereof and upon
the other terms and conditions herein provided.

3. Term and Duties.
---------------

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<PAGE>

Frontier or its subsidiaries, or unfavorably affect the performance of the
Executive's duties pursuant to this Agreement, or will not violate any
applicable statute or regulation.

4. Compensation and Reimbursement of Expenses.
------------------------------------------

(a) Compensation. Frontier agrees, or causes the Bank to pay the
------------
Executive during the term of this Agreement a salary at the rate of $125,000
per annum; provided, that the rate of such salary shall be reviewed by the
Board of Frontier not less often than annually. Such rate of salary, or
increased rate of salary, if any, as the case may be, may be further increased
(but not decreased) from time to time in such amounts as the Board of Frontier
in its discretion may decide. Such salary shall be payable in accordance with
the customary payroll practices of Frontier, but in no event less frequently
than monthly.

(c) Director Fees. To the extent Executive serves as a director of
-------------
Frontier or Bank, he shall also receive the board or committee fees payable to
all board or committee members.

5. Participation in Benefit Plans.
------------------------------

2
<PAGE>

3
<PAGE>

7. Benefits Payable Upon Disability.
--------------------------------

(b) As used in this Agreement, the term "disability" shall mean the
complete inability of the Executive to perform his duties under this Agreement
as determined by an independent physician selected with the approval of
Frontier and the Executive.

(c) Secondary Disability Benefits. In the event that Frontier elects
-----------------------------
to terminate this Agreement pursuant to Section 7(a), then in lieu of any other
benefits the Executive would have been entitled to hereunder, Frontier shall
pay, or cause Bank to pay, to the Executive a monthly disability benefit equal
to seventy (70) percent of his monthly salary at the time he became disabled.
Payment of such disability benefit shall commence on the last day of the month
following the month for which the final payment under paragraph 7(a) was made
and cease with the earlier of (i) the payment for the month in which the
Executive dies or (ii) the payment for the month preceding the month in which
the Executive attains age 65.

(d) Disability Benefit Offset. Any amounts payable under paragraph
-------------------------
7(a) or 7(b) shall be reduced by any amounts paid to the Executive under any
other disability program maintained by Frontier in which the Executive
participates; however, such payments shall not be reduced by the amount of any
payments pursuant to social security and workmen's compensation.

(e) Service During Disability. During the period the Executive is
-------------------------
entitled to receive payments under paragraphs 7(a) and (b), the Executive
shall, to the extent that he is physically and mentally able to do so, furnish
information and assistance to the Bank and Frontier.

4
<PAGE>

Executive's retirement or (b) the period specified by the Stock Option
Committee of the Board of Directors of Frontier.

9. Payments to the Executive Upon Termination of Employment.
--------------------------------------------------------

The Executive shall receive, in addition to any amount payable under
Section 9(b), a sum equal to the total amount of the present value of 2.99
times the average annual compensation payable under this Agreement and

5
<PAGE>

During the period in which Executive is being paid under paragraph
9(c), the Executive, his dependents, beneficiaries and estate shall continue to
be covered under all employee benefit plans of the Bank or Frontier, including,
without limitation, any Frontier tax-qualified retirement plans, as if the
Executive was still employed during such period under this Agreement.

If and to the extent that benefits or service credit for benefits
provided by paragraph 9(c)(ii) shall not be payable or provided under any such
plans to the Executive, his dependents, beneficiaries and estate, by reason of
his no longer being an employee of Frontier or the Bank, as a result of
termination of employment, Frontier shall itself pay or provide for payment of
such benefits and service credit for benefits to the Executive, his dependents,
beneficiaries and estate. Any such payment relating to retirement shall
commence on a date selected by the Executive which must be a date on which
payments under any Frontier tax-qualified retirement plan(s) may commence.

The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise
nor shall any amounts received from other employment or otherwise by the
Executive offset in any manner the obligations of Frontier hereunder.

6
<PAGE>

Percent Owner; or (B) the acquisition of voting securities of Frontier or the
Bank, by either (i) a person who was a 25 Percent Owner on the effective date
of the Agreement or (ii) a person, trust or other entity described in the
foregoing clauses (A)(i)-(v) of this subsection; or (C) the spin-off or other
distribution by Frontier to its shareholders of the capital stock or assets of
Frontier or the Bank.

(e) Suspension and Special Regulatory Rules.
---------------------------------------

7
<PAGE>

8
<PAGE>

16. General Provisions.
------------------

17. Modification and Waiver.
-----------------------

(a) Amendment of Agreement. This Agreement may not be modified or
----------------------
amended except by an instrument in writing signed by the parties hereto.

(c) Severability. If, for any reason, any provision of this
------------
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not held so invalid, and each such other provision shall to

9
<PAGE>

the full extent consistent with law continue in full force and effect. If any
provision of this Agreement shall be held invalid in part, such invalidity
shall in no way affect the rest of such provision, together with all other
provisions of this Agreement, shall to the full extent consistent with law
continue in full force and effect.

20. Arbitration. In the event the Executive has a dispute regarding the
-----------
operations of Frontier with other executives with similar employment
contracts, the parties shall in good faith attempt to resolve any such dispute
promptly by negotiation between the executives and members of the Board of
Directors. Any such executive may give the other executive written notice of
any dispute not resolved in the normal course of business. Within fifteen (15)
days after delivery of the notice, the receiving executive shall submit to the
other executive a written response. The notice and the response shall include
(a) a statement of each executive's position and a summary of the arguments
supporting that position, and (b) the name of one board member who will
represent that executive and of any other person who will accompany the
executive. Within thirty (30) days after delivery of the disputing executive's
notice, the executives and their representatives shall meet at a mutually
acceptable time and place, and thereafter as often as they reasonably deem
necessary, to attempt to resolve the dispute. All reasonable requests for
information made by one executive to the other will be honored. If the matter
has not been resolved within sixty (60) days of the disputing executive's
notice, or if the executives fail to meet within thirty (30) days, either
executive may request that the full Board of Directors meet to resolve the
dispute.

FRONTIER NATIONAL CORPORATION

By: ___________________________________

_______________________________________
Harry I. Brown, Jr.

<PAGE>

EXHIBIT 21
----------

Valley National Corporation (Alabama)

Valley National Bank (National Banking Association)

<PAGE>

EXHIBIT 23.1
------------

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We hereby consent to the inclusion in the Registration Statement on Form
S-4 of Valley National Corporation of our report dated March 6, 1998, on the
consolidated statements of financial condition of First National Sylacauga
Corporation and Subsidiary as of December 31, 1997 and 1996, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. We
also consent to the reference to us under the heading "Experts" in the Joint
Proxy Statement/Prospectus.

/s/ Jackson Thornton & Co., P.C.
Jackson Thornton & Co., P.C.

Montgomery, Alabama
May 11, 1998

<PAGE>

EXHIBIT 23.2
------------

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We hereby consent to the inclusion in the Registration Statement on Form
S-4 of Valley National Corporation, of our report dated February 19, 1998, on
the consolidated statements of financial condition of Valley National
Corporation and Subsidiary as of December 31, 1997 and 1996, and the related
statements of income, shareholders' equity, and cash flows for the years then
ended. We also consent to the reference to us under the heading "Experts" in
the Joint Proxy Statement/Prospectus.

/s/ Schauer Taylor Cox & Edwards, P.C.
Schauer, Taylor, Cox & Edwards, P.C.

Birmingham, Alabama
May 11, 1998

<PAGE>

EXHIBIT 23.3
------------

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We hereby consent to the inclusion in the Registration Statement on Form
S-4 of Valley National Corporation, of our report dated January 30, 1996, on
the consolidated statements of financial condition of Valley National Bank and
Subsidiary as of December 31, 1995 and 1994, and the related statements of
income, shareholders' equity, and cash flows for the years then ended. We also
consent to the reference to us under the heading "Experts" in the Joint Proxy
Statement/Prospectus.

/s/ Brantley, Stephens & Boucher
Brantley, Stephens & Boucher

Opelika, Alabama
May 11, 1998

<PAGE>

<ARTICLE> 9
<CIK> 0001059420
<NAME> VALLEY NATIONAL CORPORATION
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 MAR-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 MAR-31-1998
<CASH> 3,234 10,052
<INT-BEARING-DEPOSITS> 263 51,552
<FED-FUNDS-SOLD> 553 99
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 26,694 23,225
<INVESTMENTS-CARRYING> 0 0
<INVESTMENTS-MARKET> 0 0
<LOANS> 42,173 43,281
<ALLOWANCE> 416 435
<TOTAL-ASSETS> 75,510 80,821
<DEPOSITS> 61,015 60,869
<SHORT-TERM> 510 1,180
<LIABILITIES-OTHER> 977 571
<LONG-TERM> 5,229 10,229
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 7,777 7,841
<TOTAL-LIABILITIES-AND-EQUITY> 75,510 80,821
<INTEREST-LOAN> 3,541 975
<INTEREST-INVEST> 1,606 363
<INTEREST-OTHER> 114 24
<INTEREST-TOTAL> 5,261 1,366
<INTEREST-DEPOSIT> 2,179 558
<INTEREST-EXPENSE> 2,374 641
<INTEREST-INCOME-NET> 2,887 725
<LOAN-LOSSES> 90 30
<SECURITIES-GAINS> 1 1
<EXPENSE-OTHER> 2,303 567
<INCOME-PRETAX> 1,096 290
<INCOME-PRE-EXTRAORDINARY> 1,096 290
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 802 203
<EPS-PRIMARY> 1.00 .27
<EPS-DILUTED> 1.00 .25
<YIELD-ACTUAL> 4.35 1.04
<LOANS-NON> 115 0
<LOANS-PAST> 30 41
<LOANS-TROUBLED> 1,526 1,518
<LOANS-PROBLEM> 1,126 1,193
<ALLOWANCE-OPEN> 391 416
<CHARGE-OFFS> 102 19
<RECOVERIES> 37 8
<ALLOWANCE-CLOSE> 416 435
<ALLOWANCE-DOMESTIC> 416 435
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0

</TABLE>

<PAGE>

EXHIBIT 99.1
------------

PROXY
VALLEY NATIONAL CORPORATION
1011 North Lanier Avenue
LANETT, ALABAMA 36863
(334) 644-3171

ANNUAL MEETING OF SHAREHOLDERS

July 9, 1998

PLEASE SIGN AND RETURN PROMPTLY IN THE SELF-ADDRESSED ENVELOPE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Charles M. Reeves or Mac H. Langley as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all of the shares of Common
Stock of VALLEY NATIONAL CORPORATION, which the undersigned is entitled to vote
at the annual meeting of shareholders to be held at 1011 North Lanier Avenue,
Lanett, Alabama 336863 on Thursday, July 9, 1998, at 10:00 a.m. Eastern
Daylight Savings Time, or any adjournment thereof.

(1) To consider and vote upon the approval and adoption of a Merger Agreement
and Plan of Merger dated as of February 24, 1998 (the "Merger Agreement")
among First National Sylacauga Corporation ("FNSC") and Valley National
Corporation, a copy of which is set forth as Appendix A to the Joint Proxy
Statement/Prospectus delivered to shareholders. The Merger Agreement
provides for, among other things, the proposed merger of FNSC with and
into Valley National Corporation (the "Merger"), with Valley National
Corporation to be the surviving corporation of the Merger with a resulting
name change to Frontier National Corporation:

[ ] FOR [ ] AGAINST [ ] ABSTAIN

(2) To elect a Board of Directors to serve for the ensuing year and until
successors have been elected and qualified:

[ ] FOR [ ] AGAINST [ ] ABSTAIN

(3) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.

This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder(s). If no direction is made, this proxy will be
voted for proposals 1 and 2.

PLEASE SIGN AND RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS IS THE ONLY DOCUMENT YOU NEED TO RETURN AT THIS TIME.

Date: _________________________ _________________________________________
Signature of Shareholder(s)

<PAGE>

EXHIBIT 99.2
------------
PROXY

FIRST NATIONAL SYLACAUGA CORPORATION
43 North Broadway
SYLACAUGA, ALABAMA 35150
(205) 249-0341

SPECIAL MEETING OF SHAREHOLDERS

July 9, 1998

PLEASE SIGN AND RETURN PROMPTLY IN THE SELF-ADDRESSED ENVELOPE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Harry I. Brown, Jr. or Harry I. Brown, Sr.
as proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all of the
shares of Common Stock of FIRST NATIONAL SYLACAUGA CORPORATION ("FNSC"), which
the undersigned is entitled to vote at the special meeting of shareholders to
be held at 43 North Broadway, Sylacauga, Alabama 35150 on Thursday, July 9,
1998, at 2:00 p.m. Central Daylight Savings Time, or any adjournment thereof.

(1) To consider and vote upon the approval and adoption of a Merger Agreement
and Plan of Merger dated as of February 24, 1998 (the "Merger Agreement")
among FNSC and Valley National Corporation, a copy of which is set forth
as Appendix A to the Joint Proxy Statement/Prospectus delivered to
shareholders. The Merger Agreement provides for, among other things, the
merger of FNSC with and into Valley National Corporation (the "Merger"),
with Valley National Corporation to be the surviving corporation of the
Merger with a resulting name change to Frontier National Corporation:

[ ] FOR [ ] AGAINST [ ] ABSTAIN

(2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.

This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder(s). If no direction is made, this proxy will be
voted for proposal 1.

PLEASE SIGN AND RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS IS THE ONLY DOCUMENT YOU NEED TO RETURN
AT THIS TIME.

Date: _________________________ ______________________________________
Signature of Shareholder(s)