COMPASS BANCSHARES INC, DEF 14A, 1996-03-13

COMPASS BANCSHARES INC
DEF 14A, 1996-03-13
NATIONAL COMMERCIAL BANKS

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12

COMPASS BANCSHARES, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.

[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

Notes:
<PAGE>

[LOGO OF COMPASS BANKSHARES, INC.]

To the Shareholders of
Compass Bancshares, Inc.
March 6, 1996

In connection with the annual meeting of shareholders of Compass Bancshares,
Inc., to be held on April 9, 1996, at Compass Bank--Houston's River Oaks
Office in Houston, Texas, we enclose a Notice of Meeting and Proxy Statement
containing information concerning those matters which are to be considered at
the meeting. Detailed information concerning the Corporation's activities and
operations during 1995 is contained in our annual report, which is also
enclosed.

Please sign and return the form of proxy in the enclosed postage-prepaid
envelope so that your shares can be voted in the event you are unable to
attend the meeting. You may, of course, vote in person at the meeting, whether
or not you submitted a proxy.

We are pleased that the success of our Texas operations led your board of
directors to hold our shareholders meeting in Houston this year. Approximately
15 percent of our shareholders live in Texas and almost 1200 Compass employees
work in our 70 plus offices in that state. Significantly, upon completion of
pending acquisitions, over 40 percent of our assets will be in Texas. In
recognition of the importance of Texas to our future, Bob Wright, a Texan, is
one of the nominees for director this year. Hope to see you in Houston!

Sincerely yours,

/s/ D. Paul Jones, Jr.

D. Paul Jones, Jr.
Chairman and Chief Executive Officer

PLEASE COMPLETE, DATE, SIGN AND MAIL PROMPTLY THE ACCOMPANYING PROXY IN THE
RETURN ENVELOPE FURNISHED FOR THAT PURPOSE, WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING.

<PAGE>

COMPASS BANCSHARES, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

to be held on

April 9, 1996,

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

The annual meeting of the shareholders of Compass Bancshares, Inc., will be
held at the offices of Compass Bank--Houston, 2001 Kirby Drive, Houston,
Texas, on Tuesday, April 9, 1996, at 11:00 a.m., Houston time, for the
following purposes:

1. To elect five (5) directors, each to serve for a term of three (3) years
or until their successors are elected and qualified.

2. To approve the appointment of independent auditors.

3. To approve the Compass Bancshares, Inc. 1996 Long Term Incentive Plan.

4. To transact such other business as may properly come before the meeting
or any adjournment thereof.

Shareholders of record at the close of business on February 23, 1996, are
entitled to notice of and to vote at the meeting.

Shareholders who do not expect to attend the meeting are requested to sign
the enclosed proxy and return it immediately in the enclosed envelope in order
that their shares may be represented at the meeting.

By Order of the Board of Directors

/s/ Jerry W. Powell

Jerry W. Powell
General Counsel and Secretary

Birmingham, Alabama
March 6, 1996
<PAGE>

COMPASS BANCSHARES, INC.

PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 9, 1996

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

INTRODUCTION

This Proxy Statement is furnished to shareholders of Compass Bancshares,
Inc., a Delaware corporation (the "Corporation"), in connection with the
solicitation of proxies by the Board of Directors of the Corporation for use
at the annual meeting of shareholders to be held on April 9, 1996, and at any
adjournments thereof, for the purpose of (i) electing five directors of the
Corporation, (ii) approving the appointment of independent auditors, (iii)
approving the Compass Bancshares, Inc. 1996 Long Term Incentive Plan (the
"1996 Plan"), and (iv) transacting such other business as may properly come
before the meeting. The executive offices of the Corporation are located at 15
South 20th Street, Birmingham, Alabama 35233. This Proxy Statement and the
accompanying form of proxy, together with a copy of the Corporation's annual
report for 1995, were mailed to shareholders of the Corporation on or about
March 6, 1996.

SHAREHOLDERS ENTITLED TO VOTE

Each holder of record of the Corporation's common stock as of the close of
business on February 23, 1996, will be entitled to vote at the shareholders'
meeting and at any adjournments thereof. Each shareholder will be entitled to
one vote on each proposal for each share of common stock of the Corporation
held as of such date. At the close of business on February 23, 1996, there
were 38,569,409 shares of the Corporation's common stock issued and
outstanding. Notwithstanding the record date specified above, the stock
transfer books of the Corporation will not be closed and stock may be
transferred subsequent to the record date, although all votes must be cast in
the names of the shareholders of record as of the record date.

VOTE REQUIRED

The matters which may be considered and acted upon by the shareholders at
the meeting require approval by the affirmative vote of at least a majority of
the votes cast by the shareholders present in person or by proxy and
constituting a quorum at the annual meeting.

A shareholder may abstain or withhold his vote (collectively, "abstentions")
with respect to each item submitted for shareholder approval. Abstentions will
be counted for purposes of determining the existence of a quorum. Abstentions
will be counted as not voting in favor of the relevant item. Since the
election of directors and the approval of the appointment of auditors is
determined by the votes cast, abstentions will not affect such election or
approval. Since the approval of the 1996 Plan requires the affirmative vote of
at least a majority of the shares representing a quorum at the annual meeting,
abstentions will have the effect of a negative vote.

A broker who holds shares in street name has the authority to vote on
certain items when he has not received instructions from the beneficial owner.
Except for certain items for which brokers are prohibited from exercising
their discretion, a broker is entitled to vote on matters put to shareholders
without instructions from the beneficial owner. Where brokers do not have or
do not exercise such discretion, the inability or failure to vote is referred
to as a broker nonvote. Under the circumstances where the broker is not
permitted to or does not exercise its
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discretion, assuming proper disclosure to the Corporation of such inability to
vote, broker nonvotes will be counted for purposes of determining the
existence of a quorum, but also will be counted as not voting in favor of the
particular matter. Since each of the matters submitted for shareholder
approval is a matter for which a broker may exercise its discretion or is a
matter that will be determined by a majority of the votes cast, broker
nonvotes, if any, will not have any effect on the outcome of any matter
submitted for shareholder approval.

PROXIES

If the enclosed form of proxy is executed and returned, it may nevertheless
be revoked at any time before it has been exercised, but if it is not revoked,
the shares represented thereby will be voted by the persons designated in such
proxy. Shares represented by the proxies received will be voted in accordance
with the instructions therein. In the absence of instructions, proxies will be
voted FOR the election as directors of the nominees for directors named
herein, approval of the appointment of KPMG Peat Marwick as independent
auditors of the Corporation for the year ending December 31, 1996, and
approval of the 1996 Plan.

HOLDINGS OF VOTING SECURITIES

The following table contains information concerning the only person known to
the Corporation to be the beneficial owner of more than 5% of the
Corporation's outstanding common shares as of December 31, 1995:

<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES OWNED PERCENT OF CLASS
- ---------------- ---------------------- ----------------
<S> <C> <C>
Compass Bancshares, Inc. 2,764,713 7.2%
Employee Stock Ownership
Plan (the "ESOP")
c/o Compass Bank Trust Division
P. O. Box 10566
Birmingham, Alabama 35296
</TABLE>

As of December 31, 1995, the number of shares of common stock beneficially
owned by all directors and executive officers of the Corporation as a group
was approximately 3,009,086 shares (7.7%), including outstanding options to
purchase 939,236 shares. (See "Election of Directors".)

2
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PROPOSAL ONE

ELECTION OF DIRECTORS

The Board of Directors has nominated the five (5) persons named below for
election as Class II directors, each to hold office for a term of three (3)
years or until their successors shall have been elected and qualified. It is
intended that the persons named in the proxy will vote for the election of
these persons. The Board of Directors believes that the nominees will be
available and able to serve as directors, but if for any reason any of these
persons should not be available or able to serve, the persons named in the
proxy may exercise discretionary authority to vote for substitutes proposed by
the Board of Directors of the Corporation.

Certain information about the nominees, directors with unexpired terms, and
executive officers who are not also directors or nominees is set forth in the
following table. Certain directors of the Corporation are also directors of
Compass Bank, the Corporation's lead bank subsidiary headquartered in
Birmingham, Alabama (sometimes referred to herein as the "Bank"). Executive
officers who are not also directors serve at the discretion of the Board of
Directors.

COMMON STOCK OWNERSHIP

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4
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<TABLE>
<CAPTION>
SHARES
DIRECTOR OR BENEFICIALLY
EXECUTIVE OFFICER OWNED AT
OF CORPORATION DECEMBER 31, PERCENT OF PRINCIPAL OCCUPATION SINCE JANUARY 1,
NAME SINCE 1995 CLASS (1) 1991 AND OTHER INFORMATION
---- ----------------- ------------ ---------- -------------------------------------
<C> <C> <C> <C> <S>
Byrd Williams........... 1992 107,319(13) * Executive Vice President
of Compass Bank since
May 1992; formerly
Senior Vice President--
Operations of Compass
Bank. Age 50.
Directors, nominees and
executive officers as a
group (15 persons)....... 3,009,086 7.7
</TABLE>
- --------
*Less than 1%
(1) Percentages are calculated assuming the issuance of 939,236 options
outstanding under the Corporation's stock option plans described herein.
(2) Includes 443,653 shares owned by Marshall Durbin Food Corporation, of
which Mr. Durbin is Chairman of the Board and President, and 20,925
shares owned by The Marshall Durbin Management Company, Inc. Profit
Sharing Trust, of which Mr. Durbin is a trustee and a beneficiary. Mr.
Durbin disclaims beneficial ownership of such shares owned directly by
such Profit Sharing Trust.
(3) Includes 1,800 shares owned directly by Mr. Fitzpatrick's wife, the
beneficial ownership of which is disclaimed.
(4) Includes 11,140 shares owned jointly by Mr. Wright and his spouse and 143
shares owned directly by Mr. Wright's spouse.
(5) Includes 742,685 shares owned directly by Mr. Brock and 42,070 shares
owned directly by Mr. Brock's spouse. Excludes 547,357 shares owned by
Mr. Brock's grandchildren and adult children.
(6) Includes 1,699 shares owned by the Drummond Company, Inc., of which Mr.
Drummond is Chief Executive Officer and principal shareholder.
(7) Includes 13,382 shares held by Mr. Daniel's wife and sons, the beneficial
ownership of which is disclaimed. Does not include 960,048 shares owned
by The Daniel Foundation of Alabama, a charitable foundation for which
Mr. Daniel serves as a director, the beneficial ownership of which is
disclaimed.
(8) Includes 13,258 shares subject to options exercisable at December 31,
1995, under the Corporation's stock option plans described herein and
14,878 shares allocated to Mr. Jones' ESOP/401(k) account.
(9) Includes 100 shares owned directly by Dr. Hansberry's spouse, and 4,136
shares owned by Dr. Hansberry's adult children, for which Dr. Hansberry
has voting power.
(10) Includes 21,371 shares subject to options exercisable at December 31,
1995, under the Corporation's stock option plans described herein, 2,232
shares allocated to Mr. Hegel's ESOP/ 401(k) account, and 100 shares
owned directly by his child.
(11) Includes 17,104 shares subject to options exercisable at December 31,
1995, under the Corporation's stock option plans described herein and
2,566 shares allocated to Mr. McMahen's ESOP/401(k)account.
(12) Includes 12,725 shares subject to options exercisable at December 31,
1995, under the Corporation's stock option plans described herein and
11,526 shares allocated to Mr. Powell's ESOP/401(k) account.
(13) Includes 39,521 shares subject to options exercisable at December 31,
1995, under the Corporation's stock option plans described herein and
20,165 shares allocated to Mr. Williams' ESOP/401(k) account, owned
directly by his spouse, or held in a revocable trust of which he is the
sole beneficiary.

5
<PAGE>

REMUNERATION OF DIRECTORS

The Corporation pays non-employee directors a monthly retainer of $1,200 and
a fee of $1,665 for each board meeting attended. In addition, members of the
Corporation's Audit Committee receive $600 for each audit committee meeting
attended. Chairmen of all committees of the Boards of Directors of the
Corporation and Compass Bank receive a monthly retainer of $100 per month. The
non-employee directors of the Corporation who also serve on the board of
Compass Bank receive $400 per committee meeting attended if held on a day when
no Corporation board meeting is held and $500 if held on a day when no Compass
Bank board meeting is held. Additional amounts are paid to non-employee
directors who serve on the board and committees of the board of Compass Bank
in accordance with the compensation practices set by the Bank's board of
directors.

MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES

In 1995 the Board of Directors held four regular quarterly meetings and one
special meeting. All incumbent directors of the Corporation attended 75% or
more of the meetings of the board and the committees on which they served,
except for Garry Neil Drummond, Sr.

COMMITTEES OF THE BOARD OF DIRECTORS

Messrs. Jones, Daniel, Davenport, Durbin, Fitzpatrick, Hansberry, Myrick,
and Stein constitute the Executive Committee of the Board of Directors, which
has the full authority of the Board of Directors to act on all matters between
regularly scheduled board meetings, except as to certain matters of an
extraordinary nature. The results of each Executive Committee meeting are
reported to the full board at the next regularly scheduled board meeting. The
Executive Committee met three times in 1995.

Messrs. Stein, Daniel, Davenport and Fitzpatrick, constituted the Audit
Committee of the Board of Directors for 1995. This committee, which met six
times during 1995, meets with the Corporation's internal auditors and
periodically with its independent auditors. The committee's functions include
formulating recommendations with respect to engaging and discharging the
independent auditors and considering the fees paid to, services performed by
and the independence of such auditors. This committee reviews with the
internal and independent auditors the plan for and results of the audit of the
Corporation, the adequacy of procedures for internal auditing and the adequacy
of the system of internal control. The Audit Committee also reviews with the
internal auditors and management the results of examinations of the
Corporation's subsidiary banks by the various regulatory authorities and
considers the results of the loan examinations conducted by the internal
auditors of the Corporation.

Messrs. Myrick, Durbin and Daniel constituted the Compensation Committee of
the Board of Directors for 1995. These members are non-employee directors and
are ineligible to participate in any of the plans or programs administered by
the Compensation Committee. The primary function of the committee is to review
and approve senior officers' compensation and to administer the Corporation's
incentive plans. The committee met two times during 1995.

Messrs. Durbin, Davenport, Myrick, and Stein constituted the Credit
Committee of the Board of Directors for 1995. This committee has general
supervision over the credit policies of the Corporation and its subsidiaries,

6
<PAGE>

establishes the appropriate credit policies for the Corporation and its
subsidiaries, and provides appropriate instruction to the officers of the
Corporation regarding credit policies and procedures. The committee met six
times during 1995.

The Board of Directors has no standing nominating committee.

STOCK OWNERSHIP REPORTING BY DIRECTORS AND OFFICERS

Section 16(a) of the Securities Exchange Act of 1934 requires that executive
officers and directors of the Corporation file reports of stock ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC")
on Forms 3 (initial statement of ownership), 4 (monthly reports), and 5
(annual reports). Based solely upon a review of copies of such reports or
representations that no annual reports on Form 5 for the 1995 fiscal year were
required to be filed by officers or directors, the Corporation believes that
Section 16(a) filing requirements applicable to its officers and directors
were complied with during fiscal year 1995, except that director William
Eugene Davenport did not file timely one Form 4 to report one transaction
involving a sale of shares of the Corporation's common stock held by an
employee benefit plan maintained by his principal employer, of which he is a
participant; and executive officer Charles E. McMahen did not file timely two
Forms 4 to report seven transactions involving the exercise of options to
acquire shares of the Corporation's common stock on March 13, 1995, and
subsequent sales of a portion of such shares of such common stock that
occurred in March and April 1995. On October 10, 1995, a Form 4 was filed by
Mr. Davenport to report the sale of shares allocated to his employee benefit
account. On February 12, 1996, an annual report on Form 5 was filed by Mr.
McMahen to report his exercises of stock options and his sales of shares of
common stock.

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<PAGE>

EXECUTIVE COMPENSATION AND OTHER INFORMATION

The Corporation's 1995 compensation program for executive officers consisted
principally of salaries, cash bonuses and compensation pursuant to certain
plans which are described below.

SUMMARY COMPENSATION INFORMATION

The following table sets forth certain information regarding compensation
paid by the Corporation and its subsidiaries during the fiscal years 1993,
1994, and 1995 for services rendered to the Corporation and its subsidiaries
during such years by the Corporation's chief executive officer and the
Corporation's four most highly compensated executive officers other than the
chief executive officer who were serving in such capacities at the end of
1995:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
------------------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
NAME AND ----------------------- UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) OPTIONS (#) ($)(2)
------------------ ---- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
D. Paul Jones, Jr. 1995 450,000 - 0- -0- 16,500(3)
Chairman and Chief
Executive Officer 1994 450,000 318,735 4,150 22,980(3)
of the Corporation and
Compass Bank 1993 408,098 408,098 4,150 28,292(3)
Garrett R. Hegel........ 1995 190,000 -0- 3,846 3,570(4)
Chief Financial Officer
of the 1994 178,863 63,344 4,150 9,067(4)
Corporation and Compass
Bank 1993 170,888 85,444 4,150 10,673(4)
Charles E. McMahen...... 1995 319,991 -0- 3,846 10,200(6)
Chairman and Chief
Executive 1994 309,483 153,445 4,150 18,764(6)
Officer of Compass Banks
of 1993 297,676 208,373 4,150 27,164(6)
Texas, Inc. (5)
Jerry W. Powell......... 1995 149,500 7,475 3,400 6,739(7)
General Counsel and
Secretary 1994 143,500 46,924 3,150 11,756(7)
of the Corporation and
Compass Bank 1993 140,000 42,000 2,800 11,228(7)
Byrd Williams........... 1995 248,944 -0- 3,846 10,468(8)
Executive Vice President
of 1994 225,000 111,557 4,150 16,230(8)
Compass Bank 1993 182,500 127,750 4,150 28,871(8)
</TABLE>
- --------
(1) The bonus amounts shown in this column were paid based on performance
rendered during the years indicated, but the bonuses were paid during the
fiscal years immediately following the years indicated.
(2) The amounts shown in this column include annual contributions by the
Corporation to the ESOP/401(k) accounts of persons named in the table and
30% matching contributions by the Corporation with respect to employee
contributions for purchases of Corporation common stock under the
Corporation's Monthly Investment Plan. The ESOP/401(k) plan and the
Monthly Investment Plan are generally available to all employees of the
Corporation and its subsidiaries.

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<PAGE>

(3) Includes contributions by the Corporation under the ESOP/401(k) of $3,000,
$9,480 and $16,049 in 1995, 1994 and 1993, respectively, and matching
contributions made by the Corporation in connection with purchases of
Corporation common stock under the Corporation's Monthly Investment Plan
of $13,500, $13,500 and $12,243 for 1995, 1994 and 1993, respectively.
(4) Includes contributions by the Corporation under the ESOP/401(k) of $3,000,
$8,534, and $10,160 in 1995, 1994 and 1993, respectively, and matching
contributions made by the Corporation in connection with purchases of
Corporation common stock under the Corporation's Monthly Investment Plan
of $570, $533 and $513 for 1995, 1994 and 1993, respectively.
(5) Compass Banks of Texas, Inc. is a subsidiary of the Corporation and an
indirect parent corporation of Compass Bank-Houston, Compass Bank-Dallas,
Compass Bank-San Antonio, and certain other Texas-based subsidiaries of
the Corporation.
(6) Includes contributions by the Corporation under the ESOP/401(k) of $3,000,
$9,480 and $18,234 in 1995, 1994 and 1993, respectively, and matching
contributions made by the Corporation in connection with purchases of
Corporation common stock under the Corporation's Monthly Investment Plan
of $7,200, $9,284 and $8,930 for 1995, 1994 and 1993, respectively.
(7) Includes contributions by the Corporation under the ESOP/401(k) of $2,990,
$9,069 and $9,548 in 1995, 1994 and 1993, respectively, and matching
contributions made by the Corporation in connection with purchases of
Corporation common stock under the Corporation's Monthly Investment Plan
of $3,749, $2,687 and $1,680 for 1995, 1994 and 1993, respectively.
(8) Includes contributions by the Corporation under the ESOP/401(k) of $3,000,
$9,480 and $11,698 in 1995, 1994 and 1993, respectively, and matching
contributions made by the Corporation in connection with purchases of
Corporation common stock under the Corporation's Monthly Investment Plan
of $7,468, $6,750 and $5,475 for 1995, 1994 and 1993, respectively.

COMPENSATION PURSUANT TO PLANS

The Corporation has certain compensation plans, described below, pursuant to
which benefits may be provided to executive officers of the Corporation.

Long Term Incentive Plans

The Corporation's shareholders approved the 1982 and 1989 Long Term
Incentive Plans (the "Plans"), which provide for the granting of incentive
awards in the form of stock options, stock appreciation rights, performance
units, restricted stock, supplemental cash and in such other forms as may be
deemed appropriate from time to time under the circumstances. The Plans are
administered by the Compensation Committee of the Board of Directors, which
has the sole discretion, subject to the terms of the Plans, to determine those
employees, including executive officers, eligible to receive awards and the
amount and type of such awards. The Compensation Committee also has the
authority to interpret the Plans, formulate the terms and conditions of award
agreements, and make all other determinations required in the administration
thereof. Under the 1982 Long Term Incentive Plan, the committee was authorized
to grant awards of up to 2,475,000 shares of the Corporation's common stock,
subject to adjustment for capital structure changes. Under the 1989 Long Term
Incentive Plan, the Compensation Committee may grant awards of up to 1,500,000
shares of the Corporation's common stock, subject to adjustment for capital
structure changes. See "Proposal Three--1996 Long Term

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<PAGE>

Incentive Plan" for a description of the proposed 1996 Plan. If the 1996 Plan
is adopted, the Compensation Committee will be able to grant awards of up to
1,900,000 shares of the Corporations' common stock, subject to adjustment for
capital structure changes.

During 1995 no awards other than option grants were made under the Plans.
The following table reflects certain information concerning grants of options
to purchase the Corporation's common stock that were made by the Corporation
during 1995 to the executive officers of the Corporation named in the
preceding Summary Compensation Table:

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------
NUMBER % OF POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION
OPTIONS EMPLOYEES OR BASE EXPIR- FOR OPTION TERM
GRANTED IN FISCAL PRICE ATION -------------------------
NAME (#)(1) YEAR ($/SH)(1) DATE 5%($)(2) 10%($)(2)
---- ---------- ---------- --------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
D. Paul Jones, Jr....... -0- -0- -0- -0- -0- -0-
Garrett R. Hegel........ 3,846 1.68 26.00 1-31-05 62,886 159,367
Charles E. McMahen...... 3,846 1.68 26.00 1-31-05 62,886 159,367
Jerry W. Powell......... 3,400 1.49 26.00 1-31-05 55,594 140,887
Byrd Williams........... 3,846 1.68 26.00 1-31-05 62,886 159,367
</TABLE>
- --------
(1) The options shown in the table are incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended,
each of which were granted under the Corporation's 1989 Long Term
Incentive Plan on February 1, 1995, with an exercise price equal to the
fair market value on the date of grant. These options became exercisable
immediately upon the date of grant and will expire ten years from the date
of grant, subject to earlier termination upon termination of employment.
(2) The dollar amounts shown are based on certain assumed rates of
appreciation and the assumption that the options will not be exercised
until the end of the expiration periods applicable to the options. Actual
realizable values, if any, on stock option exercises and common stock
holdings are dependent on the future performance of the Corporation's
common stock and overall stock market conditions. There can be no
assurances that the amounts reflected will be achieved.

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<PAGE>

The following table reflects certain information concerning exercises of
options with respect to the Corporation's common stock during 1995 by the
executive officers of the Corporation named in the Summary Compensation Table
above:

AGGREGATED OPTION EXERCISES IN 1995
AND 1995 YEAR END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
1995 YEAR 1995 YEAR
END (#) END ($)
SHARES ACQUIRED VALUE ------------- -------------
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- --------- ------------- -------------
<S> <C> <C> <C> <C>
D. Paul Jones, Jr......... 0 0 13,258/0 141,440/0
Garrett R. Hegel.......... 11,750 184,146 21,371/0 270,246/0
Charles E. McMahen........ 93,693 1,462,197 17,104/0 168,362/0
Jerry W. Powell........... 5,250 84,000 12,725/0 123,024/0
Byrd Williams............. 0 0 39,521/0 441,046/0
</TABLE>

Change of Control Employment Agreements

The Corporation entered into change of control employment agreements on
December 14, 1994 (the "Agreements") with each of the individuals named in the
Summary Compensation Table and five additional officers of the Corporation or
its subsidiaries. The Agreements are designed to retain such officers and
provide for continuity of management in the event of any actual or threatened
change in control of the Corporation. The Agreements are effective for three-
year periods and are automatically extended annually for additional one-year
periods unless notice is given to the contrary. The Agreements are otherwise
terminable during their periods of effectiveness only by termination of the
executive's employment. Such termination in connection with a change in
control of the Corporation (as defined in the Agreements) will entitle an
executive to benefits under the Agreements. The Agreements require continued
employment of an executive following a change of control on an equivalent
basis to employment immediately before such change of control. In the event
that during the three-year period following a change of control, the executive
terminates the executive's employment for good reason (as defined in the
Agreements) or, during the thirty-day period commencing one year after the
change of control, for any reason, or the Corporation terminates the
executive's employment without cause (as defined in the Agreements), the
executive will be entitled to receive an immediate lump sum payment in an
amount equal to previously earned but unpaid compensation plus an amount equal
to a range of between two and three times the sum of such executive's then
current salary and annual bonus. In addition, the executive will continue to
be eligible, together with the executive's family, to receive benefits under
the Corporation's welfare benefit plans (e.g., medical, group life, etc.) for
the remainder of the three-year term, and any stock options then held by the
executive pursuant to the Corporation's stock option plans shall remain
exercisable in accordance with the terms of any stock option agreements
between the Corporation and the executive, notwithstanding any provision in
such option agreements to the contrary.

11
<PAGE>

Pension Plan

The Corporation has adopted a defined benefit pension plan pursuant to which
participants are entitled to an annual benefit on retirement equal to a
percentage of the average base compensation (generally defined as direct cash
compensation exclusive of bonuses, such as the bonuses shown in the Summary
Compensation Table above, and commissions) earned in the five consecutive
years of benefit service which produces the highest average. The following
table shows the estimated annual benefits payable upon retirement to salaried
employees, including executive officers, assuming retirement at normal
retirement age 65 on January 1, 1996:

PENSION PLAN TABLE

<TABLE>
<CAPTION>
HIGHEST
AVERAGE
EARNINGS- 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS
FIVE YEARS SERVICE SERVICE SERVICE SERVICE SERVICE
- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000......................... $15,300 $22,950 $30,600 $38,250 $ 45,900
125,000......................... 19,800 29,700 39,600 49,500 59,400
150,000......................... 24,300 36,450 48,600 60,750 72,900
200,000*........................ 30,051 45,784 61,524 77,264 93,004
250,000*........................ 40,842 56,834 76,824 96,814 116,804**
300,000*........................ 40,842 56,834 76,824 96,814 116,804**
</TABLE>
- --------
* The maximum compensation for benefits purposes is $235,840 before 1994 and
$150,000 after 1993.
** The maximum pension under Section 415 of the Internal Revenue Code of 1986,
as amended.

The percentage amount of the benefit upon retirement under the pension plan
is determined by multiplying the number of years, up to 30, of a participant's
service with the Corporation by 1.8%. Benefits are reduced by Social Security
payments at the rate of 1.8% of primary Social Security benefits times years
of service up to 30 years. The estimated annual retirement benefits shown in
the foregoing table have been reduced by estimated Social Security benefits.
All employees of the Corporation who are over the age of 21 and have worked
1,000 hours or more in their first 12 months of employment or 1,000 hours or
more in any calendar year thereafter are eligible to participate. Under most
circumstances employees are vested after five years of service. Benefits are
payable monthly commencing on the later of age 65 or the participant's date of
retirement. Eligible participants may retire at reduced benefit levels after
reaching age 55.

The current estimated years of credited service for each of the executive
officers named in the Summary Compensation Table above are as follows: D. Paul
Jones, Jr., 17; Charles E. McMahen, 6; Garrett R. Hegel, 6; Jerry W. Powell,
15; and Byrd Williams, 19.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Directors of the Corporation Charles W. Daniel, Marshall Durbin, Jr., and
Goodwin L. Myrick constitute the Compensation Committee of the Corporation's
Board of Directors. D. Paul Jones, Jr., Chairman and Chief Executive Officer
of the Corporation, is a member of the Board of Directors and serves on the
Board Compensation Committee of Golden Enterprises, Inc., of which John S.
Stein, a director of the Corporation, is President and Chief Executive
Officer.

12
<PAGE>

REPORT OF BOARD COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors of the Corporation (the
"Committee") is composed entirely of persons who are not also officers of the
Corporation or any of its subsidiaries. The Committee is responsible for
reviewing and appraising the compensation of senior officers of the
Corporation and administering the Corporation's incentive plans. See "ELECTION
OF DIRECTORS--Committees of the Board of Directors."

The base salaries and incentive bonuses of the executive officers of the
Corporation, all of whom, with the exception of Charles E. McMahen, are also
executive officers of Compass Bank, are paid by Compass Bank. Mr. McMahen's
compensation is paid by Compass Texas Management, Inc., a subsidiary of the
Corporation that provides management and administrative services to the
Corporation's Texas-based subsidiaries. Management of the Corporation and
Compass Bank are compensated primarily through base salaries, incentive
bonuses, and equity-based compensation programs that are designed to reward
for long-term strategic management and enhancement of shareholder value.

The Committee establishes the base salary of the chief executive officer of
the Corporation and Compass Bank, as well as the base salary of Mr. McMahen,
for recommendation to the full Board of Directors. The Board of Directors of
Compass Bank approves the base salaries of executive officers other than the
chief executive officer and other than Mr. McMahen based on recommendations to
the Committee from the Human Resources Division of Compass Bank and the chief
executive officer with respect to the salaries of the other executive
officers.

In connection with the Committee's setting of the chief executive officer's
base salary, the Human Resources Division of Compass Bank compiles publicly
available data concerning the salaries of the chief executive officers of the
largest Alabama-based bank holding companies other than the Corporation and
financial institutions located outside Alabama that are considered peers of
the Corporation based on their relative assets. Such data is presented to the
Committee for its consideration at one or more Committee meetings in January
or February of each year for salary determinations for the ensuing year. The
compensation levels approved by the Committee with respect to the chief
executive officer have generally been at or above the median compensation
levels of the other companies surveyed. The Committee also undertakes a
subjective analysis of the chief executive officer's base salary that is not
related to any particular established qualitative or quantitative criteria.
Based on such objective information and its subjective analysis, the Committee
then determines the chief executive officer's base salary for recommendation
to the full Board of Directors.

The Board of Directors of Compass Bank has historically approved the base
salaries recommended to it by the Human Resources Division of Compass Bank and
the chief executive officer with respect to each of the other executive
officers of the Corporation. Such salary recommendations and approval of such
recommendations by the Board of Directors of Compass Bank are generally based
primarily on subjective analyses of reasonable base salaries that should be
paid to such persons as a result of their respective job performances during
the prior fiscal year and the responsibilities of their offices on behalf of
the Corporation and Compass Bank. Such base salary determinations are based
upon established salary administration guidelines applicable to all employees.
Under these salary administration guidelines, each employee is placed in an
employment grade depending upon his or

13
<PAGE>

her job classification or title, level of responsibility, and years of
service. Within each employment grade there is a salary range, as well as
recommended levels for salary increases, which are based upon a particular
employee's job performance.

Bonuses paid to the chief executive officer and to other senior management
officials of the Corporation and Compass Bank, including, among others, all of
the persons named in the Summary Compensation Table above, are based on
predetermined performance goals and amounts payable as a percentage of their
base salaries depending on the achievement of those goals. The performance
criteria for bonuses payable for a given fiscal year are typically approved by
the full Board of Directors of Compass Bank at its regular meeting held in the
first quarter of each year.

The chief executive officer's incentive bonus is typically, and was in 1995,
based entirely on the achievement of established goals of earnings per share
on the Corporation's common stock as determined in accordance with generally
accepted accounting principles. For fiscal year 1995, the Corporation's chief
executive officer and other of the executive officers were not entitled to any
bonus if the Corporation failed to achieve an increase in earnings per share
of at least 10% over earnings per share reported for the previous fiscal year.
An increase in earnings per share of at least 15% over the previous fiscal
year's earnings per share was also required in order for maximum achievable
bonuses to be paid to the Corporation's chief executive officer and others. As
a result of an increase in earnings per share in 1995 compared to 1994 of
approximately 9%, the Corporation's chief executive officer and each of the
other named executive officers whose bonus is based solely upon the
achievement of earnings per share goals received no bonus.

The chief executive officer's maximum bonus, based solely on earnings per
share goals, is typically 100% of base salary. Other executive officers of the
Corporation and Compass Bank have incentive bonus plans pursuant to which they
receive varying bonuses depending upon the performance of the departments or
divisions of the Corporation or Compass Bank with respect to which they have
supervisory responsibility, the performance of the Corporation or Compass Bank
as a whole, and their respective individual performances. As in the case of
the chief executive officer, those bonus plans provide for the payment of
bonuses in varying amounts as a percentage of base salaries depending on the
achievement of performance goals. The maximum bonus of each of the other named
executive officers ranges from 40% to 70%.

The 1989 Long Term Incentive Plan provides for grants to the Corporation's
officers and key employees of stock options, stock appreciation rights,
restricted stock, performance units and supplemental cash payments. The
payment of equity-based compensation to these individuals under the
Corporation's incentive compensation program is designed to focus their
attention on the enhancement of shareholder value. In order for the
Corporation to have a sufficient number of shares for the grant of future
awards under the Corporation's incentive compensation program, the Board of
Directors has approved the Compass Bancshares, Inc. 1996 Long Term Incentive
Plan, which is being submitted to the Corporation's shareholders for their
approval. See "Proposal 3--1996 Long Term Incentive Plan."

During 1995, the Corporation granted options to purchase a total of 235,390
shares of the Corporation's common stock under the 1989 Long Term Incentive
Plan to 159 employees of the Corporation or its subsidiaries. Among these
option grants were grants of incentive stock options to acquire 3,846 shares
to each of Messrs. Hegel, McMahen, and Williams, and 3,400 shares to Mr.
Powell. Mr. Jones received no stock option grant in

14
<PAGE>

1995 in accordance with his request. The size of the option grants to these
executive officers was determined by the Compensation Committee and approved
by the Board of Directors based upon a subjective assessment of executive
officers' performances, their respective compensation and organization
management level in the organization, and other factors. The exercise price of
each option equaled the fair market value of the common stock as of the date
of grant and the options became exercisable immediately upon grant. Such
options will expire ten (10) years from the date of grant, subject to earlier
termination upon termination of employment.

The Committee has considered the anticipated tax treatment to the Company
and to the executive officers of various payments and benefits. In addition,
the Committee is aware that some types of compensation payments and their
deductibility (e.g., the spread on exercise of non-qualified options) depends
upon the timing of an executive officer's vesting or exercise of previously
granted rights, and that interpretations of and changes in the tax laws and
other factors beyond the Committee's control also affect the deductibility of
compensation. For those and other reasons, the Committee will not necessarily
and in all circumstances limit executive compensation to that deductible under
Section 162(m) of the Internal Revenue Code of 1986, as amended. The Committee
will consider various alternatives to preserving the deductibility of
compensation payments and benefits to the extent reasonably practicable and to
the extent consistent with its other compensation objectives.

/s/ Charles W. Daniel /s/ Goodwin L. Myrick
- ----------------------------- -----------------------------
Charles W. Daniel Goodwin L. Myrick

/s/ Marshall Durbin, Jr.
- -----------------------------
Marshall Durbin, Jr.

15
<PAGE>

CORPORATE PERFORMANCE GRAPH

The following graph illustrates, for the period commencing December 31, 1990,
and ending at year end 1995, the yearly percentage change in the cumulative
total shareholder return on the Corporation's common stock as compared with the
cumulative total returns of the other companies included within the Standard &
Poor's 500 Stock Index and the National Association of Securities Dealers,
Inc., Automated Quotation System ("NASDAQ") Bank Stocks Index. The graph
reflects shareholder returns measured by dividing (i) the sum of (A) the
cumulative amount of dividends paid between year end 1990 and year end 1995,
assuming dividend reinvestment, and (B) the difference between the closing
price of the Corporation's common stock as reported through the NASDAQ on
December 31, 1995, and December 31, 1990, by (ii) the closing price of the
Corporation's common stock as reported through NASDAQ on December 31, 1990.

[GRAPH]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------------
12/90 12/91 12/92 12/93 12/94 12/95
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>

Compass Bancshares Inc CBSS 100 208 265 256 266 415

S & P 500 1500 100 130 140 155 157 215

NASDAQ Banks INAB 100 164 239 272 271 404
</TABLE>
16

<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Some of the executive officers, directors and proposed nominees for director
of the Corporation and their affiliates are and have been customers of or had
transactions with the Corporation and its subsidiaries in the ordinary course
of business. Such transactions include loans made by the Corporation's
subsidiary banks, all of which were made in the ordinary course of business on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unaffiliated
persons and did not involve more than the normal risk of collectibility or
present other unfavorable features. Additional transactions may be expected to
take place with the subsidiary banks in the ordinary course of business in the
future.

Compass Bank is a limited partner of Guilford Affordable Housing Fund I,
Ltd., an Alabama limited partnership (the "Partnership"), which was organized
in 1992 for the purpose of acquiring limited partnership interests in other
affiliated or unaffiliated limited partnerships which own and operate
apartment complexes with income eligible for low-income housing tax credits or
historic rehabilitation tax credits under the Internal Revenue Code of 1986.
The general partner of the Partnership and the owner of a 1% partnership
interest is Guilford Capital Corporation, of which Tranum Fitzpatrick, a
director of the Corporation, is the president, a director, and a principal
shareholder. Mr. Fitzpatrick is also the chairman of the board of Guilford
Company, Inc., which provides due diligence functions, compliance audits and
certain other services on a contractual basis to the Partnership. Compass Bank
has subscribed to purchase $725,000 of units of interest in the Partnership,
$290,000 of which was invested during 1992, $159,500 of which was invested
during 1993, $36,250 of which was invested during 1994, and $108,750 of which
was invested during 1995, with the remaining balance of subscription funds due
to be paid in installments by June 1, 1996.

During 1995, D. Paul Jones, Jr., Chairman and Chief Executive Officer of the
Corporation, was indebted to the Corporation in connection with a loan for the
purpose of, among other things, financing the exercise of options to acquire
shares of common stock of the Corporation. Pursuant to a Demand Note and a
Pledge Agreement between Mr. Jones and the Corporation, both dated December
11, 1992, Mr. Jones pledged shares of the Corporation's common stock as
collateral for a loan in the original principal amount of $3,450,000, which is
due on demand, bearing interest at an annual rate equal to the London
Interbank Offering Rate ("LIBOR") plus 1%. During 1995, the largest aggregate
amount of indebtedness outstanding on such loan, and the amount outstanding as
of February 15, 1996, was $3,118,750. In addition, during 1995 Mr. Jones was
indebted to the Corporation for a loan incurred under a line of credit secured
by shares of the Corporation's common stock. The loan is due on demand and
bears interest at the rate of Compass Bank Prime. The largest aggregate amount
of indebtedness outstanding for such loan during 1995 was $312,199 and the
principal amount outstanding as of February 15, 1996, was $142,199.

During 1995, Jerry W. Powell, General Counsel and Secretary of the
Corporation, was indebted to the Corporation in connection with a loan for the
purpose of, among other things, financing the exercise of options to acquire
shares of common stock of the Corporation. Mr. Powell's loan bears interest at
the rate of Compass Bank Prime, is payable quarterly with the principal due on
demand, and is secured by shares of the Corporation's common stock. During
1995, the largest amount of indebtedness outstanding on such loan was $288,000
and the amount outstanding as of February 15, 1996, was $283,000.

17
<PAGE>

During 1995, Charles E. McMahen, Chairman and Chief Executive Officer of
Compass Banks of Texas, Inc., was indebted to the Corporation in connection
with loans for the purpose of, among other things, financing the exercise of
options to acquire shares of common stock of the Corporation. The loans were
paid in full during the second quarter of 1995. Mr. McMahen's loans bore
interest at the rate of Compass Bank Prime and were secured by shares of the
Corporation's common stock. During 1995, the largest aggregate amount
outstanding on such loans was $1,677,122.

During 1995, Garrett R. Hegel, Chief Financial Officer of the Corporation,
was indebted to the Corporation in connection with a loan for the purpose of,
among other things, financing the exercise of options to acquire shares of the
Corporation's common stock. Mr. Hegel's loan bears interest at the rate of
Compass Bank Prime, is payable quarterly with the principal due on demand, and
is secured by shares of the Corporation's common stock. During 1995, the
largest aggregate amount outstanding on such loan was $223,000 and the amount
outstanding as of February 15, 1996, was $189,000.

During 1995, Harry B. Brock, Jr., a director of the Corporation was indebted
to the Corporation in connection with a loan for the purpose of, among other
things, financing the exercise of options to acquire shares of the
Corporation's common stock. Mr. Brock's loan bears interest at the rate of
Compass Bank Prime, is payable quarterly with the principal due on demand, and
is secured by shares of the Corporation's common stock. The largest amount
outstanding on such loan during 1995 and the amount outstanding as of February
15, 1996, was $950,000.

During 1995, the law firm of Balch & Bingham, of which Stanley M. Brock, a
director of the Corporation, was a member until he withdrew from such firm on
January 27, 1995, rendered various legal services to the Corporation and its
subsidiaries. The total fees paid and expenses reimbursed to the firm by the
Corporation, its subsidiaries, and its customers during 1995 were $3,429,750.

PROPOSAL TWO

ELECTION OF AUDITORS

The Board of Directors has, on the advice of its Audit Committee,
reappointed KPMG Peat Marwick ("Peat Marwick") as the independent auditors of
the Corporation for the year ending December 31, 1996. Although not required
to do so, the Board of Directors has traditionally submitted the appointment
of independent auditors for approval at the annual meeting of shareholders.
Peat Marwick has acted as auditor of the Corporation and its subsidiaries
since 1971. A representative of Peat Marwick will be present at the annual
meeting, with an opportunity to make a statement if he or she so desires and
to respond to appropriate questions.

During the year ended December 31, 1995, Peat Marwick provided various audit
and non-audit services to the Corporation and its subsidiaries. In connection
with its service as the Corporation's auditors, Peat Marwick examined the
consolidated financial statements of the Corporation and its subsidiaries,
reviewed certain filings with the Securities and Exchange Commission and
provided consultation and assistance on accounting, tax and related matters as
required.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF
KPMG PEAT MARWICK AS INDEPENDENT AUDITORS.

18
<PAGE>

PROPOSAL THREE

1996 LONG TERM INCENTIVE PLAN

On February 19, 1996, the Board of Directors adopted and recommended for
submission to the Corporation's shareholders for their approval the Compass
Bancshares, Inc. 1996 Long Term Incentive Plan (the "1996 Plan"). The purpose
of the 1996 Plan is to further the growth in earnings and market appreciation
of the Corporation by providing long-term incentives to those officers and key
employees of the Corporation or its subsidiaries who make substantial
contributions to the Corporation through their ability, loyalty, industry and
invention.

The 1996 Plan is intended to be a continuation of the Corporation's
incentive compensation program currently provided by the Corporation's 1989
Long Term Incentive Plan. The primary purposes for submitting the 1996 Plan
for approval at the 1996 annual meeting of shareholders are to provide
sufficient shares for the grant of future awards to officers and key employees
of the Corporation and to comply with certain of the provisions of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), in order
that certain compensation attributable to awards under the Corporation's
management incentive program will qualify as performance-based compensation
and therefore not be subject to the limitation on the deductibility of
compensation set forth in Section 162(m) of the Code.

The Board of Directors believes that the Corporation should have shares
available to grant awards to certain of its officers and key employees. The
Board of Directors believes that the Corporation and its shareholders
significantly benefit from having the Corporations' key management employees
receive such awards, and that the opportunity thus afforded these employees to
acquire common stock of the Corporation is an essential element of an
effective management incentive program. The Board of Directors also believes
that stock based awards are very valuable in attracting and retaining highly
qualified management personnel and in providing additional motivation to
management to use their best efforts on behalf of the Corporation and its
shareholders.

The primary features of the 1996 Plan are summarized below. This summary is
qualified in its entirety by reference to the specific provisions of the 1996
Plan, as proposed, the full text of which is set forth as Exhibit A to this
Proxy Statement.

GENERAL INFORMATION

The 1996 Plan will be administered by the Compensation Committee of the
Board of Directors. The Compensation Committee consists of three or more
members of the Board of Directors who qualify both as "outside directors"
within the meaning of Section 162(m) of the Code and "disinterested persons"
within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934.

The 1996 Plan would authorize the Compensation Committee to grant to the
participants in the 1996 Plan (i) stock options (which may be non-qualified
options or incentive stock options for tax purposes), (ii) stock appreciation
rights ("SARs") (which may be issued in tandem with stock options), (iii)
restricted stock awards, (iv) performance units (which may be in stock, cash
or a combination thereof), and (v) supplemental cash payments. Persons
eligible to participate in the 1996 Plan shall be those officers and key
employees of the

19
<PAGE>

Corporation and its subsidiaries who are in positions in which their
decisions, actions and counsel significantly impact the performance of the
Corporation or its subsidiaries. Participants are chosen from this group by
the Compensation Committee, at its discretion. Currently, there are
approximately 250 employees of the Corporation eligible to participate in the
1996 Plan.

The effective date of the 1996 Plan, subject to the approval by the
Corporation's shareholders, will be February 19, 1996, the date it was adopted
by the Board of Directors. The 1996 Plan shall continue in effect until all
awards under the plan have been satisfied by the issuance of shares or the
payment of cash, but no award may be granted after the expiration of ten (10)
years following such effective date.

STOCK BASED AWARDS

Shares Reserved for Issuance. The aggregate number of shares of the
Corporation's common stock which may be issued under the 1996 Plan as proposed
may not exceed 1,900,000. Shares subject to options granted under the 1996
Plan which expire unexercised, or shares subject to awards which are otherwise
forfeited or cancelled, will not count against this limit. The maximum number
of shares with respect to which awards may be granted to any individual in any
one year under the 1996 Plan is 200,000.

Stock Options. The Compensation Committee will be authorized to determine
the terms and conditions of all option grants, subject to the specific
limitations set forth in Section 7 of the 1996 Plan, as proposed. In general,
no option may be granted with an exercise price of less than the fair market
value of a share of the Corporation's common stock on the date of grant (110%
if the grantee beneficially owns more than 10% of such stock), the term of an
option may not be longer than ten (10) years, and any option shall be subject
to certain restrictions on transferability. Payment of the option price may be
in cash, check or other instrument acceptable to the Compensation Committee,
or, in the discretion of the Compensation Committee, in the form of
unrestricted common stock of the Corporation owned by the optionee.

Stock Appreciation Rights. The Compensation Committee will be authorized to
grant SARs either independent of or in connection with stock options granted
under the 1996 Plan. The exercise of SARs will entitle the holder thereof to
an amount (the "appreciation") equal to the difference between the exercise
price of the shares to which the SARs relate under the SAR agreement (or, in
the case of SARs issued in connection with options, the exercise price under
the related option agreement) and the fair market value of a share of common
stock of the Corporation on the date the SAR is exercised. The appreciation
will be payable in cash or common stock of the Corporation, at the discretion
of the Compensation Committee. The exercise of SARs granted in connection with
options will terminate those options.

The exercise of SARs will be treated as the issuance of the shares of common
stock to which the SARs relate for purposes of calculating the maximum number
of shares which have been issued under the 1996 Plan.

Restricted Stock. The Compensation Committee will be authorized to award
restricted stock under the 1996 Plan subject to such terms and conditions as
the Compensation Committee may determine. The Compensation Committee will have
authority to determine the number of shares of restricted stock to be awarded,
the price, if any, to be paid by the recipient of the restricted stock, and
the date or dates on which the

20
<PAGE>

restricted stock will vest. The vesting of restricted stock may be conditioned
upon the completion of a specified period of service with the Corporation,
upon the attainment of specified performance goals, or upon such other
criteria as the Compensation Committee may determine. The 1996 Plan will give
the Compensation Committee discretion to make loans to the recipients for the
purchase price of the restricted stock and to accelerate the vesting of
restricted stock on a case by case basis at any time.

Stock certificates representing the restricted stock granted to an eligible
employee will be registered in the employee's name. However, no share of
restricted stock may be sold, transferred, assigned, or pledged by the
employee until such share has vested in accordance with the terms of the
restricted stock award. In the event of an employee's termination of
employment before all of his or her restricted stock has vested, or in the
event other conditions to the vesting of restricted stock have not been
satisfied prior to any deadline for the satisfaction of such conditions set
forth in the award, the shares of restricted stock which have not vested will
be forfeited, provided that the participant will be entitled to retain any
shares of restricted stock which have been paid for by the participant. At the
time restricted stock vests, a certificate for such vested shares will be
delivered to the employee (or the beneficiary designated by the employee, in
the event of death), free of all restrictions.

Performance Units. The Compensation Committee may grant performance units
under which payment may be made to the participant upon the attainment of
specific performance goals. Such performance goals will be established by the
Compensation Committee and will relate to the performance of the Corporation
(or any segment thereof) over a specified performance period, as judged under
any business criteria deemed appropriate by the Compensation Committee,
including without limitation growth in earnings, the ratio of earnings to
shareholder's equity or the ratio of earnings to total capital.

As an element of each performance goal, the Compensation Committee may
establish a principal performance target and a minimum performance target.
These targets may be adjusted at any time prior to payment of the performance
unit to reflect major unforeseen events such as changes in laws, regulations
or accounting procedures, mergers, acquisitions or divestitures or
extraordinary, unusual or nonrecurring items or events, subject to the
limitations of Section 162(m) of the Code discussed below. If the principal
performance target is attained, the participant will be entitled to receive
100% of the value of the performance unit. If the minimum performance target
is attained, but not the principal performance target, the participant will be
entitled to receive a lesser percentage of the value of the performance unit,
as determined by the Compensation Committee. The Compensation Committee shall
determine the extent to which the performance targets have been attained, and
what, if any, payment is due the participant on the performance unit. Such
payment may be made, at the Compensation Committee's discretion, in cash or
common stock of the Corporation (based on the then current fair market value
of such stock).

Notwithstanding any other provision of the 1996 Plan to the contrary,
performance targets established by the Compensation Committee with respect to
performance units granted to one or more of the five (5) most highly
compensated officers of the Corporation will be pre-established objective
performance goals within the meaning of Section 162(m) of the Code and
treasury regulations promulgated thereunder. Furthermore, and notwithstanding
any other provision in the 1996 Plan to the contrary, once the Compensation
Committee has established one or more performance targets with respect to a
performance unit granted to one of the five (5) most highly compensated
officers of the Corporation, the Compensation Committee shall have no
discretion to waive or alter the targets after the expiration of the earlier
of (i) the expiration of twenty-five percent of the performance period or (ii)
the date on which the outcome under the target is substantially certain.

21
<PAGE>

Supplemental Cash Payments. A stock option, SAR, restricted stock or
performance unit award may provide for the Corporation to make a supplemental
cash payment to a participant. Payments may be made for the purpose of, but
not limited to, assisting the employee in paying income taxes resulting from
an award under the 1996 Plan. In no event shall the amount of cash payment
exceed the value of the award to which it relates.

DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES

The following statements are based on current interpretations of existing
Federal income tax laws. The law is technical and complex and the statements
represent only a general summary of some of the applicable provisions.

Stock Options. There are generally no Federal income tax consequences either
to the optionee or to the Corporation upon the grant of a stock option. On
exercise of an incentive stock option, the optionee will not recognize any
income and the Corporation will not be entitled to a deduction for tax
purposes, although such exercise may give rise to liability for the optionee
under the alternative minimum tax provisions of the Code. Generally, if the
optionee disposes of shares acquired upon exercise of an incentive stock
option within two years of the date of grant or one year of the date of
exercise, the optionee will recognize compensation income and the Corporation
will be entitled to a deduction for tax purposes in the amount equal to the
excess of the fair market value of the shares on the date of exercise over the
option exercise price (or the gain on sale, if less). Otherwise, the
Corporation will not be entitled to any deduction for tax purposes upon
disposition of such shares, and the entire gain for the optionee will be
treated as a capital gain. On exercise of a non-qualified stock option, the
amount by which the fair market value of the shares on the date of exercise
exceeds the option exercise price will generally be taxable to the optionee as
compensation income and will generally be deductible for tax purposes by the
Corporation. The disposition of shares acquired upon exercise of a non-
qualified stock option will generally result in a capital gain or loss for the
optionee, but will have no tax consequences for the Corporation.

Stock Appreciation Rights. The grant of an SAR generally does not result in
income to the grantee or in a deduction for the Corporation. Upon the exercise
of an SAR, the grantee will recognize ordinary income and the Corporation will
be entitled to a deduction measured by the fair market value of the shares
plus any cash received.

Restricted Stock. The grant of restricted stock generally does not result in
income to the grantee or in a deduction for the Corporation, assuming the
shares transferred are subject to restrictions which constitute a "substantial
risk of forfeiture." If there are no such restrictions, the grantee would
recognize ordinary income upon receipt of the shares. Dividends paid to the
grantee while the stock is subject to such restrictions would be treated as
compensation for Federal income tax purposes. At the time the restrictions
lapse, the grantee would recognize ordinary income, and the Corporation would
be entitled to a deduction measured by the fair market value of the shares at
the time of lapse.

Performance Units. The grant of a performance unit generally does not result
in income to the grantee or in a deduction for the Corporation. Upon the
receipt of cash or shares of common stock under a performance unit, the
grantee will recognize ordinary income and the Corporation will be entitled to
a deduction measured by the fair market value of the shares plus any cash
received.

Supplemental Cash Payments. Supplemental Cash Payments will result in
ordinary income to the grantee and a deduction for the Corporation.

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CHANGE OF CONTROL

In the case of a merger or consolidation in which the Corporation is not the
surviving corporation, or a sale of all or substantially all of the business
or property of the Corporation, or liquidation or dissolution of the
Corporation, or in the event of a tender offer or any other change involving a
threatened change in control of the Corporation which, in the opinion of the
Compensation Committee, could deprive the holders of the benefits intended to
be conferred by awards hereunder, the Committee may, in anticipation of any
such transaction or event, make such adjustments in the terms and conditions
of outstanding awards, as the Compensation Committee in its sole discretion
determines are equitably warranted under the circumstances including, without
limitation, (i) acceleration of exercise terms, or (ii) acceleration of the
lapse of restrictions, performance objectives and other terms.

VOTE REQUIRED AND BOARD OF DIRECTOR RECOMMENDATION

The affirmative vote of a majority of the votes present or represented by
proxy and entitled to vote at the annual meeting of shareholders, at which a
quorum representing a majority of all outstanding shares of common stock of
the Corporation is present and voting, either in person or by proxy, is
required for approval of this proposal. Abstentions will be counted as present
for purposes of determining the presence of a quorum, but will have the same
effect as a negative vote on this proposal.

The Board of Directors believes that the 1996 Plan is in the best interests
of the Corporation and the shareholders for the reasons stated above.
Therefore, the Board of Directors unanimously recommends a vote FOR approval
of this proposal to adopt the 1996 Plan.

SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING

Any proposal which a shareholder of the Corporation intends to be presented
at the annual meeting of shareholders to be held in 1997 must be received by
the Corporation on or before November 6, 1996. Only proper proposals which are
timely received will be included in the proxy statement and form of proxy.

OTHER MATTERS

Management does not know of any matters to be brought before the meeting
other than as described in this Proxy Statement. Should other matters properly
come before the meeting, the persons designated as proxies will vote in
accordance with their best judgment on such matters.

EXPENSES OF SOLICITATION

The cost of soliciting proxies in the accompanying form will be borne by the
Corporation. In addition to the use of the mails, proxies may be solicited by
directors, officers or other employees of the Corporation or its subsidiaries
personally, by telephone or by facsimile or other electronic means, for which
no additional compensation will be paid to those persons engaged in such
solicitation. The Corporation will reimburse brokers, custodians or other
persons holding stock in their names or in the names of nominees for their
expenses in forwarding proxy materials to principals and obtaining their
instructions. The Company has retained Morrow & Co., New York, New York, at an
approximate total cost of $7,500, plus out-of-pocket expenses, to assist in
the solicitation of proxies by mail, personally or by telephone or other means
of communication.

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EXHIBIT A

COMPASS BANCSHARES, INC.

1996 LONG TERM INCENTIVE PLAN

Section 1. PURPOSE OF THE PLAN; DEFINITIONS. The purpose of the Compass
Bancshares, Inc. 1996 Long Term Incentive Plan (the "Plan") is to further the
growth in earnings and market appreciation of Compass Bancshares, Inc. (the
"Corporation"). The Plan provides long-term incentives to those officers and
key employees of the Corporation or its subsidiaries who make substantial
contributions to the Corporation through their ability, loyalty, industry and
invention. The Corporation intends that the Plan will thereby facilitate
securing, retaining and motivating officers and key employees of high caliber
and good potential.

For purposes of the Plan, the following terms shall be defined as set forth
below:

(a) "Board" means the Board of Directors of the Corporation.

(b) "Cause" means (i) a willful and material violation of applicable banking
laws and regulations, (ii) dishonesty, (iii) theft, (iv) fraud, (v)
embezzlement, (vi) commission of a felony or a crime involving moral
turpitude, (vii) substantial dependence or addiction to alcohol or any drug,
(viii) conduct disloyal to the Corporation or its affiliates, or (ix) willful
dereliction of duties or disregard of lawful instructions or directions of the
officers or directors of the Corporation or its affiliates relating to a
material matter.

(d) "Committee" means the Compensation Committee of the Board.

(e) "Common Stock" means the common stock, par value $2.00 per share, of the
Corporation.

(f) "Corporation" means Compass Bancshares, Inc., a Delaware corporation.

(g) "Disability" means total and permanent disability as determined under
the Corporation's long-term disability plan.

(h) "Disinterested Person" shall mean an individual who qualifies as a
"disinterested person" within the meaning set forth in Rule 16b-3(d)(3) as
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Exchange Act of 1934, or any successor definition adopted by
the Commission and who qualifies as an "outside director" within the meaning
set forth in Section 162(m) of the Code and the regulations promulgated
thereunder, or any successor definition thereto.

(i) "Early Retirement" means retirement from active employment with the
Corporation or its Subsidiary on or after the date on which the participant
reaches the age of 55 but before the date on which the participant reaches the
age of 65.

(j) "Fair Market Value" means, as of any given date, the closing price of
the Common Stock (or if no transactions were reported on such date on the next
preceding date on which transactions were reported) in the principal market in
which such Common Stock is traded on such date.

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(k) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.

(l) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.

(m) "Normal Retirement" means retirement from active employment with the
Corporation or its Subsidiary on or after the date on which the participant
reaches the age of 65.

(n) "Performance Units" means an award granted to a participant pursuant to
Section 9 hereof contingent upon achieving certain performance targets.

(o) "Plan" means the Compass Bancshares, Inc. 1996 Long Term Incentive Plan.

(p) "Restricted Stock" means an award of shares of Common Stock granted to a
participant pursuant to and subject to the restrictions set forth in Section
10 hereof.

(q) "Stock Appreciation Rights" means a right granted under Section 8
hereof, which entitles the holder to receive cash or Common Stock in an amount
equal to the excess of (a) the Fair Market Value of a specified number of
shares of Common Stock at the time of exercise over (b) a specified price.

(r) "Stock Option" means any option to purchase shares of Common Stock
granted pursuant to Section 7 hereof.

(s) "Subsidiary" means any corporation in an unbroken chain of corporations
beginning with the Corporation if each of the corporations (other than the
last corporation in the unbroken chain) owns stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in
one of the other corporations in the chain.

(t) "Ten Percent Shareholder" means a person who owns (after taking into
account the attribution rules of Code Section 424(b)) more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation.

Section 2. ADMINISTRATION.

(a) The Plan shall be administered by the Committee. The Committee shall be
appointed by the Board and shall consist of three or more members of the Board
who are Disinterested Persons. No member of the Committee shall be eligible to
receive awards under the Plan while serving on the Committee, and no member of
the Committee shall have been eligible to receive awards for one year prior to
serving on the Committee. The Committee shall have full and final authority in
its discretion to interpret the provisions of the Plan (and any agreements
relating thereto) and to decide all questions of fact arising in its
application; to determine the employees to whom awards shall be made under the
Plan; to determine the type of award to be made and the amount, size, terms
and conditions of each such award; to determine and establish additional terms
and conditions not inconsistent with the Plan for any agreements entered into
with participants in connection with the Plan; to determine the time when
awards will be granted and when rights may be exercised, which may be

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after termination of employment; to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; and to make all other determinations
necessary or advisable for the administration of the Plan.

(b) A majority of the Committee shall constitute a quorum, and the action of
a majority of members of the Committee present at any meeting at which a
quorum is present, or acts unanimously adopted in writing without the holding
of a meeting, shall be the acts of the Committee. Any decision made, or action
taken, by the Committee arising out of or in connection with the
interpretation and administration of the Plan shall be final and conclusive;
provided, however, that any such decision made or action taken may be reviewed
by the Board, in which event the determination of the Board shall be final and
conclusive. This provision shall not be construed to grant to any person any
right to review by the Board of any decision made or action taken by the
Committee.

(c) Neither the Board nor any member thereof shall be liable for any act,
omission, interpretation, construction or determination made in connection
with the Plan in good faith, and the members of the Board may be entitled to
indemnification and reimbursement by the Corporation in respect of any claim,
loss, damage or expense (including attorney's fees) arising therefrom to the
full extent permitted by law and under any directors' and officers' liability
insurance that may be in effect from time to time, in all events as a majority
of the Board then in office may determine from time to time, as evidenced by a
written resolution thereof. In addition, no member of the Board and no
employee of the Corporation shall be liable for any act or failure to act
hereunder, by any other member or other employee or by any agent to whom
duties in connection with the administration of this Plan have been delegated
or for any act or failure to act by such member or employee, in all events
except in circumstances involving such member's or employee's bad faith, gross
negligence, intentional fraud, or violation of a statute.

Section 3. PARTICIPANTS. Persons eligible to participate in the Plan shall
be those officers and key employees of the Corporation or its Subsidiaries who
are in positions in which their decisions, actions and counsel significantly
impact the performance of the Corporation or its Subsidiaries. Directors of
the Corporation who are not otherwise salaried employees of the Corporation
shall not be eligible to participate in the Plan.

Section 4. AWARDS UNDER THE PLAN. Awards by the Committee under the Plan may
be in the form of Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Performance Units, Restricted Stock, supplemental cash
payments and such other forms as the Committee may in its discretion deem
appropriate, including any combination of the above. No fractional shares
shall be issued under the Plan, and the minimum value of any shares issued
under the Plan shall be the par value at the time of award.

Section 5. SHARES SUBJECT TO PLAN.

(a) The shares that may be issued under the Plan shall not exceed in the
aggregate 1,900,000 shares of Common Stock. Such shares may be authorized and
unissued shares or treasury shares. Except as otherwise provided herein, any
shares subject to an option or right which for any reason expires or is
terminated unexercised as to such shares shall again be available under the
Plan.

(b) The maximum number of shares subject to awards which may be granted
under the Plan to any individual in any one year is 200,000 (subject to
appropriate adjustments to reflect changes in the capitalization of the
Corporation).

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(c) In the event of any change in the outstanding Common Stock of the
Corporation by reason of a stock dividend or distribution, recapitalization,
merger, consolidation, split-up, combination, exchange of shares or otherwise,
the Committee shall adjust the number of shares of Common Stock which may be
issued under the Plan and the Committee shall provide for an equitable
adjustment of any shares issuable pursuant to awards outstanding under the
Plan.

Section 6. EFFECTIVE DATE. The effective date of this Plan shall be the date
it is adopted by the Board, provided that the stockholders of the Corporation
shall approve this Plan in accordance with Rule 16b-3 of the Securities
Exchange Act of 1934 and, to the extent this Plan provides for the issuance of
Incentive Stock Options, the stockholders of the Corporation shall approve
those portions of this Plan related to the granting of Incentive Stock Options
within twelve (12) months after the date of adoption. If any awards are
granted under the Plan before the date of such stockholder approval, such
awards automatically shall be granted subject to such approval.

Section 7. STOCK OPTIONS. Stock Options may be granted either alone or in
addition to other awards granted under the Plan. Any Stock Option granted
under the Plan shall be in such form as the Committee may from time to time
approve, and the provisions of Stock Option awards need not be the same with
respect to each optionee. Each Stock Option shall be evidenced by a written
option agreement that shall specify, among other things, the type of Stock
Option granted, the option price, the duration of the Stock Option, the number
of shares of Common Stock to which the Stock Option pertains, and the schedule
on which such Stock Options become exercisable.

The Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options.

The Committee shall have the authority to grant any optionee Incentive Stock
Options, Non-Qualified Stock Options, or both types of Stock Options (in each
case with or without Stock Appreciation Rights). To the extent that any Stock
Option does not qualify as an Incentive Stock Option, it shall constitute a
separate Non-Qualified Stock Option.

Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised,
so as to disqualify either the Plan or any Incentive Stock Option under
Section 422 of the Code. Notwithstanding the foregoing, in the event an
optionee voluntarily disqualifies a Stock Option as an Incentive Stock Option
within the meaning of Section 422 of the Code, the Committee may, but shall
not be obligated to, make such additional grants, awards or bonuses as the
Committee shall deem appropriate, to reflect the tax savings to the
Corporation which result from such disqualification.

Stock Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem
desirable:

(a) Option Price. The option price per share of Common Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant
but shall be not less than the Fair Market Value of the

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Common Stock on the date of the grant of the Stock Option; provided, however,
if the Stock Option is an Incentive Stock Option granted to a Ten Percent
Shareholder, the option price for each share of Common Stock subject to such
Incentive Stock Option shall be no less than one hundred ten percent (110%) of
the Fair Market Value of a share of Common Stock on the date such Incentive
Stock Option is granted.

(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten (10) years
after the date such Stock Option is granted.

(c) Exercisability. Subject to Section 7(i) hereof with respect to Incentive
Stock Options, Stock Options shall be exercisable at such time or times and
subject to such terms and conditions as shall be determined by the Committee
at grant. If the Committee provides, in its discretion, that any Stock Option
is exercisable only in installments, the Committee may waive such installment
exercise provisions at any time, in whole or in part, based on performance
and/or such other factors as the Committee may determine in its sole
discretion.

(d) Method of Exercise. Stock Options may be exercised in whole or in part
at any time during the option period, by giving written notice of exercise to
the Corporation specifying the number of shares to be purchased, accompanied
by payment in full of the purchase price, in cash, by check or such other
instrument as may be acceptable to the Committee. As determined by the
Committee, in its sole discretion, at or after grant, payment in full or in
part may also be made in the form of unrestricted Common Stock owned by the
optionee (based on the Fair Market Value of the Common Stock on the date the
option is exercised, as determined by the Committee). No shares of Common
Stock resulting from the exercise of a Stock Option shall be issued until full
payment therefor has been made. An optionee shall have the rights to dividends
or other rights of a stockholder with respect to shares subject to the Stock
Option when the optionee has given written notice of exercise and has paid in
full for such shares.

(e) Non-transferability of Options. Except as otherwise set forth in this
Section 7(e), no Stock Option shall be transferable by the optionee otherwise
than by will or by the laws of descent and distribution, and all Stock Options
shall be exercisable, during the optionee's lifetime, only by the optionee.
For purposes of paragraphs (f), (g), (h) and (i) of this Section 7, a
transferred option may be exercised by the transferee only to the extent that
the optionee would have been entitled had the option not been transferred.

(f) Termination by Death. Unless otherwise determined by the Committee at
grant, if any optionee's employment with the Corporation or any Subsidiary
terminates by reason of death, the Stock Option may thereafter be immediately
exercised, to the extent then exercisable (or on such accelerated basis as the
Committee shall determine at or after grant), by the legal representative of
the estate or by the legatee of the optionee under the will of the optionee,
for a period of three (3) years from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of death, if an
Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, such Stock Option
will thereafter be treated as a Non-Qualified Stock Option.

(g) Termination by Reason of Disability. Unless otherwise determined by the
Committee at grant, if any optionee's employment with the Corporation or any
Subsidiary terminates by reason of Disability, any Stock Option held by such
optionee may thereafter be exercised, to the extent it was exercisable at the
time of

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termination due to Disability (or on such accelerated basis as the Committee
shall determine at or after grant), but may not be exercised after three (3)
years from the date of such termination of employment or the expiration of the
stated term of such Stock Option, whichever period is the shorter; provided,
however, that, if the optionee dies within such three year period, any
unexercised Stock Option held by such optionee shall thereafter be exercisable
to the extent to which it was exercisable at the time of death for a period of
twelve (12) months from the date of such death or for the stated term of such
Stock Option, whichever period is the shorter. In the event of termination of
employment by reason of Disability, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of
Section 422 of the Code, such Stock Option will thereafter be treated as a
Non-Qualified Stock Option.

(h) Termination by Reason of Retirement. Unless otherwise determined by the
Committee at grant, if an optionee's employment with the Corporation or any
Subsidiary terminates by reason of Normal Retirement or Early Retirement (with
Committee consent), under a formal plan or policy of the Corporation, any
Stock Option held by such optionee shall expire upon the earlier of (i) the
expiration date set forth in the Stock Option agreement to which such Stock
Option is subject, or (ii) three (3) years from the date of such Normal or
Early Retirement. An optionee shall not be deemed to have retired during any
leave of absence of the optionee authorized by the Corporation or any
Subsidiary under its standard personnel practices. In the event of termination
of employment by reason of Retirement, if an Incentive Stock Option is
exercised after the exercise periods that apply for purposes of Section 422 of
the Code, such Stock Option will thereafter be treated as a Non-Qualified
Stock Option.

(i) Limit on Value of Incentive Stock Option First Exercisable Annually. The
aggregate Fair Market Value (determined at the time of grant) of the Common
Stock for which Incentive Stock Options are exercisable for the first time by
an optionee during any calendar year under the Plan (and/or any other stock
option plans of the Corporation or any Subsidiary) shall not exceed $100,000.

Section 8. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights shall be
evidenced by Stock Appreciation Rights agreements in such form not
inconsistent with the Plan as the Committee shall approve from time to time,
which agreements shall contain in substance the following terms and
conditions:

(a) Award. A Stock Appreciation Right shall entitle the grantee to receive
upon exercise the excess of (a) the Fair Market Value of a specified number of
shares of Common Stock at the time of exercise over (b) a specified price
which shall not be less than one hundred percent (100%) of the Fair Market
Value of the Common Stock at the time the Stock Appreciation Right was
granted, or, if granted in connection with a previously issued Stock Option,
not less than 100% of the Fair Market Value of the Common Stock at the time
such option was granted. A Stock Appreciation Right may be granted in
connection with all or any portion of a previously or contemporaneously
granted Stock Option (including, in addition to options granted under the
Plan, options granted under other plans of the Corporation), or not in
connection with a Stock Option.

(b) Term. Stock Appreciation Rights shall be granted for a period of not
more than ten (10) years, and shall be exercisable in whole or in part at such
time or times and subject to such other terms and conditions as shall be
prescribed by the Committee at the time of grant.

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(c) Payment. Upon exercise of a Stock Appreciation Right, payment shall be
made in the form of Common Stock (at the Fair Market Value on the date of
exercise), in cash, or in a combination thereof, as the Committee may
determine.

(d) Effect on Shares. The exercise of a Stock Appreciation Right shall be
treated as the issuance of a share of Common Stock for purposes of calculating
the maximum number of shares which have been issued under the Plan.

(e) Stock Appreciation Right Granted with Incentive Stock Option. A Stock
Appreciation Right granted in connection with an Incentive Stock Option may be
exercised only if and when the Fair Market Value of the Common Stock subject
to the Incentive Stock Option exceeds the exercise price of such Stock Option.

Section 9. PERFORMANCE UNITS. Performance Units shall be evidenced by
performance unit agreements in such form not inconsistent with the Plan as the
Committee shall approve from time to time. Such agreements shall contain in
substance the following terms and conditions:

(a) Performance Period. The performance period for a Performance Unit shall
be established by the Committee and shall be not more than ten (10) years.

(b) Valuation of Units. A value for each Performance Unit shall be
established by the Committee, together with principal and minimum performance
targets to be achieved with respect to the Performance Unit during the
performance period. The participant shall be entitled to receive one hundred
percent (100%) of the value of the Performance Unit if the principal target is
achieved during the performance period, but shall be entitled to receive
nothing for such Performance Unit if the minimum target is not achieved during
the performance period. The participant shall be entitled to receive a stated
portion of the value of the Performance Unit for performance during the
performance period which meets or exceeds the minimum target but fails to meet
the principal target.

(c) Performance Targets. The performance targets established under the Plan
shall relate to the performance of the Corporation or any segment thereof
(collectively referred to in this Section 9 as "Corporation's performance")
over the performance period, and may be established in terms of growth in
earnings or equity, ratio of earnings to stockholders' equity or to total
capital, or any other performance standards as may be determined by the
Committee. Multiple targets may be used and may have the same or different
weighting, and they may relate to the Corporation's absolute performance or
the Corporation's performance as measured against that of other companies, or
any other standards as may be determined by the Committee.

(d) Adjustments. At any time prior to payment of the Performance Units, the
Committee may adjust previously established performance targets and other
terms and conditions, to reflect major unforeseen events such as changes in
laws, regulations or accounting policies or procedures, mergers, acquisitions
or divestitures or extraordinary, unusual or nonrecurring items or events.

(e) Payments of Performance Units. Following the conclusion of each
performance period, the Committee shall determine the extent to which
performance targets have been attained for such period as well as the other
terms and conditions established by the Committee. The Committee shall
determine what, if any, payment is due

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on the Performance Units and whether such payment shall be made in cash, in
Common Stock, or partially in cash and partially in Common Stock. Any payments
made in Common Stock shall be calculated based on the Fair Market Value of the
Common Stock. Payments shall be made as promptly as practicable following the
end of the performance period unless deferred subject to such terms and
conditions as may be prescribed by the Committee.

(f) Termination by Death, Disability or Retirement. Any employee granted a
Performance Unit pursuant to this Section 9, who, by reason of death,
Disability or Normal or Early Retirement, terminates employment before the end
of the performance period, may be entitled to receive a portion of any earned
Performance Unit. The Committee, in its discretion, will determine the amount,
if any, of the Performance Unit earned and the time at which payment will be
made.

(g) Other Termination. An employee who voluntarily terminates employment or
whose employment is terminated involuntarily for Cause will forfeit all rights
under the Performance Unit.

(h) Section 162(m) Provisions. Notwithstanding any other provision of the
Plan to the contrary, performance targets established by the Committee for the
top five most highly compensated officers of the Corporation shall be pre-
established objective performance goals within the meaning of Section 162(m)
of the Code and treasury regulations promulgated thereunder. Furthermore, and
notwithstanding any other provision of the Plan to the contrary, once the
Committee has established one or more performance targets with respect to a
Performance Unit granted to one of the top five most highly compensated
officers of the Corporation, the Committee shall have no discretion to waive
or alter the targets after the earlier of (i) the expiration of twenty-five
percent (25%) of the performance period or (ii) the date on which the outcome
under the targets is substantially certain.

Section 10. RESTRICTED STOCK AWARDS.

(a) Administration. Shares of Restricted Stock may be issued either alone or
in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Corporation and its
Subsidiaries to whom, and the time or times at which, grants of Restricted
Stock will be made, the number of shares to be awarded, the price, if any, to
be paid by the recipient of Restricted Stock (subject to Section 10(b)
hereof), the time or times within which such awards may be subject to
forfeiture, and all other conditions of the awards. The Committee may also
condition the grant of Restricted Stock upon the attainment of specified
performance goals, or such other criteria as the Committee may determine, in
its sole discretion. The provisions of Restricted Stock awards need not be the
same with respect to each recipient.

(b) Awards and Certificates. The prospective recipient of an award of shares
of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
(a "Restricted Stock Award Agreement") and has delivered a fully executed copy
thereof to the Corporation, and has otherwise complied with the then
applicable terms and conditions.

(i) Awards of Restricted Stock must be accepted within a period of ninety
(90) days (or such shorter period as the Committee may specify) after the
award date by executing a Restricted Stock Award Agreement and paying
whatever price, if any, is required.

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(ii) A stock certificate in respect of shares of Restricted Stock shall be
issued in the name of each participant who is awarded Restricted Stock.
Such certificate shall be registered in the name of the participant, and
shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such award, substantially in the following form:

"The transferability of this certificate and the shares
of stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Compass
Bancshares, Inc. 1996 Long Term Incentive Plan and a
Restricted Stock Award Agreement entered into between the
registered owner and the Corporation. Copies of such Plan
and Agreement are on file in the offices of the
Corporation, 15 South 20th Street, Birmingham, Alabama
35233."

(iii) The Committee shall require that the stock certificates evidencing
such shares be held in custody by the Corporation until the restrictions
thereon shall have lapsed, and that, as a condition of any Restricted Stock
award, the participant shall have delivered a stock power, endorsed in
blank, relating to the Common Stock covered by such award.

(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 10 shall be subject to the following restrictions and
conditions:

(i) Subject to the provisions of this Plan and the Restricted Stock Award
Agreements, during such period as may be set by the Committee commencing on
the grant date (the "Restriction Period"), the participant shall not be
permitted to sell, transfer, pledge or assign shares of Restricted Stock
awarded under the Plan. Within these limits, the Committee may, in its sole
discretion, provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions in whole or in part based on
performance and/or such other factors as the Committee may determine, in
its sole discretion.

(ii) Except as provided in paragraph (c)(i) of this Section 10, the
participant shall have, with respect to the shares of Restricted Stock, all
of the rights of a stockholder of the Corporation, including the right to
vote and to receive any dividends. Dividends paid in stock of the
Corporation or stock received in connection with a stock split with respect
to Restricted Stock shall be subject to the same restrictions as on such
Restricted Stock. Certificates for shares of unrestricted Stock shall be
delivered to the participant promptly after, and only after, the period of
forfeiture shall expire without forfeiture in respect of such shares of
Restricted Stock.

(iii) Subject to the provisions of the Restricted Stock Award Agreement
and this Section 10, upon termination of employment for any reason during
the Restriction Period, all shares still subject to restriction shall be
forfeited by the participant; provided, however, that the participant shall
be entitled to retain the shares of Restricted Stock which have been paid
for by the participant.

(iv) In the event of death or Disability or in the event that a
participant's employment is terminated as the result of special hardship
circumstances (other than for Cause), the Committee may, in its sole
discretion, waive in whole or in part any or all remaining restrictions
with respect to such participant's shares of Restricted Stock.

A-9
<PAGE>

Section 11. SUPPLEMENTAL CASH PAYMENTS. Subject to the Committee's
discretion, Stock Options, Stock Appreciation Rights, Performance Units, or
Restricted Stock agreements may provide for the payment by the Corporation of
a supplemental cash payment after the exercise of a Stock Option or Stock
Appreciation Right, at the time of payment of a Performance Unit or at the end
of the restriction period of a Restricted Stock award. Supplemental cash
payments shall be subject to such terms and conditions as shall be provided by
the Committee at the time of grant, provided that in no event shall the amount
of each payment exceed:

(a) In the case of a Stock Option, the excess of the Fair Market Value of
a share of Common Stock on the date of exercise over the option price,
multiplied by the number of shares for which such option is exercised, or

(b) In the case of a Stock Appreciation Right, Performance Unit or
Restricted Stock award, the value of the shares and other consideration
issued in payment of such award.

Section 12. SALE OR MERGER OF CHANGE IN CONTROL. In the case of a merger or
consolidation in which the Corporation is not the surviving corporation, or a
sale of all or substantially all of the business or property of the
Corporation, or liquidation or dissolution of the Corporation, or in the event
of a tender offer or any other change involving a threatened change in control
of the Corporation which, in the opinion of the Committee, could deprive the
holders of the benefits intended to be conferred by awards hereunder, the
Committee may, in anticipation of any such transaction or event, either at the
time of grant or thereafter, make such adjustments in the terms and conditions
of outstanding awards, as the Committee in its sole discretion determines are
equitably warranted under the circumstances including, without limitation, (i)
acceleration of exercise terms, or (ii) acceleration of the lapse of
restrictions and/or performance objectives or other terms.

Section 13. GENERAL PROVISIONS.

(a) Governmental or Other Regulations. Each award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that (a) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any
state or federal law, or (b) the consent or approval of any government
regulatory authority, or (c) an agreement by the recipient of an award with
respect to the disposition of shares of Common Stock, is necessary or
desirable as a condition of, or in connection with, the granting of such award
or the issue or purchase of shares of Common Stock thereunder, such award may
not be consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee. A participant
shall agree, as a condition of receiving any award under the Plan, to execute
any documents, make any representations, agree to restrictions on stock
transferability and take any actions which in the opinion of legal counsel to
the Corporation is required by any applicable law, ruling or regulation.

(b) Rights of a Stockholder. The recipient of any award under the Plan,
unless otherwise provided by the Plan, shall have no rights as a stockholder
with respect thereto unless and until certificates for shares of Common Stock
are issued to the recipient.

A-10
<PAGE>

(c) No Additional Rights. Nothing set forth in this Plan shall prevent the
Board from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases. Nothing
in the Plan or in any agreement entered into pursuant to the Plan shall confer
upon any participant the right to continue in the employment of the
Corporation or its Subsidiaries, or affect any right which the Corporation or
such Subsidiaries may have to terminate the employment of the participant.

(d) Withholding. Whenever the Corporation proposes or is required to issue
or transfer shares of Common Stock under the Plan, the Corporation shall have
the right to require the recipient to remit to the Corporation or provide
indemnification satisfactory to the Corporation for, an amount sufficient to
satisfy any federal, state or local withholding tax requirements prior to the
issuance or delivery of any certificate or certificates for such shares.
Whenever payments are to be made in cash, such payments shall be net of an
amount sufficient to satisfy any federal, state or local withholding tax
requirements.

(e) Non-Assignability. No award under the Plan shall be assignable or
transferable by the participant except by will or by the laws of descent and
distribution. During the life of a participant, such award shall be
exercisable only by the participant or by the participant's guardian or legal
representative.

(f) Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a participant or optionee by the Corporation, nothing
set forth herein shall give any such participant or optionee any rights that
are greater than those of a general creditor of the Corporation. In its sole
discretion, the Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver Common
Stock or payments in lieu of or with respect to awards hereunder; provided,
however, that the existence of such trusts or other arrangements is consistent
with the unfunded status of the Plan.

(g) Non-Uniform Determination. The Committee's determinations under the Plan
(including, without limitation, determinations of the persons to receive
awards, the form, amount and timing of such awards, the terms and provisions
of awards and the agreements evidencing the awards, and the establishment of
values and performance targets) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, awards
under the Plan, whether or not such persons are similarly situated.
Notwithstanding anything contained in the Plan, the Corporation may make loans
to participants in connection with awards under the Plan or otherwise.

(h) Amendment or Termination. The Board may amend, modify, suspend or
terminate the Plan at any time; provided, however, that without stockholder
approval, the Board may not increase the maximum number of shares which may be
issued under the Plan (except increases pursuant to Section 5(c) hereof),
change the class of employees eligible to receive awards, extend the period
during which any award may be exercised, extend the term of the Plan or change
the minimum option price. The termination or any modification, suspension or
amendment of the Plan shall not, without the consent of a participant,
adversely affect the participant's rights under an award previously granted.
The Committee may amend the terms of any award or option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights
of any holder without his consent. The Committee may also substitute new Stock
Options for previously granted Stock Options including options granted under
other plans applicable to the participant and previously granted Stock Options
having higher option prices.

A-11
<PAGE>

(i) Use of Proceeds. The proceeds received by the Corporation from the sale
of Common Stock pursuant to the sale or exercise of awards under the Plan
shall be added to the Corporation's general funds and used for general
corporate purposes.

(j) Section 16. It is intended that the Plan and any grants made to a person
subject to Section 16 of the Securities Exchange Act of 1934 meet all of the
requirements of Rule 16b-3 thereunder. If any provision of the Plan or any
award hereunder would disqualify the Plan or such award, or would otherwise
not comply with Rule 16b-3, such provision or award shall be construed or
deemed amended to conform to Rule 16b-3.

(k) No Restriction on Right of Company to Effect Corporate Changes. Nothing
in the Plan shall affect the right or power of the Corporation or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Corporation's capital structure or its
business, or any merger or consolidation of the Corporation, or any issue of
stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to
or affect the Common Stock or the rights thereof or which are convertible into
or exchangeable for Common Stock, or the dissolution or liquidation of the
Corporation, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.

(l) Construction of Plan. The validity, interpretation, and administration of
the Plan and of any rules, regulations, determinations, or decisions made
thereunder, and the rights of any and all persons having or claiming to have
any interest therein or thereunder, shall be determined exclusively in
accordance with the laws of the State of Alabama.

(m) Duration of the Plan. The Plan shall remain in effect until all awards
under the Plan have been satisfied by the issuance of shares or the payment of
cash, but no award shall be granted more than ten (10) years after the
effective date hereof.

A-12
<PAGE>

P
R
O
X
Y
COMPASS BANCSHARES, INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Garrett R. Hegel, Jerry W. Powell, and Byrd
Williams, or any of them, proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote all the shares
of common stock of Compass Bancshares, Inc., held of record by the undersigned
on February 23, 1996, at the annual meeting of stockholders to be held on
April 9, 1996, or at any adjournment(s) or postponement(s) thereof.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3.

YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.

(CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE)

<PAGE>
----+
PLEASE MARK |
[X] VOTES AS IN |
THIS EXAMPLE.

IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS PROPERLY MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT.

1. ELECTION OF DIRECTORS. NOMINEES:

William Eugene Davenport, Marshall Durbin, Jr.,
Trantum Fitzpatrick, John S. Stein, and Robert J. Wright

FOR WITHHELD
[ ] [ ]

[ ]
---------------------------------------
For all nominees except as noted above

FOR AGAINST ABSTAIN
2. Approve the appointment of [ ] [ ] [ ]
KPMG Peat Marwick LLP as
the independent auditors of
the Corporation.

FOR AGAINST ABSTAIN
3. Approve the Corporation's [ ] [ ] [ ]
1996 Long Term Incentive
Plan.

MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT

When signing as attorney, trustee or guardian, please give full style as
such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name
by authorized person.

Please sign exactly as named appears hereon. When shares are held by joint
tenants, both should sign. Please mark, sign, date and return the proxy
promptly using the enclosed envelope.

Signature: Date: Signature: Date:
-------------- --------- ----------- ---------
<PAGE>
DETACH HERE

TO: Compass Bank, as Plan Trustee of the Compass Bancshares, Inc.
Employee Stock Ownership/401(K) Plan

I hereby direct you, as Trustee of the Compass Bancshares, Inc. Employee Stock
Ownership/401(k) Plan (the "Plan") to act in accordance with the instructions
I have specified on the reverse side hereof in voting each share of Compass
Bancshares, Inc. common stock ("Bancshares Stock") allocated to my account
under the Plan at the 1996 Annual Meeting of Stockholders of Compass Bancshares,
Inc. to be held on April 9, 1996, and at any adjournment thereof. Any previous
instructions to the Plan Trustee relating to the 1996 Annual Meeting of
Stockholders of Compass Bancshares, Inc. hereby are revoked. Under the terms of
the Plan and subject to the Plan Trustee's responsibilities under ERISA, the
Plan Trustee will vote Bancshares Stock allocated to the accounts of Plan
participants and beneficiaries ("Participants") in accordance with timely
instructions received from such Participants and will not vote Bancshares Stock
allocated to Plan Participants if the Plan Trustee does not receive timely
instructions from such Participants on or before the date designated below.

IMPORTANT: YOUR INSTRUCTIONS SHOULD BE MAILED IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE. NO POSTAGE IS REQUIRED. IN ORDER TO COMPLY WITH YOUR INSTRUCTIONS,
THIS CARD MUST BE PROPERLY EXECUTED AND MAILED TO THE FIRST NATIONAL BANK OF
BOSTON SO AS TO BE RECEIVED BEFORE 5:00 P.M. EASTERN TIME ON APRIL 4, 1996. YOUR
INSTRUCTIONS WILL BE KEPT CONFIDENTIAL.

DO NOT MAIL THESE INSTRUCTIONS TO COMPASS BANK OR COMPASS BANCSHARES.

CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
PLEASE MARK
[X] INSTRUCTIONS AS
IN THIS EXAMPLE.

Items left blank will not be considered instructions to this Plan Trustee.
---

1. Election of Directors of Compass Bancshares, Inc.:
Nominees:
William Eugene Davenport, Marshall Durbin, Jr.,
Trantum Fitzpatrick, John S. Stein, and Robert J. Wright

FOR WITHHELD
[ ] [ ]

[ ]
------------------------------------
For all nominees except as listed above

2. Approve the appointment of KPMG Peat Marwick, LLP as the Independent
auditors of Compass Bancshares, Inc.

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

3. Approve the Compass Bancshares, Inc. 1996 Long Term Incentive Plan.

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

MARK HERE
FOR ADDRESS
CHANGE AND [ ]
NOTE AT LEFT

(Important Please sign exactly as name appears hereon.)

Signature Date Signature Date
------------------- -------- ---------------- --------

<PAGE>

TO: PARTICIPANTS IN THE COMPASS BANCSHARES, INC. ESOP/401(K) PLAN

Enclosed for your review and consideration, as a participant in the Compass
Bancshares, Inc. ESOP/401(k) Plan (the "Plan"), are the proxy statement of
Compass Bancshares, Inc. relating to the 1996 Annual Meeting of Shareholders
of Compass Bancshares, Inc. and a copy of the 1995 Annual Report of Compass
Bancshares, Inc. Also enclosed is a CONFIDENTIAL voting instruction card for
your use in instructing the Plan trustee regarding the voting of shares
allocated to your Plan in connection with proposals scheduled to be voted on
at the 1996 Annual Meeting.

Please read the instructions entitled "DIRECTING THE VOTE OF SHARES OF
COMPASS BANCSHARES HELD IN YOUR ESOP/401(K) ACCOUNTS AT THE 1996 ANNUAL
MEETING" appearing on the reverse side of this letter, which contain IMPORTANT
information concerning your rights to direct the voting of shares held in your
Plan accounts and the procedures for exercising such rights, including the
confidentiality of your instructions and where to send confidential voting
cards. The Plan trustee will not recommend how you should complete your
confidential voting instruction cards. However, the Plan trustee encourages
you to READ ALL PROXY MATERIALS CAREFULLY AND THOROUGHLY and to exercise your
right to direct the voting of your allocated shares at the meeting.

Voting instruction cards are to be sent, in the supplied return envelope, to
The First National Bank of Boston, and should not be sent to the Compass Bank
or its Trust Division or to Compass Bancshares.

COMPASS BANK
Trust Division
March 6, 1996
<PAGE>

DIRECTING THE VOTE OF SHARES OF COMPASS BANCSHARES, INC. HELD IN YOUR
ESOP/401(K) ACCOUNTS AT THE 1996 ANNUAL MEETING

YOUR RIGHTS TO DIRECT VOTING OF YOUR ALLOCATED SHARES. Under the terms of
the Compass Bancshares, Inc. ESOP/401(k) Plan (the "Plan"), you have the right
to direct the Plan trustee in writing as to the manner you wish to vote the
shares of Compass Bancshares, Inc. stock allocated to your Plan accounts at
the Compass Bancshares' 1996 Annual Meeting of Shareholders. Under the terms
of the Plan and subject to the Plan trustee's responsibilities under ERISA,
the Plan trustee will vote your allocated shares in accordance with your
instructions and will not vote your allocated shares if you do not provide
instructions.

CONFIDENTIALITY OF VOTING INSTRUCTIONS. Your instructions to the Plan
trustee will be completely confidential. The First National Bank of Boston,
which is also the transfer agent for Compass Bancshares, Inc., has agreed to
act as the confidential voting instruction tabulator for the Plan in
connection with the 1996 Annual Meeting of Shareholders of Compass Bancshares,
Inc. Voting instruction cards are to be sent to The First National Bank of
Boston in the return envelope supplied with the voting instruction card and
should not be sent to Compass Bank or its Trust Division or to Compass
Bancshares, Inc. The First National Bank of Boston will tabulate the
instructions received from Plan participants and beneficiaries and report the
aggregate totals to the Plan trustee. Unless otherwise required by law, The
First National Bank of Boston has agreed to maintain your instructions in
strict confidence.

HOW TO EXERCISE YOUR RIGHTS. You direct the voting of shares in your
accounts by completing, signing and returning a confidential voting
instruction card. Proxy cards supplied with any other proxy materials you may
receive in connection with shares you own outside of the Plan are not
appropriate for the purpose of instructing the Plan trustee in connection with
the voting of shares allocated to your ESOP/401(k) accounts. Voting
instructions for your allocated shares under the Plan must be received by The
First National Bank of Boston on the voting instruction cards provided by the
Plan trustee for that purpose.

MAKING AN INFORMED DECISION. In order to make an informed judgment
concerning how to instruct the Plan trustee to vote your allocated shares, you
should read all proxy materials carefully and thoroughly.

WHEN TO SUBMIT YOUR CONFIDENTIAL VOTING INSTRUCTION CARD. You may submit
your voting instructions to the confidential vote processing agent at any
time, except that in order to be effective your instructions must be received
by The First National Bank of Boston not later than 5:00 p.m. Eastern time on
April 4, 1996. You may request additional confidential voting instruction
cards at any time by contacting the Plan trustee at (205) 558-6700 or The
First National Bank of Boston at (617) 575-2130. If The First National Bank of
Boston receives more than one voting instruction card from you, the
instruction card bearing the latest date will be considered to have revoked
and cancelled all instruction cards bearing an earlier date. If more than one
confidential voting instruction card is received from you bearing the same
date, The First National Bank of Boston will consider the card bearing the
latest postmark as controlling. In addition, your voting instruction cards may
be revoked, subject to verification by The First National Bank of Boston, if
such revocation is in writing and received by The First National Bank of
Boston at P.O. Box 1628, Boston, Massachusetts 02105, not later than 5:00 p.m.
Eastern time on April 4, 1996.

If you have any questions regarding the procedures for instructing the Plan
trustee, please call J. Vance Davidson at (205) 558-6683 or Tom Radigan at
(205) 558-6745.