COLONIAL BANCGROUP INC, S-4, 1996-02-23

COLONIAL BANCGROUP INC
S-4, 1996-02-23
STATE COMMERCIAL BANKS

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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D. C. 20549
---------------------------

FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

THE COLONIAL BANCGROUP, INC.
(Exact name of Registrant as specified in its charter)

Delaware 6711 63-0661573
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)

ONE COMMERCE STREET, SUITE 800 (334) 240-5000
MONTGOMERY, ALABAMA 36104 (Telephone No.)
(Address of principal executive offices)

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

W. FLAKE OAKLEY, IV
SECRETARY
POST OFFICE BOX 1108
MONTGOMERY, ALABAMA 36102
(Name and address of agent for service)

Copies to:

MICHAEL D. WATERS, ESQUIRE WILLIAM C. CARN, III
MILLER, HAMILTON, SNIDER & ODOM, L.L.C. LEE & MCINISH
ONE COMMERCE STREET, SUITE 802 POST OFFICE BOX 1665
P.O. BOX 19 DOTHAN, ALABAMA 36302
MONTGOMERY, ALABAMA 36101-0019

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

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

CALCULATION OF REGISTRATION FEE (1)

<TABLE>
<CAPTION>
Title of Each Class Amount to be Proposed Maximum Proposed Maximum Amount of
of Securities to be Registered Offering Price Per Aggregate Offering Registration Fee
Registered Unit Price
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par 173,333(2) Not Applicable $1,413,000(3) $487.24
value $2.50 per share
</TABLE>

(1) Calculated pursuant to Rule 457(f)(2) based upon book value of company
acquired at December 31, 1995.

(2) Represents a maximum number of shares based upon a market price at
closing of $15 per share. The actual number of shares to be issued
will vary based upon the market price of registrant's securities at
closing.

(3) Respresents the book value of company acquired less $2,600,000 cash
paid by Registrant.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON EACH SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(a), MAY DETERMINE.
<PAGE> 2

THE COLONIAL BANCGROUP, INC.
CROSS REFERENCE SHEET
TO ITEMS IN FORM S-4

<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION CAPTION IN PROSPECTUS OR OTHER LOCATION IN
-------------------------------- ------------------------------------------
REGISTRATION STATEMENT
----------------------
<S> <C> <C>
Item 1. Forepart of Registration Statement and Outside Facing page, Cross Reference Sheet, Outside
Front Cover Page of Prospectus front cover page of Prospectus

Item 2. Inside Front and Outside Back Cover Pages of "AVAILABLE INFORMATION," Inside front cover page
Prospectus of Prospectus, "DOCUMENTS INCORPORATED BY
REFERENCE," "TABLE OF CONTENTS"

Item 3. Risk Factors, Ratio of Earnings to Fixed Charges "SUMMARY," Cover Page of Prospectus, "PER SHARE
and Other Information DATA," "APPROVAL OF THE MERGER," "PRO FORMA
FINANCIAL INFORMATION" AND "SELECTED FINANCIAL
DATA"

Item 4. Terms of the Transaction "APPROVAL OF THE MERGER," "DOCUMENTS
INCORPORATED BY REFERENCE"

Item 5. Pro Forma Financial Information "PER SHARE DATA," "CONDENSED PRO FORMA
STATEMENTS OF CONDITION," AND "CONDENSED PRO
FORMA STATEMENTS OF INCOME"

Item 6. Material Contacts with the Company "APPROVAL OF THE MERGER -- Background of the
Merger," "Reasons for the Merger," and
"Interests of Certain Persons in the Merger"
</TABLE>
<PAGE> 3

<TABLE>
<S> <C> <C>
Item 7. Additional Information Required for Reoffering Not Applicable
by Persons and Parties Deemed to be Underwriters

Item 8. Interests of Named Experts and Counsel "LEGAL MATTERS"

Item 9. Disclosure of Commission Position on Not Applicable; See Items 20 and 22 below
Indemnification for Securities Act Liabilities

Item 10. Information with Respect to S-3 Registrants "DOCUMENTS INCORPORATED BY REFERENCE," "BUSINESS
OF BANCGROUP - Proposed Affiliate Banks" and
"Management Information"

Item 11. Incorporation of Certain Information by "DOCUMENTS INCORPORATED BY REFERENCE"
Reference

Item 12. Information with Respect to S-2 or S-3 Not Applicable
Registrants -- Item 12(b)

Item 13. Incorporation of Certain Information by Not Applicable
Reference

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

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

Item 16. Information with Respect to S-2 or S-3 Companies Not Applicable

Item 17. Information with Respect to Companies Other than "BUSINESS OF THE BANK"
S-3 or S-2 Companies "FINANCIAL STATEMENTS"

Item 18. Information if Proxies, Consents or "INTRODUCTION," "BUSINESS OF BANCGROUP - Voting
Authorizations are to be Solicited Securities and Principal Stockholders,"
"Security Ownership of Management," "Management
Information"
</TABLE>
<PAGE> 4

<TABLE>
<S> <C> <C>
Item 19. Information if Proxies, Consents or Not Applicable
Authorizations are not to be Solicited or in an
Exchange Offer

Item 20. Indemnification of Directors and Officers PART II, Item 20

Item 21. Exhibits and Financial Statement Schedules PART II, Item 21

Item 22. Undertakings PART II, Item 22
</TABLE>
<PAGE> 5

DOTHAN FEDERAL SAVINGS BANK
1962 WEST MAIN STREET
DOTHAN, ALABAMA 36302
(334) 794-1988

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1996

NOTICE IS HEREBY GIVEN that a Special Meeting of stockholders (the "Special
Meeting") of Dothan Federal Savings Bank (the "Bank") will be held at 1962 West
Main Street, Dothan, Alabama on , 1996, at 5:30 p.m., local time,
for the following purposes:

1. Merger. To consider and vote upon the proposed merger (the
"Merger") of the Bank with and into Colonial Bank ("Colonial Bank"), a
subsidiary of The Colonial BancGroup, Inc. ("BancGroup"), in accordance
with an Agreement and Plan of Merger, dated as of January 22, 1996 (the
"Agreement"). Pursuant to the Agreement, Colonial Bank will be the
surviving corporation in the Merger, and each share of Common Stock of the
Bank outstanding at the time of the Merger will be converted into the right
to receive shares of Common Stock of BancGroup and cash, with cash also
paid in lieu of fractional shares, as described more fully in the
accompanying Joint Proxy Statement and Prospectus. The Agreement is
attached to the Joint Proxy Statement and Prospectus as Appendix A.

2. Other Matters. To transact such other business as may properly
come before the Special Meeting or any adjournments thereof.

The Board of Directors of the Bank is not aware of any other business to
come before the Special Meeting.

The Board of Directors of the Bank has fixed the close of business on
, 1996, as the record date for the determination of stockholders
entitled to notice of and to vote at the Special Meeting. Only holders of record
of Common Stock of the Bank at the close of business on that date will be
entitled to notice of and to vote at the Special Meeting or any adjournments
thereof.

Under federal law, holders of Common Stock of the Bank are eligible to
exercise dissenters' rights of appraisal in connection with the Merger, as
described more fully in the accompanying Joint Proxy Statement and Prospectus.

You are requested to complete and sign the enclosed form of Proxy which is
solicited by the Board of Directors of the Bank and to mail it promptly in the
enclosed envelope. The Proxy may be revoked at any time by filing with the
Secretary of the Bank a written revocation, by executing a later dated Proxy, or
by attending the Special Meeting and voting in person.

BY ORDER OF THE BOARD OF DIRECTORS

Secretary

Dothan, Alabama
, 1996
<PAGE> 6

JOINT PROXY STATEMENT AND PROSPECTUS

COLONIAL BANCGROUP

COMMON STOCK

DOTHAN FEDERAL SAVINGS BANK

SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
, 1996

This Joint Proxy Statement and Prospectus (the "Prospectus") relates to the
proposed merger (the "Merger") of Dothan Federal Savings Bank, a federal savings
bank, (the "Bank") with and into Colonial Bank ("Colonial Bank"), an Alabama
banking corporation and a wholly-owned subsidiary bank of The Colonial
BancGroup, Inc., a Delaware corporation, ("BancGroup") and is furnished to the
Bank's stockholders on or about the date set forth below. Colonial Bank conducts
business throughout the State of Alabama. In connection with the Merger,
BancGroup will issue shares of its Common Stock, par value $2.50 per share, and
also pay cash to the holders of the outstanding shares of Common Stock of the
Bank. The number of shares of BancGroup Common Stock to be issued to the
stockholders of the Bank will depend upon the market value of such shares prior
to the Merger. See "APPROVAL OF THE MERGER -- Conversion of Bank Shares." The
shares of Common Stock of BancGroup are listed on the New York Stock Exchange
("NYSE") under the symbol "CNB." The closing price per share of such stock as
reported by the NYSE as of February 9, 1996, was $32 1/8.

Consummation of the Merger requires, among other things, the affirmative
vote of at least two-thirds of the outstanding shares of Common Stock of the
Bank.

BancGroup has filed a Registration Statement pursuant to the Securities Act
of 1933, as amended, to register the shares of its Common Stock to be issued in
connection with the Merger described herein. This document constitutes a Proxy
Statement of the Bank in connection with stockholder approval of the Merger
described herein and a Prospectus of BancGroup with respect to the BancGroup
Common Stock to be issued in the Merger.

THE BOARD OF DIRECTORS OF THE BANK UNANIMOUSLY RECOMMENDS APPROVAL OF THE
MERGER.

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

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

The office and mailing address of the Bank are 1962 West Main Street,
Dothan, Alabama 36302 (telephone 334-794-1988), and the principal office and
mailing address of BancGroup are Colonial Financial Center, One Commerce Street,
Post Office Box 1108, Montgomery, Alabama 36192 (telephone 334-240-5000).

The date of this Prospectus is , 1996.
<PAGE> 7

AVAILABLE INFORMATION

BancGroup is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and, in accordance therewith, files reports
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information filed by BancGroup, including
proxy and information statements, can be inspected and copied at the public
reference facilities of the Commission, Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at certain regional offices: 7 World
Trade Center, 13th Floor, New York, New York 10048; Citicorp Center, 500 West
Madison Street, suite 1400, Chicago, Illinois 60661-2511; 1401 Brickell Avenue,
Suite 200, Miami, Florida 33131; 1801 California Street, Suite 4800, Denver,
Colorado 80202-2648; 5670 Wilshire Boulevard, 11th Floor, Los Angeles,
California 90036-3648. Copies of such material can be obtained from the Public
Reference Section of the Commission at prescribed rates.

BancGroup's Common Stock is listed for trading on the NYSE. Reports,
including proxy and information statements, of BancGroup and other information
may be inspected at the NYSE, 20 Broad Street, New York, New York 10005.

BancGroup has filed with the Commission a Registration Statement under the
Securities Act of 1933, as amended, to register the shares of Common Stock of
BancGroup being offered in connection with the Merger. This Prospectus omits
certain information contained in the Registration Statement and exhibits
thereto. Such Registration Statement, including the exhibits thereto, can be
inspected at the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of such Registration Statement can be
obtained at prescribed rates from the Commission at that address.

The information in this Prospectus concerning BancGroup and its
subsidiaries has been furnished by BancGroup, and the information concerning the
Bank has been furnished by the Bank. The Bank is not subject to the periodic
reporting requirements of the Exchange Act.

DOCUMENTS INCORPORATED BY REFERENCE

THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
THE PERSON SPECIFIED BELOW. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE RECEIVED BY BANCGROUP NO LATER THAN FIVE BUSINESS DAYS
PRIOR TO THE SPECIAL MEETING.

The following documents filed by BancGroup with the Commission are hereby
incorporated by reference into this Prospectus:

(1) BancGroup's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994;

(2) BancGroup's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1995;

(3) BancGroup's Current Report on Form 8-K dated February 21, 1995;

(4) BancGroup's Current Report on Form 8-K/A dated April 21, 1995;

(5) BancGroup's Current Report on Form 8-K dated July 10, 1995; and

(6) BancGroup's Registration Statement on Form 8-A dated November 22,
1994, effective February 22, 1995, containing a description of BancGroup's
Common Stock.

All documents filed by BancGroup pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 after the date of this Prospectus
and prior to the Special Meeting shall be deemed incorporated by reference in
this Prospectus and made a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed
incorporated herein by reference will be deemed to be modified or superseded for
the purpose of this Prospectus to the extent that a statement contained herein
or in the other subsequently filed document which also is, or is deemed to be,
incorporated

2
<PAGE> 8

herein by reference modifies or supersedes such statement. Any such statement so
modified or superseded will not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.

BancGroup has entered into an Agreement and Plan of Merger dated as of
January 22, 1996 (the "Agreement") with the Bank regarding the Merger described
herein. Various provisions of the Agreement are summarized or referred to in
this Prospectus, and the Agreement is incorporated by reference into this
Prospectus and attached hereto at Appendix A.

BancGroup will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the request of any
such person, a copy of any and all of the documents which have been incorporated
herein by reference but not delivered herewith (other than the exhibits to such
documents). Such request, in writing or by telephone, should be directed to W.
Flake Oakley, IV, Secretary, The Colonial BancGroup, Inc., One Commerce Street,
Post Office Box 1108, Montgomery, Alabama 36192 (telephone 334-240-5000).

3
<PAGE> 9

TABLE OF CONTENTS

<TABLE>
<CAPTION>
CAPTION PAGE
- ------------------------------------------------------------------------------------- ----
<S> <C>
SUMMARY.............................................................................. 6
INTRODUCTION......................................................................... 14
General.............................................................................. 14
Record Date; Shares Entitled to Vote; Vote Required for the Merger................... 14
Solicitation; Voting and Revocation of Proxies....................................... 14
Voting Effect of Merger.............................................................. 15
APPROVAL OF THE MERGER............................................................... 15
General.............................................................................. 15
Reasons for and Background of the Merger............................................. 16
Interests of Certain Persons in the Merger........................................... 16
Conversion of Bank Shares............................................................ 17
Certain Federal Income Tax Consequences.............................................. 18
Other Possible Consequences.......................................................... 21
Conditions of Consummation of the Merger............................................. 21
Amendment and Termination............................................................ 22
Conduct of Business Pending the Merger............................................... 22
Rights of Dissenting Stockholders.................................................... 23
Resale of BancGroup Common Stock..................................................... 24
Accounting Treatment................................................................. 24
COMPARATIVE MARKET PRICES AND DIVIDENDS.............................................. 25
BancGroup............................................................................ 25
The Bank............................................................................. 25
BANCGROUP CAPITAL STOCK AND DEBENTURES............................................... 26
Common Stock......................................................................... 26
Preference Stock..................................................................... 26
1986 Debentures...................................................................... 27
Changes in Control................................................................... 27
COMPARATIVE RIGHTS OF STOCKHOLDERS................................................... 29
Director Elections................................................................... 29
Removal of Directors................................................................. 29
Voting............................................................................... 30
Preemptive Rights.................................................................... 30
Directors' Liability................................................................. 30
Indemnification...................................................................... 30
Special Meetings of Stockholders; Action Without a Meeting........................... 31
Mergers, Share Exchanges and Sales of Assets......................................... 31
Amendment of Certificate of Incorporation and Bylaws................................. 32
Rights of Dissenting Stockholders.................................................... 32
Antitakeover Statutes................................................................ 33
Preferred Stock...................................................................... 33
Other Provisions..................................................................... 33
Effect of Merger on Bank Stockholders................................................ 33
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES........................................ 34
Condensed Pro Forma Statement of Condition (Unaudited)............................... 34
Condensed Pro Forma Statements of Income (Unaudited)................................. 38
RECENT DEVELOPMENTS -- COLONIAL BANCGROUP INC., DOTHAN FEDERAL SAVINGS BANK,
COMMERCIAL BANCORP OF GEORGIA, INC., AND SOUTHERN BANKING CORPORATION.............. 41
</TABLE>

4
<PAGE> 10

<TABLE>
<CAPTION>
CAPTION PAGE
- ------------------------------------------------------------------------------------- ----
<S> <C>
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES........................................ 48
Selected Interim Financial Data (Unaudited).......................................... 48
Selected Financial Data (as restated)................................................ 49
Selected Quarterly Financial Data 1994-1993 (as restated)............................ 51
DOTHAN FEDERAL SAVINGS BANK.......................................................... 52
Selected Interim Financial Data (unaudited).......................................... 52
Management's Discussion and Analysis of Financial Condition and Results of Operations
Comparison of the Three Months Ended September 30, 1995 and 1994................... 53
Selected Financial Data.............................................................. 54
Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................... 55
BUSINESS OF BANCGROUP................................................................ 61
General.............................................................................. 61
Lending Activities................................................................... 61
Proposed Affiliate Banks............................................................. 62
Voting Securities and Principal Stockholders......................................... 62
Security Ownership of Management..................................................... 64
Management Information............................................................... 65
Certain Regulatory Considerations.................................................... 65
BUSINESS OF THE BANK................................................................. 67
General.............................................................................. 67
Principal Stockholders............................................................... 67
Security Ownership of Management..................................................... 68
ADJOURNMENT OF SPECIAL MEETING....................................................... 68
OTHER MATTERS........................................................................ 69
DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS............................... 69
INDEPENDENT ACCOUNTANTS.............................................................. 69
LEGAL MATTERS........................................................................ 69
INDEX TO FINANCIAL STATEMENTS........................................................ F-1
APPENDIX A -- Agreement and Plan of Merger........................................... A-1
APPENDIX B -- OTS Regulation Regarding Dissenters' Rights of Appraisal............... B-1
</TABLE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES OR THE SOLICITATION OF A PROXY OR AN
OFFER TO SELL THE SECURITIES COVERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH SOLICITATION OR OFFER. THE DELIVERY
OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

5
<PAGE> 11

SUMMARY

The following provides a summary of information included in this
Prospectus. The summary is qualified in its entirety by the more detailed
information appearing elsewhere herein, the Appendices hereto and the documents
incorporated herein by reference. Stockholders of the Bank are urged to read
this document in full.

GENERAL

This Prospectus relates to the issuance of shares of BancGroup Common Stock
and the offer of cash pursuant to the Merger of the Bank with and into Colonial
Bank. Colonial Bank will be the surviving corporation in the Merger. See
"APPROVAL OF THE MERGER."

The Merger will be presented for approval at the Special Meeting of the
stockholders of the Bank to be held on , , 1996, at
5:30 p.m., local time, at the Bank's main office. See "INTRODUCTION."

TERMS OF THE MERGER

Upon the date of consummation of the Merger (the "Effective Date") and
subject to certain conditions, holders of the Bank's Common Stock will be
entitled to receive shares of BancGroup Common Stock and cash. On the Effective
Date, each share of Bank Common Stock issued and outstanding shall be converted
by operation of law into the right to receive the number of shares, or such
fractions of a share, of BancGroup Common Stock which shall be equal to
$2,600,000 divided by the total number of shares of Bank Common Stock
outstanding, divided in turn by the Market Value. The "Market Value" shall
represent the per share market value of the BancGroup Common Stock at the
Effective Date and shall be determined by calculating the average of the closing
prices of the Common Stock of BancGroup as reported by the NYSE on each of the
10 consecutive trading days ending on the trading day immediately preceding the
Effective Date. In addition, BancGroup will pay an aggregate of $2,600,000 in
cash for the outstanding shares of Bank Common Stock, with the amount of cash to
be paid for each share of Bank Common Stock equal to $2,600,000 divided by the
number of shares of Bank Common Stock outstanding. (The BancGroup Common Stock
to be issued and cash to be exchanged for Bank Common Stock as stated above is
sometimes referred to as the "Merger Consideration.") As of the date of this
Prospectus, there were 399,688 shares of Bank Common Stock outstanding.

Stockholders of the Bank may elect, subject to the restrictions summarized
below, to receive their Merger Consideration in all cash or all shares of
BancGroup Common Stock, or some proportion that is other than 50% for each.
Stockholders must file an election form (a copy of which is enclosed with this
Prospectus) prior to the Special Meeting if they wish to have their Merger
Consideration paid in a proportion of BancGroup Common Stock and cash that is
other than 50-50. Regardless of such elections, however, the total amount of
BancGroup Common Stock to be issued in the Merger shall equal 50% of the total
Merger Consideration and the total amount of cash (including cash paid for
appraisal rights) shall equal 50%. Accordingly, stockholders of the Bank may be
paid Merger Consideration in a proportion that is other than 50-50 of BancGroup
Common Stock and cash, even if such stockholders have filed an election form
requesting Merger Consideration in some other proportion.

No fractions of shares of Common Stock will be issued. Pursuant to the
Agreement, each holder of shares of Bank Common Stock who would otherwise be
entitled to receive a fraction of a share of BancGroup Common Stock shall
receive, in lieu of such fractional share, cash (without interest) in an amount
equal to such fractional share multiplied by the Market Value.

6
<PAGE> 12

rights, and assuming a Market Value of BancGroup Common Stock at the Merger of
$32, then such stockholder would receive Merger Consideration as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES OF AMOUNT OF
BANCGROUP COMMON CASH TO TOTAL VALUE
NUMBER OF SHARES STOCK TO BE BE OF MERGER
OF BANK COMMON STOCK RECEIVED RECEIVED CONSIDERATION
- -------------------- ------------------- --------- -------------
<S> <C> <C> <C>
500 101.64(1) $3,252.55(2) $ 6,505(3)
</TABLE>

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

(1) Each share of Bank Common Stock receives an amount of BancGroup Common Stock
determined by the following formula: $2,600,000 / 399,688 / 32 = .203284.
Thus, 500 shares multiplied by .203284 yields 101.64 BancGroup shares. The
fraction of .64 of a share would be paid in cash.
(2) Determined by the following formula: $2,600,000 / 399,688 = $6.51 cash for
each share of Bank Common Stock.
(3) The total Merger Consideration represents the $3252.55 of cash to be
received plus the value of the 101.64 shares of BancGroup Common Stock to
be received at a Market Value of $32 per share.

See "APPROVAL OF THE MERGER -- Conversion of Bank Shares."

The closing price of BancGroup Common Stock as reported on the NYSE as of
February 9, 1996 was $32 1/8 per share. See "COMPARATIVE MARKET PRICES AND
DIVIDENDS."

Except as stated above, no adjustments will be made to the number of shares
of BancGroup Common Stock to be issued in the Merger based upon the operating
results, financial condition or other factors relating to either the Bank or
BancGroup. The actual number of shares to be issued will depend upon the Market
Value of the BancGroup Common Stock at the time of the Effective Date of the
Merger. The aggregate number of shares of BancGroup Common Stock issued in the
Merger will increase as the Market Value of such shares at the Effective Date of
the Merger decreases and will decrease as the Market Value increases. The amount
of cash to be paid will not vary based upon the earnings of the Bank or other
performance factors. See "APPROVAL OF THE MERGER -- Conversion of Bank Shares"
and "-- Certain Federal Income Tax Consequences."

Bank stockholders will be given notice of consummation of the Merger
promptly after the Effective Date of the Merger. Certificates for the BancGroup
Common Stock issued and cash to be paid will not be distributed until
stockholders surrender their certificates representing Bank Common Stock. See
"APPROVAL OF THE MERGER -- Conversion of Bank Shares."

INTEREST OF CERTAIN PERSONS IN THE MERGER

The Bank has entered into agreements with Charles Williams, president and
chief executive officer of the Bank, and Charles E. Myers, executive vice
president and controller of the Bank, pursuant to which each person could
receive cash payments following the Merger, should such persons terminate
employment with the Bank (or Colonial Bank following the Merger). The purpose of
these agreements is to provide incentives to each person to remain as officers
and employees of the Bank during the period of time that the Merger is pending.

REASONS FOR THE MERGER

The Board of Directors of the Bank believes the Merger is in the best
interests of Bank stockholders. In recommending the Merger, the Board considered
a number of factors, including the market price of BancGroup Common Stock, the
dividend history of the BancGroup Common Stock, the lack of liquidity for the
Bank Common Stock, and the apparent and continued trend toward consolidation in
the banking field which may make it more difficult for the Bank to compete and
maintain profitability in the future. See "APPROVAL OF THE MERGER -- Reasons for
and Background of Merger."

7
<PAGE> 13

VOTE REQUIRED

Pursuant to OTS regulations, the Merger (item 1 on the proxy card) requires
the approval of at least two-thirds of the outstanding shares of Common Stock of
the Bank. Each share of Bank Common Stock is entitled to one vote per share. A
total of 399,688 shares are outstanding. Only those stockholders of the Bank who
were stockholders of record at the close of business on , 1996,
are entitled to notice of and to vote at the Special Meeting. The Bank's
directors and executive officers own in the aggregate 210,549 shares
representing 52.68% of the outstanding shares of Common Stock of the Bank and
have agreed to vote for the Merger. Directors and executive officers of
BancGroup beneficially own in the aggregate 2,103,478 shares representing 15.35%
of the outstanding shares of Common Stock of BancGroup, but no vote of
BancGroup's stockholders is required for the Merger. See "INTRODUCTION" and
"BUSINESS OF THE BANK -- Principal Stockholders," and "Security Ownership of
Management."

Proxies should be submitted in the envelope enclosed herewith. Stockholders
of the Bank submitting proxies may revoke their proxies by giving notice of such
revocation in writing to the person named in the Notice of Special Meeting of
Stockholders, by executing and delivering a proxy bearing a later date, or by
attending the Special Meeting and voting in person. Because approval of the
Merger requires the approval of at least two-thirds of the outstanding shares of
Common Stock of the Bank, failure to submit a proxy or failure to vote in person
at the Special Meeting will have the same effect as a negative vote. See
"INTRODUCTION -- Solicitation, Voting and Revocation of Proxies."

RIGHTS OF DISSENTING STOCKHOLDERS

Pursuant to regulations of the OTS, any stockholder of record of the Bank
may dissent from the Merger and obtain the fair value of his Common Stock in
cash if such stockholder (i) gives notice in writing to the Bank before voting
on the Merger that he intends to demand appraisal rights, (ii) does not vote in
favor of the Merger, and (iii) follows certain other procedures explained
further herein. Exercise of appraisal rights by stockholders will reduce the
$2,600,000 figure for determining the amount of cash to be issued in the Merger
by an amount equal to the number of shares exercising appraisal rights
multiplied by $13.01. See "APPROVAL OF THE MERGER -- Rights of Dissenting
Stockholders" and Appendix B hereto.

Any stockholder who properly exercises appraisal rights and receives the
fair market value for his shares will encounter income tax treatment different
than the treatment for stockholders who do not exercise appraisal rights. See
"APPROVAL OF THE MERGER -- Certain Federal Income Tax Consequences."

For certain information concerning dissenting stockholders' rights, voting
at the Special Meeting, and management of BancGroup and the Bank, see "APPROVAL
OF THE MERGER -- Rights of Dissenting Stockholders," "-- Conversion of Bank
Shares"; "INTRODUCTION -- Solicitation, Voting and Revocation of Proxies,"
"-- Record Date; Shares Entitled to Vote; Vote Required"; "BUSINESS OF
BANCGROUP -- Voting Securities and Principal Stockholders," "-- Security
Ownership of Management," and "BUSINESS OF THE BANK -- Principal Holders of
Common Stock," and "-- Security Ownership of Management."

CONDITIONS OF CONSUMMATION

The Merger is subject to approval by the requisite vote of at least
two-thirds of the outstanding shares of Common Stock of the Bank, and certain
other conditions. The Merger must be approved by the Alabama State Banking
Department (the "Alabama Department"), the Office of Thrift Supervision ("OTS")
and the Federal Deposit Insurance Corporation ("FDIC"). Applications are
expected to be filed with these agencies within the next two weeks, and the
regulatory approval process is expected to take approximately five months. It is
anticipated that the foregoing conditions, as well as certain other conditions
contained in the Agreement, will be satisfied, but the Agreement states that the
Bank and BancGroup may waive all conditions to their obligations to consummate
the Merger, except that the conditions of the requisite approvals of regulatory
authorities and stockholder approval of the Merger may not be waived. Either
BancGroup or the Bank may terminate the Merger if the Merger is not consummated
by December 31, 1996. See "APPROVAL OF THE MERGER -- Conditions of Consummation
of the Merger."

8
<PAGE> 14

In addition, the Boards of Directors of BancGroup and the Bank may amend or
terminate the Agreement before or after approval by the stockholders of the
Bank. No amendments will be made to the Agreement which would alter the Merger
Consideration or which, in the opinion of the Board of Directors of the Bank,
would adversely affect the rights of the stockholders of the Bank. Any
amendments to the Agreement which in the opinion of the Board of Directors of
the Bank would have a material adverse effect upon the stockholders of the Bank
would be submitted to the Bank's stockholders for approval. Such amendments
could require the filing of an amendment of the Registration Statement, of which
this Prospectus forms a part, with the Commission.

See "APPROVAL OF THE MERGER -- Conditions of Consummation of the Merger."

BUSINESS OF THE BANK

The Bank is a federally chartered stock savings bank which began operations
in 1988. The Bank's primary business is to accept savings deposits from the
general public and to make real estate loans secured by residential and
commercial property and, to a lesser extent, to make commercial and consumer
loans. Its income is derived from interest and fees in connections with such
loans. The Bank's principal expenses are interest paid on deposits and operating
expenses. The Bank conducts business through one office in Dothan, Alabama. See
"BUSINESS OF THE BANK."

BUSINESS OF BANCGROUP

BancGroup conducts a commercial banking business in the states of Alabama,
Tennessee and Georgia through 98, four and four banking offices, respectively.
Colonial Mortgage Company, a subsidiary of BancGroup's Alabama bank subsidiary,
Colonial Bank, is a mortgage company that has $9 billion of residential loan
servicing and 13 offices in 12 states. As of September 30, 1995, BancGroup had
consolidated assets of $3.4 billion and consolidated shareholders' equity of
$223 million. BancGroup has entered into agreements to acquire an additional
bank in Alabama and to acquire a bank in Orlando, Florida. See "BUSINESS OF
BANCGROUP" and "PRO FORMA INFORMATION."

COMMON STOCK OF THE BANK

The holders of Common Stock of the Bank are entitled to dividends as and
when declared by the Board of Directors out of funds legally available therefor,
to one vote for each share held on matters submitted to a vote of stockholders,
and, in the event of liquidation, to the net assets remaining after satisfaction
of all liabilities. As of , 1996, the Bank had 399,688 shares of
its Common Stock outstanding and 196 stockholders of record. See "COMPARATIVE
RIGHTS OF STOCKHOLDERS."

COMMON STOCK OF BANCGROUP

BancGroup is authorized to issue 44,000,000 shares of its Common Stock, of
which on January 31, 1996, 13,491,691 shares were issued and outstanding.
Further, up to 345,321 shares of Common Stock are issuable upon conversion of
certain debentures of BancGroup and 214,957 shares are subject to issue upon
exercise of outstanding options under BancGroup's stock option plans. BancGroup
has authorized 1,000,000 shares of Preference Stock, none of which has been
issued. Certain provisions of BancGroup's Restated Certificate of Incorporation
and bylaws may have the effect of preventing, delaying or deferring a change in
control of BancGroup. Among other things, these provisions include the election
of the BancGroup Board of Directors on a classified basis, supermajority votes
of stockholders to approve certain business combinations, and the inability of
stockholders to call special meetings or to act by written consent.

See "BANCGROUP CAPITAL STOCK AND DEBENTURES," and "COMPARATIVE RIGHTS OF
STOCKHOLDERS."

9
<PAGE> 15

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

No ruling with respect to the federal income tax consequences of the Merger
to the Bank's stockholders will be requested from the Internal Revenue Service
(the "IRS"). BancGroup and the Bank have received an opinion from counsel to
BancGroup, Miller, Hamilton, Snider & Odom, L.L.C., Mobile, Alabama, that, among
other things, a stockholder of the Bank who exchanges shares of Bank Common
Stock for BancGroup Common Stock and cash shall recognize gain, if any, but only
in an amount not in excess of the sum of such cash received. Also, stockholders
of the Bank will also recognize gain to the extent such stockholders receive
cash in lieu of fractional shares of BancGroup Common Stock or who receive cash
pursuant to the exercise of their dissenting stockholders' rights. See "APPROVAL
OF THE MERGER -- Certain Federal Income Tax Consequences."

ACCOUNTING TREATMENT

The acquisition of the Bank will be treated as a "purchase" transaction by
BancGroup. Accordingly, the purchase price will be assigned to the fair value of
the net tangible assets acquired and any purchase price in excess thereof will
be assigned to intangibles. The valuation of intangibles, if any, will be made
as of the Effective Date of the Merger. Intangibles, approximating $1,574,000,
will be amortized by charges or credits to future earnings over a period
approximating 20 years. See "APPROVAL OF THE MERGER -- Accounting Treatment."

RECENT PER SHARE MARKET PRICE

The Bank. There is no established public trading market for the Common
Stock of the Bank. To the knowledge of the Bank, 10,518 shares of the Bank
Common Stock have been transferred since January 1, 1994. The Bank has no
knowledge of the sales prices, if any, in such transfers. See "COMPARATIVE
MARKET PRICES AND DIVIDENDS -- The Bank."

BancGroup. BancGroup Common Stock is listed for trading on the NYSE under
the System symbol "CNB."

The following table indicates the high and low closing prices of the
BancGroup Class A Common Stock and the BancGroup Common Stock as reported on the
Nasdaq National Market and the NYSE for the last two full fiscal years. Prior to
February 21, 1995, BancGroup had two classes of Common Stock outstanding, Class
A and Class B. Class B was not publicly traded. Class A was traded as a Nasdaq
National Market security under the symbol "CLBGA" until February 24, 1995. On
February 21, 1995, the Class A and Class B Common Stock were reclassified into
Common Stock.

<TABLE>
<CAPTION>
PRICE PER
SHARE OF
COMMON STOCK
--------------
HIGH LOW
---- ---
<S> <C> <C>
1994
First Quarter................................................................ 20 1/4 18
Second Quarter............................................................... 25 19 1/4
Third Quarter................................................................ 24 3/4 22
Fourth Quarter............................................................... 23 3/4 19 1/2

1995
First Quarter(1)............................................................. 23 5/8 19 1/2
Second Quarter............................................................... 27 1/2 23 1/8
Third Quarter................................................................ 29 7/8 27 1/2
Fourth Quarter............................................................... 32 7/8 28 1/2

1996
First Quarter (through February 9, 1996)..................................... 32 1/2 30
</TABLE>

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

(1) Trading on the NYSE commenced on February 24, 1995.

10
<PAGE> 16

See "COMPARATIVE MARKET PRICES AND DIVIDENDS -- BancGroup."

On November 20, 1995, the business day immediately prior to the public
announcement of the Merger, the closing price of the Common Stock on the NYSE
was $29 per share. The following table presents the market value of BancGroup
Common Stock on November 20, 1995, and the market value and equivalent per share
value of the Bank Common Stock on that date:

<TABLE>
<CAPTION>
EQUIVALENT
BANCGROUP BANK BANCGROUP
COMMON STOCK COMMON STOCK COMMON STOCK
(PER SHARE) (PER SHARE) (PER SHARE)
------------ ------------ ------------
<S> <C> <C> <C>
Comparative Market Value.............................. $29.00(1) $ 9.89(2) $ 6.5051(3)
</TABLE>

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

(1) Closing price as reported by the NYSE.
(2) There is no established public trading market for the Common Stock of the
Bank. The value shown is the per share book value at September 30, 1995.
(3) If the Merger had closed on, November 21, 1995, .2230 (6.5051/29.175) shares
of BancGroup Common Stock would have been exchanged for each one share of
the Bank Common Stock, and $6.50 in cash would also have been paid for such
share, assuming 399,688 shares of Bank Common Stock outstanding, no
exercise of dissenters' rights of appraisal, and a 50-50 distribution of
stock and cash for each one share of Bank Common Stock.

See "COMPARATIVE MARKET PRICES AND DIVIDENDS."

CERTAIN LEGAL RESTRICTIONS ON ACQUISITIONS OF CONTROL

Certain restrictions under Delaware law prevent a person who beneficially
owns 15% or more of BancGroup's Common Stock from engaging in a "business
combination" with BancGroup unless certain conditions are satisfied. Also, the
Change in Bank Control Act of 1978 prohibits a person from acquiring "control"
of BancGroup unless certain notice provisions with the Federal Reserve Board
have been satisfied.

BancGroup's Restated Certificate of Incorporation and bylaws also contain
provisions which may deter or prevent a takeover of BancGroup that is not
supported by BancGroup's Board of Directors. These provisions include (1) a
classified Board of Directors, (2) supermajority vote requirements for certain
"business combinations" that exceed the provisions of Delaware law described
above, (3) flexibility for the Board to consider non-economic and other factors
in evaluating a "business combination," (4) inability of stockholders to call
special meetings and act by written consent, and (5) certain advance notice
provisions for the conduct of business at stockholder meetings.

See "COMPARATIVE RIGHTS OF STOCKHOLDERS."

PER SHARE DATA

The table on the following page presents on a per share basis the book
value, cash dividends and income from continuing operations of BancGroup and the
Bank on a historical basis and on a pro forma equivalent basis assuming the
acquisition of the Bank. Certain information from the table has been taken from
the

11
<PAGE> 17

condensed pro forma statements of condition and income included elsewhere in
this document. The table should be read in conjunction with those pro forma
statements.

<TABLE>
<CAPTION>
NINE MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, 1995 1994(A)
------------------ -------
<S> <C> <C>
BANCGROUP -- HISTORICAL (RESTATED):(1)
Net Income
Primary............................................................ $ 2.35 $ 2.28
Fully diluted...................................................... 2.27 2.23
Book value at end of period.......................................... 18.22 16.08
Dividends per share:
Common Stock....................................................... 0.675
Common A........................................................... 0.80
Common B........................................................... 0.40
DOTHAN FEDERAL SAVINGS BANK:
Net Income
Historical:
Primary......................................................... 0.28 0.82
Fully diluted................................................... 0.28 0.82
Pro forma equivalent assuming acquisition of Dothan Federal Savings
Bank only(b):
Primary......................................................... 0.48 0.47
Fully diluted................................................... 0.46 0.46
Pro forma equivalent assuming acquisition of Dothan Federal Savings
Bank, Commercial Bancorp of Georgia, Inc. and Southern Banking
Corporation(b):
Primary......................................................... 0.44 0.41
Fully diluted................................................... 0.43 0.40
Book value at end of period
Historical......................................................... 9.89 9.04
Pro forma equivalent assuming acquisition of Dothan Federal Savings
Bank only(b).................................................... 3.75 N/A
Pro forma equivalent assuming acquisition of Dothan Federal Savings
Bank, Commercial Bancorp of Georgia, Inc. and Southern Banking
Corporation(b).................................................. 3.53 N/A
Dividends per share
Historical(d)...................................................... 0.15
Pro forma equivalent assuming acquisition of Dothan Federal Savings
Bank only(c).................................................... 0.14 0.16
Pro forma equivalent assuming acquisition of Dothan Federal Savings
Bank, Commercial Bancorp of Georgia, Inc. and Southern Banking
Corporation(c).................................................. 0.14 0.16
</TABLE>

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

<TABLE>
<S> <C> <C>
(1) As restated to give effect to the February 17, 1995 acquisition of Colonial Mortgage Company,
an entity under common control, which was accounted for in a manner similar to a pooling of
interests.
</TABLE>

12
<PAGE> 18

<TABLE>
<CAPTION>
NINE MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, 1995 1994(A)
------------------ -------
<S> <C> <C>
BANCGROUP -- PRO FORMA COMBINED (DOTHAN FEDERAL ONLY):
Net Income:
Primary............................................................ 2.33 2.28
Fully diluted...................................................... 2.26 2.23
Book value at end of period.......................................... 18.31 N/A

BANCGROUP -- PRO FORMA COMBINED (DOTHAN FEDERAL SAVINGS BANK,
COMMERCIAL BANCORP OF GEORGIA, INC. AND SOUTHERN BANKING
CORPORATION):
Net Income
Primary............................................................ 2.13 2.00
Fully diluted...................................................... 2.08 1.97
Book value at end of period.......................................... 17.25 N/A
</TABLE>

- ---------------
<TABLE>
<S> <C>
N/A Not applicable due to pro forma balance sheet being presented only at
September 30, 1995 which assumes the transaction was consummated on the
latest balance sheet date in accordance with Rule 11.02(b) of Regulation
S-X.

(a) Per share data of BancGroup (restated) is for the year ended December 31,
1994. Per share data of Dothan Federal Savings Bank is for the year ended
December 31, 1994 (last six months from fiscal year end June 30, 1994 and
first six months of fiscal year end June 30, 1995).

(b) Pro forma equivalent per share amounts are calculated by multiplying the
pro forma combined total income per share and the pro forma combined total
book value per share of BancGroup by the conversion ratio so that the per
share amounts are equated to the respective values for one share of Dothan
Federal Savings Bank. For the purposes of these pro forma equivalent per
share amounts, a .2045 BancGroup common stock share conversion ratio is
utilized. The ratio is based on the 10-day average market price of Colonial
BancGroup, Inc. common stock of $31.8125 at January 9, 1996.

(c) Pro forma equivalent dividends per share are shown at BancGroup's Class A
Common Stock dividend per share rate multiplied by the .2045 conversion
ratio per share of Dothan Federal Savings Bank common stock (see note (a)).
BancGroup presently contemplates that dividends will be declared in the
future. However, the payment of cash dividends is subject to BancGroup's
actual results of operations as well as certain other internal and external
factors. Accordingly, there is no assurance that cash dividends will either
be declared and paid in the future, or, if declared and paid, that such
dividends will approximate the pro forma amounts indicated.

(d) Dothan Federal declared a $.15 per share dividend in the fiscal year ended
June 30, 1995.

</TABLE>
13
<PAGE> 19

INTRODUCTION

GENERAL

This Prospectus is being furnished to the stockholders of the Bank in
connection with the solicitation of proxies by the Board of Directors of the
Bank for use at a Special Meeting of stockholders to be held on ,
1996, at 5:30 p.m., local time, and at any adjournments thereof (the "Special
Meeting"), as stated in the accompanying Notice of Special Meeting of
Stockholders and described herein. The purpose of the Special Meeting is to
consider and vote upon the proposed Merger of the Bank with and into Colonial
Bank, BancGroup's Alabama bank subsidiary. Colonial Bank will be the surviving
corporation in the Merger.

This Prospectus is also furnished by BancGroup in connection with the offer
of shares of BancGroup Common Stock to be issued in the Merger. No vote of
BancGroup stockholders is required to approve the Merger.

The Board of Directors of the Bank believes that the Merger is in the best
interests of the Bank and its stockholders and unanimously recommends that
stockholders vote "FOR" the Merger (item 1 on the proxy card). Each member of
the Board of Directors of the Bank has separately agreed with BancGroup to vote
his or her shares in favor of the Merger.

RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED FOR THE MERGER

Shares of Common Stock, par value $.01 per share, are the only securities
of the Bank issued and outstanding. The close of business on , 1996,
has been fixed by the Board of Directors of the Bank as the record date for
determination of stockholders entitled to vote at the Special Meeting. There
were 196 record holders of Bank Common Stock as of such date. On that date,
there were outstanding 399,688 shares of Common Stock of the Bank. Approval of
the Merger requires the affirmative vote of at least two-thirds of the
outstanding shares of Common Stock of the Bank. Each share is entitled to one
vote.

Under federal regulations, stockholders of the Bank have dissenters' rights
of appraisal with respect to the Merger. See "APPROVAL OF THE MERGER -- Rights
of Dissenting Stockholders."

If the Merger is approved at the Special Meeting, the Bank is expected to
merge with and into Colonial Bank promptly after the other conditions to the
Agreement are satisfied. See "APPROVAL OF THE MERGER -- Conditions of
Consummation of the Merger." If the Merger is not approved at the Special
Meeting and it becomes reasonably and objectively certain that stockholder
approval cannot be obtained or the other conditions to the Agreement are not
satisfied, the Merger will be terminated.

THE BOARD OF DIRECTORS OF THE BANK URGES THE STOCKHOLDERS OF THE BANK TO
EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE AND UNANIMOUSLY
RECOMMENDS THAT THE SHARES REPRESENTED BY THE PROXY BE VOTED IN FAVOR OF THE
MERGER.

SOLICITATION, VOTING AND REVOCATION OF PROXIES

In addition to soliciting proxies by mail, directors, officers, and other
employees of the Bank, without receiving special compensation therefor, may
solicit proxies from the Bank's stockholders by telephone, by telegram or in
person. Arrangements will also be made with brokerage firms and other
custodians, nominees and fiduciaries, if any, to forward solicitation materials
to any beneficial owners of shares of Common Stock of the Bank held of record by
such persons.

The cost of mailing this Prospectus and other materials furnished to
stockholders of the Bank and all other expenses of solicitation, including the
expenses of brokers, custodians, nominees, and other fiduciaries who, at the
request of the Bank, mail material to or otherwise communicate with beneficial
owners of the shares held by them, will be paid by the Bank. Expenses incident
to the registration of the securities to be issued in connection with the Merger
will be paid by BancGroup.

14
<PAGE> 20

Each proxy which is solicited on behalf of the Bank, as stated on such
proxy, permits each record holder of Common Stock of the Bank to vote on the
Merger. Where a stockholder specifies his or her choice on the proxy with
respect to the Merger, the shares represented by the proxy will be voted in
accordance with such specification. IF NO SUCH SPECIFICATION IS MADE, THE SHARES
WILL BE VOTED IN FAVOR OF THE MERGER. Properly executed proxies will be voted in
accordance with the determination of a majority of the Board of Directors of the
Bank as to any other matter which may properly come before the Special Meeting.
The enclosed proxy card should be returned in the accompanying envelope.

Proxies marked as abstentions and shares held in street name which have
been designated by brokers on proxy cards as not voted will not be counted as
votes cast. Such proxies will be counted for purposes of determining a quorum at
the Special Meeting. Stockholders who execute proxies retain the right to revoke
them at any time. However, abstentions and broker non-votes will have the same
effect as a "no" vote respecting stockholder approval of the Merger.

A proxy may be revoked at any time before it is voted by: (i) filing with
the Secretary of the Bank a written notice of revocation, (ii) delivering to the
Bank a duly executed proxy bearing a later date; or (iii) attending the Special
Meeting and voting in person. Attendance at the Special Meeting will not in and
of itself constitute revocation of the proxy.

The Board of Directors of the Bank is not aware of any business to be acted
upon at the Special Meeting other than consideration of the Merger described
herein.

VOTING EFFECT OF MERGER

Assuming that (i) no dissenters' rights of appraisal are exercised in
connection with the Merger and (ii) a Market Value of BancGroup's Common Stock
of $32 per share, upon consummation of the Merger (a) 81,250 shares of BancGroup
Common Stock will be issued and $2,600,000 in cash will in the aggregate be paid
in connection with the Merger and (b) former holders of Bank Common Stock will
hold 81,250 shares, or .60%, of the BancGroup Common Stock then outstanding.

APPROVAL OF THE MERGER

THE FOLLOWING SETS FORTH A SUMMARY OF THE MATERIAL PROVISIONS OF THE
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. THE DESCRIPTION DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
AGREEMENT, A COPY OF WHICH IS ATTACHED HERETO AS APPENDIX A, AND CERTAIN
REGULATIONS OF THE OTS RELATING TO THE RIGHTS OF DISSENTING STOCKHOLDERS, A COPY
OF WHICH IS ATTACHED HERETO AS APPENDIX B. ALL BANK STOCKHOLDERS ARE URGED TO
READ ALL APPENDICES IN THEIR ENTIRETY.

GENERAL

Pursuant to the Agreement, subject to stockholder approval, receipt of
necessary regulatory approval and certain other conditions set forth in the
Agreement, the Bank will merge with and into Colonial Bank, a wholly-owned
Alabama bank subsidiary of BancGroup. Upon completion of the Merger, the
corporate existence of the Bank will cease, and Colonial Bank will succeed to
the business formerly conducted by the Bank.

In the event there is an insufficient number of shares of Bank Common Stock
present in person or by proxy at the Special Meeting to approve the Merger, the
Board of Directors of the Bank intends to adjourn the Special Meeting. Any such
adjournment will require the affirmative vote of a majority of shares present at
the Special Meeting. While such an adjournment would not invalidate any proxies
previously filed, including those filed by stockholders voting against the
Merger, it would give the Bank the opportunity to solicit additional proxies in
favor of the Merger.

15
<PAGE> 21

REASONS FOR AND BACKGROUND OF THE MERGER

In March, 1995, BancGroup contacted representatives of the Bank about a
possible acquisition of the Bank. At that time, the Bank did not enter into
negotiations regarding such an acquisition. In August, 1995, the Bank retained
the services of T. Stephen Johnson & Associates, a financial brokerage firm, to
seek possible buyers of the Bank. In September 1995, such broker contacted
BancGroup to determine whether BancGroup would have an interest in the Bank.
Approximately 24 potential purchasers of the Bank were contacted, and ten
expressed interest to the Bank in an acquisition. BancGroup was the only
institution making an offer of acquisition. The Bank's Board of Directors
decided that the BancGroup proposal represented the best transaction for the
Bank's stockholders. Following negotiations, the Bank and BancGroup entered into
a letter of intent on November 17, 1995, stating the intent of the parties to
merge the Bank with Colonial Bank. Following further discussions and a review of
the Bank's finances and operations by BancGroup, the Agreement was executed in
late January, 1996.

In negotiating the letter of intent and the Agreement, Bank management
wanted an opportunity for the stockholders of the Bank to be paid cash for their
Bank Common Stock. Although the Common Stock of BancGroup represents a liquid
security that may be readily sold on the NYSE, Bank management believed that the
opportunity for Bank stockholders to receive cash in the Merger was important.
At the same time, Bank stockholders have an opportunity in the Merger to receive
BancGroup Common Stock that, unlike the Bank Common Stock for which there is no
active trading market, may be traded on the NYSE.

The Bank also considered the market value of the BancGroup Common Stock and
the dividend history of BancGroup.

In approving the Agreement, the Board of Directors of the Bank also
considered the general trend in the banking industry toward consolidations and
mergers between community and regional banks. The Board believes that new
interstate banking legislation may result in increased consolidation in the
banking industry and may make it more difficult for smaller community banks,
such as the Bank, to compete in a given market area with larger, better
capitalized banks. With such increased competition, the upgrading of customer
services and products that would probably be necessary for the Bank would
necessitate additional personnel and overhead costs, both of which could
significantly reduce the Bank's profitability.

Finally, the Board considered the management philosophy of
BancGroup -- i.e., an emphasis upon local input and judgment in the operations
of its branch banks -- to be important in serving the Bank's customers.

In reaching its decision to approve the Merger, the Board of Directors did
not place a relative weight on any of the foregoing factors, but concluded that
in light of all of the foregoing, the merger is in the best interests of the
Bank's stockholders.

The Merger will also enable BancGroup to expand its banking operations in
southeast Alabama in locations where BancGroup has not previously had branch
banking offices.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Charles Williams, president and chief executive officer of the Bank, and
Charles E. Myers, vice president and controller, each entered into agreements
with the Bank, dated October 22, 1995, and expiring October 1, 1996, which
provide that in the event of a change in control of the Bank, each person will
be entitled for a period of 180 days from the date of closing the change in
control transaction to terminate such agreements and receive a lump sum cash
payment, in the case of Mr. Williams, of $32,000, and in the case of Mr. Myers
of $22,000. Mr. Williams is also entitled to receive his Bank-furnished
automobile. Among other things, a "change in control" is defined as a merger of
the Bank in which any person acquires control of 50% or more of the Bank's
Common Stock. The agreements were entered into by the Bank to provide incentives
to Mr. Williams and Mr. Myers to remain as officers and employees of the Bank
during the time that the Bank was actively considering a sale. The Merger
constitutes a change in control of the Bank.

16
<PAGE> 22

CONVERSION OF BANK SHARES

Merger Consideration. On the effective date of the Merger (the "Effective
Date"), and except as stated below, each share of the Bank's Common Stock
outstanding and held of record by Bank stockholders shall be converted by
operation of law into the right to receive shares of BancGroup Common Stock and
cash upon surrender of the certificates representing shares of Bank Common
Stock. Each outstanding share of Bank Common Stock shall be converted into the
number of shares, or such fractions of a share, of BancGroup Common Stock which
shall be equal to $2,600,000 divided by the total number of shares of Bank
Common Stock outstanding, divided in turn by the Market Value. The "Market
Value" shall represent the per share market value of the BancGroup Common Stock
at the Effective Date and shall be determined by calculating the average of the
closing prices of the Common Stock of BancGroup as reported by the NYSE on each
of the 10 consecutive trading days ending on the trading day immediately
preceding the Effective Date. In addition, BancGroup will pay an aggregate of
$2,600,000 in cash for the outstanding shares of Bank Common Stock, with the
amount of cash to be paid for each share of Bank Common Stock equal to
$2,600,000 divided by the number of shares of Bank Common Stock outstanding.
(The BancGroup Common Stock to be issued and the cash to be paid in exchange for
Bank Common Stock as stated above is sometimes referred to as the "Merger
Consideration.") The closing price of the BancGroup Common Stock on the NYSE on
February 9, 1996, was $32 1/8 per share. As of the date of this Prospectus,
there were 399,688 shares of Bank Common Stock outstanding.

No fractions of shares of BancGroup Common Stock will be issued in the
Merger. Pursuant to the Agreement, each holder of shares of Bank Common Stock
who would otherwise be entitled to receive a fraction of a share of BancGroup
Common Stock shall receive, in lieu of such fractional share, cash (without
interest) in an amount equal to such fraction of a share multiplied by the
Market Value.

As an example, a stockholder of the Bank who owns 500 shares of Bank Common
Stock would be entitled to receive for such shares BancGroup Common Stock and
cash. Assuming such stockholder receives BancGroup Common Stock and cash in the
proportion of 50-50 for each, assuming no exercise of appraisal rights, and
assuming a Market Value of BancGroup Common Stock at the Merger of $32, then
such stockholder would receive Merger Consideration as follows:

<TABLE>
<CAPTION>
AMOUNT OF
NUMBER OF SHARES OF CASH TO TOTAL VALUE
NUMBER OF SHARES BANCGROUP COMMON BE OF MERGER
OF BANK COMMON STOCK STOCK TO BE RECEIVED RECEIVED CONSIDERATION
- -------------------- -------------------- --------- -------------
<S> <C> <C> <C>
500 101.64(1) $ 3252.55(2) $ 6505(3)
</TABLE>

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

If any stockholder of the Bank exercises dissenters' rights of appraisal
and receives cash for Bank Common Stock held, the $2,600,000 figure stated above
which is to be used for calculating the cash to be distributed shall be reduced
by an amount that equals the number of shares of Bank Common Stock properly
exercising dissenting rights of appraisal multiplied by $13.01. See "Rights of
Dissenting Stockholders."

Election Forms. A holder of Bank Common Stock may, prior to the Special
Meeting, file a written election form (an "Election Form") with the Bank
specifying whether such holder prefers to have the Merger Consideration paid to
such holder in shares of BancGroup Common Stock only, cash only, or a proportion
of cash and BancGroup Common Stock that is other than 50% for each, provided
that, notwithstanding any elections made pursuant to such Election Forms, the
aggregate number of shares of BancGroup Common

17
<PAGE> 23

Stock to be distributed in the Merger shall equal 50% of the total Merger
Consideration and the aggregate amount of cash to be paid in the Merger shall
equal 50% of the total Merger Consideration. An Election Form shall apply to all
shares of record of Bank Common Stock held by the holder of record submitting
the Election Form. An Election Form is enclosed with this Prospectus.

If the aggregate amount of cash to be paid in the Merger is less than 50%
of the Merger Consideration based upon the Election Forms which have been
properly filed, then a sufficient amount of additional cash shall be distributed
pro rata to all stockholders of the Bank who have not elected to receive 100% of
the Merger Consideration in cash, regardless of whether such stockholders have
filed an Election Form, so that the aggregate amount of Merger Consideration to
be paid in cash in the Merger will equal 50%, and the number of shares of
BancGroup Common Stock otherwise required to be distributed shall be reduced pro
rata as to all stockholders who have not elected to receive 100% of the Merger
Consideration in cash.

If the aggregate amount of cash to be paid in the Merger is greater than
50% of the Merger Consideration based upon the Election Forms which have been
properly filed, then the aggregate amount of cash will be reduced and a
sufficient amount of cash shall be distributed pro rata to all stockholders of
the Bank who have not elected to receive 100% of the Merger Consideration in
BancGroup Common Stock, regardless of whether such stockholders have filed an
Election Form, so that the aggregate amount of Merger Consideration to be paid
in cash in the Merger will equal 50%, and the number of shares of BancGroup
Common Stock otherwise required to be distributed shall be increased pro rata as
to all stockholders who have not elected to receive 100% of the Merger
Consideration in BancGroup Common Stock. Cash to be paid to holders exercising
dissenter's rights of appraisal shall be included as part of the Merger
Consideration for determining the amount of cash to be paid in the Merger.
Interest will not be paid on any cash to be paid as part of the Merger
Consideration.

Deadline for Election Forms. The Election Form may be submitted to the
Bank along with the proxy in the envelope which has been provided with this
Prospectus. ELECTION FORMS MUST BE RECEIVED BY THE BANK NO LATER THAN 5:30 P.M.
ON , 1996, THE START OF THE SPECIAL MEETING.

Surrender of Certificates and Dividends. Upon the Effective Date and
subject to the conditions described at "Conditions of Consummation of the
Merger," the Bank's stockholders will automatically, and without further action
by such stockholders or by BancGroup, have the right to receive shares of
BancGroup Common Stock and cash upon surrender of the certificates representing
their shares of Bank Common Stock as described herein. Outstanding certificates
representing shares of Bank Common Stock shall represent the right to receive
shares of Common Stock of BancGroup and cash. Thereafter, upon surrender of the
certificates formerly representing shares of Bank Common Stock, the holder will
receive certificates for the Common Stock of BancGroup and the cash payment to
which such person is entitled. Dividends on the shares of BancGroup Common Stock
will accumulate without interest and will not be distributed to any former
stockholder of the Bank unless and until such stockholder surrenders for
cancellation his certificates for Bank Common Stock. No interest will be paid on
the cash to be distributed in the Merger. Trust Company Bank, Atlanta, Georgia,
transfer agent for BancGroup Common Stock, will act as the Exchange Agent with
respect to the shares of Bank Common Stock surrendered and cash paid in
connection with the Merger.

A detailed explanation of these arrangements will be mailed to Bank
stockholders promptly following the Effective Date. STOCK CERTIFICATES FOR BANK
COMMON STOCK SHOULD NOT BE SENT TO THE EXCHANGE AGENT UNTIL SUCH NOTICE IS
RECEIVED.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following discussion is a summary of certain anticipated material
federal income tax consequences of the Merger to the Bank and the Bank
stockholders who are citizens of the United States. It does not discuss all the
tax consequences that may be relevant to the Bank stockholders entitled to
special treatment under the Internal Revenue Code of 1986, as amended (the
"Code") (such as insurance companies, dealers in securities, tax-exempt
organizations or foreign persons) or to Bank stockholders who acquired their
Bank Common Stock pursuant to the exercise of employee stock options or
otherwise as compensation. The summary set forth below does not purport to be a
complete analysis of all potential tax effects of the

18
<PAGE> 24

transactions contemplated by the Agreement or the Merger itself. EACH BANK
STOCKHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISOR AS TO
THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER ON HIS OR HER OWN PARTICULAR
FACTS AND CIRCUMSTANCES, AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER TAX
CONSEQUENCES ARISING OUT OF THE MERGER.

No ruling has been or will be requested from the Internal Revenue Service
("IRS") as to any of the federal income tax effects to the Bank stockholders of
the Merger or the federal income tax effects to the Bank. Instead, the Bank is
relying upon an opinion of BancGroup's special counsel, Miller, Hamilton, Snider
& Odom, L.L.C., as to the federal income tax consequences of the Merger to the
Bank stockholders and to the Bank.

Based upon the opinion of Miller, Hamilton, Snider & Odom, L.L.C., which
relies upon various representations and is subject to various assumptions and
qualifications, including that the Merger is consummated in the manner and
according to the terms provided in the Agreement, the following federal income
tax consequences to the Bank stockholders and to the Bank will result from the
Merger. The tax opinion is based upon certain assumptions, including the
assumption that the Bank has no knowledge of any plan or intention on the part
of the Bank stockholders to sell or dispose of BancGroup Common Stock that would
reduce their holdings to the number of shares having in the aggregate a fair
market value of less than 50% of the total fair market value of the Bank Common
Stock outstanding immediately upon the Merger. The following presents a summary
of that opinion:

1. The Merger will qualify as a reorganization within the meaning of
Section 368(a)(1) pursuant to Section 368(a)(2)(D) of the Code.

2. A Bank stockholder who exchanges shares of Bank Common Stock solely
for BancGroup Common Stock pursuant to the election provided in the
Agreement, will not recognize any gain or loss.

3. No gain or loss will be recognized by the Bank as a result of the
Merger.

4. A Bank stockholder who exchanges shares of Bank Common Stock for a
combination of BancGroup Common Stock and cash, as described in the
Agreement, shall recognize gain. The amount of the gain realized by a
stockholder will be the excess of (a) the sum of (i) the amount of cash
received, and (ii) the fair market value of shares of BancGroup Common
Stock received, over (b) the tax basis of the shares of Bank Common Stock
exchanged therefor. Of such gain realized, a stockholder will recognize
gain, but limited to the amount of cash received. No loss shall be
recognized. Any gain recognized by such stockholders of the Bank will be
characterized as capital gain if the Bank Common Stock is a capital asset
in the hands of such stockholders and their receipt of the cash does not
have "the effect of the distribution of a dividend" within the meaning of
Section 356(a)(2) of the Code, as interpreted by the United States Supreme
Court in Commission v. Clark, 489 U. S. 726 (1989). Otherwise, the receipt
of the cash will be treated as a dividend. Pursuant to Clark, such Bank
stockholders will be treated as if the stockholder received only BancGroup
Common Stock and then BancGroup redeemed a portion of such Common Stock for
the amount of cash that actually was issued (a post-reorganization
hypothetical redemption). If that hypothetical redemption satisfies any of
the tests of Section 302(b) of the Code, it will be treated as an exchange.
Bank stockholders should be able to satisfy one or more of the tests for
exchange treatment under of Section 302(b) of the Code. Consequently, any
gain recognized by a Bank stockholder should be treated as capital gain or
loss. However, the application of Section 302(b) is dependent on each
stockholder's particular facts and circumstances and is affected by the
attribution rules of Section 318 of the Code. Consequently, Bank
stockholders should seek independent tax advice as to the tax effect of the
Merger including the receipt of the cash, to them.

5. A Bank stockholder who exchanges Bank Common Stock solely for cash
pursuant to an election provided in the Agreement shall recognize gain or
loss. The amount of the gain realized by such stockholder will be the
excess of the amount of cash received over the tax basis of the shares of
Bank Common Stock exchanged therefor. Any gain recognized by such
stockholders of the Bank will be

19
<PAGE> 25

characterized as capital gain if the Bank Common Stock is a capital asset
in the hands of such stockholders and receipt of the cash does not have the
"effect of the distribution of a dividend" within the meaning of Section
356(a)(2) of the Code. It is unclear whether the post-reorganization
hypothetical redemption of the Clark case discussed above will be
applicable to such stockholders. Nonetheless, such stockholders should be
entitled to capital gain treatment if the redemption satisfies any of the
tests of Section 302(b) of the Code. Such Bank stockholders should be able
to satisfy one or more of the tests for exchange treatment under Section
302(b) of the Code. However, the application of Section 302(b) is dependent
upon each stockholder's particular facts and circumstances and is affected
by the attribution rules of Section 318 of the Code. Consequently, such
Bank stockholders should seek independent tax advice as to the tax effects
of the Merger, including the receipt of the cash, to them.

6. The payment of cash to a Bank stockholder in lieu of a fractional
share of BancGroup Common Stock as part of the Merger will be treated as if
the fractional share was delivered to the stockholder and then redeemed by
BancGroup, with the tax effect of such deemed redemption being determined
under Section 302(b) of the Code.

7. A Bank stockholder who dissents and receives only cash pursuant to
dissenter's rights of appraisal will recognize gain or loss. Such gain or
loss will, in general, be treated as capital gain or loss, measured by the
difference between the amount of cash received and the tax basis of the
shares of Bank Common Stock converted, if the shares of Bank Common Stock
were held as capital assets. However, a Bank stockholder who receives only
cash may need to consider the effects of Sections 302 and 318 of the Code
in determining the federal income tax consequences of the transaction.

8. The basis of the BancGroup Common Stock (including any fractional
share) received by a Bank stockholder in the Merger will be the same as the
basis of the Bank Common Stock surrendered in exchange therefor, decreased
by the amount of cash received, and increased by the amount treated as a
dividend and the amount of gain recognized on the exchange.

9. The holding period of the BancGroup Common Stock received by a Bank
stockholder in the Merger will include the holding period of the Bank
Common Stock surrendered in exchange therefor, provided such shares of Bank
Common Stock were capital assets or property described under Section 1231
of the Code in the hands of the Bank stockholder on the day of the Merger,
and otherwise will begin on the date following the date of the Merger.

If the assumption stated above, that there is no plan or intention by the
Bank stockholders to sell or dispose of BancGroup Common Stock that would reduce
their holdings to the number of shares with an aggregate fair market value of at
least 50 percent of the total fair market value of Bank Common Stock outstanding
immediately before the Merger, were to be incorrect, then counsel would not be
able to opine that the Merger is a reorganization under Section 368 of the Code.
Accordingly, the Merger must satisfy the "continuity of interest" requirement
contained in Treasury Regulations and in judicial authority. The IRS has stated
that, for ruling purposes, for mergers to qualify as reorganizations, the
stockholders of the acquired corporation must receive and retain stock of the
acquiror equal to 50 percent of the aggregate fair market value of the acquired
corporation immediately before the Merger. Thus, of the total consideration
received by the stockholders of the Bank, at least 50% must consist of BancGroup
Common Stock. Moreover, Bank stockholders must retain at least that amount of
BancGroup stock after the Merger.

The "continuity of interest" test may be affected by actions of the Bank's
stockholders subsequent to the Merger. If shares of BancGroup Common Stock
received in the Merger are sold after the Merger, for example, within a twelve
month period, the IRS may challenge the status of the Merger as a reorganization
under Section 368 of the Code. For example, if ten percent of such shares were
sold within such twelve month period pursuant to a pre-arranged plan or
commitment by any one or more Bank stockholders, the IRS might assert that there
was insufficient continuity by the Bank stockholders. If the IRS were successful
in that assertion, the Merger would be taxable to both the Bank and its
stockholders. As a result, Bank stockholders would be subject to gain or loss on
the entire transaction, including the receipt of BancGroup stock.

20
<PAGE> 26

As noted above, for advance ruling purposes the IRS requires fifty percent
continuity. However, that is not a rule of substantive law. Rather, it is the
minimum required by the IRS for issuance of Private Rulings to taxpayers that
request such rulings prior to consummating a transaction. Courts, however, have
upheld the status of mergers as reorganizations where continuity was less than
fifty percent.

The opinion of Miller, Hamilton, Snider & Odom, L.L.C., is based entirely
upon the Code, regulations now in effect thereunder, current administrative
rulings and practice, and judicial authority, all of which are subject to
change. Unlike a ruling from the IRS, an opinion of counsel is not binding on
the IRS and there can be no assurance, and none is hereby given, that the IRS
will not take a position contrary to one or more positions reflected herein or
that the opinion will be upheld by the courts if challenged by the IRS.

OTHER POSSIBLE CONSEQUENCES

If the Merger becomes effective, the stockholders of the Bank, a federal
savings bank, will exchange their shares of Common Stock for securities in a
Delaware business corporation.

The state tax consequences, where applicable, of owning stock of a Delaware
business corporation may be different from those of owning shares of a federal
savings bank.

For a discussion of the differences, if any, in the rights, preferences,
and privileges attaching to Bank Common Stock as compared with BancGroup Common
Stock, see "COMPARATIVE RIGHTS OF STOCKHOLDERS."

CONDITIONS OF CONSUMMATION OF THE MERGER

Consummation of the Merger is subject to a number of conditions. First, the
Agreement must be approved by the affirmative vote of at least two-thirds of the
outstanding shares of Common Stock of the Bank.

The Merger must also be approved by the Alabama State Banking Department
(the "Alabama Department"), the Office of Thrift Supervision ("OTS") and the
Federal Deposit Insurance Corporation ("FDIC"). Applications for approval are
expected to be filed with these agencies within the next two weeks, and the
regulatory approval process is expected to take approximately five months. Any
of these agencies might refuse or revoke approval or condition approval on one
or more of the parties agreeing to take some action such as making some change
in operations. The Bank Merger Act imposes a waiting period which prohibits
consummation of the Merger, in ordinary circumstances, for a period ranging from
15-30 days following the FDIC's approval of the Merger. During such period, the
United States Department of Justice, should it object to the Merger for
antitrust reasons, may challenge the consummation of the Merger.

The obligations of the Bank and BancGroup to consummate the Merger are
conditioned upon, among other things, (i) the absence of pending or threatened
litigation with a view to restraining or prohibiting consummation of the Merger
or in which it is sought to obtain divestiture, rescission or damages in
connection with the Merger, (ii) the absence of any investigation by any
governmental agency which might result in any such proceeding, (iii)
consummation of the Merger no later than December 31, 1996, and (iv) receipt of
a favorable opinion of counsel to BancGroup regarding certain federal income tax
consequences of the Merger.

The mutual obligations of the Bank and BancGroup to consummate the Merger
are further conditioned upon, among other things, (i) the accuracy in all
material respects of the representations and warranties of the Bank and
BancGroup contained in the Agreement, and the performance by the Bank and
BancGroup of all covenants and agreements of the Bank and BancGroup; (ii) the
absence of any material adverse changes in the results of operations and
financial condition of the Bank and BancGroup, except as may be disclosed in the
Agreement; and (iii) in the case of BancGroup's obligations, receipt by
BancGroup of certain undertakings from holders of the Bank Common Stock who may
be deemed to be "affiliates" of the Bank pursuant to the rules of the Securities
and Exchange Commission (the "Commission").

It is anticipated that the foregoing conditions, as well as certain other
conditions contained in the Agreement, such as the receipt of certificates of
officers of each party as to compliance with the Agreement,

21
<PAGE> 27

will be satisfied, but the Agreement states that the Bank and BancGroup may
waive all conditions to their obligations to consummate the Merger, except that
the conditions of the requisite approvals of regulatory authorities and Bank
stockholder approval of the Merger may not be waived. In making any decisions
regarding a waiver of one or more conditions to consummation of the Merger or an
amendment of the Agreement, the Board of Directors of the Bank would be subject
to fiduciary duty standards imposed upon such board by relevant law that would
require such Board to act in the best interests of the Bank's stockholders.

AMENDMENT AND TERMINATION

The Boards of Directors of BancGroup and the Bank may amend or terminate
the Agreement before or after approval by the stockholders of the Bank. No
amendments will be made to the Agreement which would alter the Merger
Consideration or which, in the opinion of the Board of Directors of the Bank
would adversely affect the rights of the stockholders of the Bank. Any
amendments to the Agreement which in the opinion of the Board of Directors of
the Bank would have a material adverse effect upon the stockholders of the Bank
would be submitted to the Bank's stockholders for approval. Such amendments
could require the filing of an amendment of the Registration Statement, of which
this Prospectus forms a part, with the Commission.

CONDUCT OF BUSINESS PENDING THE MERGER

The Agreement contains certain restrictions on the conduct of the business
of the Bank pending consummation of the Merger. In particular, prior to the
Effective Date, the Agreement prohibits the Bank from taking any of the
following actions, subject to certain limited exceptions previously agreed to by
the parties, without the prior written approval of BancGroup:

(i) Issuing, delivering or agreeing to issue or deliver any stock,
bonds or other corporate securities (whether authorized and unissued or
held in the treasury);

(ii) Borrowing or agreeing to borrow any funds or incurring or
becoming subject to, any liability (absolute or contingent) except
borrowings, obligations and liabilities incurred in the ordinary course of
business and consistent with past practice;

(iii) Paying any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the
most recent balance sheet and current liabilities incurred since that date
in the ordinary course of business and consistent with past practice;

(iv) Declaring or making or agreeing to declare or make, any payment
of dividends or distributions of any assets of any kind whatsoever to
stockholders, or purchasing or redeeming or agreeing to purchase or redeem,
any of its outstanding securities;

(v) Except in the ordinary course of business, selling or transferring
or agreeing to sell or transfer, any of its assets, property or rights or
canceling, or agreeing to cancel, any debts or claims;

(vi) Except in the ordinary course of business, entering or agreeing
to enter into any agreement or arrangement granting any preferential rights
to purchase any of its assets, property or rights or requiring the consent
of any party to the transfer and assignment of any of its assets, property
or rights;

(vii) Suffering any losses or waiving any rights of value which in the
aggregate are material;

(viii) Except in the ordinary course of business, making or permitting
any amendment or termination of any contract, agreement or license to which
it is a party if such amendment or termination is material considering its
business as a whole;

(ix) Except for customary bonuses, making any accrual or arrangement
for or payment of bonuses or special compensation of any kind or any
severance or termination pay to any present or former officer or employee;

(x) Except in accordance with normal and usual practice, increasing
the rate of compensation payable to or to become payable to any of its
officers or employees or making any material increase in any

22
<PAGE> 28

profit-sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan, payment or arrangement made to,
for or with any of its officers or employees;

(xi) Receiving notice or having knowledge or reason to believe that
any of its substantial customers has terminated or intends to terminate its
relationship, which termination would have a material adverse effect on its
financial condition, results of operations, business, assets or properties;

(xii) Failing to operate its business in the ordinary course so as to
preserve its business intact and to preserve the goodwill of its customers
and others with whom it has business relations; and

(xiii) Entering into any other material transaction other than in the
ordinary course of business.

Until the termination of the Agreement, neither the Bank nor any of its
directors or officers (or any person representing any of the foregoing) shall
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to or participate in any negotiations or discussions
concerning, any acquisition or purchase of all or of a substantial portion of
the assets of, or of a substantial equity interest in, the Bank or any business
combination involving the Bank other than as contemplated by the Agreement. The
Bank will notify BancGroup immediately if any such inquiries or proposals are
received by the Bank, if any such information is requested from the Bank, or if
any such negotiations or discussions are sought to be initiated with the Bank.
The Bank shall instruct its officers, directors, agents or affiliates or their
subsidiaries to refrain from doing any of the above; provided, however, that
nothing contained in the Agreement shall be deemed to prohibit any officer or
director of such party from fulfilling his fiduciary duty or from taking any
action that is required by law, and provided further that nothing in the
foregoing clause shall be deemed a waiver by BancGroup that any action taken by
the Bank pursuant to such proviso constitutes a breach of the Agreement.

RIGHTS OF DISSENTING STOCKHOLDERS

Stockholders of record of the Bank have certain appraisal rights under
Federal law relating to the Merger. OTS regulation 12 C.F.R. sec. 552.14
provides for rights of appraisal for the value of the shares of such stockholder
who (1) has given notice in writing to the Bank prior to voting upon the Merger
that he or she intends to exercise appraisal rights and demand appraisal for his
or her Bank Common Stock and (2) does not vote in favor of the Merger. Failure
of a stockholder to give such written notice or to follow properly any provision
of this regulation will result in a waiver of his or her rights of appraisal.
Such notice must identify the stockholder and state that the stockholder intends
to demand appraisal of and payment for his or her shares. Such written notice
must be in addition to and separate from any proxy or vote against the Merger by
the stockholder.

Within 10 days of the consummation of the Merger, Colonial Bank will give
written notice of the Effective Date to the stockholders who dissented from the
Merger and will make a written offer to such stockholders to pay for their
shares at a specified price deemed by Colonial Bank to be the fair value thereof
and outlining other applicable procedures.

If within 60 days after the Effective Date the fair value of such shares is
agreed upon between Colonial Bank and a dissenting Bank stockholder, payment
therefor shall be made within 90 days after the Effective Date upon the
surrender of the certificate representing such stockholder's shares of Bank
Common Stock.

If within such period of 60 days a dissenting stockholder and Colonial Bank
do not agree, then such stockholder may file a petition with the OTS, 1700 G.
Street, N.W., Washington, D.C. 20552, attention: Director, with a copy filed by
certified or registered mail, with Colonial Bank, demanding a determination of
the fair market value of the shares. A stockholder who fails to file such
petition within 60 days of the Effective Date will be deemed to have accepted
the terms offered under the Merger. (At any time within such 60 days, any
stockholder will have the right to withdraw his demand for appraisal and accept
the terms of the Merger.) Within such 60 day period, such stockholder must also
submit to Trust Company Bank, BancGroup's transfer agent, his or her
certificates representing Bank Common Stock with a notation thereon that
appraisal rights have been requested. ANY STOCKHOLDER WHO FAILS TO SUBMIT HIS OR
HER STOCK CERTIFICATES FOR SUCH NOTATION WILL NO LONGER BE ENTITLED TO APPRAISAL
RIGHTS AND WILL BE DEEMED TO HAVE ACCEPTED THE TERMS OF THE MERGER. The OTS
shall determine the fair market value of such shares as of the date of the
Merger, exclusive of any

23
<PAGE> 29

element of value arising from the accomplishment or expectation of the Merger.
Colonial Bank shall pay to such stockholders the fair market value as determined
by the OTS.

The costs and expenses of any proceeding under this regulation may be
apportioned and assessed by the OTS as it deems equitable against all or some of
the parties. In making this determination the OTS shall consider whether any
party has acted arbitrarily, vexatiously, or not in good faith in respect to the
rights provided by this section.

Cash, if any, received by a Bank stockholder who dissents to the Merger
will be taxable as having been received as a distribution in redemption of the
stockholder's shares of Bank Common Stock, subject to the provisions and
limitations of the Code. See "Certain Federal Income Tax Consequences."

STOCKHOLDERS OF THE BANK WHO EXERCISE APPRAISAL RIGHTS MAY RECEIVE MORE OR
LESS CONSIDERATION THAN THOSE WHO DO NOT, IF THEIR SHARES ARE APPRAISED FOR MORE
OR LESS THAN THE AGGREGATE CONSIDERATION THEY WOULD HAVE RECEIVED PURSUANT TO
THE MERGER. THE FAILURE OF A HOLDER OF BANK COMMON STOCK TO VOTE AGAINST THE
MERGER WILL NOT ITSELF CONSTITUTE A WAIVER OF THE RIGHT TO RECEIVE PAYMENT FOR
HIS SHARES, NOR WILL A VOTE AGAINST THE MERGER SATISFY THE NOTICE REQUIREMENTS
REFERRED TO ABOVE. A STOCKHOLDER WHO HAS DEMANDED APPRAISAL RIGHTS SHALL
THEREAFTER NEITHER BE ENTITLED TO VOTE SUCH STOCK NOR BE ENTITLED TO THE PAYMENT
OF DIVIDENDS.

If a stockholder does not hold shares directly or of record but instead
holds shares of Bank Common Stock through a bank, broker or other nominee, such
stockholder must act promptly to cause the bank, broker or other nominee, as the
record holder, to follow the steps outlined above properly and in a timely
manner to perfect such stockholder's dissenters' rights. Stockholders who hold
shares of Bank Common Stock through banks, brokers or other nominees are urged
to consult with such banks, brokers or nominees regarding these procedures.

Stockholders who wish to exercise dissenters' rights should consult a legal
advisor before attempting to exercise such rights.

References herein to applicable regulations are summaries of portions
thereof, do not purport to be complete, and are qualified in their entirety by
reference to applicable law. OTS regulation 12 C.F.R. sec. 552.14, is attached
hereto as Appendix B.

RESALE OF BANCGROUP COMMON STOCK

The issuance of the shares of BancGroup Common Stock pursuant to the Merger
has been registered under the Securities Act of 1933 (the "Securities Act") and
the shares so issued may be traded without restriction, except that such
registration does not cover resales by persons ("Affiliates") receiving such
Common Stock who may be deemed to control or be controlled by, or be under
common control with the Bank at the time of the Special Meeting. Rule 145
promulgated by the Commission under the Securities Act restricts the resale of
Common Stock received in the Merger by Affiliates.

The Bank will provide BancGroup with such information as may be reasonably
necessary to determine the identity of those persons (primarily officers,
directors and principal stockholders) who may be deemed to be Affiliates. The
Bank will also obtain from each such person a written undertaking to the effect
that no sale or transfer will be made of any shares of Common Stock by such
person except pursuant to Rule 145 of the Commission or pursuant to an effective
registration or an exemption from registration under the Securities Act. Receipt
of such an undertaking is a condition to BancGroup's obligation to close the
Merger. If such certificates are not received and BancGroup waives receipt of
such condition, the certificates for the shares of BancGroup Common Stock to be
issued to such person will contain an appropriate restrictive legend and
appropriate stop transfer orders will be given to BancGroup's stock transfer
agent.

ACCOUNTING TREATMENT

24
<PAGE> 30

Effective Date of the Merger. Intangibles, in the approximate amount of
$1,574,000, will be amortized by charges or credits to future earnings over a
period of approximately twenty years.

COMPARATIVE MARKET PRICES AND DIVIDENDS

BANCGROUP

BancGroup Common Stock is listed for trading on the NYSE. The Common Stock
was first listed on the NYSE on February 24, 1995. Prior to February 21, 1995,
BancGroup had two classes of common stock outstanding, Class A and Class B. The
Class B was not publicly traded. The Class A Common Stock was traded in the
over-the-counter market and quoted on the Nasdaq National Market. The Class A
Common Stock had more limited voting rights than the Class B Common Stock. The
Class A and Class B Common Stock were reclassified into one class of Common
Stock on February 21, 1995, and the Class A Common Stock ceased to be quoted on
the Nasdaq National Market on February 24, 1995.

The following table shows the dividends paid per share and indicates the
high and low closing prices for the Class A Common Stock as reported by on the
Nasdaq National Market up to February 24, 1995, and the same information
reported by the NYSE for the BancGroup Common Stock commencing February 24,
1995.

<TABLE>
<CAPTION>
PRICE AND DIVIDENDS PAID
----------------------------
DIVIDENDS
HIGH LOW (PER SHARE)
---- --- -----------
<S> <C> <C> <C>
1994
1st Quarter................................................ $20 1/4 $18 $ 0.20
2nd Quarter................................................ 25 191/4 0.20
3rd Quarter................................................ 24 3/4 22 0.20
4th Quarter................................................ 23 3/4 191/2 0.20
1995
1st Quarter................................................ 23 5/8 191/2 0.225
2nd Quarter................................................ 27 1/2 231/8 0.225
3rd Quarter................................................ 29 7/8 271/2 0.225
4th Quarter................................................ 32 7/8 281/2 0.225
1996
1st Quarter
(through February 9, 1996)............................... 32 1/2 30 0.27
</TABLE>

On November 20, 1995, the business day immediately prior to the public
announcement of the Merger, the closing price as reported on the NYSE of the
BancGroup Common Stock was $29 per share.

At December 31, 1995, BancGroup's banking subsidiaries accounted for
approximately 98% of BancGroup's consolidated assets. BancGroup derives
substantially all of its income from dividends received from its subsidiary
banks. Various statutory provisions limit the amount of dividends the subsidiary
banks may pay without regulatory approval. In addition, federal statutes
restrict the ability of subsidiary banks to make loans to BancGroup, and
regulatory policies may also restrict such dividends.

THE BANK

There is no organized public market for the Bank's Common Stock. To the
knowledge of the Bank, 10,518 shares of Bank Common Stock have been transferred
since January 1, 1994. The Bank has no knowledge of the sales price, if any, in
such transfers.

The Bank has paid one cash dividend. That dividend was paid in 1994 at the
rate of 15c per share. The Agreement contains certain restrictions on the Bank's
right to pay dividends prior to consummation of the Merger. See "APPROVAL OF THE
MERGER -- Conduct of Business Pending the Merger."

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<PAGE> 31

BANCGROUP CAPITAL STOCK AND DEBENTURES

BancGroup's authorized capital stock consists of 44,000,000 shares of its
Common Stock, par value $2.50 per share, and 1,000,000 shares of its Preference
Stock, par value $2.50 per share. As of January 31, 1996, there were issued and
outstanding a total of 13,491,691 shares of Common Stock. No shares of
Preference Stock are issued and outstanding. BancGroup issued in 1986
$28,750,000 in principal amount of its 7 1/2% Convertible Subordinated
Debentures due 2011 (the "1986 Debentures") of which $9,416,000 are currently
outstanding and are convertible at any time into 345,321 shares of Common Stock,
subject to adjustment. There are 214,957 shares of Common Stock subject to
exercise under BancGroup's stock option plans. In addition to BancGroup Common
Stock issued in the Merger, BancGroup will issue additional shares of its Common
Stock in two pending acquisitions. See "BUSINESS OF BANCGROUP -- Proposed
Affiliate Banks."

The following statements with respect to Common Stock and Preference Stock
are brief summaries of material provisions of Delaware law and the Restated
Certificate of Incorporation (the "Certificate"), as amended, and bylaws of
BancGroup, do not purport to be complete and are qualified in their entirety by
reference to the foregoing.

COMMON STOCK

Dividends. Subject to the rights of holders of BancGroup's Preference
Stock, if any, to receive certain dividends prior to the declaration of
dividends on shares of BancGroup Common Stock, when and as dividends, payable in
cash, stock or other property, are declared by the BancGroup Board of Directors,
the holders of Common Stock are entitled to share ratably in such dividends.

Voting Rights. Each holder of Common Stock has one vote for each share
held on matters presented for consideration by the stockholders.

Preemptive Rights. The holders of Common Stock have no preemptive rights
to acquire any additional shares of BancGroup.

Issuance of Stock. The BancGroup Certificate authorizes the BancGroup
Board to issue authorized shares of Common Stock without stockholder approval.
However, BancGroup's Common Stock is listed on the NYSE, which requires
stockholder approval of the issuance of additional shares of Common Stock under
certain circumstances.

Liquidation Rights. In the event of liquidation, dissolution or winding-up
of BancGroup, whether voluntary or involuntary, the holders of Common Stock will
be entitled to share ratably in any of its assets or funds that are available
for distribution to its stockholders after the satisfaction of its liabilities
(or after adequate provision is made therefor) and after preferences of any
outstanding Preference Stock.

PREFERENCE STOCK

BancGroup's Preference Stock may be issued from time to time as a class
without series, or if so determined by the BancGroup Board of Directors, either
in whole or in part in one or more series. The voting rights, and such
designations, preferences and relative, participating, optional or other special
rights, if any, and the qualifications, limitations or restrictions thereof, if
any, including, but not limited to, the dividend rights, conversion rights,
redemption rights and liquidation preferences, if any, of any wholly unissued
series of BancGroup Preference Stock (or of the entire class of BancGroup
Preference Stock if none of such shares has been issued), the number of shares
constituting any such series and the terms and conditions of the issue thereof
may be fixed by resolution of the BancGroup Board of Directors. BancGroup
Preference Stock may have a preference over the Common Stock with respect to the
payment of dividends and the distribution of assets in the event of the
liquidation or winding-up of BancGroup and such other preferences as may be
fixed by the BancGroup Board.

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<PAGE> 32

1986 DEBENTURES

BancGroup issued in 1986 its 7 1/2% Convertible Subordinated Debentures due
2011 in the total principal amount of $28,750,000 of which $9,416,000 are
outstanding at January 31, 1996. The 1986 Debentures were issued under a trust
indenture (the "1986 Indenture") between BancGroup and Trust Company Bank,
Atlanta, Georgia, as trustee.

The 1986 Debentures will mature on March 31, 2011, and are convertible at
any time into shares of BancGroup Common Stock at the option of a holder
thereof, at the conversion price of $28 principal amount of the 1986 Debentures
for each share of BancGroup Common Stock. The conversion price is, however,
subject to adjustment upon the occurrence of certain events as described in the
1986 Indenture. In the event all of the outstanding 1986 Debentures are
converted into shares of BancGroup Common Stock in accordance with the 1986
Indenture, a total of 345,321 shares of such Common Stock will be issued. The
1986 Debentures are redeemable, in whole or in part, at the option of BancGroup
at certain premiums until 1996, when the redemption price shall be equal to 100%
of the face amount of the 1986 Debentures plus accrued interest. The payment of
principal and interest on the 1986 Debentures is subordinate, to the extent
provided in the 1986 Indenture, to the prior payment when due of all Senior
Indebtedness of BancGroup. "Senior Indebtedness" is defined as any indebtedness
of BancGroup for money borrowed, or any indebtedness incurred in connection with
an acquisition or with a merger or consolidation, outstanding on the date of
execution of the 1986 Indenture as originally executed, or thereafter created,
incurred or assumed, and any renewal, extension, modification or refunding
thereof, for the payment of which BancGroup (which term does not include
BancGroup's consolidated or unconsolidated subsidiaries) is at the time of
determination responsible or liable as obligor, guarantor or otherwise. Senior
Indebtedness does not include (i) indebtedness as to which, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding, it
is provided that such indebtedness is subordinate in right of payment to any
other indebtedness of BancGroup, and (ii) indebtedness which by its terms states
that such indebtedness is subordinate to or equally subordinate with the 1986
Debentures.

At September 30, 1995, BancGroup's Senior Indebtedness as defined in the
1986 Indenture aggregated approximately $543.8 million. Such debt includes all
short-term debt consisting of federal funds purchased, securities purchased
under repurchase agreements and borrowings with the Federal Home Loan Bank but
excludes all federally-insured deposits. BancGroup may from time to time incur
additional indebtedness constituting Senior Indebtedness. The 1986 Indenture
does not limit the amount of Senior Indebtedness which BancGroup may incur, nor
does such indenture prohibit BancGroup from creating liens on its property for
any purpose.

CHANGES IN CONTROL

Certain provisions of the BancGroup Certificate and bylaws may have the
effect of preventing, discouraging or delaying any change in control of
BancGroup. The authority of the BancGroup Board of Directors to issue BancGroup
Preference Stock with such rights and privileges, including voting rights, as it
may deem appropriate may enable the BancGroup Board to prevent a change in
control despite a shift in ownership of the BancGroup Common Stock. See
"General" and "Preference Stock." In addition, the BancGroup Board's power to
issue additional shares of BancGroup Common Stock may help delay or deter a
change in control by increasing the number of shares needed to gain control. See
"Common Stock." The following provisions also may deter any change in control of
BancGroup.

Classified Board. BancGroup's Board of Directors is classified into three
classes, as nearly equal in number as possible, with the members of each class
elected to three-year terms. Thus, one-third of BancGroup's Board of Directors
is elected by stockholders each year. With this provision, two annual elections
are required in order to change a majority of the Board of Directors. There are
currently 18 directors of BancGroup. This provision of BancGroup's Certificate
also stipulates that (i) directors can be removed only for cause upon a vote of
80% of the voting power of the outstanding shares entitled to vote in the
election of directors, voting as a class, (ii) vacancies in the Board may only
be filled by a majority vote of the directors remaining in office, (iii) the
maximum number of directors shall be fixed by resolution of the Board of

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<PAGE> 33

Directors, and (iv) the provisions relating to the classified Board can only be
amended by the affirmative vote of the holders of at least 80% of the voting
power of the outstanding shares entitled to vote in the election of directors,
voting as a class.

Business Combinations. Certain "Business Combinations" of BancGroup with a
"Related Person" may only be undertaken with the affirmative vote of at least
75% of the outstanding shares of "Voting Stock," plus the affirmative vote of at
least 67% of the outstanding shares of Voting Stock, not counting shares owned
by the Related Person, unless the Continuing Directors of BancGroup approve such
Business Combination. A "Related Person" is a person, or group, who owns or
acquires 10% or more of the outstanding shares of Common Stock, provided that no
person shall be a Related Person if such person would have been a Related Person
on the date of approval of this provision by BancGroup's Board of Directors,
i.e., April 20, 1994. An effect of this provision may be to exclude Robert E.
Lowder, the chairman and president of BancGroup, or certain members of his
family from the definition of Related Person. A "Continuing Director" is a
director who was a member of the Board of Directors immediately prior to the
time a person became a Related Person. This provision may not be amended without
the affirmative vote of the holders of at least 75% of the outstanding shares of
Voting Stock, plus the affirmative vote of the outstanding shares of at least
67% of the outstanding Voting Stock, excluding shares held by a Related Person.
This provision may have the effect of giving the incumbent Board of Directors a
veto over a merger or other Business Combination that could be desired by a
majority of BancGroup's stockholders. The current Board of Directors of
BancGroup owns approximately 15% of the outstanding shares of Common Stock of
BancGroup.

Board Evaluation of Mergers. BancGroup's Certificate permits the Board of
Directors to consider certain factors such as the character and financial
stability of the other party, the projected social, legal, and economic effects
of a proposed transaction upon the employees, suppliers, regulatory agencies and
customers and communities of BancGroup, and other factors when considering
whether BancGroup should undertake a merger, sale of assets, or other similar
transaction with another party. This provision may not be amended except by the
affirmative vote of at least 80% of the outstanding shares of Common Stock. This
provision may give greater latitude to the Board of Directors in terms of the
factors which the Board may consider in recommending or rejecting a merger or
other Business Combination of BancGroup.

Director Authority. BancGroup's Certificate prohibits stockholders from
calling special stockholders' meetings and acting by written consent. It also
provides that only BancGroup's Board of Directors has the authority to undertake
certain actions with respect to governing BancGroup such as appointing
committees, electing officers, and establishing compensation of officers, and it
allows the Board to act by majority vote.

Bylaw Provisions. BancGroup's bylaws provide that stockholders wishing to
propose nominees for the Board of Directors or other business to be taken up at
an annual meeting of BancGroup stockholders must comply with certain advance
written notice provisions. These bylaw provisions are intended to provide for
the more orderly conduct of stockholder meetings but could make it more
difficult for stockholders to nominate directors or introduce business at
stockholder meetings.

Delaware Business Combination Statute. Subject to some exceptions,
Delaware law prohibits BancGroup from entering into certain "business
combinations" (as defined) involving persons beneficially owning 15% or more of
the outstanding BancGroup Common Stock (or who is an affiliate of BancGroup and
has over the past three years beneficially owned 15% or more of such stock)
(either, for the purpose of this paragraph, an "Interested Stockholder"), unless
the BancGroup Board has approved either (i) the business combination or (ii)
prior to the stock acquisition by which such person's beneficial ownership
interest reached 15% (a "Stock Acquisition"), the Stock Acquisition. The
prohibition lasts for three years from the date of the Stock Acquisition.
Notwithstanding the preceding, Delaware law allows BancGroup to enter into a
business combination with an Interested Stockholder if (i) the business
combination is approved by the BancGroup Board of Directors and authorized by an
affirmative vote of at least 66 2/3% of the outstanding voting stock of
BancGroup which is not owned by the Interested Stockholder or (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
Interested Stockholder, such stockholder owned at least 85% of the outstanding
stock of BancGroup (excluding BancGroup stock held by officers and directors of
BancGroup or by certain BancGroup stock plans). These provisions of Delaware law
apply simultaneously with the

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<PAGE> 34

provisions of BancGroup's Certificate relating to business combinations with a
related person, described above at "Business Combinations," but they are
generally less restrictive than BancGroup's Certificate.

Control Acquisitions. As it relates to BancGroup, the Change in Bank
Control Act of 1978 prohibits a person or group of persons from acquiring
"control" of a bank holding company unless the Federal Reserve Board has been
given 60 days' prior written notice of such proposed acquisition and within that
time period the Federal Reserve Board has not issued a notice disapproving the
proposed acquisition or extending for up to another 30 days the period during
which such a disapproval may be issued. An acquisition may be made prior to the
expiration of the disapproval period if the Federal Reserve Board issues written
notice of its intent not to disapprove the action. Under a rebuttable
presumption established by the Federal Reserve Board, the acquisition of more
than 10% of a class of voting stock of a bank holding company with a class of
securities registered under Section 12 of the Exchange Act, such as BancGroup,
would, under the circumstances set forth in the presumption, constitute the
acquisition of control. The receipt of revocable proxies, provided the proxies
terminate within a reasonable time after the meeting to which they relate, is
not included in determining percentages for change in control purposes.

COMPARATIVE RIGHTS OF STOCKHOLDERS

If the Merger is consummated, all stockholders of the Bank, other than
those properly exercising dissenters' rights of appraisal or receiving all cash
pursuant to an Election Form, will become holders of BancGroup Common Stock. The
rights of the holders of the Common Stock of the Bank who become holders of the
Common Stock of BancGroup following the Merger will be governed by BancGroup's
Certificate and bylaws, as well as the laws of Delaware, the state in which
BancGroup is incorporated.

The following summary compares the rights of holders of Bank Common Stock
with the rights of the holders of the Common Stock of BancGroup. For a more
complete description of the rights of the holders of BancGroup Common Stock, see
"BANCGROUP CAPITAL STOCK AND DEBENTURES."

The following information is qualified in its entirety by BancGroup's
Certificate and bylaws, and the Bank's Stock Charter and bylaws, the Delaware
General Corporation Law (the "Delaware GCL") and the regulations of the OTS.

DIRECTOR ELECTIONS

The Bank. The Bank's directors are elected to terms of three years with
approximately one-third of the board to be elected annually. Stockholders of the
Bank have cumulative voting rights in the election of directors, which means a
stockholder is entitled to the number of votes as shall equal the number of
directors to be elected multiplied by the number of shares held by such
stockholder. The stockholder may give one candidate all of such votes or may
distribute votes among the directors to be elected as such stockholder
determines.

BancGroup. BancGroup's directors are elected to terms of three years with
approximately one-third of the board to be elected annually. There is no
cumulative voting in the election of directors. See "BANCGROUP CAPITAL STOCK AND
DEBENTURES -- Changes in Control -- Classified Board."

REMOVAL OF DIRECTORS

The Bank. At a meeting of stockholders called expressly for such purpose,
stockholders of the Bank may remove a director with cause upon the affirmative
vote of the holders of at least a majority of the Common Stock entitled to vote.

BancGroup. The BancGroup Certificate provides that a director may be
removed from office, but only for cause and by the affirmative vote of the
holders of at least 80% of the voting shares then entitled to vote at an
election of directors.

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<PAGE> 35

VOTING

The Bank. Each share of Common Stock of the Bank is entitled to one vote
per share on all matters requiring a stockholder vote, except in the election of
directors, in which case stockholders have cumulative voting rights. See
"Director Elections."

BancGroup. Each stockholder is entitled to one vote for each share of
Common Stock held, and such holders are not entitled to cumulative voting rights
in the election of directors.

PREEMPTIVE RIGHTS

The Bank. Holders of the Bank's capital stock do not have preemptive
rights to acquire additional shares of capital stock which the Bank may issue.

BancGroup. The holders of BancGroup Common Stock have no preemptive rights
to acquire any additional shares of BancGroup Common Stock or any other shares
of BancGroup capital stock.

DIRECTORS' LIABILITY

The Bank. Neither the Bank's Stock Charter nor bylaws contain any
provisions respecting the personal liability of directors.

BancGroup. The BancGroup Certificate provides that a director of BancGroup
will have no personal liability to BancGroup or its stockholders for monetary
damages for breach of fiduciary duty as a director except (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) for the payment of certain unlawful dividends
and the making of certain stock purchases or redemptions, or (iv) for any
transaction from which the director derived an improper personal benefit. This
provision would absolve directors of personal liability for negligence in the
performance of duties, including gross negligence. It would not permit a
director to be exculpated, however, for liability for actions involving
conflicts of interest or breaches of the traditional "duty of loyalty" to
BancGroup and its stockholders, and it would not affect the availability of
injunctive or other equitable relief as a remedy.

INDEMNIFICATION

The Bank. Neither the Bank's Stock Charter nor bylaws contain any
provisions respecting indemnification of the Bank's directors.

Pursuant to OTS regulations, the Bank shall indemnify any person against
whom an action is brought or threatened because that person is or was a
director, officer or employee of the Bank for any amount for which that person
becomes liable under a judgment and reasonable attorney's fees, actually paid or
incurred by that person in defending or settling such action, or in enforcing
his or her rights under such regulations if he or she obtains a favorable
judgment in such enforcement action. Indemnification shall be made to such
person only if:

(1) Final judgment on the merits is in his or her favor; or

(2) In case of:

(i) Settlement,

(ii) Final judgment against him or her, or

(iii) Final judgment in his or her favor, other than on the merits,
if a majority of the disinterested directors of the Bank determine that
he or she was acting in good faith within the scope of his or her
employment or authority as he or she could reasonably have perceived it
under the circumstances and for a purpose he or she could reasonably
have believed under the circumstances was in the best interests of the
Bank or its members. However, no indemnification shall be made unless
the Bank gives the OTS at least 60 days' notice of its intention to make
such indemnification.

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<PAGE> 36

BancGroup. Section 145 of the Delaware GCL contains detailed and
comprehensive provisions providing for indemnification of directors and officers
of Delaware corporations against expenses, judgments, fines and settlements in
connection with litigation. Under the Delaware GCL, other than an action brought
by or in the right of BancGroup, such indemnification is available if it is
determined that the proposed indemnitee acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of
BancGroup and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In actions brought by or
in the right of BancGroup, such indemnification is limited to expenses
(including attorneys' fees) actually and reasonably incurred in the defense or
settlement of such action if the indemnitee acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
BancGroup and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person has been adjudged to be liable to
BancGroup unless and only to the extent that the Delaware Court of Chancery or
the court in which the action was brought determines upon application that in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.

To the extent that the proposed indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding (or any claim,
issue or matter therein), such person must be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection therewith.

In addition, BancGroup maintains an officers' and directors' insurance
policy and a separate indemnification agreement pursuant to which certain
officers and all directors of BancGroup would be entitled to indemnification
against certain liabilities, including reimbursement of certain expenses.

SPECIAL MEETINGS OF STOCKHOLDERS; ACTION WITHOUT A MEETING

The Bank. Special meetings of stockholders of the Bank may be called at
any time by the Chairman of the Board of the Bank, the President, or a majority
of the Board of Directors, and shall be called by the Chairman, the President or
Secretary upon the written request of the holders of at least 10 percent of the
outstanding shares of capital stock. Any action required to be taken at any
meeting of stockholders may be taken without a meeting if a consent, in writing,
setting forth the action to be taken, is given by all stockholders entitled to
vote on such matter.

BancGroup. Under the BancGroup Certificate, a special meeting of
BancGroup's stockholders may only be called by a majority of the BancGroup Board
of Directors or by the chairman of the Board of Directors of BancGroup. Holders
of BancGroup Common Stock may not call special meetings or act by written
consent.

MERGERS, SHARE EXCHANGES AND SALES OF ASSETS

The Bank. Regulations of the OTS provide that mergers, consolidations and
sales of all or substantially all of the assets of the Bank must be approved by
the affirmative vote of at least two-thirds of the outstanding share of Bank
Common Stock. Stockholders of the Bank need not authorize a merger or other such
transaction if the Bank is the resulting corporation and if:

(i) The Bank's Stock Charter is not changed;

(ii) Each share of stock outstanding immediately prior to the
effective date of the transaction is to be an identical outstanding share
or a treasury share of the resulting Federal stock association after such
effective date; and

(iii) Either:

(A) No shares of voting stock of the resulting Federal stock
association and no securities convertible into such stock are to be
issued, or delivered under the plan of combination, or

(B) The authorized unissued shares of the treasury shares of voting
stock of the resulting Federal stock association to be issued or
delivered under the plan of combination, plus those initially issuable
upon conversion of any securities to be issued or delivered under such
plan, do not exceed 15% of the total shares of voting stock of such
association outstanding immediately prior to the effective date of the
combination.

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<PAGE> 37

BancGroup. The Delaware GCL provides that mergers and sales of
substantially all of the assets of a corporation must be approved by a majority
of the outstanding stock of the corporation entitled to vote thereon. The
Delaware GCL law also provides, however, that the stockholders of the
corporation surviving a merger need not approve the transaction if: (i) the
agreement of merger does not amend in any respect the certificate of
incorporation of such corporation; (ii) each share of stock of such corporation
outstanding immediately prior to the effective date of the merger is to be an
identical outstanding or treasury share of the surviving corporation after the
effective date of the merger; and (iii) either no shares of common stock of the
surviving corporation and no shares, securities or obligations convertible into
such stock are to be issued or delivered under the plan of merger, or the
authorized unissued shares or the treasury shares of common stock of the
surviving corporation to be issued or delivered under the plan of merger plus
those initially issuable upon conversion of any other shares, securities or
obligations to be issued or delivered under such plan do not exceed 20% of the
shares of common stock of such corporation outstanding immediately prior to the
effective date of the merger. See also "BANCGROUP CAPITAL STOCK AND
DEBENTURES -- Changes in Control" for a description of the statutory provisions
and the provisions of the BancGroup Certificate relating to changes of control
of BancGroup. See "Antitakeover Statutes" for a description of additional
restrictions on business combination transactions.

AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS

The Bank. Amendments to the Bank's Stock Charter must be approved by the
affirmative vote of the holders of at least a majority of the outstanding shares
of Bank Common Stock, after recommendation by the Board of Directors. The Bank's
bylaws may be amended by a vote of at least two-thirds of the Board of Directors
or by at least a majority of the shares of Common Stock voted at a meeting of
stockholders.

BancGroup. Under the Delaware GCL, a corporation's certificate of
incorporation may be amended by the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote thereon, and a majority of
the outstanding stock of each class entitled to vote as a class, unless the
certificate requires the vote of a larger portion of the stock. The BancGroup
Certificate requires "supermajority" stockholder approval to amend or repeal any
provision of, or adopt any provision inconsistent with, certain provisions in
the BancGroup Certificate governing (i) the election or removal of directors,
(ii) business combinations between BancGroup and a Related Person, and (iii)
Board of Director evaluation of business combination procedures. See "BANCGROUP
CAPITAL STOCK AND DEBENTURES -- Changes in Control."

As is permitted by the Delaware GCL, the Certificate gives the Board of
Directors the power to adopt, amend or repeal the bylaws. The stockholders
entitled to vote have concurrent power to adopt, amend or repeal the BancGroup
bylaws.

RIGHTS OF DISSENTING STOCKHOLDERS

The Bank. Stockholders of the Bank have the right to exercise dissenters'
rights of appraisal respecting mergers, consolidations and sales of all or
substantially all of the assets of the Bank. For a description of such rights,
see "APPROVAL OF THE MERGER -- Rights of Dissenting Stockholders." Stockholders
of a federal savings bank do not have such appraisal rights if the consideration
to be paid for the shares of the bank in the transaction constitutes only
"qualified consideration" and if the shares of the bank are listed on a national
securities exchange or quoted on the Nasdaq National Market. "Qualified
consideration" means cash, or shares listed on a national securities exchange or
quoted on the Nasdaq National Market, or a combination of both.

BancGroup. Under the Delaware GCL, a stockholder has the right, in certain
circumstances, to dissent from certain corporate transactions (such as a Merger
but not a sale of assets) and receive the fair value (excluding any appreciation
or depreciation as a consequence or in expectation of the transaction) of his
shares in cash in lieu of the consideration he otherwise would have received in
the transaction. Such fair value is determined by the Delaware Court of Chancery
if a petition for appraisal is timely filed. Appraisal rights are not available,
however, to stockholders of a corporation (i) if the shares are listed on a
national securities exchange (as is BancGroup Common Stock) or quoted on the
Nasdaq National Market, or held of record by more than 2,000 stockholders (as is
BancGroup Common Stock), and (ii) stockholders are permitted by the

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<PAGE> 38

terms of the merger or consolidation to accept in exchange for their shares (a)
shares of stock of the surviving or resulting corporation, (b) shares of stock
of another corporation listed on a national securities exchange or held of
record by more than 2,000 stockholders, (c) cash in lieu of fractional shares of
such stock, or (d) any combination thereof. Stockholders are not permitted
appraisal rights in a merger if such corporation is the surviving corporation
and no vote of its stockholders is required.

ANTITAKEOVER STATUTES

The Bank. Neither the OTS regulations nor Alabama law has a business
combination statute that may have antitakeover effects.

BancGroup. As a Delaware corporation, BancGroup is subject to the business
combination statute described under the heading "BANCGROUP CAPITAL STOCK AND
DEBENTURES -- Changes in Control -- Control Acquisitions."

PREFERRED STOCK

The Bank. The Bank's Stock Charter permits the Bank to issue up to
1,000,000 shares of preferred stock, par value $1.00 per share. The shares may
be issued from time to time on such terms as the Bank's Board of Directors may
determine. Among other things, the Board may decide the voting rights (including
the right of the preferred stock to vote as a class), dividend rights,
redemption, and liquidation preferences of the preferred stock to be issued.

BancGroup. The BancGroup Certificate authorizes the issuance of 1,000,000
shares of Preference Stock from time to time by resolution of the BancGroup
Board of Directors. Currently, no shares of Preference Stock are issued and
outstanding. See "BANCGROUP CAPITAL STOCK AND DEBENTURES -- Preference Stock."

OTHER PROVISIONS

The Bank's Stock Charter provides that no shares of capital stock shall be
issued to officers, directors or controlling persons of the Bank other than as a
part of a general public offering unless the issue is approved by at least a
majority of the Bank's shares of Common Stock outstanding. BancGroup's
Certificate has no similar provisions.

EFFECT OF THE MERGER ON BANK STOCKHOLDERS

As of January 31, 1996, the number of stockholders of record of the Bank
was 196 and the number of shares of Common Stock outstanding was 399,688. As of
that date, BancGroup had 13,491,691 shares of Common Stock outstanding with
5,388 stockholders of record.

Assuming at the Effective Date a 10-day average market price per share of
the BancGroup Common Stock of $32, an aggregate amount of 81,250 shares of
BancGroup Common Stock would be distributed to the stockholders of the Bank
pursuant to the Merger. These shares would represent .60% of the total shares of
Common Stock outstanding after the Merger, not counting shares of BancGroup
Common Stock to be issued in other pending acquisitions.

The issuance of the Common Stock pursuant to the Merger will reduce the
percentage interest of the Common Stock currently held by each principal
stockholder and each director and officer of BancGroup. Such reduction will not
be material. See "BUSINESS OF BANCGROUP -- Voting Securities and Principal
Stockholders."

BancGroup has entered into agreements pursuant to which approximately
2,898,412 additional shares of BancGroup Common Stock will be issued. See
"BUSINESS OF BANCGROUP -- Proposed Affiliate Banks."

33
<PAGE> 39

THE COLONIAL BANCGROUP INC. AND SUBSIDIARIES

CONDENSED PRO FORMA STATEMENT OF CONDITION (UNAUDITED)
(IN THOUSANDS)

The following summary includes (i) the condensed statement of condition of
BancGroup and subsidiaries as of September 30, 1995, (ii) the condensed
statement of condition of Dothan Federal Savings Bank ("Dothan Federal") as of
September 30, 1995, (iii) the condensed statement of condition of Commercial
Bancorp of Georgia, Inc. and subsidiaries ("CBG") as of September 30, 1995, (iv)
the condensed statement of condition of Southern Banking Corporation and
subsidiary ("SBC") as of September 30, 1995, (v) adjustments to give effect to
the proposed purchase method acquisition of Dothan Federal and the proposed
pooling of interests with CBG and SBC, and (vi) the pro forma combined condensed
statement of condition of BancGroup and subsidiaries as if such combination had
occurred on September 30, 1995.

These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of condition of
BancGroup and subsidiaries (as restated), incorporated by reference herein, and
the statements of condition of Dothan Federal, CGB and SBC, included elsewhere
herein. The pro forma information provided below may not be indicative of future
results. The pro forma statements provided do not reflect two immaterial
completed acquisitions: Mt. Vernon Financial Corporation and Farmers and
Merchants Bank.

34
<PAGE> 40
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
----------------------------------------------------------------------------------------
COMMERCIAL
COLONIAL DOTHAN FEDERAL ADJUSTMENTS/ BANCORP OF ADJUSTMENTS/
BANCGROUP SAVINGS BANK (DEDUCTIONS) SUBTOTAL GEORGIA, INC. (DEDUCTIONS)
---------- -------------- ------------ ---------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks................. $ 100,485 $ 2,643 $ (2,600)(1) $ 100,528 $ 12,682
Interest-bearing deposits............... 3,737 3,737
Federal funds sold...................... 1,250 1,250 25,900
Securities available for sale........... 114,057 5,195 119,252 17,004
Investment securities................... 305,407 3,248 (13)(1) 308,642 17,873
Mortgage loans held for sale............ 140,437 140,437
Loans, net of unearned income........... 2,562,386 35,457 2,597,843 142,940
Less: Allowance for possible loan
losses................................ (35,691) (14) (35,705) (1,926)
---------- ------- ------------ ---------- ------------- ------------
Loans, net.............................. 2,526,695 35,443 2,562,138 141,014
Premises and equipment, net............. 47,841 1,051 48,892 5,671
Excess of cost over tangible and
intangible assets acquired, net....... 18,145 1,574(1) 19,719
Purchased mortgage servicing rights..... 74,489 74,489
Other real estate owned................. 8,807 8,807 1,446
Accrued interest and other assets....... 59,227 504 (22)(1) 59,876 5,256
(29)(1)
196(1)
---------- ------- ------------ ---------- ------------- ------------
Total Assets.................... $3,400,577 $ 48,084 $ (894) $3,447,767 $ 226,846 $ 0
========= ============ ========== ========= ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits................................ $2,539,762 $ 41,042 $2,580,804 $ 202,907
FHLB short-term borrowings.............. 420,000 420,000
Other short-term borrowings............. 106,418 106,418
Subordinated debt....................... 17,418 17,418
Other long-term debt.................... 24,005 2,500 26,505
Other liabilities....................... 69,746 588 $ 460(1) 70,794 3,321
---------- ------- ------------ ---------- ------------- ------------
Total liabilities............... 3,177,349 44,130 460 3,221,939 206,228
Common Stock............................ 30,622 4 (4)(1) 30,826 1,857 $ (1,857)(3)
204(1) 3,105(2)
Additional paid in capital.............. 116,211 3,329 (3,329)(1) 118,607 16,090 (16,090)(3)
2,396(1) 14,542(2)
Treasury Stock.......................... (300) 300(3)
Retained earnings....................... 76,176 636 (636)(1) 76,176 2,946
Unrealized loss on securities........... 219 (15) 15(1) 219 25
---------- ------- ------------ ---------- ------------- ------------
Total equity.................... 223,228 3,954 (1,354) 225,828 20,618 0
Total liabilities and equity.... $3,400,577 $ 48,084 $ (894) $3,447,767 $ 226,846 $ 0
========= ============ ========== ========= ========== ==========

<CAPTION>
SEPTEMBER 30, 1995
------------------------------------------------------
SOUTHERN PRO FORMA
BANKING ADJUSTMENTS/ COMBINED
SUBTOTAL CORPORATION (DEDUCTIONS) TOTAL
---------- ----------- ------------ ----------

Cash and due from banks................. $ 113,210 $ 14,832 $ 128,042
Interest-bearing deposits............... 3,737 1,044 4,781
Federal funds sold...................... 27,150 9,500 36,650
Securities available for sale........... 136,256 18,386 154,642
Investment securities................... 326,515 15,959 342,474
Mortgage loans held for sale............ 140,437 140,437
Loans, net of unearned income........... 2,740,783 142,130 2,882,913
Less: Allowance for possible loan
losses................................ (37,631) (1,715) (39,346)
---------- ----------- ------------ ----------
Loans, net.............................. 2,703,152 140,415 2,843,567
Premises and equipment, net............. 54,563 4,957 59,520
Excess of cost over tangible and
intangible assets acquired, net....... 19,719 2,438 22,157
Purchased mortgage servicing rights..... 74,489 74,489
Other real estate owned................. 10,253 156 10,409
Accrued interest and other assets....... 65,132 3,038 68,170

---------- ----------- ------------ ----------
Total Assets.................... $3,674,613 $ 210,725 $ 0 $3,885,338
========= ========= ========== =========

Deposits................................ $2,783,711 $ 193,056 $2,976,767
FHLB short-term borrowings.............. 420,000 420,000
Other short-term borrowings............. 106,418 106,418
Subordinated debt....................... 17,418 17,418
Other long-term debt.................... 26,505 1,476 27,981
Other liabilities....................... 74,115 74,115
---------- ----------- ------------ ----------
Total liabilities............... 3,428,167 194,532 3,622,699
Common Stock............................ 33,931 3,362 $ (3,362)(5) 37,944
4,013(4)
Additional paid in capital.............. 133,149 7,405 (7,405)(5) 139,903
6,754(4)
Treasury Stock..........................
Retained earnings....................... 79,122 5,543 84,665
Unrealized loss on securities........... 244 (117) 127
---------- ----------- ------------ ----------
Total equity.................... 246,446 16,193 0 262,639
Total liabilities and equity.... $3,674,613 $ 210,725 $ 0 $3,885,338
========= ========= ========== =========
</TABLE>

35
<PAGE> 41

PRO FORMA ADJUSTMENTS (IN THOUSANDS):

DOTHAN FEDERAL SAVINGS BANK
(PURCHASE METHOD)

(1) To assign the amount by which the estimated value of the investment in
Dothan Federal Savings Bank is in excess of the historical carrying amount of
the net assets acquired, based on the estimated fair value of such net assets
and to record the investment in Dothan Federal Savings Bank by the issuance of
approximately 81,729 shares of BancGroup Common Stock and $2,600,000 in cash for
all of the outstanding 399,688 shares of Dothan Federal Savings Bank as follows:

<TABLE>
<S> <C>
Equity in carrying value of net assets of Dothan Federal Savings Bank....... $3,954
Adjustments to state assets at fair value:
Write-down prepaid expenses............................................... (22)
Write-down deposit premium................................................ (29)
Write-down investment securities.......................................... (13)
Acquisition accruals:
Miscellaneous legal, accounting, other professional....................... (460)
Tax effect of purchase adjustments.......................................... 196
Goodwill.................................................................... 1,574
------
Total adjustments................................................. 1,246
------
Adjusted equity in carrying value of net assets............................. $5,201
======
Allocated as follows:
Par Value of 81,729 shares issued for all outstanding shares of Dothan
Federal Savings Bank...................................................... $ 204
Estimated amount in excess of par value of 81,729 shares of BancGroup Common
Stock issued for Dothan Federal Savings Bank outstanding shares at an
assumed market value of $31.8125 per share (10 day average at January 9,
1996)..................................................................... 2,396
Cash of approximately $6.51 per share paid to Dothan
Federal Savings Bank shareholders......................................... 2,600
------
Total purchase price.............................................. $5,200
======
</TABLE>

COMMERCIAL BANCORP OF GEORGIA, INC.
(POOLING OF INTEREST)

(2) To record the issuance of 1,241,908 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of CBG:

<TABLE>
<S> <C> <C>
Par value of 1,241,908 shares issued at $2.50 per share........... $ 3,105
Shares issued at par value........................................ $ 3,105
Total capital stock of CBG.............................. 17,647
-------
Excess recorded as an increase in contributed capital... 14,542
--------
17,647
</TABLE>

(3) To eliminate CBG's capital stock:

<TABLE>
<S> <C>
Common stock, at par value................................................ (1,857)
Contributed capital....................................................... (16,090)
Treasury Stock............................................................ 300
--------
(17,647)
--------
Net change in equity............................................ $ 0
========
</TABLE>

36
<PAGE> 42

SOUTHERN BANKING CORPORATION
(POOLING OF INTEREST)

(4) To record the issuance of 1,632,709 shares of BancGroup Common Stock in
exchange for all of the outstanding shares and options of SBC common stock
determined as follows:

<TABLE>
<CAPTION>
OUTSTANDING
SHARES OPTIONS TOTAL
----------- --------- ---------
<S> <C> <C> <C>
Southern Bank outstanding shares................... 3,362,000 1,015,056
Conversion ratio per agreement..................... 0.3919 0.2834*
----------- ---------
Colonial BancGroup shares to be issued............. 1,317,568 287,667 1,605,235
========
Par value of 1,632,709 shares issued at $2.50 per share................ $ 4,013
Shares issued at par value.................................... $ 4,013
Total capital stock of SBC.......................... 10,767
-------
Excess recorded as an increase in contributed capital............. 6,754
--------
10,767
</TABLE>

(5) To eliminate SBC's capital stock:

<TABLE>
<S> <C>
Common stock, at par value................................................ (3,362)
Contributed capital....................................................... (7,405)
--------
(10,767)
--------
Net change in equity................................................. $ 0
========
</TABLE>

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

* Assumes no options are exercised prior to the date of combination and that the
weighted average exercise price of the options is $3.32 per share.

37
<PAGE> 43

CONDENSED PRO FORMA STATEMENTS OF INCOME (UNAUDITED)

The following summaries include (i) the condensed statements of income of
Colonial BancGroup and subsidiaries on a historical basis for the nine months
ended September 30, 1995 and the year ended December 31, 1994 (as restated),
(ii) the condensed statements of income of Dothan Federal for the nine months
ended September 30, 1995 and for the year ended December 31, 1994, (iii) the
condensed statements of income of CBG for the nine months ended September 30,
1995 and for the year ended December 31, 1994, (iv) the condensed statements of
income of SBC for the nine months ended September 30, 1995 and for the year
ended December 31, 1994, (v) adjustments to give effect to the proposed purchase
method acquisition of Dothan Federal and the proposed pooling of interests with
CBG and SBC, and (vi) the pro forma combined condensed consolidated statements
of income of BancGroup and subsidiaries as if such combinations had occurred on
January 1, 1994.

These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of income of
BancGroup and subsidiaries (as restated), incorporated by reference herein, and
the statements of income of Dothan Federal, CBG and SBC included elsewhere
herein. The pro forma information provided may not necessarily be indicative of
future results. These pro forma statements do not reflect three immaterial
completed purchase method acquisitions; Brundidge Banking Company, Mt. Vernon
Financial Corporation, and Farmers and Merchants Bank.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1995
----------------------------------------------------------------------------
CONSOLIDATED COMMERCIAL
COLONIAL DOTHAN FEDERAL ADJUSTMENTS/ BANCORP OF
BANCGROUP SAVINGS BANK (DEDUCTIONS) SUBTOTAL GEORGIA, INC.
------------ -------------- ------------ ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Interest income.......................... $ 180,233 $ 2,616 $ 2(1) $ 182,739 $ 13,877
(112)(1)
Interest expense......................... 94,048 1,628 95,676 6,097
------------ -------------- ------------ ----------- -------------
Net interest income before provision for
loan losses............................ 86,185 988 (110) 87,063 7,780
Provision for loan losses................ 3,430 45 3,475 633
------------ -------------- ------------ ----------- -------------
Net interest income after provision for
loan losses............................ 82,755 943 (110) 83,588 7,147
------------ -------------- ------------ ----------- -------------
Noninterest income....................... 36,542 53 3(1) 36,598 1,859
Noninterest expense...................... 74,810 801 (17)(1) 75,653 6,183
59(1)
------------ -------------- ------------ ----------- -------------
Income before income taxes............... 44,487 195 (149) 44,533 2,823
Income taxes............................. 15,734 83 (32)(1) 15,785 1,114
------------ -------------- ------------ ----------- -------------
Net Income............................... $ 28,753 $ 112 $ (117) $ 28,748 $ 1,709
========== ============ ========== ========== ==========
Average primary shares outstanding....... 12,247,000 399,688 81,729 12,328,729 1,826,711
(399,688)
Average fully-diluted shares
outstanding............................ 13,017,000 399,688 81,729 13,098,729 1,826,711
(399,688)
Earnings per share:
Net Income:
Primary.............................. $ 2.35 $ 0.28 $ 2.33 $ .94
Fully diluted........................ $ 2.27 $ 0.28 $ 2.26 $ .94

NINE MONTHS ENDED SEPTEMBER 30, 1995
------------------------------------
SOUTHERN PRO FORMA
ADJUSTMENTS/ BANKING ADJUSTMENTS/ COMBINED
(DEDUCTIONS) SUBTOTAL CORPORATION (DEDUCTIONS) TOTAL
------------ ----------- ----------- ------------ -----------

<S> <<C> <C> <C> <C> <C>
Interest income.......................... $ 0 $ 196,616 $ 12,569 $ 0 $ 209,185

Interest expense......................... 101,773 4,431 106,204
------------ ----------- ----------- ------------ -----------
Net interest income before provision for
loan losses............................ 0 94,843 8,138 0 102,981
Provision for loan losses................ 4,108 245 4,353
------------ ----------- ----------- ------------ -----------
Net interest income after provision for
loan losses............................ 0 90,735 7,893 0 98,628
------------ ----------- ----------- ------------ -----------
Noninterest income....................... 38,457 1,401 39,858
Noninterest expense...................... 81,836 6,178 88,014

------------ ----------- ----------- ------------ -----------
Income before income taxes............... 0 47,356 3,116 0 50,472
Income taxes............................. 16,899 1,147 18,046
------------ ----------- ----------- ------------ -----------
Net Income............................... $ 0 $ 30,457 $ 1,969 $ 0 $ 32,426
========== ========== ========= ========== ==========
Average primary shares outstanding....... 1,241,908 13,570,637 3,647,540 1,605,235 15,175,872
(1,826,711 ) (3,647,540 )
Average fully-diluted shares
outstanding............................ 1,241,908 14,340,637 3,647,541 1,605,235 15,945,872
(1,826,711 ) (3,647,541 )
Earnings per share:
Net Income:
Primary.............................. $ 2.24 $ 0.54 $ 2.14
Fully diluted........................ $ 2.18 $ 0.54 $ 2.09
</TABLE>

38
<PAGE> 44
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
---------------------------------------------------------------------------------------------
COLONIAL COMMERCIAL
BANCGROUP DOTHAN FEDERAL ADJUSTMENTS/ BANCORP ADJUSTMENTS/
(RESTATED)(1) SAVINGS BANK (DEDUCTIONS) SUBTOTAL OF GEORGIA, INC. (DEDUCTIONS)
----------- -------------- ------------ ----------- ---------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income...................... $ 187,230 $ 3,089 $ 3(1) $ 190,172 $ 14,347 $ 0
(150)(1)
Interest expense..................... 82,549 1,563 84,112 5,458
----------- -------------- ------------ ----------- ---------------- ------------
Net interest income before provision
for loan
losses............................. 104,681 1,526 (147) 106,060 8,889 0
Provision for loan losses............ 6,481 60 6,541 695
----------- -------------- ------------ ----------- ---------------- ------------
Net interest income after provision
for loan
losses............................. 98,200 1,466 (147) 99,519 8,194 0
----------- -------------- ------------ ----------- ---------------- ------------
Noninterest income................... 44,243 55 4(1) 44,302 2,215
Noninterest expense.................. 100,791 1,000 (22)(1) 101,848 9,213
79(1)
----------- -------------- ------------ ----------- ---------------- ------------
Income before income taxes........... 41,652 521 (200) 41,973 1,196 0
Income taxes......................... 14,342 193 (42)(1) 14,493 498
----------- -------------- ------------ ----------- ---------------- ------------
Net Income........................... $ 27,310 $ 328 $ (158) $ 27,480 $ 698 $ 0
========== ============ =========== ========== ============ ==========
Average primary shares outstanding... 11,996,000 399,688 81,729 12,077,729 1,826,711 1,241,908
(399,688) (1,826,711)
Average fully-diluted shares
outstanding........................ 12,763,000 399,688 81,729 12,844,729 1,826,711 1,241,908
(399,688) (1,826,711)
Earnings per share:
Net income:
Primary.......................... $ 2.28 $ 0.82 $ 2.28 $ 0.38
Fully diluted.................... $ 2.23 $ 0.82 $ 2.23 $ 0.38

YEAR ENDED DECEMBER 31, 1994
------------------------------------------------------
SOUTHERN PRO FORMA
BANKING ADJUSTMENTS/ COMBINED
SUBTOTAL CORPORATION (DEDUCTIONS) TOTAL
----------- ----------- ------------ -----------

<S> <C> <C> <C> <C>
Interest income...................... $ 204,519 $ 10,326 $ 0 $ 214,845

Interest expense..................... 89,570 2,895 92,465
----------- ----------- ------------ -----------
Net interest income before provision
for loan
losses............................. 114,949 7,431 0 122,380
Provision for loan losses............ 7,236 330 7,566
----------- ----------- ------------ -----------
Net interest income after provision
for loan
losses............................. 107,713 7,101 0 114,814
----------- ----------- ------------ -----------
Noninterest income................... 46,517 1,294 47,811
Noninterest expense.................. 111,061 5,672 116,733

----------- ----------- ------------ -----------
Income before income taxes........... 43,169 2,723 0 45,892
Income taxes......................... 14,991 989 15,980
----------- ----------- ------------ -----------
Net Income........................... $ 28,178 $ 1,734 $ 0 $ 29,912
========== ========= ========== ==========
Average primary shares outstanding... 13,319,637 2,730,623 1,605,235 14,924,872
(2,730,623 )
Average fully-diluted shares
outstanding........................ 14,086,637 2,730,624 1,605,235 15,691,872
(2,730,624 )
Earnings per share:
Net income:
Primary.......................... $ 2.12 $ 0.63 $ 2.00
Fully diluted.................... $ 2.08 $ 0.63 $ 1.98
</TABLE>

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

(1) Restated to give effect to the February 17, 1995 acquisition of Colonial
Mortgage Company and of its parent.

39
<PAGE> 45

PRO FORMA ADJUSTMENTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS YEAR
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C> <C>
Adjustments Applicable to Dothan Federal Savings Bank:
(1) To amortize the assignment of estimated fair value in excess
of the carrying amount of assets acquired. The amortization
consists of the following:
Increases in income:
Reduction of amortization of deposit premium (8 year
period).................................................... $ 3 $ 4
Amortization of write-down of investment securities (5 year
period).................................................. 2 3
Decreases in income:
Earnings forgone on $2,600,000 cash at an average interest
rate
5.75%.................................................... (112) (150)
------------- ------------
Total.............................................. (107) (143)
------------- ------------
Decrease in expense:
Reversal of prepaid expenses................................. 17 22
Increase in expense:
Amortization of goodwill (20 year period).................... (59) (79)
------------- ------------
Total.............................................. (42) (57)
------------- ------------
Net decrease in income before tax............................ (149) (200)
------------- ------------
Tax effect of the pro forma adjustments (other than goodwill
amortization).............................................. 32 42
------------- ------------
Net decrease in income....................................... $(117) $ (158)
------------- ------------
</TABLE>

SUMMARY OF FUTURE ADJUSTMENTS

Assuming that the actual purchase accounting adjustments approximate such
adjustments used in preparing the September 30, 1995 pro forma statement of
condition, (assuming that the acquisitions had taken place January 1, 1994) the
anticipated effect of purchase accounting adjustments for the acquisition of
Dothan Federal Savings Bank and the other acquisitions would be as follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
--------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Amortization of goodwill...................................... $(79) $(79) $(79) $(79) $(79)
---- ---- ---- ---- ----
Total charges to earnings........................... (79) (79) (79) (79) (79)
Amortization of write-down of securities...................... 3 3 3 3 1
---- ---- ---- ---- ----
Total credits to earnings........................... 3 3 3 3 1
---- ---- ---- ---- ----
Net charges to future earnings before income taxes............ (76) (76) (76) (76) (78)
Tax benefit of net charges to future earnings................. (1) (1) (1) (1) (0)
---- ---- ---- ---- ----
Net charges to future earnings................................ $(77) $(77) $(77) $(77) $(78)
---- ---- ---- ---- ----
</TABLE>

40
<PAGE> 46

RECENT DEVELOPMENTS

COLONIAL BANCGROUP INC., DOTHAN FEDERAL SAVINGS BANK, COMMERCIAL BANCORP OF
GEORGIA, INC., AND SOUTHERN BANKING CORPORATION

COLONIAL BANCGROUP INC. -- RECENT UNAUDITED RESULTS

The following condensed consolidated financial statements present certain
unaudited data for Colonial BancGroup as of and for the period ended December
31, 1995 and comparative data derived from audited financial statements as of
and for the year ended December 31, 1994. Unaudited historical data reflect, in
the opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary to a fair presentation of such data. The unaudited
financial information is presented for informational purposes only and is not
necessarily indicative of the financial position or results of operations which
would have actually occurred if the transactions had been consummated in the
past or which may be obtained in the future.

THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CONDITION

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994*
---------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
ASSETS
Cash and due from banks............................................... $ 126,777 $ 129,720
Interest-bearing deposits in banks.................................... 5,384 1,777
Federal funds sold.................................................... -- 500
Securities available for sale......................................... 159,863 78,265
Investment securities................................................. 269,493 326,599
Mortgage loans held for sale.......................................... 110,486 60,536
Loans, net of unearned income......................................... 2,875,581 2,094,028
Less:
Allowance for possible loan losses.................................. (36,912) (33,410)
---------- ----------
Loans, net............................................................ 2,838,669 2,060,618
Premises and equipment................................................ 55,161 45,874
Excess of cost over tangible and identified intangible assets
acquired, net....................................................... 26,262 16,239
Mortgage servicing rights............................................. 80,053 54,796
Other real estate owned............................................... 8,781 8,199
Accrued interest and other assets..................................... 60,288 55,220
---------- ----------
Total....................................................... $3,741,217 $2,838,343
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits.............................................................. $2,785,958 $2,171,464
FHLB short-term borrowings............................................ 465,000 210,000
Other short-term borrowings........................................... 132,256 134,550
Subordinated debt..................................................... 17,121 17,459
Other long-term debt.................................................. 29,038 69,042
Other liabilities..................................................... 58,696 44,277
---------- ----------
Total liabilities........................................... 3,488,069 2,646,792
---------- ----------
Shareholders' equity:
Preference Stock $2.50 par value; 1,000,000 shares authorized, none
issued...........................................................
Common Stock, $2.50 par value; 44,000,000 shares authorized,
13,084,721 shares issued and outstanding at December 31, 1995.... 32,712 --
Class A Common Stock, $2.50 par value; 40,000,000 shares authorized,
11,280,031 shares issued and outstanding at December 31,
1994**........................................................... -- 28,200
Class B Common Stock, $2.50 par value; 4,000,000 shares authorized,
635,088 shares issued and outstanding at December 31, 1994**..... 1,588
Additional paid in capital.......................................... 137,107 109,658
Retained earnings................................................... 83,315 55,042
Unearned compensation............................................... (822) --
Unrealized gains (losses) on securities available for sale, net of
taxes............................................................ 836 (2,937)
---------- ----------
Total shareholders' equity.................................. 253,148 191,551
---------- ----------
Total....................................................... $3,741,217 $2,838,343
========= =========
</TABLE>

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

* As restated
** On February 21, 1995 the Class A and Class B Common Stock were reclassified
into one class.

41
<PAGE> 47

THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1995 1994* 1995 1994*
-------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans.......................... $224,784 $164,649 $ 63,780 $ 44,979
Interest on investments............................. 25,473 22,102 6,582 5,831
Other interest income............................... 643 479 305 60
-------- -------- -------- --------
Total interest income....................... 250,900 187,230 70,667 50,870
-------- -------- -------- --------
Interest expense:
Interest on deposits................................ 99,490 68,663 29,243 18,443
Interest on short-term borrowings................... 29,231 10,425 8,314 3,941
Interest on long-term debt.......................... 3,737 3,461 853 957
-------- -------- -------- --------
Total interest expense...................... 132,458 82,549 38,410 23,341
-------- -------- -------- --------
Net interest income before provision for possible loan
losses.............................................. 118,442 104,681 32,257 27,529
Provision for possible loan losses.................... 5,480 6,481 2,050 1,767
-------- -------- -------- --------
Net interest income after provision for possible loan
losses.............................................. 112,962 98,200 30,207 25,762
-------- -------- -------- --------
Noninterest income:
Mortgage servicing and origination fees............. 23,429 22,216 6,367 5,951
Service charges on deposit accounts................. 14,203 12,384 3,982 3,223
Other charges, fees and commissions................. 3,545 3,134 889 851
Securities gains, net............................... 5 84 1 --
Other income........................................ 8,993 6,425 2,394 1,403
-------- -------- -------- --------
Total noninterest income.................... 50,175 44,243 13,633 11,428
-------- -------- -------- --------
Noninterest expense:
Salaries and employee benefits...................... $ 39,786 $ 43,355 $ 10,742 $ 11,667
Occupancy expense of bank premises, net............. 9,004 8,610 2,382 2,200
Furniture and equipment expenses.................... 8,504 7,468 2,417 1,950
Amortization of purchased servicing rights.......... 9,095 6,078 3,145 2,116
Amortization of intangible assets................... 1,325 1,196 392 288
Other expense....................................... 35,516 34,084 9,342 8,783
-------- -------- -------- --------
Total noninterest expense................... 103,230 100,791 28,420 27,004
-------- -------- -------- --------
Income before income taxes............................ 59,907 41,652 15,420 10,186
Applicable income taxes............................... 21,113 14,342 5,379 3,542
-------- -------- -------- --------
Net income.................................. $ 38,794 $ 27,310 $ 10,041 $ 6,644
======== ======== ======== ========
Earnings per share:
Primary............................................. $ 3.12 $ 2.28 $ 0.78 $ 0.55
Fully diluted....................................... 3.02 2.23 0.75 0.54
Dividends paid:
Common Stock........................................ $ 0.90 N/A $ 0.225 N/A
Class A**........................................... N/A $ 0.80 N/A $ 0.20
Class B**........................................... N/A 0.40 N/A 0.10
</TABLE>

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

<TABLE>
<S> <C>
N/A not applicable
* As restated
** On February 21, 1995 BancGroup's Class A and Class B Common Stock were reclassified
into one class of stock called Common Stock.
</TABLE>

42
<PAGE> 48

Net income for year ended 1995 was $38,794,000 compared to $27,310,000 for
the previous year, a 42% increase. Earnings per share for the year were $3.02 on
a fully diluted basis, a 35% increase over 1994. The company's return on average
equity was 17.94% compared to 14.94% in 1994. Return on average assets was 1.20%
compared to 1.00% in 1994.

Net income for the fourth quarter of 1995 was $10,041,000 compared to
$6,644,000 in 1994, a 51% increase. Earnings per share for the fourth quarter of
1995 were $.75 compared to $.54 for the same period in 1994, a 39% increase.

The Company's internal loan growth of 25% has been a factor in its
increased earnings. Loans increased from $2.094 billion in 1994 to $2.876
billion in 1995. Loans increased $781.6 million or 37% over 1994. For the year
ended 1995, net charge-offs were $3.1 million, or .13% of average loans,
compared to $1.7 million, or .09% in 1994. The provision for loan losses was
$5.480 million for 1995 versus $6.481 million for 1994. Nonperforming assets at
year-end 1995 were $22.4 million, .78% of loans and other real estate compared
to .90% at year-end 1994. The total reserve for loan losses at year end 1995 was
$36.9 million or 1.28% of loans.

43
<PAGE> 49

DOTHAN FEDERAL SAVINGS BANK UNAUDITED RESULTS OF OPERATIONS AND FINANCIAL
HIGHLIGHTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1995

Dothan Federal Savings Bank ("Dothan Federal") unaudited results for the
six months ended December 31, 1995 reported net income of $71,000 or $.18 per
share, versus $137,000 or $.34 per share for the prior year.

For the second quarter of 1995, Dothan Federal showed net income of $40,000
or $.10 per share, as compared to net income of $70,000 or $.18 per share, for
the same period in 1994. The decrease in net income in the second quarter of
1995 as compared to the same period in 1994 is due to an increase in interest
expense as a result of increased deposit balances of approximately $7,691,000
over the same period in 1994.

Net interest income for the six months ended December 31, 1995 decreased
over 1994, again as a result of increased interest expense from higher deposit
balances. Other income and other expense remained consistent from six months
ended 1994 to 1995.

Set forth below are selected financial highlights for Dothan Federal for
the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED DECEMBER ENDED DECEMBER
31, 31,
----------------- -----------------
1995 1994 1995 1994
------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Total interest income........................... $ 911 $ 796 $ 1,792 $ 1,552
Total interest expense.......................... 612 441 1,199 834
------- ------- ------- -------
Net interest income............................. 299 355 593 718
Provision for loan losses....................... 15 15 30 30
------- ------- ------- -------
Net interest income after provision for loan
losses........................................ 284 340 563 688
Total other income.............................. 25 25 55 42
Total other expenses............................ 239 254 493 509
------- ------- ------- -------
Income before taxes............................. 70 111 125 221
Income tax...................................... 30 41 54 84
------- ------- ------- -------
Net income...................................... 40 70 71 137
======= ======= ======= =======
Net income per share............................ .10 .18 .18 .34
Average share outstanding....................... 399,688 399,688 399,688 399,688
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
------- -------
(UNAUDITED)
<S> <C> <C>
Total Assets................................................... $48,620 $44,191
Deposits....................................................... 41,798 34,107
Loans receivable, net.......................................... 35,792 35,423
Allowances for loan losses..................................... 286 227
Securities..................................................... 11,213 7,043
Real estate owned.............................................. -- 5
Stockholders' equity........................................... 4,013 3,614
Stockholders' equity per share................................. 10.0402 9.0426
</TABLE>

44
<PAGE> 50

COMMERCIAL BANCORP OF GEORGIA, INC. UNAUDITED RESULTS OF OPERATIONS AND
FINANCIAL HIGHLIGHTS FOR YEAR ENDED DECEMBER 31, 1995

Commercial Bancorp of Georgia, Inc. ("CBG") unaudited results for the year
ended December 31, 1995 reported net income of $857,000 or $.47 per share,
versus $698,000 or $.38 per share for the prior year.

For the fourth quarter of 1995, CBG experienced a loss of $852,000 or
($.47) per share, as compared to net income of $121,000 or $.07 per share, for
the same period in 1994. The fourth quarter loss reflected additional provision
for loan losses of $892,000 as a result of $380,000 in normal monthly provision
and a one-time increase of $512,000 due to estimated change in economic
uncertainty as compared to approximately $290,000 for the fourth quarter of
1994. There was also approximately $1,219,000 of proposed acquisition related
expenses incurred in the fourth quarter of 1995.

Net interest income for the year ended December 31, 1995 increased over the
1994 as a result of increased interest income from slightly higher interest
rates and increased construction loan volume. Other income remained consistent
from year end 1994 to 1995.

BancGroup has previously considered the impact of the aforementioned fourth
quarter additional expenses and earnings trends in evaluating the exchange ratio
in the Merger, therefore, BancGroup does not expect the decrease in earnings or
additional expenses to have a material impact on BancGroup's future earnings or
financial condition.

BancGroup has advised CBG that CBG's unaudited 1995 financial results will
not affect the proposed Merger.

Set forth below are selected financial highlights for CBG for the periods
indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------ -----------------------
1995 1994 1995 1994
------- ------ ----------- -------
(UNAUDITED) (UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
Total interest income..................... $ 5,263 $4,134 $19,140 $14,347
Total interest expense.................... 2,267 1,565 8,364 5,458
------- ------ ----------- -------
Net interest income....................... 2,996 2,569 10,776 8,889
Provision for loan losses................. 892 291 1,525 695
------- ------ ----------- -------
Net interest income after provision for
loan losses............................. 2,104 2,278 9,251 8,194
Total other income........................ 304 584 2,163 2,215
Total other expenses...................... 3,528 2,563 9,711 9,213
------- ------ ----------- -------
Income (loss) before taxes................ (1,120) 299 1,703 1,196
Income tax................................ (268) 178 846 498
------- ------ ----------- -------
Net income (loss)......................... (852) 121 857 698
======= ====== ========= =======
Net income (loss) per share............... (.47) .07 .47 .38
======= ====== ========= =======
Average share outstanding................. 1,827 1,827 1,827 1,827
</TABLE>

45
<PAGE> 51

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
----------- --------
(UNAUDITED)
<S> <C> <C>
Total Assets............................................... $ 229,740 $199,377
Deposits................................................... 206,631 178,264
Loans receivable, net...................................... 142,230 133,736
Allowance for loan losses.................................. 2,670 1,966
Securities................................................. 35,813 26,588
Real estate owned.......................................... 1,247 1,480
Stockholders' equity....................................... 19,978 18,732
Stockholders' equity per share............................. 10.9367 10.2544
</TABLE>

46
<PAGE> 52

SOUTHERN BANKING CORPORATION UNAUDITED RESULTS OF OPERATIONS AND FINANCIAL
HIGHLIGHTS FOR YEAR ENDED DECEMBER 31, 1995

Southern Banking Corporation ("SBC") unaudited results for the year ended
December 31, 1995 reported net income of $2,091,000 or $.57 per share, versus
$1,734,000 or $.63 per share for the prior year.

For the fourth quarter of 1995, SBC recorded net income $122,000 or $.03
per share, as compared to net income of $726,000 or $.27 per share, for the same
period in 1994. The decrease in fourth quarter earnings in 1995 as compared to
the same period in 1994 was the result of approximately $893,000 in acquisition
related expenses incurred in the fourth quarter of 1995; as well as
approximately $250,000 in additional loan loss provision as a result of decline
in asset quality in the fourth quarter.

Net interest income for the year ended December 31, 1995 increased over the
1994 as a result of increased interest income from slightly higher interest
rates and increased loan volume. Other income remained consistent from year end
1994 to 1995. Other expense increased from year end 1994 to 1995 as a result of
approximately $893,000 in acquisition related expenses incurred in 1995.

BancGroup has advised SBC that SBC's unaudited 1995 financial results will
not affect the proposed Merger.

Set forth below are selected financial highlights for SBC for the periods
indicated:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED DECEMBER
31, YEAR ENDED DECEMBER 31,
----------------- -----------------------
1995 1994 1995 1994
------ ------ ----------- -------
(UNAUDITED) (UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
Total interest income........................ $4,755 $4,243 $17,324 $10,326
Total interest expense....................... 1,702 1,085 6,133 2,895
------ ------ ----------- -------
Net interest income.......................... 3,053 3,158 11,191 7,431
Provision for loan losses.................... 280 60 525 330
------ ------ ----------- -------
Net interest income after provision for loan
losses..................................... 2,773 3,098 10,666 7,101
Total other income........................... 562 (129) 1,926 1,294
Total other expenses......................... 3,079 1,923 9,220 5,672
------ ------ ----------- -------
Income before taxes.......................... 256 1,046 3,372 2,723
Income tax................................... 134 320 1,281 989
------ ------ ----------- -------
Net income................................... 122 726 2,091 1,734
====== ====== ========= =======
Net income per share......................... .03 .27 .57 .63
====== ====== ========= =======
Average share outstanding.................... 3,648 2,731 3,648 2,731
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
----------- --------
(UNAUDITED)
<S> <C> <C>
Total Assets................................................... $ 230,270 $181,362
Deposits....................................................... 211,610 154,734
Loans receivable, net.......................................... 152,347 121,530
Allowances for loan losses..................................... 1,958 1,609
Securities..................................................... 33,663 34,735
Real estate owned.............................................. 129 --
Stockholders' equity........................................... 16,524 13,735
Stockholders' equity per share................................. 4.915 4.1001
</TABLE>

47
<PAGE> 53

THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES

SELECTED INTERIM FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1995 1994*
------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
STATEMENT OF CONDITION SUMMARY
Total assets...................................................... $ 3,400,577 $ 2,718,072
Loans, net of unearned income..................................... 2,562,386 1,980,201
Total earnings assets............................................. 3,127,274 2,485,042
Deposits.......................................................... 2,539,762 2,123,120
Shareholders' equity.............................................. 223,228 187,173
Book value per share.............................................. $ 18.22 $ 15.72
------------- -------------
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1995 1994*
------- -------
<S> <C> <C>
EARNINGS SUMMARY
Net interest income (taxable equivalent)................................. $88,080 $78,793
Provision for loan losses................................................ 3,430 4,714
Noninterest income....................................................... 36,542 32,815
Noninterest expense...................................................... 74,810 73,787
Net income............................................................... 28,753 20,666
Average primary shares outstanding....................................... 12,247 11,986
Average fully diluted shares outstanding................................. 13,017 12,759
Per common share:
Fully-diluted earnings:
Net Income.......................................................... $ 2.35 $ 1.72
Dividends:
Common Stock........................................................ 0.675 N/A
Class A............................................................. N/A 0.60
Class B............................................................. N/A 0.30
------- -------
SELECTED RATIOS
Return on average assets................................................. 1.24% 1.02%
Return on average equity................................................. 18.51% 15.31%
Efficiency ratio......................................................... 60.03% 66.11%
Equity to assets......................................................... 6.56% 6.89%
Total capital............................................................ 8.04% 8.62%
Tangible leverage........................................................ 6.16% 6.45%
------- -------
</TABLE>

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

* As restated

48
<PAGE> 54

THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES

SELECTED FINANCIAL DATA
(AS RESTATED)*

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income............................. $187,230 $141,572 $130,624 $138,969 $137,343
Interest expense............................ 82,549 59,517 60,576 81,486 88,102
-------- -------- -------- -------- --------
Net interest income......................... 104,681 82,055 70,048 57,483 49,241
Provision for possible loan losses.......... 6,481 7,945 7,979 6,364 6,306
-------- -------- -------- -------- --------
Net interest income after provision for
possible loan losses...................... 98,200 74,110 62,069 51,119 42,935
Noninterest income.......................... 44,243 40,433 34,727 31,271 28,547
Noninterest expense......................... 100,791 86,520 75,529 65,996 61,435
-------- -------- -------- -------- --------
Income before income taxes.................. 41,652 28,023 21,267 16,394 10,047
Applicable income taxes..................... 14,342 8,886 5,715 4,175 1,782
-------- -------- -------- -------- --------
Income before extraordinary items and the
cumulative effect of a change in
accounting for income taxes............... 27,310 19,137 15,552 12,219 8,265
Extraordinary items, net of income taxes.... -- (463) -- 831 1,385
Cumulative effect of a change in accounting
for income taxes.......................... -- 3,219 -- -- --
-------- -------- -------- -------- --------
Net income.................................. $ 27,310 $ 21,893 $ 15,552 $ 13,050 $ 9,650
======== ======== ======== ======== ========
EARNINGS PER COMMON SHARE
Income before extraordinary items and the
cumulative effect of a change in
accounting for income taxes:
Primary................................... $ 2.28 $ 2.01 $ 1.72 $ 1.37 $ 0.94
Fully-diluted............................. $ 2.23 $ 1.96 $ 1.71 $ 1.37 $ 0.94
Net income:
Primary................................... $ 2.28 $ 2.30 $ 1.72 $ 1.47 $ 1.10
Fully-diluted............................. $ 2.23 $ 2.21 $ 1.71 $ 1.47 $ 1.10
Average shares outstanding:
Primary................................... 11,996 9,530 9,016 8,905 8,792
Fully-diluted............................. 12,763 10,623 10,327 10,247 10,095
Cash dividends per common share:(1)
Class A................................... $ 0.80 $ 0.71 $ 0.67 $ 0.63 $ 0.60
Class B................................... $ 0.40 $ 0.31 $ 0.27 $ 0.23 $ 0.20
======== ======== ======== ======== ========
</TABLE>

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

* As restated to give effect to the February 17, 1995 acquisition of Colonial
Mortgage Company, an entity under common control, which was accounted for
in a manner similar to a pooling of interests; restated BancGroup financial
statements were filed on July 10, 1995 on Form 8-K and are incorporated by
reference to this prospectus.
(1) On February 21, 1995, the Class A and Class B Common Stock were reclassified
into one class of Common Stock.

49
<PAGE> 55

THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES

SELECTED FINANCIAL DATA -- (CONTINUED)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1994 1993(1) 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION
At year-end:
Total assets....................... $2,838,343 $2,822,521 $1,796,246 $1,687,177 $1,568,216
Loans, net of unearned income...... 2,093,703 1,771,989 1,172,151 1,093,728 1,062,798
Mortgage loans held for sale....... 60,536 361,496 144,215 105,219 31,069
Deposits........................... 2,171,464 2,190,998 1,493,479 1,452,344 1,339,918
Long-term debt..................... 69,043 57,397 22,979 27,225 29,397
Shareholders' equity............... 191,551 172,764 100,406 88,429 78,412
Average daily balances:
Total assets....................... $2,726,710 $2,119,660 $1,764,397 $1,643,622 $1,532,863
Interest-earning assets............ 2,458,568 1,871,254 1,540,926 1,450,115 1,355,059
Loans, net of unearned income...... 1,906,385 1,315,910 1,136,124 1,094,096 1,016,826
Mortgage loans held for sale....... 131,121 241,683 118,510 65,373 28,525
Deposits........................... 2,158,532 1,644,658 1,476,668 1,403,538 1,309,395
Shareholders' equity............... 182,823 119,790 94,833 84,423 75,371
Book value per share at year-end..... $ 16.08 $ 14.64 $ 11.27 $ 10.00 $ 8.92
Tangible book value per share at
year-end........................... 14.71 13.25 10.60 9.21 8.12
========= ========= ========= ========= =========
SELECTED RATIOS
Income before extraordinary items and
the cumulative effect of a change
in accounting for income taxes to:
Average assets..................... 1.00% 0.90% 0.88% 0.74% 0.54%
Average shareholders' equity....... 14.94 15.98 16.40 14.47 10.97
Net income to:
Average assets..................... 1.00 1.03 0.88 0.79 0.63
Average shareholders' equity....... 14.94 18.28 16.40 15.46 12.80
Efficiency ratio..................... 66.68 69.50 70.64 72.52 76.69
Dividend payout ratio................ 27.21 25.33 26.85 31.60 44.00
Average equity to average total
assets............................. 6.70 5.65 5.37 5.14 4.92
Total nonperforming assets to net
loans, other real estate and
repossessions...................... 0.91 1.31 1.34 1.07 1.49
Net charge-offs to average loans..... 0.09 0.33 0.47 0.51 0.49
Allowance for possible loan losses to
total loans (net of unearned
income)............................ 1.60 1.62 1.60 1.48 1.42
Allowance for possible loan losses to
nonperforming loans................ 314% 347% 246% 246% 132%
========= ========= ========= ========= =========
</TABLE>

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

* As restated to give effect to the February 17, 1995 acquisition of Colonial
Mortgage Company, an entity under common control, which was accounted for in a
manner similar to a pooling of interests; restated BancGroup financial
statements were filed on July 10, 1995 on Form 8-K and are incorporated by
reference to this prospectus.

50
<PAGE> 56

THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES

SELECTED QUARTERLY FINANCIAL DATA 1994-1993
(AS RESTATED)*

<TABLE>
<CAPTION>
1994 1993
--------------------------------------- ---------------------------------------
DEC. 31 SEPT. 30 JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
------- -------- ------- -------- ------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income.......................... $50,870 $47,180 $45,779 $43,401 $38,269 $37,524 $35,361 $30,418
Interest expense......................... 23,341 20,439 19,915 18,854 15,922 15,824 14,855 12,916
------- -------- ------- -------- ------- -------- ------- --------
Net interest income...................... 27,529 26,741 25,864 24,547 22,347 21,700 20,506 17,502
Provision for loan losses................ 1,767 1,818 1,448 1,448 2,333 2,061 2,263 1,288
------- -------- ------- -------- ------- -------- ------- --------
Net interest income after provision for
loan losses............................ 25,762 24,923 24,416 23,099 20,014 19,639 18,243 16,214
Income before extraordinary items and the
cumulative effect of a change in
accounting for income taxes............ 6,644 7,078 6,740 6,848 4,688 5,223 5,202 4,024
Net income............................... $6,644 $ 7,078 $6,740 $ 6,848 $4,688 $ 4,760 $5,202 $ 7,243 (1)
------- -------- ------- -------- ------- -------- ------- --------
Per common share:
Income before extraordinary items and
the cumulative effect of a change in
accounting for income taxes
Primary................................ $ 0.55 $ 0.59 $ 0.56 $ 0.57 $ 0.48 $ 0.54 $ 0.54 $ 0.44
Fully-diluted.......................... 0.54 0.58 0.55 0.56 0.47 0.53 0.52 0.43
Net income
Primary................................ $ 0.55 $ 0.59 $ 0.56 $ 0.57 $ 0.48 $ 0.49 $ 0.54 $ 0.80
Fully-diluted.......................... 0.54 0.58 0.55 0.56 0.47 0.48 0.52 0.74
======= ======= ======= ========= ======= ======= ======= =========
</TABLE>

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

51
<PAGE> 57

DOTHAN FEDERAL SAVINGS BANK

SELECTED INTERIM FINANCIAL DATA
(UNAUDITED)

FINANCIAL CONDITION DATA:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
Total Amount of: 1995 1994
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets........................................................ $48,084 $41,625
Investments(1)................................................ 11,086 8,201
Loans Receivable, net......................................... 35,443 31,963
Deposits...................................................... 41,042 33,115
FHLB Advances................................................. 2,500 4,417
Retained Earnings............................................. 636 455
-------- --------
Number of Full Service Facilities............................. 1 1
-------- --------
</TABLE>

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

(1) Consist of Interest Bearing Deposits in Other Banks, Marketable Securities
and Cash

OPERATING DATA:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------
1995 1994
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Interest and Dividend Income................................... $ 881 $ 756
Interest Expense............................................... 587 393
------- -------
Net Income Before Loan Loss Provision.......................... 294 363
------- -------
Provision for Loan Loss........................................ 15 15
Non-Interest Income............................................ 29 17
Non-Interest Expense........................................... 254 255
------- -------
Income Before Income Taxes..................................... 54 110
Provision For Income Taxes..................................... 24 43
------- -------
Net Income..................................................... $ 30 $ 67
======= =======
</TABLE>

PER SHARE DATA:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------
1995 1994
------- -------
<S> <C> <C>
Earnings per share............................................. $ 0.08 $ 0.17
Dividends Paid................................................. NA 0.15
</TABLE>

52
<PAGE> 58

DOTHAN FEDERAL SAVINGS BANK

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

Comparison of the Three Months Ended September 30, 1995 and 1994

FINANCIAL CONDITION

ASSETS. Total assets increased $1,442,987 from $40,182,106 as of June 30,
1994 to $41,625,093 at September 30, 1994. The net increase was primarily due to
an increase in loans and investments of $842,213 and an increase in cash of
$370,444. Total assets increased $3,426,465 from $44,657,061 at June 30, 1995 to
$48,083,526 at September 30, 1995. The increase was due to an increase in loans
and investments of $1,649,329 and a decrease in cash federal funds of
$1,729,797.

LIABILITIES. Total liabilities were $38,002,015 at September 30, 1994, an
increase of $1,473,229 from June 30, 1994, and were $44,129,704 at September 30,
1995, a $3,370,553 increase from June 30, 1995. Both the 1994 and 1995 increases
were due to increases of deposits and borrowed money of $1,507,010 and
$3,248,635, respectively.

CAPITAL. Capital as of September 30, 1994 totaled $3,623,078, a $30,242
decrease from capital of $3,653,320 at June 30, 1994. The net decrease consists
of net income of $66,683 less cash dividends declared of $59,953, and a $36,972
adjustment in unrealized losses on securities. Capital as of September 30, 1995
totaled $3,953,822, a $55,912 increase from capital of $3,897,910 at June 30,
1995. The net increase consists of net income of $30,449 and a $25,463
adjustment in unrealized gains on securities.

RESULTS OF OPERATIONS

SUMMARY. The Bank's net income decreased $36,234 from $66,683 or $.17 per
share to $30,449 or $.08 per share for the three months ended September 30, 1994
and 1995, respectively. The decrease can be attributed to a $69,247 decrease in
net interest income.

NET INTEREST INCOME. Net interest income decreased from $363,154 for the
three months ended September 30, 1994, to $293,907 for the same period of 1995.
Interest earning assets increased $905,994 to $39,542,116 in the three months
ended September 30, 1994 and increased $2,964,580 to $45,599,405 during the same
period in 1995. Interest bearing liabilities increased $1,507,010 to $37,531,827
in the three months ended September 30, 1994 and increased $3,248,635 to
$43,542,314 during the same period in 1995.

PROVISION FOR LOAN LOSSES. During the first three months ended September
30, 1994 and 1995, the Bank added $15,000 to the allowance for loan losses. Even
though the Bank's asset quality continues to be strong, the Bank's management
and Board of Directors feels that a monthly increase of $5,000 would help to
strengthen the Bank's allowance due to higher risk commercial loans being
portfolioed in 1995.

NON-INTEREST INCOME. For the three months ended September 30, 1995, the
Bank's non-interest income increased $12,693 to $29,820 compared to the same
period in 1994. The increase is primarily due to a $10,000 payment received to
resolve a legal matter.

NON-INTEREST EXPENSE. Non-interest expense decreased $995 to $254,340 for
the first three months of 1995 from $255,335 for the same period in 1994. The
decrease is primarily due to a $9,602 decrease in compensation expense offset by
a $10,128 increase in consulting fees.

PROVISION FOR INCOME TAXES. The provision for income taxes for the three
months ended September 30, 1995 and 1994 was $23,938 and $43,263, respectively.
The income tax expense expressed as percent of income before income taxes was
44.01% for 1995 and 39.35% for 1994.

53
<PAGE> 59

DOTHAN FEDERAL SAVINGS BANK

SELECTED FINANCIAL DATA

FINANCIAL CONDITION DATA:

<TABLE>
<CAPTION>
JUNE 30,
-------------------
TOTAL AMOUNT OF: 1995 1994
---------------- ------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Assets........................................................... $44,657 $40,182
Investments(1)................................................... 7,692 9,035
Loans Receivable, net............................................ 35,457 29,917
Deposits......................................................... 37,627 32,191
FHLB Advances.................................................... 2,667 3,833
Retained Earnings................................................ 605 448
------- -------
Number of Full Service Facilities................................ 1 1
------- -------
</TABLE>

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

(1) Consist of Interest Bearing Deposits in Other Banks, Marketable Securities
and Cash

OPERATING DATA:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------
1995 1994 1993
------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest and Dividend Income................................. $3,293 $3,160 $3,088
Interest Expense............................................. 1,874 1,460 1,510
------ ------ ------
Net Income Before Loan Loss Provision........................ 1,419 1,700 1,578
------ ------ ------
Provision For Loan Loss...................................... 60 60 90
Non-Interest Income.......................................... 58 71 69
Non-Interest Expense......................................... 1,057 956 921
------ ------ ------
Income Before Income Taxes................................... 360 755 636
Provision for Income Taxes................................... 143 278 0
------ ------ ------
Net Income......................................... $ 217 $ 477 $ 636
====== ====== ======
</TABLE>

SELECTED STATISTICAL DATA:

<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
----------------
1995 1994
------ -----
<S> <C> <C>
Return on Assets (net earnings divided by average total assets)..... 0.49% 1.18%
Equity-to-Assets Ratio (average equity divided by average total
assets)........................................................... 8.46% 8.68%
Allowance for possible loan losses as a percent of total loans...... 0.72% 0.71%
Cash Dividends per share............................................ $ 0.15 NA
Dividend Payout ratio (dividend declared per share dividend by net
income per share)................................................. 27.78% NA
Earnings per share.................................................. $ 0.54 $1.19
</TABLE>

54
<PAGE> 60

DOTHAN FEDERAL SAVINGS BANK

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

INTRODUCTION

The following discussion and financial information is presented to aid the
understanding of the current financial position and results of operations of
Dothan Federal Savings Bank, Dothan, Alabama (the "Bank") and should be read in
conjunction with the Financial Statements and Notes. With respect to the figures
for the years ended June 30, 1995 and 1994 and for the three month periods ended
September 30, 1995 and 1994, which are unaudited, in the opinion of management
all adjustments (none of which were other than normal recurring adjustments)
necessary for a fair statement of such results for such periods have been
included. The Bank has one banking facility located in Houston County, Alabama.

As of and For the Years Ended June 30, 1995 and 1994

FINANCIAL CONDITION

ASSETS. The total assets of the Bank were $44,657,061 at June 30, 1995, a
$4,474,955 increase from the 1994 year end assets of $40,182,106. At June 30,
1995, earning assets totaled $42,606,060 or 95.41% of total assets, compared to
$38,554,768, or 95.95% at June 30, 1994.

The Bank's investment securities portfolio decreased from $8,221,091 at
June 30, 1994 to $6,778,919 at year end 1995. The primary reason for the
decrease was normal principal repayments and maturities.

During 1995, the average yield on interest bearing deposits in other banks
increased from an average rate of 3.47% in 1994 to an average of 5.91%. The
balance of interest bearing deposits in other banks decreased from $417,151 at
June 30, 1994 to $369,732 at June 30, 1995. The decrease was due mainly to the
purchase of adjustable rate mortgage loans to help improve the Bank's interest
rate risk.

Total loans, net of unearned income, increased by $5,584,292 during 1995,
or 18.53% from the June 30, 1994 total of $30,128,839. Mortgage loans increased
$4,118,242 or 15.31%. Commercial non-real estate loans decreased by $716,620 or
26.97%. Consumer loans increased $944,252 or 34.05%. The increase in loan demand
was caused by an increase in rates during the first quarter, which caused
consumers to enter the market early in the year and take advantage of lower
rates while they could.

An allowance is established for uncollectible interest on loans that are 60
days past due based on management's periodic evaluations. The allowance is
established by a charge to interest income equal to all interest previously
accrued, and income is subsequently recognized to the extent that cash payments
are received until, in management's judgment, the borrower's ability to make
periodic interest and principal payments has been demonstrated, in which case
the loan is returned to accrual status. Loans that had been placed on nonaccrual
status at June 30, 1995 and 1994 totaled $145,531 and $10,452, respectively.

The Allowance for loan losses is maintained through provisions charged to
expense at levels which management considers adequate to absorb losses inherent
in the loan portfolio. The allowance is decreased by charge-offs, net of
recoveries. Management's evaluation of the allowance includes a review of all
loans for which full collectibility is not reasonably assured and considers,
among other factors, prior years' loss experience, economic conditions,
distribution of loans by risk class, and the estimated value of underlying
collateral. Though management believes the allowance for loan losses to be
adequate, the ultimate losses may vary from these evaluations; however, the
allowance is reviewed periodically and, as adjustments become necessary, they
are reported in earnings in the periods in which they become known.

The Bank's allowance for loan losses at June 30, 1995 and 1994, was
$255,722 and $212,313, respectively, with the corresponding ratios of allowance
to total loans being .72% and .71%. Net charge-offs totaled $16,591 and $25,023
in 1995 and 1994, respectively, representing .05% and .08% of net loans.

55
<PAGE> 61

DEPOSITS. The Bank relies on deposits to fund loans and other investments.
Total deposits at June 30, 1995 were $37,627,012, an increase of $5,435,528 or
16.88% from June 30, 1994. Demand and time deposit accounts at June 30, 1995
were $2,837,515 and $28,852,755, respectively, representing a decrease of
$68,154 and an increase of $6,503,415, respectively. Savings and money market
accounts totaled $5,936,742 at June 30, 1995, representing a decrease of
$999,733. The decrease in savings and money market accounts and increase in time
deposits was due to customers withdrawing their funds from the low yielding
savings accounts and depositing them in higher yielding time deposits.

LIQUIDITY. Liquidity refers to the ability of the Bank to meet borrowing
needs and withdrawal demands of its customers, while also providing funds for
operating expenses and its own cash flow requirements. The Bank achieves its
desired liquidity from management of both assets and liabilities. In the
ordinary course of business, the Bank's cash flows are generated from interest
and fee income, as well as from loan repayments and the maturity or sales of
other earning assets. In addition, liquidity is continuously provided through
the acquisition of new deposits or the rollover of matured deposits.

The Bank normally meets it short-term liquidity requirements with interest
bearing deposits in other banks and short term government securities; however,
occasionally it may become necessary to borrow from the Federal Home Loan Bank
to meet short-term cash flow needs. At June 30, 1995, the Bank's average
regulatory liquidity ratio was 8.65% which is 3.65% above the OTS's Requirement
of 5.00%.

The Bank's liquid assets as of June 30, 1995 totaled $2,526,392, down from
$3,415,856 on June 30, 1994. Management considers the Bank's liquidity sources
to be adequate to meet its current and projected needs.

The Bank's total outstanding advances from the FHLB of Atlanta were
$2,666,667 as of June 30, 1995 compared to $3,833,333 on June 30, 1994. This
decrease of $1,166,666 was due to the repayment of maturing advances with funds
received from increased deposits.

CAPITAL. Capital is a measure of the Bank's financial soundness and
viability. The Bank is committed to maintaining a strong capital position to
protect shareholders and depositors, provide for reasonable growth, and fully
comply with all regulatory requirements while paying dividends to its
shareholders.

The Bank's capital at June 30, 1995 totaled $3,897,910 compared to
$3,653,320 in 1994. This growth in the Bank's capital has been through the
retention of internally generated earnings. Total capital as expressed as a
percent of total assets as of June 30, 1995 and 1994 was 8.73% and 9.09%,
respectively.

As a federally chartered savings bank, the Bank is required by its primary
regulator, the Office of Thrift Supervision ("OTS"), to maintain capital
sufficient to meet three requirements, as defined: (1) a tangible capital
requirement equal to 1.5% of adjusted total assets; (2) a leverage or core
capital requirement of 3% of adjusted total assets, though it is anticipated
that most institutions will be required by the regulators to maintain capital of
an additional 100 to 200 basis points; and (3) a risk-based capital requirement
equal to 8% of risk-weighted assets, which were approximately $21,895,200 at
June 30, 1995. Assets and off-balance sheet commitments are assigned a
credit-risk weighting based upon their relative risk ranging from 0% for assets
backed by the full faith and credit of the United States Government or that pose
no credit risk to the Bank, to the 100% for assets such as commercial loans,
delinquent, or repossessed assets.

56
<PAGE> 62

The following presents the Bank's capital levels and ratios compared to its
minimum capital requirements as of June 30, 1995:

<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
---------- ----------
(UNAUDITED)
<S> <C> <C>
Tangible capital, as defined................................... $3,903,946 8.74%
Required minimum............................................... 669,946 1.5
---------- ----------
Excess............................................... $3,234,000 7.24%
========= ========
Core capital, as defined....................................... $3,903,946 8.74%
Required Minimum(a)............................................ 1,339,893 3.00
---------- ----------
Excess............................................... $2,564,053 5.74%
========= ========
Risk-based capital............................................. $4,039,268 18.45%
Required Minimum............................................... 1,751,616 8.00
---------- ----------
Excess............................................... $2,287,652 10.45%
========= ========
</TABLE>

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

(a) The required minimum based on 5% would be $2,233,155 leaving an excess of
$1,670,791.

Capital requirements continue to be under study by the OTS. Management
continues to monitor these requirements and contemplated changes and believes
that the Bank will continue to exceed its regulatory minimum requirements.

The Bank has not been required by the OTS to incorporate an interest rate
risk component to the risk-based capital requirement. This regulation requires a
deduction from risk-based capital based on an institution's exposure to interest
rate risk. Management believes the Bank would continue to exceed its regulatory
minimum requirements if the interest rate risk component is ever required.

RESULTS OF OPERATIONS

For the year ended June 30, 1995 the Bank recorded net income of $217,207
which represents a 54.47% decrease from 1994 net income of $477,048 and a 65.83%
decrease from 1993 net income at $635,747. Earnings per share were $0.54, $1.19
and $1.59, respectively, for the years ended June 30, 1995, 1994 and 1993.

NET INTEREST INCOME. By the nature of its business, the largest portion of
the Bank's income is derived primarily from net interest income. Net interest
income is the difference between interest income, earned primarily on loans and
investment securities, and interest expense, which is paid on deposits and other
interest-bearing liabilities. Many factors influence net interest income,
including fluctuations in interest rates and changes in the volume and mix of
earning assets and interest-bearing liabilities.

The table included in this section details the distribution of average
assets, liabilities and shareholders' equity, with the interest rate
differentials for the Bank for the two years ended June 30, 1995 and 1993.

Interest income for 1995 of $3,293,441 represents a 4.23% increase over
1994 interest income of $3,159,905. The increase in income occurred as a result
of an increase in the volume of earning assets of $4,051,292 from 1994 to 1995.

Interest income on loans represents the largest source of revenue for the
Bank. Interest income on loans increased from $2,797,004 in 1994 to $2,873,845
in 1995. This $76,841 or 2.75% increase was due to an increase in net loans of
$5,540,883 even though the average yield on loans decreased from 9.05% to 8.37%
during the year.

Even though investment securities decreased by $1,442,172 in 1995 interest
income on investment securities increased by $52,068 in 1995 over 1994. This
increase occurred due to the maturing of lower yielding securities and the
repricing of adjustable mortgage backed securities to a higher rate.

57
<PAGE> 63

Interest income on interest bearing deposits in other banks in 1995
increased from $32,248 in 1994 to $36,875. This increase was due to the increase
in the yield on these deposits in 1995 to 5.91% compared to 3.47% during 1994.

Interest expense is the Bank's largest single expense category. In 1995,
interest expense totaled $1,874,878, a 28.45% increase from the 1994 interest
expense of $1,459,562. This increase was due to the increased volume of deposits
and FHLB borrowings, and slightly higher rates.

The resulting net interest income for 1995 was $1,418,563, a 16.57%
decrease from the 1994 net interest income of $1,700,343. This decrease was due
to interest bearing liabilities repricing at a faster rate than interest earning
assets. This timing difference would lead to lower earnings in a time of
increasing interest rates.

PROVISION FOR LOAN LOSSES. The provision for loan losses in 1995 and 1994
was $60,000. The purpose of the provision for loan losses is to replace
reductions in the allowance for loan losses caused by actual charge-offs and to
establish adequate reserves for the growth of the loan portfolio. The allowance
for loan losses represents the estimated uncollectible amount of loans included
in the Bank's loan portfolio, and is available to absorb potential losses from
any category of loans.

NON-INTEREST INCOME. Non-interest income is generated by various financial
services and activities. As pressures on net interest income continue, expansion
of these services and the related fee income is of great importance to the
future profitability of the Bank. Among these fees are deposit service charge,
safe deposit box rent, and net gains on the sale of assets.

Total non-interest income decreased $13,039 in 1995 to $58,214. This was
primarily due to decreased gains on the sale of mortgage loans during the year.

NON-INTEREST EXPENSE. Total non-interest expense for 1995 totaled
$1,056,644 compared to $956,423 for the previous year, an increase of $100,221
or 10.48%. The majority of the increase was due to the implementation of a
profit sharing plan for the Bank's employees. Payments under the plan amounted
to $18,954 during 1995.

INCOME TAX EXPENSE. Income before taxes for 1995 was $360,133, a 52.31%
decrease from the 1994 income before taxes of $755,173. The income tax expense
expressed as a percent of income before taxes was 39.69% and 36.83% for 1995 and
1994, respectively. The income tax expense for 1995 totaled $142,926 compared to
$278,125 for 1994. The Bank did not begin recording a provision for income taxes
until July, 1993 due to the utilization of net operating loss carry forwards.
The provision for income taxes includes deferred taxes on temporary differences
between income tax and financial accounting.

NEW ACCOUNTING STANDARDS

On June 30, 1994, the Bank adopted Financial Accounting Standards Board
("FASB") Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The Bank has
elected to classify all its mortgage-backed securities and mortgage related
securities as available-for-sale and all its U.S. Government securities as
held-to-maturity. The effect of this election decreased stockholder's equity by
$40,525 and $127,861 as of June 30, 1995 and 1994, respectively.

IMPACT OF INFLATION AND INTEREST RATE SENSITIVITY

The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles which
require the measurement of financial position and operating results without
considering changes in the relative purchasing power of money over time due to
inflation.

The majority of assets and liabilities of a financial institution are
monetary in nature and therefore differ greatly from most commercial and
industrial companies that have an important impact on the growth of total assets
and creates the need to generate more equity capital in order to maintain an
appropriate equity to assets ratio. Another significant effect of inflation is
on non-interest expenses, which tend to rise during periods of inflation.

58
<PAGE> 64

A portion of the Bank's interest earning assets are long-term fixed rate
mortgage loans and mortgage-backed securities, while its principal source of
funds are saving deposits with maturities of three years or less. Because of the
short-term nature of the savings deposits, their costs generally reflect returns
currently available in the market. Accordingly, the savings deposits have a high
degree of interest rate sensitivity while the mortgage loan portfolio, to the
extent of fixed rate loans, is relatively fixed and has much less sensitivity to
changes in current market rates. Although these conditions are somewhat
mitigated by the Bank's risk management strategies of selling long-term fixed
rate loans and reinvesting in adjustable-rate mortgage-backed securities and
loans, changes in market interest rates tend to directly affect the level of net
interest income.

59
<PAGE> 65

DOTHAN FEDERAL SAVINGS BANK

AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST INCOME
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
(DOLLARS IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
1995 1994
--------------------------- ---------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Earning Assets:
Loans, Net................................... $34,330 $ 2,874 8.37% $30,921 $ 2,797 9.05%
Investment Securities........................ 6,660 383 5.75 6,615 331 5.00
Interest Bearing Deposits in Other Banks..... 626 37 5.91 921 32 3.47
------- -------- ------ ------- -------- ------
Total Interest Earning Assets........ 41,616 3,294 7.92 38,457 3,160 8.22
------- -------- ------ ------- -------- ------
Non-interest Earning Assets
Cash and Due From Banks...................... 637 833
Bank Premises and Equipment (net)............ 1,009 752
Other Assets................................. 647 500
------- -------
Total Non-Interest Earning Assets.... 2,293 2,085
------- -------
Total Assets......................... $43,909 $40,542
======= =======
LIABILITIES
Interest Bearing Liabilities:
Interest Bearing Demand Deposits............. $33,668 $ 1,620 4.81% $31,360 $ 1,279 4.08%
FHLB Advances................................ 5,078 255 5.02 3,944 181 4.59
------- -------- ------ ------- -------- ------
Total Interest Bearing Liabilities... 38,746 1,875 4.84 35,304 1,460 4.14
------- -------- ------ ------- -------- ------
Non-Interest Bearing Liabilities:
Non-Interest Bearing Demand Deposits......... 856 1,252
Other Liabilities............................ 593 464
------- -------
Total Non-Interest Bearing
Liabilities........................ 1,449 1,716
------- -------
Total Liabilities.................... 40,195 37,020
------- -------
Stockholders' Equity........................... 3,714 3,521
------- -------
Total Liabilities and Stockholders'
Equity............................. $43,909 $40,541
======= =======
Net Interest Income............................ $ 1,419 $ 1,700
====== ======
Net Spread on Interest Earning Assets.......... 3.08% 4.08%
===== =====
</TABLE>

60
<PAGE> 66

BUSINESS OF BANCGROUP

GENERAL

BancGroup is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended. It was organized in 1974 under the laws of
Delaware. BancGroup operates a wholly-owned subsidiary bank in Alabama, Colonial
Bank, which conducts a full service commercial banking business in the state of
Alabama through 98 banking offices. The Bank will merge with Colonial Bank in
the Merger. BancGroup also has a wholly-owned bank subsidiary in Tennessee, The
Colonial Bank of Tennessee, which conducts a general commercial banking business
through four offices located in that state, and BancGroup operates a
wholly-owned federal savings bank subsidiary in Georgia, Colonial Bank, which
conducts the business of a federal savings bank through four offices in the
Atlanta area. This bank located in Georgia is sometimes referred to as Colonial
Bank -- Georgia. Colonial Mortgage Company, a subsidiary of Colonial Bank, is a
mortgage banking company with approximately $9 billion in residential loan
serving and 13 offices in 12 states. BancGroup's commercial banking loan
portfolio is comprised primarily of commercial real estate loans (26%) and
residential real estate loans (43%), a significant portion of which is located
within the State of Alabama. BancGroup's growth in loans over the past several
years has been concentrated in commercial and residential real estate loans. The
lending activities of Colonial Bank in Alabama are dependent upon the demands
within the local markets of its branches. Based on this demand, loans
collateralized by commercial and residential real estate have been the fastest
growing component of Colonial Bank's loan portfolio.

LENDING ACTIVITIES

BancGroup, through the branches and offices of its subsidiary banks, makes
loans for a range of business and personal uses in response to local demands for
credit. Loans are concentrated in Alabama, Georgia and Tennessee and are
dependent upon economic conditions in those states. Alabama has historically
been a slow growth state. The following broad categories of loans have varying
risks and underwriting standards.

- Real Estate -- Commercial. Loans classified as commercial real estate
loans are loans which are collateralized by real estate and substantially
dependent upon cash flow from income-producing improvements attached to
the real estate. For BancGroup, these primarily consist of apartments,
hotels, office buildings, shopping centers, amusement/recreational
facilities, one to four family residential housing developments, and
health service facilities.

Loans within this category are underwritten based on projected cash flows
and loan-to-appraised-value ratios of 80% or less. The risks associated
with commercial real estate loans are primarily dependent upon real estate
values in local market areas, the equity investments of borrowers, and the
borrowers' experience and expertise. BancGroup has diversified its
portfolio of commercial real estate loans with less than 10% of its total
loan portfolio concentrated in any of the above-mentioned industries.

- Real Estate Construction. Construction loans include loans to finance
single family and multifamily residential as well as nonresidential real
estate. Loan values for these loans are from 80% to 85% of completed
appraised values. The principal risks associated with these loans are
related to the borrowers' ability to complete the project and local market
demand, the sales market, presales or preleasing, and permanent loan
commitments. BancGroup evaluates presale requirements, preleasing rates,
permanent loan take-out commitments, as well as other factors in
underwriting construction loans.

- Real Estate-Residential. These loans consist of loans made to finance
one to four family residences and home equity loans on residences.
BancGroup may loan up to 95% of appraised value on these loans without
other collateral or security. The principal risks associated with one to
four family residential loans are the borrowers' debt coverage ratios and
real estate values.

- Commercial, Financial, and Agricultural. Loans classified as commercial,
financial, and agricultural consist of secured and unsecured credit lines
and equipment loans for various industrial, agricultural, commercial,
retail, or service businesses.

61
<PAGE> 67

The risk associated with loans in this category are generally related to
the earnings capacity and cash flows generated from the individual
business activities of the borrowers. Collateral consists primarily of
business equipment, inventory, and accounts receivables with loan-to-value
ratios of less than 80%. Credit may be extended on an unsecured basis or
in excess of 80% of collateral value in circumstances as described in the
paragraph below.

- Installment and Consumer. Installment and consumer loans are loans to
individuals for various purposes. Automobile loans and unsecured loans
make up the majority of these loans. The principal source of repayment is
the earnings capacity of the individual borrowers as well as the value of
the collateral. Installment and consumer loans are sometimes made on an
unsecured basis or with loan-to-value ratios in excess of 80%.

Collateral values referenced above are monitored by loan officers through
property inspections, reference to broad measures of market values, as well as
current experience with similar properties or collateral. Loans with
loan-to-value ratios in excess of 80% have potentially higher risks which are
offset by other factors including the borrower's or guarantors' credit
worthiness, the borrower's other banking relationships, the bank's lending
experience with the borrower, and any other potential sources of repayment.

BancGroup's subsidiary banks fund loans primarily with customer deposits
approximately 10% of which are considered more rate sensitive or volatile than
other deposits. In addition the subsidiary banks borrow funds from the Federal
Home Loan Bank to fund residential real estate loans.

PROPOSED AFFILIATE BANKS

BancGroup has entered into a definitive agreement dated as of December 21,
1995, to acquire Commercial Bancorp of Georgia, Inc., Lawrenceville, Georgia
("CBG"). CBG is a Georgia corporation and is a holding company for Commercial
Bank of Georgia ("Commercial Bank"). CBG will merge with BancGroup, and
following such merger, Commercial Bank, which will be a wholly-owned subsidiary
of BancGroup doing business in the Atlanta, Georgia area, will be merged with
Colonial Bank -- Georgia. Based on the market price of BancGroup Common Stock as
of January 9, 1996, a total of 1,265,703 shares of Common Stock of BancGroup
will be offered to the stockholders of CBG. The actual number of shares of
BancGroup Common Stock to be issued in this transaction will depend upon the
market value of such Common Stock at the time of the Merger. This transaction is
subject to, among other things, approval by the stockholders of CBG and approval
by appropriate regulatory authorities. At September 30, 1995, CBG had assets of
$227 million, deposits of $203 million and stockholders' equity of $21 million.
See "THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES -- Condensed Pro Forma
Statements of Condition (Unaudited)."

BancGroup has entered into a definitive agreement dated as of February 15,
1996, to acquire Southern Banking Corporation, Orlando, Florida ("Southern").
Southern is a Florida corporation and is a holding company for Southern Bank of
Central Florida. Southern will merge with BancGroup and following such merger
Southern Bank of Central Florida will become a subsidiary of BancGroup with the
name "Colonial Bank". A total of 1,605,235 shares of Common Stock of BancGroup
will be offered to the stockholders of Southern. This transaction is subject to,
among other things, approval by the stockholders of Southern and approval by
appropriate regulatory authorities. At September 30, 1995, Southern had assets
of $211 million, deposits of $193 million and stockholders' equity of $16
million. See "THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES -- Condensed Pro
Forma Statements of Condition (Unaudited)."

VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS

As of January 31, 1996, BancGroup had issued and outstanding 13,491,691
shares of Common Stock with 5,388 stockholders of record. Each such share is
entitled to one vote. In addition, as of that date, 214,957 shares of Common
Stock were subject to issue upon exercise of options pursuant to BancGroup's
stock option plans and up to 345,321 shares of Common Stock were issuable upon
conversion of BancGroup's 1986 Debentures. There are currently 44,000,000 shares
of Common Stock authorized.

62
<PAGE> 68

On February 21, 1995, BancGroup concluded a reclassification of its Class A
and Class B Common Stock into one class of Common Stock. The reclassification
was approved by BancGroup's stockholders on December 8, 1994. On February 24,
1995, the Common Stock of BancGroup was listed for trading on the New York Stock
Exchange.

The following table shows those persons who are known to BancGroup to be
beneficial owners as of January 31, 1996, of more than five percent of
BancGroup's outstanding Common Stock.

SHARES OF BANCGROUP BENEFICIALLY OWNED

<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON CLASS
NAME AND ADDRESS STOCK OUTSTANDING(1)
- ------------------------------------------------------------------- --------- --------------
<S> <C> <C>
Robert E. Lowder(2)................................................ 1,437,345 10.49%
Post Office Box 1108
Montgomery, AL 36101
James K. Lowder.................................................... 1,099,649 8.03%
Post Office Box 250
Montgomery, AL 36142
Thomas H. Lowder................................................... 1,073,053 7.83%
Post Office Box 11687
Birmingham, AL 35202
</TABLE>

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

(1) Percentages are calculated assuming the issuance of 214,957 shares of Common
Stock pursuant to BancGroup's stock option plans.
(2) Robert E. Lowder is the brother of James K. and Thomas H. Lowder. Robert E.
Lowder disclaims any beneficial ownership interest in the shares owned by
his brothers. Robert E. Lowder's mother, Catherine K. Lowder, owns 85,442
shares of Common Stock. Mr. Lowder disclaims any beneficial interest in
such shares.

63
<PAGE> 69

SECURITY OWNERSHIP OF MANAGEMENT

The following table indicates for each director, executive officer, and all
executive officers and directors of BancGroup as a group the number of shares of
outstanding Common Stock of BancGroup beneficially owned as of January 31, 1996.

SHARES OF BANCGROUP BENEFICIALLY OWNED

<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME STOCK OUTSTANDING(1)
- ----------------------------------------------------------------- --------- --------------
<S> <C> <C>
DIRECTORS
Young J. Boozer.................................................. 7,082(2) *
William Britton.................................................. 6,808 *
Jerry J. Chesser................................................. 73,231 *
Augustus K. Clements, III........................................ 8,976 *
Robert S. Craft.................................................. 5,997 *
Patrick F. Dye................................................... 26,063(3) *
Clinton O. Holdbrooks............................................ 145,932(4) 1.07%
D. B. Jones...................................................... 9,797 *
Harold D. King**................................................. 77,729(4) *
Robert E. Lowder**............................................... 1,437,345(5) 10.49%
John Ed Mathison................................................. 14,227 *
Milton E. McGregor............................................... 0 *
John C. H. Miller, Jr. .......................................... 10,243 *
Joe D. Mussafer.................................................. 10,000 *
William E. Powell, III........................................... 6,959 *
Jack H. Rainer................................................... 1,345 *
Frances E. Roper................................................. 181,970 1.33%
Ed V. Welch...................................................... 29,582 *
EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Young J. Boozer, III............................................. 22,914(2)(6) *
W. Flake Oakley, IV.............................................. 11,337(6) *
Michael R. Holley................................................ 6,808 *
Samuel R. Morgan................................................. 5,926(6) *
Michelle Condon.................................................. 3,207 *
All Executive Officers & Directors as a Group.................... 2,103,478 15.35%
</TABLE>

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

* Represents less than one percent.
** Executive Officer.
(1) Percentages are calculated assuming the issuance of 214,957 shares of Common
Stock pursuant to BancGroup's stock option plans.
(2) Includes 500 shares of Common Stock out of 1,000 shares owned by Young J.
Boozer, and Young J. Boozer, III EX U/W Phyllis C. Boozer.
(3) Includes 24,600 shares of Common Stock subject to options exercisable under
BancGroup's stock option plans.
(4) Includes 12,262 shares and 12,262 shares of Common Stock subject to options
exercisable by Mr. Holdbrooks and Mr. King, respectively, under BancGroup's
stock option plans.
(5) These shares include 90,510 shares of Common Stock subject to options under
BancGroup's stock option plans. See the table at "Voting Securities and
Principal Stockholders."
(6) Young J. Boozer, III, Michael R. Holley, W. Flake Oakley, IV, and Samuel R.
Morgan, hold options respecting 12,500, 5,000, 3,000, and 500 shares of
Common Stock, respectively, pursuant to BancGroup's stock option plans.

64
<PAGE> 70

MANAGEMENT INFORMATION

Certain information regarding the biographies of the directors and
executive officers of BancGroup, executive compensation and related party
transactions is included in BancGroup's Annual Report on Form 10-K for the
fiscal year ending December 31, 1994, at items 10, 11, and 13 and is
incorporated herein by reference.

CERTAIN REGULATORY CONSIDERATIONS

BancGroup is a registered bank holding company subject to supervision and
regulation by the Federal Reserve. As such, it is subject to the Bank Holding
Company Act of 1956 as amended (the "BHC Act") and many of the Federal Reserve's
regulations promulgated thereunder. It is also subject to regulation by the
Georgia Department of Banking and Finance and by the OTS as a savings and loan
holding company.

BancGroup's subsidiary banks, Colonial Bank, Colonial Bank of Tennessee and
Colonial Bank -- Georgia, (the "Subsidiary Banks"), are subject to supervision
and examination by applicable federal and state banking agencies. Colonial Bank,
as a state chartered bank and not a member of the Federal Reserve system, is
regulated and examined both by the State of Alabama Banking Department and by
the FDIC. Colonial Bank of Tennessee is also state chartered and not a member of
the Federal Reserve system and is regulated by both the State of Tennessee
Department of Financial Institutions and by the FDIC. Colonial Bank -- Georgia,
is a federal savings bank and is regulated by the OTS. The deposits of the
Subsidiary Banks are insured by the FDIC to the extent provided by law. The FDIC
assesses deposit insurance premiums the amount of which may, in the future,
depend in part on the condition of the Subsidiary Banks. Moreover, the FDIC may
terminate deposit insurance of the Subsidiary Banks under certain circumstances.
Both the FDIC and the respective state regulatory authorities have jurisdiction
over a number of the same matters, including lending decisions, branching and
mergers.

One limitation under the BHC Act and the Federal Reserve's regulations
requires that BancGroup obtain prior approval of the Federal Reserve before
BancGroup acquires, directly or indirectly, more than five percent of any class
of voting securities of another bank. Prior approval also must be obtained
before BancGroup acquires all or substantially all of the assets of another
bank, or before it merges or consolidates with another bank holding company.
BancGroup may not engage in "non-banking" activities unless it demonstrates to
the Federal Reserve's satisfaction that the activity in question is closely
related to banking and a proper incident thereto. Because BancGroup is a
registered bank holding company, persons seeking to acquire 25 percent or more
of any class of its voting securities must receive the approval of the Federal
Reserve. Similarly, under certain circumstances, persons seeking to acquire
between 10 percent and 25 percent also may be required to obtain prior Federal
Reserve approval.

In 1989 Congress expressly authorized the acquisition of savings
associations by bank holding companies. BancGroup must obtain the prior approval
of the Federal Reserve and the OTS (among other agencies) before making such an
acquisition, and must demonstrate that the likely benefits to the public of the
proposed transaction (such as greater convenience, increased competition, or
gains in efficiency) outweigh potential burdens (such as an undue concentration
of resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices).

Following enactment in 1991 of the FDIC Improvement Act, banks now are
subject to increased reporting requirements and more frequent examinations by
the bank regulators. The agencies also now have the authority to dictate certain
key decisions that formerly were left to management, including compensation
standards, loan underwriting standards, asset growth, and payment of dividends.
Failure to comply with these new standards, or failure to maintain capital above
specified levels set by the regulators, could lead to the imposition of
penalties or the forced resignation of management. If a bank becomes critically
undercapitalized, the bank agencies have the authority to place an institution
into receivership or require that the bank be sold to, or merged with, another
financial institution.

In September 1994 Congress enacted the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994. This legislation, among other things, amended
the BHC Act to permit bank holding companies,

65
<PAGE> 71

subject to certain limitations, to acquire either control or substantial assets
of a bank located in states other than that bank holding company's home state
regardless of state law prohibitions. This legislation became effective on
September 29, 1995. In addition, this legislation also amended the Federal
Deposit Insurance Act to permit, beginning on June 1, 1997 (or earlier where
state legislatures provide express authorization), the merger of insured banks
with banks in other states.

The officers and directors of BancGroup and the Subsidiary Banks are
subject to numerous insider transactions restrictions, including limits on the
amount and terms of transactions involving the Subsidiary Banks, on the one
hand, and their principal stockholders, officers, directors, and affiliates on
the other. There are a number of other laws that govern the relationship between
the Subsidiary Banks and their customers. For instance, the Community
Reinvestment Act is designed to encourage lending by banks to persons in low and
moderate income areas. The Home Mortgage Disclosure Act and the Equal Credit
Opportunity Act attempt to minimize lending decisions based on impermissible
criteria, such as race or gender. The Truth-in-Lending Act and the
Truth-in-Savings Act require banks to provide full disclosure of relevant terms
related to loans and savings accounts, respectively. Anti-tying restrictions
(which prohibit, for instance, conditioning the availability or terms of credit
on the purchase of another banking product) further restrict the Subsidiary
Banks' relationships with their customers.

The Budget Reconciliation Act of 1995 ("Budget Act") was passed by Congress
but subsequently vetoed by President Clinton. Congressional leadership and
President Clinton began discussions in 1995 to determine whether the Congress
and the Administration could reach a compromise on budget reconciliation. It is
unknown whether these negotiations will be successful. The Budget Act originally
passed by Congress and subsequently vetoed by the President contained a
provision which directed the FDIC to set a one-time special assessment on
SAIF-insured deposits which would be in an amount sufficient to recapitalize the
Savings Association Insurance Fund ("SAIF"). It is anticipated that a special
assessment in the range of $0.80 to $0.90 per $100 of SAIF-insured deposits
would be necessary in order to recapitalize the SAIF, if the assessment were to
be made in the next six months. In the event a budget reconciliation agreement
is reached between the Congress and the Administration, it is expected that the
agreement would include the special assessment provision contained in the
original Budget Act. If no agreement is reached by the Congress and the
Administration, it is still possible that Congress could attach such a provision
to another piece of legislation or pass such a provision as a free-standing
bill. The Administration, in testimony before Congress and in the press, has
indicated its support of the recapitalization of SAIF in the manner provided in
the Budget Act.

BancGroup's subsidiary banks maintain deposits which are insured by both
the SAIF and the BIF (Bank Insurance Fund). The SAIF insured deposits in all of
BancGroup's subsidiary bank's total $797 million. Under the Budget Act certain
of these deposits would be excluded from the special assessment. The total
special assessment that would be due under the Budget Act is estimated to be
approximately $5.4 million.

It should be noted that supervision, regulation, and examination of
BancGroup and the Subsidiary Banks are intended primarily for the protection of
depositors, not stockholders.

66
<PAGE> 72

BUSINESS OF THE BANK

GENERAL

The Bank was organized in July, 1988. On July 22, 1988, the Bank commenced
its business operations as a federally chartered stock savings bank. The Bank is
a member of the Federal Home Loan Bank System and its deposits are insured by
the SAIF.

The Bank's primary business is to accept savings deposits from the general
public and to make real estate loans secured by residential and commercial
property, and to a lesser extent, to make commercial and consumer loans. Its
income is derived from interest and fees in connection with such loans. The
Bank's principal expenses are interest paid on deposits and operating expenses.

The Bank conducts its operations through one office located at 1962 West
Main Street, Dothan, Alabama. The Bank's primary market area is the City of
Dothan and Houston County in the southeastern portion of the State of Alabama.

PRINCIPAL STOCKHOLDERS

There are 399,688 shares of Bank Common Stock outstanding with 176
stockholders of record. The following table shows those persons who are known to
the Bank to be beneficial owners as of the date of this Prospectus of more than
five percent of the Bank's outstanding Common Stock as of January 31, 1996.

SHARES OF BANK BENEFICIALLY OWNED

<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME AND ADDRESS STOCK OUTSTANDING
- ---------------- ------ -----------
<S> <C> <C>
Gerald B. Crowley...................................................... 28,620(1) 7.16%
8235 S. County Road 33
Dothan, AL 36301
Barbara Everett........................................................ 30,578(2) 7.65%
405 Choctow Street
Dothan, AL 36303
Hayne Hollis SDIRS..................................................... 20,635 5.16%
Hollis & Spann, Inc.
116 Loftin Road
Dothan, AL 36303
William M. Lee......................................................... 37,696(3) 9.43%
109 Christen Lane
Dothan, AL 36301
Ralph Don Lewis........................................................ 25,960(4) 6.50%
202 Boyce Road
Dothan, AL 36301
William C. Shelor, Jr.................................................. 24,099(5) 6.03%
402 Girard Avenue
Dothan, AL 36303
</TABLE>

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

(1) Includes 1,800 shares owned indirectly.
(2) Includes 18,813 shares owned indirectly.
(3) Includes 25,783 shares owned indirectly.
(4) Includes 12,695 shares owned indirectly.
(5) Includes 15,307 shares owned indirectly.

67
<PAGE> 73

SECURITY OWNERSHIP OF MANAGEMENT

The following table indicates for each director, executive officer, and all
executive officers and directors of the Bank as a group the number of shares of
outstanding Common Stock of the Bank beneficially owned as of January 31, 1996.

SHARES OF BANK BENEFICIALLY OWNED*

<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME STOCK OUTSTANDING
- ---- ------ -----------
<S> <C> <C>
DIRECTORS
Sue K. Byrd............................................................ 9,298 (1) 2.33%
Gerald B. Crowley...................................................... 28,620 7.16%
William Griggs Espy.................................................... 7,647 1.91%
Barbara Everett........................................................ 30,578 7.65%
James H. Hartzog....................................................... 13,530(2) 3.39%
William M. Lee**....................................................... 37,696 9.43%
Ralph Don Lewis........................................................ 25,960 6.50%
Larry Register......................................................... 8,846 (3) 2.21%
William C. Shelor, Jr.................................................. 24,099 6.03%
Terry Weatherly........................................................ 14,728 3.69%
Felton E. Woodham...................................................... 9,547 (4) 2.39%
All Directors and Executive Officers as a group........................ 210,549 52.68%
</TABLE>

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

* For shares owned indirectly by directors Crowley, Everett, Lee, Lewis and
Shelor see the footnotes to the table at "Principal Stockholders."
** Director is also an executive officer.
(1) Includes 970 shares owned indirectly.
(2) Includes 2,940 shares owned indirectly.
(3) All of these shares are owned by Mr. Register's company, Register Realty.
(4) Includes 1,569 shares owned indirectly.

ADJOURNMENT OF SPECIAL MEETING

Approval of the Merger by the Bank's stockholders requires the affirmative
vote of at least two-thirds of the total votes eligible to be cast at the
Special Meeting. In the event there are an insufficient number of shares of Bank
Common Stock represented in person or by proxy at the Special Meeting to approve
the Merger, the Bank's Board of Directors in its discretion may adjourn the
Special Meeting to a later date. The place and date to which the Special Meeting
would be adjourned would be announced at the Special Meeting, but would not be
more than 30 days after the date of the Special Meeting. Proxies voted against
the Merger will not be voted to adjourn the Special Meeting.

The effect of any such adjournment would be to permit the Bank to solicit
additional proxies for approval of the Merger. While such an adjournment would
not invalidate any proxies previously filed, including those filed by
stockholders voting against the Merger, it would afford the Bank the opportunity
to solicit additional proxies in favor of the Merger.

68
<PAGE> 74

OTHER MATTERS

The Board of Directors of the Bank is not aware of any business to come
before the Special Meeting other than those matters described above in this
Prospectus. If, however, any other matters not now known should properly come
before the Special Meeting, the proxy holders named in the accompanying proxy
will vote such proxy on such matters as determined by a majority of the Board of
Directors of the Bank.

DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS

In order to be eligible for inclusion in BancGroup's proxy solicitation
materials for its 1997 annual meeting of stockholders, any stockholder proposal
to take action at such meeting must be received at BancGroup's main office at
One Commerce Street, Post Office Box 1108, Montgomery, Alabama 36101, no later
than 120 calendar days in advance of the date of BancGroup's proxy statement
used for BancGroup's 1996 annual meeting of stockholders.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P. serves as the independent accountants for
BancGroup. The consolidated financial statements of BancGroup as of December 31,
1994 and 1993 and for each of the three years ended December 31, 1994 that are
incorporated by reference in this Prospectus in reliance upon the report of such
firm, given on the authority of that firm as experts in accounting and auditing.
It is not expected that a representative of such firm will be present at the
Special Meeting.

The financial statements of Dothan Federal Savings Bank included in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto and are included
herein in reliance upon the authority of said firm as experts in giving said
reports. It is expected that a representative of such firm will be present at
the Special Meeting and will have an opportunity to answer questions from
stockholders.

LEGAL MATTERS

Certain legal matters regarding the tax consequences of the Merger and the
shares of Common Stock of BancGroup offered hereby are being passed upon by the
law firm of Miller, Hamilton, Snider & Odom, L.L.C., Mobile, Alabama, of which
John C. H. Miller, Jr., a director of BancGroup and of Colonial Bank, is a
partner. John C. H. Miller, Jr. owns 10,243 shares of Common Stock. Mr. Miller
also received employee-related compensation from BancGroup in 1995 of $58,070.

PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. YOU MAY REVOKE THE PROXY BY
GIVING WRITTEN NOTICE OF REVOCATION TO THE PERSON NAMED IN THE NOTICE OF THE
SPECIAL MEETING PRIOR TO THE SPECIAL MEETING, BY EXECUTING A LATER DATED PROXY
OR BY ATTENDING THE SPECIAL MEETING VOTING IN PERSON.

69
<PAGE> 75

INDEX TO FINANCIAL STATEMENTS

COLONIAL BANCGROUP:

All required financial statements have been incorporated by reference into
this prospectus.

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DOTHAN FEDERAL SAVINGS BANK:
Report of Independent Public Accountants................................................... F-2
Statements of Financial Condition, June 30, 1995 and 1994.................................. F-3
Statements of Income Years Ended June 30, 1995, 1994 and 1993.............................. F-4
Statements of Stockholders' Equity Years Ended June 30, 1995, 1994 and 1993................ F-5
Statements of Cash Flows Years Ended June 30, 1995, 1994 and 1993.......................... F-6
Notes to Financial Statements.............................................................. F-7
Condensed Statements of Financial Condition, September 30, 1995 and 1994 (Unaudited)....... F-18
Condensed Statements of Income for the Three Months Ended September 30, 1995 and 1994
(Unaudited).............................................................................. F-19
Condensed Statement of Stockholders' Equity for the Three Months Ended September 30, 1995
(Unaudited).............................................................................. F-20
Condensed Statements of Cash Flows for the Three Months Ended September 30, 1995 and 1994
(Unaudited).............................................................................. F-21
Notes to Condensed Financial Statements.................................................... F-22
COMMERCIAL BANCORP OF GEORGIA, INC.
Independent Auditors' Report............................................................... F-23
Consolidated Balance Sheets, December 31, 1994 and 1993.................................... F-24
Consolidated Statements of Income Years Ended December 31, 1994, 1993 and 1992............. F-25
Consolidated Statements of Changes in Stockholders' Equity Years Ended December 31, 1994,
1993
and 1992................................................................................. F-26
Consolidated Statements of Cash Flows Years Ended December 31, 1994, 1993 and 1992......... F-27
Notes to Consolidated Financial Statements................................................. F-28
Consolidated Balance Sheet, September 30, 1995 and 1994 (Unaudited)........................ F-43
Consolidated Income Statement for the Three Months and Nine Months Ended September 30, 1995
and 1994 (Unaudited)..................................................................... F-44
Consolidated Statements of Changes in Stockholders' Equity for the Nine Months Ended
September 30, 1995 and 1994 (Unaudited).................................................. F-45
Condensed Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 1995
and 1994 (Unaudited)..................................................................... F-46
Notes to Financial Statements September 30, 1995 and 1994.................................. F-47
SOUTHERN BANKING CORPORATION:
Report of Independent Accountants.......................................................... F-49
Consolidated Balance Sheets, December 31, 1994 and 1993.................................... F-50
Consolidated Statements of Income Years Ended December 31, 1994, 1993 and 1992............. F-51
Consolidated Statements of Stockholders' Equity Years Ended December 31, 1994, 1993
and 1992................................................................................. F-52
Consolidated Statements of Cash Flows Years Ended December 31, 1994, 1993 and 1992......... F-53
Notes to Consolidated Financial Statements................................................. F-55
Consolidated Statements of Financial Condition, September 30, 1995 and 1994 (Unaudited).... F-66
Consolidated Statements of Income for the Nine Months Ended September 30, 1995 and 1994
(Unaudited).............................................................................. F-67
Consolidated Statement of Stockholders' Equity for the Nine Months Ended September 30, 1995
(Unaudited).............................................................................. F-68
Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 1995 and 1994
(Unaudited).............................................................................. F-69
</TABLE>

F-1
<PAGE> 76

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Dothan Federal Savings Bank:

We have audited the accompanying statements of financial condition of
DOTHAN FEDERAL SAVINGS BANK (a federally chartered savings bank) as of June 30,
1995 and 1994 and the related statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended June 30, 1995. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dothan Federal Savings Bank
as of June 30, 1995 and 1994 and the results of its operations and its cash
flows for each of the three years in the period ended June 30, 1995 in
conformity with generally accepted accounting principles.

As discussed in Note 1 to the financial statements, effective June 30,
1994, the Bank changed its method of accounting for investment securities and
mortgage-backed securities.

Arthur Andersen LLP

Birmingham, Alabama
July 28, 1995, (except with
respect to the matter
discussed in Note 14, as to which
the date is February 19, 1996)

F-2
<PAGE> 77

DOTHAN FEDERAL SAVINGS BANK

STATEMENTS OF FINANCIAL CONDITION
AS OF JUNE 30, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS:
Cash on hand and in banks........................................... $ 543,604 $ 396,328
Interest-bearing deposits in other banks............................ 369,732 417,151
----------- -----------
913,336 813,479
----------- -----------
SECURITIES AVAILABLE FOR SALE (Notes 1 and 2)....................... 5,280,789 5,713,879
SECURITIES HELD TO MATURITY, fair values of $1,504,690 and
$2,486,016, respectively (Notes 1 and 2).......................... 1,498,130 2,507,212
LOANS RECEIVABLE, net of allowance for loan losses of $255,722 and
$212,313, respectively (Notes 1 and 3)............................ 35,457,409 29,916,526
LAND, BUILDINGS, AND EQUIPMENT, less accumulated depreciation of
$180,194 and $202,981, respectively (Notes 1 and 4)............... 1,048,117 771,369
REAL ESTATE OWNED (Note 5):
Held pending sale................................................... 0 27,000
Properties under mortgage loans to facilitate sale.................. 28,765 69,746
ACCRUED INTEREST AND DIVIDENDS RECEIVABLE (Note 6).................. 331,692 293,312
OTHER ASSETS (Note 1)............................................... 98,823 69,583
----------- -----------
Total assets.............................................. $44,657,061 $40,182,106
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits (Note 7)................................................. $37,627,012 $32,191,484
Federal Home Loan Bank advances (Note 8).......................... 2,666,667 3,833,333
Advance payments by borrowers for taxes and insurance............. 186,094 161,947
Accrued interest payable.......................................... 179,610 93,418
Income taxes payable (Notes 1 and 9):
Current........................................................ 15,465 193,458
Deferred....................................................... 41,765 14,286
----------- -----------
57,230 207,744
----------- -----------
Accrued expenses and other liabilities............................ 42,538 40,860
----------- -----------
Total liabilities......................................... 40,759,151 36,528,786
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY (Note 1):
Preferred stock, 1,000,000 shares authorized, none issued, par
value
of $.01........................................................ 0 0
Common stock, 4,000,000 shares authorized, 399,688 issued and
outstanding, par value of $.01................................. 3,997 3,997
Paid-in capital................................................... 3,329,339 3,329,339
Retained earnings................................................. 605,099 447,845
Unrealized loss on securities available for sale, net (Notes 1 and
2)............................................................. (40,525) (127,861)
----------- -----------
Total stockholders' equity................................ 3,897,910 3,653,320
----------- -----------
Total liabilities and stockholders' equity................ $44,657,061 $40,182,106
========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE> 78

DOTHAN FEDERAL SAVINGS BANK

STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 1995, 1994, AND 1993

<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans................................. $2,873,845 $2,797,004 $2,852,402
Interest and dividends on securities available for sale.... 309,585 242,319 0
Interest on mortgage-backed securities..................... 0 0 103,364
Interest and dividends on securities....................... 73,136 88,334 73,034
Other interest income...................................... 36,875 32,248 59,482
---------- ---------- ----------
Total interest income............................ 3,293,441 3,159,905 3,088,282
---------- ---------- ----------
INTEREST EXPENSE:
Interest on deposits (Note 7).............................. 1,619,537 1,278,586 1,371,427
Interest on other borrowings (Note 8)...................... 255,341 180,976 138,727
---------- ---------- ----------
Total interest expense........................... 1,874,878 1,459,562 1,510,154
---------- ---------- ----------
Net interest income.............................. 1,418,563 1,700,343 1,578,128
PROVISION FOR LOAN LOSSES (Notes 1 and 3).................. 60,000 60,000 90,000
---------- ---------- ----------
Net interest income after provision for loan
losses......................................... 1,358,563 1,640,343 1,488,128
---------- ---------- ----------
OTHER INCOME:
Service charges............................................ 47,251 38,794 32,620
Gain on sale of securities................................. 7,169 0 34,531
Gain/(loss) on sale of loans............................... 3,304 25,847 0
Other income............................................... 490 6,612 2,289
---------- ---------- ----------
Total other income............................... 58,214 71,253 69,440
---------- ---------- ----------
OTHER EXPENSES:
Salaries and employee benefits (Note 11)................... 508,742 500,980 426,802
Office building and equipment.............................. 143,657 127,668 101,183
Federal deposit insurance premiums......................... 75,682 74,159 66,894
Data processing............................................ 79,042 64,244 63,140
Real estate owned (income)/expense, net.................... (3,838) (13,739) 47,643
Other expenses............................................. 253,359 203,111 216,159
---------- ---------- ----------
Total other expenses............................. 1,056,644 956,423 921,821
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES................... 360,133 755,173 635,747
Provision for income taxes (Notes 1 and 9)................. 142,926 278,125 0
---------- ---------- ----------
NET INCOME................................................. $ 217,207 $ 477,048 $ 635,747
========= ========= =========
EARNINGS PER SHARE (Note 1)................................ $ .54 $ 1.19 $ 1.59
========= ========= =========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE> 79

DOTHAN FEDERAL SAVINGS BANK

STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995, 1994, AND 1993

<TABLE>
<CAPTION>
COMMON STOCK RETAINED UNREALIZED TOTAL
------------------- PAID-IN EARNINGS GAIN (LOSS), STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) NET EQUITY
------- --------- ---------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1992....... 399,688 $ 399,688 $2,933,648 $(664,950) $ 0 $ 2,668,386
Net income................... 0 0 0 635,747 0 635,747
Change in par value (Note
1)......................... 0 (395,691) 395,691 0 0 0
------- --------- ---------- --------- ------------ -------------
BALANCE, JUNE 30, 1993....... 399,688 3,997 3,329,339 (29,203) 0 3,304,133
Net income................... 0 0 0 477,048 0 477,048
Unrealized loss on securities
available for sale, net
(Notes 1 and 2)............ 0 0 0 0 (127,861) (127,861)
------- --------- ---------- --------- ------------ -------------
BALANCE, JUNE 30, 1994....... 399,688 3,997 3,329,339 447,845 (127,861) 3,653,320
Net income................... 0 0 0 217,207 0 217,207
Dividends paid............... 0 0 0 (59,953) 0 (59,953)
Change in unrealized loss on
securities available for
sale, net (Notes 1 and
2)......................... 0 0 0 0 87,336 87,336
------- --------- ---------- --------- ------------ -------------
BALANCE, JUNE 30, 1995....... 399,688 $ 3,997 $3,329,339 $ 605,099 $ (40,525) $ 3,897,910
======= ========= ========= ========= ========= ==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE> 80

DOTHAN FEDERAL SAVINGS BANK

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995, 1994, AND 1993

<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income....................................................... $ 217,207 $ 477,048 $ 635,747
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................. 65,200 78,351 83,071
Accretion of deferred income................................... (84,431) (149,915) (89,051)
Provision for losses on loans and real estate owned............ 60,000 60,000 165,000
Provision for deferred taxes................................... 17,482 80,125 0
Loan fees deferred, net........................................ 49,169 95,325 127,461
Federal Home Loan Bank stock dividend.......................... 0 (10,300) (14,400)
Loss (gain), net, on sale of:
Loans........................................................ (3,304) (25,847) 0
Real estate owned............................................ (5,980) (15,145) (31,433)
Securities available for sale................................ (7,169) 0 0
Securities................................................... 0 0 (34,531)
Equipment.................................................... 27,704 (2,353) 3,364
Change in assets and liabilities:
Increase in accrued interest and dividends receivable........ (38,380) (31,856) (3,015)
Decrease in other assets..................................... 3,390 3,077 1,065
Increase (decrease) in current income taxes payable.......... (262,680) 193,458 0
Increase (decrease) in accrued expenses and other
liabilities................................................ 1,678 727 (6,590)
Increase in accrued interest payable......................... 86,192 39,046 9,338
------------ ----------- -----------
Net cash provided by operating activities............... 126,078 791,741 846,026
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities held to maturity.......... 1,500,000 0 0
Proceeds from sales of securities available for sale............. 184,508 0 0
Proceeds from sales of loans..................................... 1,756,117 3,534,550 0
Proceeds from sales of mortgage-backed securities................ 0 0 496,354
Proceeds from sales of equipment................................. 10,500 14,077 0
Proceeds from sales of real estate owned......................... 40,000 40,000 95,000
Repayments on securities available for sale...................... 437,139 0 0
Repayments on mortgage-backed securities......................... 0 514,469 424,130
Purchases of securities held to maturity......................... (496,328) (1,508,047) (300,000)
Purchases of mortgage-backed securities.......................... 0 (3,002,680) (1,455,195)
Loans originated, net of repayments.............................. (3,368,654) (512,306) (3,828,340)
Loans and participations purchased............................... (3,902,260) 0 (3,850,752)
Capital expenditures............................................. (367,099) (77,823) (12,640)
Purchase of Federal Home Loan Bank stock......................... (53,200) (19,900) (4,300)
------------ ----------- -----------
Net cash used in investing activities................... (4,259,277) (1,017,660) (8,435,743)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net............................. 5,435,528 (967,403) 5,013,703
Principal payments on capital lease obligation................... 0 0 (40,933)
Advances from Federal Home Loan Bank............................. 16,850,000 7,000,000 3,000,000
Repayments of Federal Home Loan Bank advances.................... (18,016,666) (6,666,667) (1,500,000)
Increase (decrease) in advance payments by borrowers for taxes
and insurance.................................................. 24,147 (2,706) 57,075
Cash dividends paid.............................................. (59,953) 0 0
------------ ----------- -----------
Net cash (used in) provided by financing activities..... 4,233,056 (636,776) 6,529,845
------------ ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................................... 99,857 (862,695) (1,059,872)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR..................... 813,479 1,676,174 2,736,046
------------ ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR........................... $ 913,336 $ 813,479 $ 1,676,174
============= ============ ============
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE> 81

DOTHAN FEDERAL SAVINGS BANK

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SECURITIES

Securities designated as available for sale are reported at fair value. The
unrealized difference between amortized cost and fair value on securities
available for sale is excluded from earnings and is reported net of deferred
taxes as a component of stockholders' equity. This caption includes securities
that management intends to use as part of its asset/liability management
strategy or that may be sold in response to changes in interest rates, changes
in prepayment risk, liquidity needs, or for other purposes.

Securities designated as held to maturity are reported at amortized cost,
as the Bank has both the ability and positive intent to hold these securities to
maturity. There are no securities classified as trading as of June 30, 1995 or
1994.

Amortization of premium and accretion of discount are computed under the
interest method. The adjusted cost of the specific security sold is used to
compute realized gain or loss on the sale of securities.

On June 30, 1994, Dothan Federal Savings Bank (the "Bank") adopted
Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities."

Initial adoption of SFAS No. 115 was accomplished by transferring certain
securities previously shown as investment securities or mortgage-backed
securities to the available for sale portfolio and had the effect of decreasing
stockholders' equity by $127,861 at June 30, 1994; it had no effect on 1994
income.

Prior to the adoption of SFAS No. 115, securities determined to be held on
a long-term basis or until maturity were accounted for in a manner similar to
securities held to maturity.

LOANS RECEIVABLE

Loans receivable are stated at unpaid principal balances, less the
allowance for loan losses and net of deferred loan origination fees and
premiums.

An allowance is established for uncollectible interest on loans that are 60
days past due based on management's periodic evaluations. The allowance is
established by a charge to interest income equal to all interest previously
accrued, and income is subsequently recognized only to the extent that cash
payments are received until, in management's judgment, the borrower's ability to
make periodic interest and principal payments has been demonstrated, in which
case the loan is returned to accrual status.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is maintained through provisions charged to
expense at levels which management considers adequate to absorb losses inherent
in the loan portfolio. The allowance is decreased by charge-offs, net of
recoveries. Management's evaluation of the allowance includes a review of all
loans for which full collectibility is not reasonably assured and considers,
among other factors, prior years' loss experience, economic conditions,
distribution of loans by risk class, and the estimated value of underlying
collateral. Though management believes the allowance for loan losses to be
adequate, ultimate losses may vary from these evaluations; however, the
allowance is reviewed periodically and, as adjustments become necessary, they
are reported in earnings in the periods in which they become known.

F-7
<PAGE> 82

DOTHAN FEDERAL SAVINGS BANK

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

FASB issued SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures", an amendment to SFAS No. 114. SFAS
No. 118 amends SFAS No. 114 to allow a creditor to use existing methods for
recognizing interest on an impaired loan. Management adopted SFAS Nos. 114 and
118 as of July 1, 1995; however, given the Bank's current loan portfolio
composition, the impact of adoption was not material.

LOAN ORIGINATION FEES, PREMIUMS, AND DISCOUNTS

Loan origination fees, net of direct costs associated with originating or
acquiring loans, are treated as an adjustment to the yield of the related loans
using the interest method over the contractual term of the loans. Such
adjustments are reflected in "Interest and fees on loans" in the accompanying
statements of income. Loan commitment fees are recognized into income upon
expiration of the commitment period, unless the commitment results in the loan
being funded and maintained in the loan portfolio.

Premiums paid and discounts received in connection with loans receivable
are amortized to interest income over the lives of the loans using the interest
method.

LAND, BUILDINGS, AND EQUIPMENT

Land, buildings, and equipment are carried at cost, net of accumulated
depreciation. Depreciation is computed on the straight-line method over the
estimated useful lives of the assets (40 years for buildings and 3 to 25 years
for equipment).

INTANGIBLE ASSETS

Intangible assets, included in "Other Assets" in the accompanying
statements of financial condition, consist of premiums paid to acquire the
deposits of other financial institutions. These costs ($33,498 and $50,562 at
June 30, 1995 and 1994, respectively) are being amortized using an accelerated
method over an eight year period which approximates the expected deposit
relationship lives. Amortization expense totaled $17,064, $20,565, and $24,065
in fiscal 1995, 1994, and 1993, respectively.

INCOME TAXES

The financial statements have been prepared on an accrual basis. Because
some income and expense items are recognized in different periods for financial
reporting purposes and for purposes of computing currently payable income taxes,
a provision or credit for deferred income taxes is made for such temporary
differences.

Effective July 1, 1991, the Bank adopted the asset and liability approach
for financial accounting and reporting of income taxes pursuant to SFAS No. 109,
"Accounting for Income Taxes."

No provision for income taxes was reflected in the statement of income for
the year ended June 30, 1993 due to the utilization of net operating loss
("NOL") carryforwards. The Bank utilized all of its federal and state NOL
carryforwards during fiscal 1994.

CHANGE IN PAR VALUE

On October 22, 1992, the Bank changed the par value of all authorized
preferred and common stock from $1.00 per share to $.01 per share.

F-8
<PAGE> 83

DOTHAN FEDERAL SAVINGS BANK

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

STATEMENTS OF CASH FLOWS

Cash and cash equivalents, for purposes of reporting cash flows, include
cash on hand and in banks and interest-bearing deposits in banks.

<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Supplemental cash flow information:
Cash paid during the period for:
Income taxes.......................................... $ 388,095 $ 4,513 $ 0
========= ========= =========
Interest.............................................. $1,788,686 $1,420,516 $1,500,816
========= ========= =========
Noncash transactions:
Transfers of loans receivable to real estate owned.... $ 6,000 $ 0 $ 0
========= ========= =========
Transfer of mortgage-backed and investment securities
to securities available for sale at fair value...... $ 0 $5,713,879 $ 0
========= ========= =========
Increase/(decrease) in unrealized net loss on
securities available for sale, net of deferred tax
provision/(benefit) of $44,961 and $(65,839),
respectively........................................ $ (87,336) $ 127,861 $ 0
========= ========= =========
</TABLE>

EARNINGS PER SHARE

Earnings per share have been calculated on the basis of the weighted
average number of shares of common stock outstanding, which were 399,688 during
fiscal years 1995, 1994, and 1993.

FINANCIAL STATEMENT RECLASSIFICATION

The financial statements for the prior years have been reclassified in
certain instances in order to conform with the 1995 financial statement
presentation. The reclassification did not change total assets or net income in
the prior years.

PENDING ACCOUNTING STANDARDS

Financial Instruments

In December 1991, the FASB issued SFAS No. 107, "Disclosures about Fair
Values of Financial Instruments", adoption of which is required for fiscal years
ending after December 15, 1995. In October 1994, the FASB issued SFAS No. 119,
"Disclosure about Derivative Financial Instruments and Fair Value of Financial
Instruments," adoption of which is required for fiscal years ending after
December 15, 1995. The Bank has elected not to adopt the provisions of these
statements before the required date.

DISCLOSURE OF CERTAIN RISKS

In December 1994, the Accounting Standards Division of the AICPA approved
SOP 94-6, "Disclosure of Certain Significant Risks and Uncertainties." SOP 94-6
requires disclosures in the financial statements beyond those now being required
or generally made in the financial statements about the risks and uncertainties
existing as of the date of those financial statements in the following areas:
nature of operations, use of estimates in the preparation of financial
statements, certain significant estimates, and current vulnerability due to
certain concentrations. SOP 94-6 is effective for financial statements issued
for fiscal years ending after December 15, 1995. The Bank has elected not to
adopt the provisions of SOP 94-6 before the required date.

F-9
<PAGE> 84

DOTHAN FEDERAL SAVINGS BANK

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS

In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
establishes accounting standards for evaluating the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. The Bank has elected not to adopt the provisions
of SFAS No. 121 until the required date, though management does not believe that
the adoption of SFAS No. 121 will have a significant impact on the Bank's
financial position or on the results of its operations.

MORTGAGE SERVICING RIGHTS

In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights," an amendment to SFAS No. 65. SFAS No. 122 amends certain provisions of
SFAS No. 65 to eliminate the accounting distinction between rights to service
mortgage loans for others that are acquired through loan origination activities
and those acquired through purchase transactions. Management does not intend to
adopt the provisions of SFAS No. 122 before the required date. Based on the
Bank's current operating activities, management does not believe that the
adoption of this Statement will have a material impact on the Bank's financial
condition or results of operations.

2. SECURITIES AVAILABLE FOR SALE AND SECURITIES HELD TO MATURITY

The amortized historical cost, approximate fair value, and gross unrealized
gains and losses of the Bank's securities available for sale and securities held
to maturity at June 30, 1995 and 1994 were as follows:

<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE
------------------------------------------------------------------------------------------------
1995 1994
----------------------------------------------- -----------------------------------------------
AMORTIZED GROSS GROSS AMORTIZED GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED FAIR HISTORICAL UNREALIZED UNREALIZED FAIR
COST GAIN (LOSS) VALUE COST GAIN (LOSS) VALUE
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FHLB stock............... $ 340,300 $ 0 $ 0 $ 340,300 $ 287,100 $ 0 $ 0 $ 287,100
Mortgage-backed
securities............. 4,701,892 6,416 (66,317) 4,641,991 5,320,479 10,740 (199,635) 5,131,584
Mutual Fund.............. 300,000 0 (1,502) 298,498 300,000 0 (4,805) 295,195
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$5,342,192 $6,416 $ (67,819) $5,280,789 $5,907,579 $ 10,740 $ (204,440) $5,713,879
========== ======== ========= ========== ========== ======== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
SECURITIES HELD TO MATURITY
------------------------------------------------------------------------------------------------
1995 1994
----------------------------------------------- -----------------------------------------------
AMORTIZED GROSS GROSS AMORTIZED GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED FAIR HISTORICAL UNREALIZED UNREALIZED FAIR
COST GAIN (LOSS) VALUE COST GAIN (LOSS) VALUE
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities... $1,498,130 $ 11,295 $ (4,735) $1,504,690 $2,507,212 $1,602 $ (22,798) $2,486,016
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$1,498,130 $ 11,295 $ (4,735) $1,504,690 $2,507,212 $1,602 $ (22,798) $2,486,016
========== ======== ======== ========== ========== ======== ========= ==========
</TABLE>

The amortized historical cost and approximate fair value of securities
available for sale and securities held to maturity at June 30, 1995 by
contractual maturity, are shown below. Expected maturities will differ from

F-10
<PAGE> 85

DOTHAN FEDERAL SAVINGS BANK

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
----------------------- -----------------------
AMORTIZED AMORTIZED
HISTORICAL FAIR HISTORICAL FAIR
COST VALUE COST VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or less......................... $ 300,000 $ 298,498 $1,001,142 $ 996,407
Due after one year through five years........... 0 0 496,988 508,283
Due after five years through ten years.......... 4,701,892 4,641,991 0 0
---------- ---------- ---------- ----------
5,001,892 4,940,489 1,498,130 1,504,690
FHLB stock...................................... 340,300 340,300 0 0
---------- ---------- ---------- ----------
$5,342,192 $5,280,789 $1,498,130 $1,504,690
========= ========= ========= =========
</TABLE>

Mortgage-backed securities totaling $934,227 have been pledged as
collateral against certain large deposits at June 30, 1995. Deposits (public
monies) associated with pledged mortgage-backed securities had an aggregate
balance of $750,000 at June 30, 1995.

Proceeds from sales of securities available for sale during 1995 were
$184,508 with gross gains of $7,169 realized on the sales. There were no
securities sales during fiscal 1994.

3. LOANS RECEIVABLE

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Mortgage loans:
Conventional loans:
Construction loans, primarily on one-to-four family
residences.................................................... $ 2,400,460 $ 3,670,870
Loans on existing property:
Residential.................................................. 26,673,402 20,621,089
Commercial................................................... 1,940,483 2,657,103
FHA and VA loans............................................. 1,937,669 2,601,330
Other loans, primarily consumer and lines of credit................. 3,717,059 2,772,807
Less:
Undisbursed portion of mortgage loans............................. (679,809) (1,879,760)
Unearned loan fees................................................ (249,452) (282,972)
Allowance for loan losses......................................... (255,722) (212,313)
Net acquisition discount.......................................... (26,681) (31,628)
----------- -----------
Total loans receivable, net............................... $35,457,409 $29,916,526
========== ==========
</TABLE>

As a savings bank, the Bank has a credit concentration in residential
mortgage loans. The majority of the Bank's customers are located in Dothan,
Alabama, and the surrounding area. The ability of these borrowers to repay is
highly dependent on local economic conditions.

Loans receivable at June 30, 1995 and 1994 included $145,531 and $10,452,
respectively, in loans that had been placed on nonaccrual status. Interest
income recognized on the nonaccrual loans outstanding at June 30, 1995 and 1994
was $2,217 and $1,119, respectively, as compared to $11,184 and $1,340 of
interest income in 1995 and 1994, respectively, that would have been recorded
under the original terms of the loans.

At June 30, 1995 and 1994, loans to key officers, directors and principal
stockholders and their affiliates amounted to $894,331 and $831,373,
respectively. In the opinion of management, related party loans are made on
substantially the same terms, including interest rates and collateral, as
comparable transactions with

F-11
<PAGE> 86

DOTHAN FEDERAL SAVINGS BANK

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

unrelated parties and do not involve more than normal risks of collectibility.
During fiscal 1995, new loans totaled $613,939 and repayments were $550,981.

An analysis of the Bank's allowance for loan losses for the years ended
June 30, 1995 and 1994 is as follows:

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Beginning balance.............................................. $212,313 $177,336
Provision...................................................... 60,000 60,000
Charge-offs.................................................... (16,591) (25,523)
Recoveries..................................................... 0 500
-------- --------
Ending balance................................................. $255,722 $212,313
======== ========
</TABLE>

4. LAND, BUILDINGS, AND EQUIPMENT

Land, buildings, and equipment, as reflected in the accompanying statements
of financial condition at June 30, 1995 and 1994 consisted of the following:

<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Land........................................................ $ 222,707 $ 222,707
Buildings................................................... 773,399 419,329
Furniture, fixtures and equipment........................... 232,205 293,173
Construction in progress.................................... 0 39,141
---------- ---------
1,228,311 974,350
Less accumulated depreciation and amortization.............. (180,194) (202,981)
---------- ---------
$1,048,117 $ 771,369
========= =========
</TABLE>

5. REAL ESTATE OWNED

Real estate owned consists either of properties acquired through
foreclosure and held pending sale or properties sold under mortgage loans to
facilitate sale and accounted for under the deposit method. Real estate owned is
carried at the lower of loan balance or fair value, less estimated costs of
disposition. Subsequent to foreclosure, real estate owned is evaluated on an
individual basis for changes in fair value. Future declines in fair value of the
asset less costs of disposition below its carrying amount result in an increase
in the valuation allowance account. Future increases in fair value of the asset
less costs of disposition above its carrying amount reduce the valuation
allowance account, but not below zero. Minor costs relating to holding and
maintaining the property are expensed and amounts incurred to improve the
property are capitalized. The amounts expensed in fiscal 1995, 1994, and 1993
were $2,142, $4,280, and $10,699, respectively. The amount capitalized in fiscal
1995 was $1,020. No amounts were capitalized in fiscal 1994 or 1993. Valuations
are periodically performed by management and a provision for estimated losses on
real estate is charged to earnings when such losses are anticipated. No property
was held pending sale at June 30, 1995. Property held pending sale at June 30,
1994 consisted of residential property with a basis of $27,000 and no valuation
allowance.

There were no valuation allowances for real estate owned for the years
ended June 30, 1995 and 1994 and there was no related activity in the valuation
allowances.

F-12
<PAGE> 87

DOTHAN FEDERAL SAVINGS BANK

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. ACCRUED INTEREST AND DIVIDENDS RECEIVABLE

Accrued interest and dividends receivable at June 30, 1995 and 1994 is
summarized as follows:

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Securities held to maturity.................................... $ 29,086 $ 52,378
Securities available for sale.................................. 31,353 28,748
Loans receivable............................................... 271,253 212,186
-------- --------
$331,692 $293,312
======== ========
</TABLE>

7. DEPOSITS

The weighted average rate payable on all deposits at June 30, 1995 and 1994
was 5.48% and 4.10%, respectively. Deposits at June 30, 1995 and 1994 and the
related range of interest rates payable for deposits outstanding at June 30,
1995 consisted of the following:

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Statement savings, 3.0%................................... $ 1,522,588 $ 1,312,254
NOW accounts, 2.5% to 2.75%............................... 2,837,515 2,905,669
Money market accounts, 3.0% to 4.0%....................... 4,414,154 5,624,221
Certificates of deposit, 2.62% to 10.50%.................. 28,852,755 22,349,340
----------- -----------
$37,627,012 $32,191,484
========== ==========
</TABLE>

Certificates of deposit above included $4,620,069 and $3,719,531,
respectively, of certificates in excess of $100,000 at June 30, 1995 and 1994.

At June 30, 1995 and 1994, scheduled maturities of certificates of deposit
were as follows:

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Within one year........................................... $16,507,873 $12,535,224
One to three years........................................ 12,141,196 8,629,291
Thereafter................................................ 203,686 1,184,825
----------- -----------
$28,852,755 $22,349,340
========== ==========
</TABLE>

Interest expense on deposits consisted of the following:

<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Statement savings.................................. $ 53,089 $ 24,852 $ 20,319
NOW accounts....................................... 58,338 53,240 49,201
Money market accounts.............................. 198,978 216,652 278,288
Certificates of deposit............................ 1,309,132 983,842 1,023,619
---------- ---------- ----------
$1,619,537 $1,278,586 $1,371,427
========= ========= =========
</TABLE>

F-13
<PAGE> 88

DOTHAN FEDERAL SAVINGS BANK

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. FEDERAL HOME LOAN BANK ADVANCES

Federal Home Loan Bank advances outstanding at June 30, 1995 and 1994
mature as follows:

<TABLE>
<CAPTION>
INTEREST
RATE 1995 1994
-------- ---------- ----------
<S> <C> <C> <C>
July 8, 1994........................................... 6.70% $ 0 $ 500,000
September 28, 1995..................................... 4.25% 166,667 833,333
September 27, 1998..................................... 4.73% 2,500,000 2,500,000
---------- ----------
$2,666,667 $3,833,333
========= =========
</TABLE>

The Bank is required by its blanket floating lien agreement with the
Federal Home Loan Bank to maintain qualifying collateral for its advances in an
amount at least equal to 175% of such advances. In addition, the Bank's
investment in Federal Home Loan Bank stock is pledged as collateral on
outstanding advances.

In 1994, the Bank maintained a $3,000,000 line of credit with the Federal
Home Loan Bank at a variable rate, which was 6.70% at June 30, 1994, which
matured July 8, 1994. The amount outstanding under this line of credit at June
30, 1994 was $500,000 and is included in the outstanding advances disclosed
above.

9. INCOME TAXES

The provision for income taxes for the years ended June 30, 1995 and 1994
were as follows:

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current:
Federal........................................................ $144,943 $173,000
State.......................................................... 15,465 25,000
-------- --------
160,408 198,000
Deferred......................................................... (17,482) 80,125
-------- --------
Totals................................................. $142,926 $278,125
======== ========
</TABLE>

No provision for income taxes was recorded for the year ended June 30, 1993
due to utilization of net operating loss carryforwards (see Note 1).

The differences between the provision for income taxes and the amount
computed by applying the statutory federal income tax rate of 34% to income
before taxes for the years ended June 30, 1995 and 1994 were as follows:

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Expected income tax expense at federal tax rate.................. $122,445 $256,758
Add (deduct):
Utilization of NOL carryforwards............................... 0 (78,452)
State income tax, net of federal tax benefit................... 10,207 16,716
Restoration of deferred tax liability.......................... 0 75,583
Other, net..................................................... 10,274 7,520
-------- --------
Totals................................................. $142,926 $278,125
======== ========
</TABLE>

F-14
<PAGE> 89

DOTHAN FEDERAL SAVINGS BANK

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The components of the net deferred tax liability as of June 30, 1995 and
1994 were as follows:

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax asset:
Unrealized loss................................................ $ 20,878 $ 65,839
-------- --------
Deferred tax liability:
FHLB stock dividend............................................ (21,852) (23,340)
Depreciation................................................... (14,047) (10,786)
Capital leases................................................. (29,332) (32,319)
Other.......................................................... 2,588 (13,680)
-------- --------
Total deferred tax liability........................... (62,643) (80,125)
-------- --------
Net deferred tax liability............................. $(41,765) $(14,286)
======== ========
</TABLE>

10. COMMITMENTS AND CONTINGENCIES

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Bank is party to financial instruments with off-balance sheet risk in
the normal course of business, primarily to meet the financing needs of its
customers. These financial instruments consisted of commitments to extend credit
and amounted to $182,000 at June 30, 1995. The Bank's policies as to collateral
and assumption of credit risk for off-balance sheet items are essentially the
same as those for extension of credit to its customers.

LITIGATION

The Bank is a party to litigation and claims arising in the normal course
of business. Management, after consultation with legal counsel, believes that
the liabilities, if any, arising from such litigation and claims will not be
material to the financial statements.

FDIC ASSESSMENTS

The FDIC-SAIF assessments became effective January 1, 1990. The FDIC
assessment rate was 20.8 basis points of insured deposits through December 31,
1990, and has been 23 basis points since January 1, 1991. However, significant
debate has ensued in Congress and within the industry as to the disparity
between bank and thrift deposit insurance premiums which arose during 1995 when
bank premiums were reduced when the target capitalization of the Bank Insurance
Fund ("BIF") was achieved. To eliminate and reduce the disparity and provide for
the recapitalization of the Savings Association Insurance Fund ("SAIF"), a
special recapitalization premium for SAIF deposits has been discussed
approximating 85 basis points. No decision has been finalized as to the
resolution of BIF/SAIF premium disparity or the fund recapitalization issue. In
the event of an 85 basis point assessment, the Bank would incur approximately
$320,000 in expense.

11. COMPENSATION AND BENEFITS

During fiscal 1994, the Bank adopted a profit sharing plan and distributes
funds earned to employees on a semiannual basis. Total distributions during 1995
related to this plan were $18,954, which are included in "Salaries and employee
benefits" in the accompanying statements of income. The Bank also adopted a
defined-contribution 401(k) plan, but does not contribute or match the
employees' contributions.

In December 1990 and November 1992, the FASB issued SFAS No. 106,
"Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits", respectively. The Bank does
not offer these benefits, as defined, to its employees and, accordingly,

F-15
<PAGE> 90

DOTHAN FEDERAL SAVINGS BANK

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

SFAS No. 106 had no effect on the Bank's 1995 financial statements and SFAS No.
112 at the date of adoption will have no effect on the Bank's financial
condition based on current activity.

12. REGULATION

As a federally chartered savings bank, the Bank is required by its primary
regulator, the Office of Thrift Supervision ("OTS"), to maintain capital
sufficient to meet three requirements, as defined: (1) a tangible capital
requirement equal to 1.5% of adjusted total assets; (2) a leverage or core
capital requirement of 3% of adjusted total assets, though it is anticipated
that most institutions will be required by the regulators to maintain capital of
an additional 100 to 200 basis points; and (3) a risk-based capital requirement
equal to 8% of risk-weighted assets, which were approximately $21,895,200 at
June 30, 1995. Assets and off-balance sheet commitments are assigned a
credit-risk weighting based upon their relative risk ranging from 0% for assets
backed by the full faith and credit of the United States Government or that pose
no credit risk to the Bank, to 100% for assets such as commercial loans,
delinquent, or repossessed assets.

The following is a reconciliation of the Bank's total stockholders' equity
to the Bank's tangible, core, and risk-based capital available to meet its
regulatory requirements:

<TABLE>
<CAPTION>
JUNE 30, 1995
-------------
<S> <C>
Stockholders' equity as reported in the accompanying financial
statements............................................................ $ 3,897,910
Intangible assets required to be deducted............................... (33,498)
Unrealized loss on debt securities available for sale................... 39,534
-------------
Tangible capital........................................................ 3,903,946
Required deductions..................................................... 0
-------------
Core capital............................................................ 3,903,946
General allowance for loan losses....................................... 135,322
-------------
Risk-based capital...................................................... $ 4,039,268
==========
</TABLE>

The following presents the Bank's capital levels and ratios compared to its
minimum capital requirements:

<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
---------- ----------
<S> <C> <C>
Tangible capital, as defined................................... $3,903,946 8.74%
Required minimum............................................... 669,946 1.50
---------- ----------
Excess............................................... $3,234,000 7.24%
========= ========
Core capital, as defined....................................... $3,903,946 8.74%
Required minimum (a)........................................... 1,339,893 3.00
---------- ----------
Excess............................................... $2,564,053 5.74%
========= ========
Risk-based capital............................................. $4,039,268 18.45%
Required minimum............................................... 1,751,616 8.00
---------- ----------
Excess............................................... $2,287,652 10.45%
========= ========
</TABLE>

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

(a) The required minimum based on 5% would be $2,233,155, leaving an excess of
$1,670,791.

F-16
<PAGE> 91

DOTHAN FEDERAL SAVINGS BANK

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Effective December 19, 1992, the Bank became subject to additional capital
standards established by the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA"). These regulations established capital standards in five
categories ranging from "critically undercapitalized" to "well capitalized," and
defined "well capitalized" as at least 5% for core (leverage) capital and at
least 10% for risk-based capital. Institutions with a core capital less than 4%
or risk-based capital less than 8% are considered "undercapitalized," and
subject to increasingly stringent prompt corrective action measures. The Bank's
capital ratios above place it in the "well capitalized" category.

13. INTEREST RATE SENSITIVITY

A portion of the Bank's interest earning assets are long-term fixed rate
mortgage loans and mortgage-backed securities (approximately 79%), while its
principal source of funds are savings deposits with maturities of three years or
less (approximately 99%). Because of the short-term nature of the savings
deposits, their cost generally reflects returns currently available in the
market. Accordingly, the savings deposits have a high degree of interest rate
sensitivity while the mortgage loan portfolio, to the extent of fixed rate
loans, is relatively fixed and has much less sensitivity to changes in current
market rates. Although these conditions are somewhat mitigated by the Bank's
risk management strategies of selling long-term fixed rate loans and reinvesting
in adjustable-rate mortgage-backed securities, changes in market interest rates
tend to directly affect the level of net interest income.

14. SUBSEQUENT EVENT

On January 22, 1996, the Bank entered into a definitive agreement for the
acquisition of the Bank by The Colonial BancGroup, Inc. ("BancGroup"), in which
BancGroup will acquire all of the outstanding stock of the Bank, consideration
consisting of both shares of BancGroup's common stock and cash for an aggregate
purchase price of approximately $5,200,000. This transaction is subject to,
among other things, approval by the stockholders of the Bank and BancGroup and
approval by the appropriate regulatory authorities. In connection with the
pending acquisition, the Bank has entered into agreements with its president and
chief executive officer and its vice president and controller pursuant to which
each could receive cash payments following the merger, should they terminate
employment with the Bank or BancGroup following the merger. Total payments
possible under the agreements, if exercised, would approximate $54,000.

F-17
<PAGE> 92

DOTHAN FEDERAL SAVINGS BANK

CONDENSED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash................................................................ $ 2,643,133 $ 1,183,923
Securities available for sale....................................... 5,195,127 5,513,361
Securities held to maturity......................................... 3,247,629 1,503,949
Loans receivable.................................................... 35,442,901 31,962,520
Land, buildings, and equipment...................................... 1,050,925 941,994
Real estate owned................................................... 28,312 101,251
Accrued interest and dividends receivable........................... 334,761 276,592
Other assets........................................................ 140,738 141,503
----------- -----------
$48,083,526 $41,625,093
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits............................................................ $41,042,314 $33,115,160
Federal Home Loan Bank advances..................................... 2,500,000 4,416,667
Advance payments by borrowers for taxes and insurance............... 228,118 191,633
Accrued interest payable............................................ 259,727 126,088
Income taxes payable
Current........................................................... 15,465 68,850
Deferred.......................................................... 54,853 0
Accrued expenses and other liabilities.............................. 29,227 83,617
----------- -----------
Total Liabilities......................................... $44,129,704 $38,002,015
----------- -----------
Stockholders' Equity
Preferred stock, 1,000,000 shares authorized, none issued, par value
of $.01........................................................... $ 0 $ 0
Common Stock, 4,000,000 shares authorized, 399,688 issued and
outstanding, par value of $.01.................................... 3,997 3,997
Paid-in Capital..................................................... 3,329,339 3,329,339
Retained Earnings................................................... 635,548 454,575
Unrealized loss on securities available for sale, net............... (15,062) (164,833)
----------- -----------
Total Stockholders' Equity................................ $ 3,953,822 $ 3,623,078
----------- -----------
$48,083,526 $41,625,093
========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-18
<PAGE> 93

DOTHAN FEDERAL SAVINGS BANK

CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1995 1994
-------- --------
(UNAUDITED)
<S> <C> <C>
Interest Income:
Loans.............................................................. $745,973 $653,140
Other investments.................................................. 135,088 103,080
-------- --------
Total interest income...................................... 881,061 756,220
-------- --------
Interest Expense
Deposits........................................................... 556,372 347,319
Other Borrowings................................................... 30,782 45,747
-------- --------
Total interest expense..................................... 587,154 393,066
-------- --------
Net Interest income........................................ 293,907 363,154
Provision for possible loan losses................................... 15,000 15,000
-------- --------
Net interest income after provision for possible loan losses......... 278,907 348,154
-------- --------
Other Income:
Other loan fees and charges........................................ 9,558 9,265
Demand deposit fees................................................ 8,522 6,949
Other income....................................................... 11,740 913
-------- --------
Total other income......................................... 29,820 17,127
-------- --------
Other Expenses:
Salaries and employee benefits..................................... 110,936 120,538
Office building and equipment...................................... 30,753 37,107
Federal deposit insurance premiums................................. 20,100 18,659
Data processing.................................................... 16,212 18,373
Other expenses..................................................... 76,339 60,658
-------- --------
Total other expenses....................................... 254,340 255,335
-------- --------
Income before provision for income taxes................... 54,387 109,946
-------- --------
Provision for income taxes........................................... 23,938 43,263
-------- --------
Net Income................................................. $ 30,449 $ 66,683
======== ========
Earnings Per Share................................................... $ 0.08 $ 0.17
======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-19
<PAGE> 94

DOTHAN FEDERAL SAVINGS BANK

CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995

<TABLE>
<CAPTION>
COMMON STOCK
------------------ UNREALIZED TOTAL
NUMBER OF ADDITIONAL RETAINED GAIN/(LOSS), STOCKHOLDERS'
SHARES AMOUNT PAID-IN CAPITAL EARNINGS NET EQUITY
--------- ------ --------------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1995......................... 399,688 $3,997 $ 3,329,339 $605,099 $(40,525) $ 3,897,910
Net income....................................... 0 0 0 30,449 0 30,449
Change in unrealized loss on securities available
for sale, net.................................. 0 0 0 0 25,463 25,463
--------- ------ --------------- -------- ------------ -------------
Balance at September 30, 1995.................... 399,688 $3,997 $ 3,329,339 $635,548 $(15,062) $ 3,953,822
======== ====== =========== ======== ========= ==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-20
<PAGE> 95

DOTHAN FEDERAL SAVINGS BANK

CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income.................................................................. $ 30,449 $ 66,683
Adjustments to reconcile net income to net cash provided by (used in)
operating activities
Depreciation and amortization............................................. 19,360 17,479
Accretion of deferred income.............................................. (11,650) (18,991)
Provision for losses on loans and real estate owned....................... 15,000 15,000
Loan fees deferred, net................................................... 13,634 13,982
Loss (gain) net, on sale of Loans......................................... 447 57
Change in assets and liabilities:
(Decrease) Increase in accrued interest and dividends receivable........ (3,069) 16,720
Increase in other assets................................................ (69,573) (65,954)
Increase (decrease) in current income taxes payable..................... 23,938 (129,150)
Increase (decrease) in accrued expenses and other liabilities........... (13,311) 42,757
Increase in accrued interest payable.................................... 80,117 32,670
----------- -----------
Net cash provided by (used in) operating activities.................. 85,342 (8,747)
Cash flows from investing activities:
Proceeds from maturities of securities held to maturity..................... 500,000 1,000,000
Proceeds from sales of loans................................................ 640,548 77,443
Repayments of securities available for sale................................. 122,448 143,136
Purchases of securities held to maturity.................................... (2,249,531) --
Loans originated, net of repayments......................................... (496,159) (1,120,354)
Loans and participations purchased.......................................... (148,296) (1,015,750)
Capital expenditures........................................................ (15,214) (182,027)
----------- -----------
Net cash used in investing activities................................ (1,646,204) (1,097,552)
Cash flows from financing activities:
Increase in deposits, net................................................... 3,415,302 923,676
Advances from Federal Home Loan Bank........................................ -- 4,850,000
Repayments of Federal Home Loan Bank advances............................... (166,667) (4,266,666)
Increase in advance payments by borrowers for taxes and insurance........... 42,024 29,686
Cash dividends paid......................................................... -- (59,953)
----------- -----------
Net cash (used in) provided by financing activities.................. 3,290,659 1,476,743
----------- -----------
Increase in cash and cash equivalents......................................... 1,729,797 370,444
Cash and cash equivalents, beginning of year.................................. 913,336 813,479
----------- -----------
Cash and cash equivalents, end of year........................................ $ 2,643,133 $ 1,183,923
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes.............................................................. $ 0 $ 172,413
============ ============
Interest.................................................................. $ 488,336 $ 360,396
============ ============
Noncash transactions:
Transfers of loans receivable to real estate owned........................ $ 0 $ 6,000
============ ============
Increase/(decrease) in unrealized net loss on securities available for
sale, net of deferred tax provision/(benefit) of $13,088 and $(20,304),
respectively............................................................. $ (25,463) $ 36,972
============ ============
</TABLE>

The accompanying notes are an integral part of these statements.

F-21
<PAGE> 96

DOTHAN FEDERAL SAVINGS BANK

NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994

1. BASIS OF PRESENTATION

The condensed financial statements were prepared by Dothan Federal Savings
Bank (the "Bank") without audit, but in the opinion of management, reflect all
adjustments necessary for the fair presentation of the Bank's financial position
and results of operations for the three month periods ended September 30, 1995
and 1994. Results of operations for the interim 1995 period are not necessarily
indicative of results expected for the full year. While certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted, the Bank believes that the disclosures herein are adequate to make the
information presented not misleading. These condensed financial statements
should be read in conjunction with the financial statements and the notes
thereto included in the Bank's statements of financial condition for the year
ended June 30, 1995. The accounting policies employed are the same as those
shown in Note 1 to the statements of financial condition.

2. IMPLEMENTATION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NOS. 114 AND
118

During 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," which is effective for fiscal years beginning after
December 15, 1994. SFAS No. 114 requires that impaired loans be valued based on
the present value of those loans' estimated cash flows at each loan's effective
interest rate or the loan's observable market price or the fair value of the
underlying collateral. In October 1994, the FASB issued SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures", an amendment to SFAS No. 114. SFAS No. 118 amends SFAS No. 114 to
allow a creditor to use existing methods for recognizing interest on an impaired
loan. Management adopted SFAS Nos. 114 and 118 as of July 1, 1995; however,
given the Bank's current loan portfolio composition, the impact of adoption was
not material.

3. FDIC ASSESSMENTS

The FDIC-SAIF assessments became effective January 1, 1990. The FDIC
assessment rate was 20.8 basis points of insured deposits through December 31,
1990, and has been 23 basis points since January 1, 1991. However, significant
debate has ensued in Congress and within the industry as to the disparity
between bank and thrift deposit insurance premiums which arose during 1995 when
bank premiums were reduced when the target capitalization of the Bank Insurance
Fund ("BIF") was achieved. To eliminate or reduce the disparity and provide for
the recapitalization of the Savings Association Insurance Fund ("SAIF"), a
special recapitalization premium for SAIF deposits has been discussed
approximating 85 basis points. No decision has been finalized as to the
resolution of BIF/SAIF premium disparity or the fund recapitalization issue. In
the event of an 85 basis point assessment, the Bank would incur approximately
$320,000 in expense.

4. SUBSEQUENT EVENT

On January 22, 1996, the Bank entered into a definitive agreement for the
acquisition of the Bank by the Colonial BancGroup, Inc. ("BancGroup"), in which
BancGroup will acquire all of the outstanding stock of the Bank, consideration
consisting of both shares of BancGroup's common stock and cash for an aggregate
purchase price approximating $5,200,000. This transaction is subject to, among
other things, approval by the stockholders of the Bank and BancGroup and
approval by the appropriate regulatory authorities. In connection with the
pending acquisition, the Bank has entered into agreements with its president and
chief executive officer and its vice president and controller, pursuant to which
each could receive cash payments following the merger should they terminate
employment with the Bank or BancGroup following the merger. Total payments
possible under the agreements, if exercised, would approximate $54,000.

F-22
<PAGE> 97

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Commercial Bancorp of Georgia, Inc.
and Subsidiaries
Lawrenceville, Georgia

We have audited the accompanying consolidated balance sheet of Commercial
Bancorp of Georgia, Inc. (formerly known as Commercial Bancorp of Gwinnett,
Inc.) and Subsidiaries as of December 31, 1994, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of Commercial Bancorp of Georgia, Inc.'s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit. We audited the consolidated financial statements of Commercial Bancorp of
Georgia, Inc. (formerly known as Commercial Bancorp of Gwinnett, Inc.) and
Subsidiary as of December 31, 1994 and 1993, and for the three years then ended,
and our reports dated January 19, 1995, except for the information presented in
Note L for which the date is March 2, 1995, and January 25, 1994, expressed an
unqualified opinion on those statements. We audited the consolidated financial
statements of the former Commercial Bancorp of Georgia, Inc. and Subsidiary as
of December 31, 1994, and for the year then ended, and our report dated March
10, 1995, expressed an unqualified opinion on those statements. The consolidated
financial statements of the former Commercial Bancorp of Georgia, Inc. and
Subsidiary as of December 31, 1993, and for the two years then ended, were
audited by other auditors whose report, dated March 2, 1994, expressed an
unqualified opinion on those statements.

The consolidated financial statements of Commercial Bancorp of Georgia,
Inc. (formerly known as Commercial Bancorp of Gwinnett, Inc.) as of December 31,
1994 and 1993, and for the three years then ended have been restated to reflect
the 1995 pooling of interests with the former Commercial Bancorp of Georgia,
Inc., as described in Note B of the consolidated financial statements.

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

In our opinion, the restated 1994 consolidated financial statements
referred to above present fairly, in all material respects, the consolidated
financial position of Commercial Bancorp of Georgia, Inc. (formerly known as
Commercial Bancorp of Gwinnett, Inc.) and Subsidiaries as of December 31, 1994,
and the results of their operations and their cash flows for the year then ended
in conformity with generally accepted accounting principles. We previously
audited and reported on the consolidated balance sheet of Commercial Bancorp of
Georgia, Inc. (formerly known as Commercial Bancorp of Gwinnett, Inc.) as of
December 31, 1993, and the related consolidated statements of income and cash
flows for the two years then ended, prior to their restatement for the 1995
pooling of interests. Its contribution to total assets, revenues, and net income
represented 33%, 30% and 59% of the respective restated totals. Separate
consolidated financial statements of the former Commercial Bancorp of Georgia,
Inc. included in the 1993 restated consolidated balance sheet and consolidated
statements of income and cash flows for the two years then ended were audited
and reported on separately by other auditors. We also audited the combination of
the accompanying consolidated balance sheets and consolidated statements of
income and cash flows as of and for the two years ended December 31, 1993, after
restatement for the 1995 pooling of interests. In our opinion, such consolidated
statements have been properly combined on the basis described in Note A of the
notes to the consolidated financial statements.

As discussed in Note A to the consolidated financial statements, the
Company changed its method of accounting for investment securities in 1994 to
adopt the provisions of Statement of Financial Accounting Standards No. 115.

BRICKER & MELTON, P.A.

January 19, 1995
Duluth, Georgia

F-23
<PAGE> 98

COMMERCIAL BANCORP OF GEORGIA, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks (Note C).................................. $ 12,164,453 $ 8,066,046
Federal funds sold................................................ 14,610,000 19,187,000
Interest-bearing deposits in other banks.......................... 200,000 --
Investment securities held to maturity (market value of
$18,226,280 and $8,879,489 for 1994 and 1993, respectively)
(Note D)........................................................ 19,096,399 8,770,920
Investment securities available for sale (Note D)................. 7,311,800 11,600,058
Other investments................................................. 180,000 180,000
Loans, net (Notes E and K)........................................ 133,736,244 110,945,568
Loans held for sale............................................... 189,590 2,807,064
Premises and equipment, net (Note F).............................. 5,995,057 5,665,600
Other real estate (Note G)........................................ 1,480,417 1,377,730
Intangible assets, net............................................ 984,637 1,142,231
Accrued interest receivable....................................... 1,532,366 1,081,299
Other assets (Note I)............................................. 1,896,522 1,431,005
------------ ------------
TOTAL ASSETS............................................ $199,377,485 $172,254,521
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing demand................................... $ 38,075,216 $ 25,777,835
Interest-bearing demand and money market..................... 46,423,500 45,428,567
Savings...................................................... 5,744,815 5,038,845
Time deposits of $100,000 or more............................ 18,766,716 18,603,150
Other time deposits.......................................... 69,253,881 57,206,396
------------ ------------
Total Deposits.......................................... 178,264,128 152,054,793
------------ ------------
Note payable (Note K)........................................ 50,000 --
Obligation under capital leases (Note F)..................... 160,692 289,190
Accrued interest payable..................................... 1,066,201 844,976
Other liabilities............................................ 1,104,624 879,474
------------ ------------
TOTAL LIABILITIES....................................... 180,645,645 154,068,433
------------ ------------
STOCKHOLDERS' EQUITY (Note L)
Common stock -- $1 par value: 10,000,000 shares authorized,
1,856,711 shares issued...................................... 1,856,711 1,856,711
Surplus........................................................... 16,090,386 16,090,386
Retained earnings................................................. 1,236,769 538,991
Treasury stock, at cost, 30,000 shares............................ (300,000) (300,000)
Market valuation reserve on investment securities available for
sale (Note D)................................................... (152,026) --
------------ ------------
TOTAL STOCKHOLDERS' EQUITY.............................. 18,731,840 18,186,088
------------ ------------
Commitments and contingent liabilities (Note M)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............. $199,377,485 $172,254,521
=========== ===========
</TABLE>

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

F-24
<PAGE> 99

COMMERCIAL BANCORP OF GEORGIA, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees........................................... $12,517,671 $10,853,400 $ 8,309,263
Interest on investment securities............................... 1,238,857 1,136,767 1,402,108
Interest on federal funds sold.................................. 586,398 336,179 408,320
Interest on deposits in other banks............................. 4,295 -- 180,106
----------- ----------- -----------
TOTAL INTEREST INCOME.................................... 14,347,221 12,326,346 10,299,797
----------- ----------- -----------
INTEREST EXPENSE
Interest-bearing demand and money market........................ 1,427,552 1,304,223 1,679,931
Savings......................................................... 162,809 118,444 147,770
Time deposits of $100,000 or more............................... 857,799 705,595 760,608
Other time deposits............................................. 2,978,769 2,635,520 2,192,853
Obligation under capital leases (Note F)........................ 12,171 14,970 22,308
Other (Notes J and K)........................................... 18,906 13,533 10,507
----------- ----------- -----------
TOTAL INTEREST EXPENSE................................... 5,458,006 4,792,285 4,813,977
----------- ----------- -----------
NET INTEREST INCOME...................................... 8,889,215 7,534,061 5,485,820
PROVISION FOR LOAN LOSSES (Note E)................................ 694,967 438,854 652,089
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES...... 8,194,248 7,095,207 4,833,731
----------- ----------- -----------
OTHER INCOME
Service charges on deposit accounts............................. 918,899 671,802 519,022
Investment securities gains, net (Note D)....................... -- 66,912 64,613
Gains on sales of SBA loan participations....................... 526,400 529,942 522,615
Fees/gains on the origination/sale of mortgage loans............ 164,032 473,574 331,128
Loan servicing fees............................................. 254,723 185,962 162,166
Other income.................................................... 351,193 205,611 63,566
----------- ----------- -----------
TOTAL OTHER INCOME....................................... 2,215,247 2,133,803 1,663,110
----------- ----------- -----------
OTHER EXPENSE
Salaries and employee benefits (Note J)......................... 4,518,188 4,045,739 3,358,945
Net occupancy and equipment expense (Note F).................... 1,403,746 1,237,045 1,004,812
Other real estate expense (Note G).............................. 308,872 142,030 143,007
Amortization expense............................................ 157,594 158,540 95,357
Other expense (Note O).......................................... 2,824,909 2,280,444 2,085,882
----------- ----------- -----------
TOTAL OTHER EXPENSE...................................... 9,213,309 7,863,798 6,688,003
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLES..................... 1,196,186 1,365,212 (191,162)
INCOME TAX EXPENSE (BENEFIT) (Note I)............................. 498,408 479,024 (45,345)
----------- ----------- -----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLES.................................. 697,778 886,188 (145,817)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES FOR INCOME
TAXES (Note I).................................................. -- 383,691 --
----------- ----------- -----------
NET INCOME (LOSS)........................................ $ 697,778 $ 1,269,879 $ (145,817)
============ ============ ============
EARNINGS PER SHARE
Before cumulative effect of change.............................. $ .38 $ .49 $ (.08)
Cumulative effect of change..................................... -- .21 --
----------- ----------- -----------
$ .38 $ .70 $ (.08)
============ ============ ============
</TABLE>

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

F-25
<PAGE> 100

COMMERCIAL BANCORP OF GEORGIA, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
---------------------------------------------------------------------------
MARKET
COMMON RETAINED VALUATION TREASURY
STOCK SURPLUS EARNINGS RESERVE STOCK TOTAL
---------- ----------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991....... $1,856,711 $16,090,386 $ (585,071) $ -- $(300,000) $17,062,026
Net loss........................... -- -- (145,817) -- -- (145,817)
---------- ----------- ---------- --------- --------- -----------
BALANCE AT DECEMBER 31, 1992....... 1,856,711 16,090,386 (730,888) -- (300,000) 16,916,209
Net income......................... -- -- 1,269,879 -- -- 1,269,879
---------- ----------- ---------- --------- --------- -----------
BALANCE AT DECEMBER 31, 1993....... 1,856,711 16,090,386 538,991 -- (300,000) 18,186,088
Net income......................... -- -- 697,778 -- -- 697,778
Market valuation adjustment........ -- -- -- (152,026) -- (152,026)
---------- ----------- ---------- --------- --------- -----------
BALANCE AT DECEMBER 31, 1994....... $1,856,711 $16,090,386 $1,236,769 $(152,026) $(300,000) $18,731,840
========== ============ ========== ========== ========== ============
</TABLE>

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

F-26
<PAGE> 101

COMMERCIAL BANCORP OF GEORGIA, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).......................................................... $ 697,778 $ 1,269,879 $ (145,817)
Adjustments to reconcile net income to net cash provided by operating
activities:
Cumulative effect of change in accounting principles..................... -- (383,691) --
Provision for loan losses................................................ 694,967 438,854 652,089
Net accretion on investment securities................................... 58,068 149,280 190,443
Depreciation and amortization............................................ 656,940 631,128 517,462
Amortization of intangible assets........................................ 157,594 158,540 95,357
Provision for losses on other real estate................................ 231,939 27,751 51,904
Investment securities gains, net......................................... -- (66,912) (64,613)
Deferred income tax benefit.............................................. (441,699) (63,025) (142,608)
Gains on sales of SBA loans.............................................. (526,400) (529,942) (522,615)
(Increase) decrease in interest receivable............................... (451,067) 32,917 (248,677)
Increase in interest payable............................................. 221,225 195,113 123,815
(Increase) decrease in other assets...................................... 54,497 (86,398) (1,077,842)
Increase (decrease) in other liabilities................................. 225,150 592,872 (424,550)
------------ ------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES................... 1,578,992 2,366,366 (995,652)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) decrease in interest-bearing deposits in other banks.......... (200,000) 1,682,000 (1,236,115)
Purchases of investment securities held to maturity...................... (6,590,000) (5,311,044) (17,883,140)
Purchases of investment securities available for sale.................... (7,423,081) (10,305,683) (2,892,409)
Proceeds from sales of investment securities............................. -- 6,150,146 5,677,073
Maturities of investment securities held to maturity..................... 2,956,286 3,496,175 1,986,816
Maturities of investment securities available for sale................... 4,731,165 6,326,704 --
Proceeds from sales of SBA loans......................................... 7,027,300 5,734,588 7,178,117
Loans originated or acquired, net of principal repayments................ (28,929,818) (21,064,155) (39,356,243)
Proceeds from sale of premises and equipment............................. -- 39,241 --
Purchases of premises and equipment...................................... (986,397) (533,742) (1,373,801)
Capital improvements to other real estate................................ (331,898) (97,378) (60,642)
Proceeds from sales of other real estate................................. 1,558,021 1,512,170 328,944
------------ ------------ ------------
NET CASH USED BY INVESTING ACTIVITIES.............................. (28,188,422) (12,370,978) (47,631,400)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in federal funds purchased........................... -- (1,500,000) 1,500,000
Net increase in demand, money market and savings accounts................ 13,998,284 8,934,421 16,333,284
Time deposits accepted, net of repayments................................ 12,211,051 17,267,714 23,584,808
Reduction of capital lease obligation.................................... (128,498) (181,085) (195,181)
Proceeds from short-term borrowing....................................... 50,000 -- --
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES.......................... 26,130,837 24,521,050 41,222,911
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... (478,593) 14,516,438 (7,404,141)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR............................. 27,253,046 12,736,608 20,140,749
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR................................... $ 26,774,453 $ 27,253,046 $ 12,736,608
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH PAID
Interest................................................................. $ 5,236,781 $ 4,656,511 $ 4,675,319
=========== =========== ===========
Income taxes............................................................. $ 1,214,700 $ 289,500 $ 38,000
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING AND INVESTING ACTIVITIES
Real estate acquired in settlement of loans.............................. $ 1,560,749 $ 504,323 $ 843,787
=========== =========== ===========
Transfers of investment securities held to maturity...................... $ 9,286,388 $ -- $ --
=========== =========== ===========
Transfers of investment securities available for sale.................... $ 2,553,851 $ 9,267,563 $ 3,405,571
=========== =========== ===========
</TABLE>

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

F-27
<PAGE> 102

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Commercial Bancorp of Georgia,
Inc. and subsidiaries conform to generally accepted accounting principles and to
general practices within the banking industry. The following is a summary of the
more significant of these policies.

The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance sheet
and revenues and expenses for the period. Actual results could differ
significantly from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate, for example, to the
determination of the allowance for loan losses, the market valuation reserve on
investment securities available for sale, and the valuation of other real estate
acquired in connection with foreclosures or in satisfaction of loans. Management
believes that the allowance for loan losses is adequate, the decline in market
value of investment securities available for sale is temporary, and the
valuation of other real estate is appropriate. While management uses available
information to recognize losses on loans, future additions to the allowance may
be necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the allowance for loan losses and valuation of other real
estate. Such agencies may require the recognition of additions to the allowance
or valuation adjustments to other real estate based on their judgments about
information available to them at the time of their examination.

BASIS OF PRESENTATION

The consolidated financial statements of Commercial Bancorp of Georgia,
Inc. (formerly Commercial Bancorp of Gwinnett, Inc.) (Parent Company) and its
wholly-owned subsidiary, Commercial Bank of Gwinnett, collectively known as the
Company as of December 31, 1994 and 1993, and for the three years then ended
have been restated to reflect the 1995 pooling of interests with the former
Commercial Bancorp of Georgia, Inc. and Subsidiary as described in Note B. These
consolidated financial statements include the accounts of both entities and
their wholly-owned subsidiaries, Commercial Bank of Gwinnett and Commercial Bank
of Georgia, collectively know as the Company. The stock of the Parent Company
held by the former Commercial Bancorp of Georgia, Inc. has been treated as
treasury stock. All other significant intercompany accounts and transactions
have been eliminated in consolidation.

INVESTMENT SECURITIES

In 1992, Georgia segregated its investment securities portfolio into
securities held to maturity and those available for sale. Investments in debt
securities, for which management has both the ability and intent to hold to
maturity, are carried at amortized cost. Investments in debt securities which
management believes may be sold prior to maturity, in connection with changes in
interest rates, prepayment risk, changes in the Company's liquidity or other
similar factors, are classified in 1993 and 1992 as available for sale and are
carried at the lower of aggregate cost or market. All Gwinnett investment
securities in 1993 and 1992 are classified as held to maturity.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 115 (SFAS 115) on the accounting and reporting for
investments in all debt securities and equity securities that have readily
determinable fair values. SFAS 115 requires that investments are to be
classified as held to maturity, available for sale or trading securities. Held
to maturity securities are to be reported at amortized cost, while available for
sale and trading securities are to be reported at fair value. The Company has
adopted SFAS 115 in 1994 as required.

F-28
<PAGE> 103

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In 1994, investment securities held to maturity are reported at amortized
cost. Investment securities available for sale are reported at fair value, with
unrealized gains and losses reported as a separate component of stockholders'
equity, net of the related tax effect. Other investments are reported at cost.
Earnings are reported when interest is accrued or when dividends are received.

Premium and discount on all investment securities are amortized (deducted)
and accreted (added), respectively, to interest income on the effective yield
method over the period to the maturity of the related securities. Premium and
discount on mortgage-backed securities are amortized (deducted) and accreted
(added), respectively, to interest income using a method which approximates a
level yield over the period to maturity of the related securities taking into
consideration assumed prepayment patterns.

Gains or losses on disposition are computed by the specific identification
method for all securities.

LOANS

Loans are reported at the gross amount outstanding less net deferred loan
fees and a valuation allowance for loan losses. Interest income on all loans is
recognized over the terms of the loans based on the unpaid daily principal
amount outstanding. If the collectibility of interest appears doubtful, the
accrual thereof is discontinued. Loan origination fees, net of direct loan
origination costs, are deferred and recognized as income over the life of the
related loan on a level-yield basis.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 114 (SFAS 114) on accounting by creditors for
impairment of a loan. SFAS 114, as amended by SFAS 118, requires that impaired
loans be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, or at the loan's fair value if
the loan is collateral dependent. The provisions of SFAS 114 are effective for
the Company beginning in 1995. The adoption is not expected to have a
significant adverse effect on the Company.

Loans held for sale represent loans originated for sale by the Company in
the secondary market and are reported at the lower of cost or market.

Gains and losses on sales of loans and participating interests in loans are
recognized at the time of sale, as determined by the difference between the net
sales proceeds and the fair value of the loans sold. Discounts recorded to
adjust the value of the portions of the loans retained to fair value are
amortized to income over the life of the loan.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is established through a provision for loan
losses charged to expense. The allowance represents an amount which, in
management's judgment, will be adequate to absorb probable losses on existing
loans that may become uncollectible. Management's judgment in determining the
adequacy of the allowance is based on evaluations of the collectibility of loans
and takes into consideration such factors as changes in the nature and volume of
the loan portfolio, current economic conditions that may affect the borrower's
ability to pay, overall portfolio quality and review of specific problem loans.
Periodic revisions are made to the allowance when circumstances which
necessitate such revisions become known. Recognized losses are charged to the
allowance for loan losses, while subsequent recoveries are added to the
allowance.

PREMISES AND EQUIPMENT

Premises and equipment are reported at cost less accumulated depreciation
and amortization. For financial reporting purposes, depreciation and
amortization are computed using primarily straight-line methods over the
estimated useful lives of the assets. Capital lease assets are amortized over
the shorter of the estimated useful lives of the assets or term of the related
leases. Expenditures for maintenance and repairs are

F-29
<PAGE> 104

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

charged to operations as incurred, while major renewals and betterments are
capitalized. When property is disposed of, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
income. For Federal tax reporting purposes, depreciation and amortization are
computed using primarily accelerated methods.

OTHER REAL ESTATE

Other real estate represents property acquired through foreclosure or in
settlement of loans and is recorded at the lower of cost or fair value less
estimated selling expenses and a valuation allowance for losses. The allowance
represents an amount which, in management's judgement, will be adequate to
absorb probable losses. Losses incurred in the acquisition of foreclosed
properties are charged against the allowance for loan losses at the time of
foreclosure. Provisions for subsequent devaluation of other real estate are
charged against the current period's operations. Losses on disposal of other
real estate are charged to the valuation allowance for losses. Costs associated
with improving the property are capitalized to the extent fair value less
estimated selling expenses is not exceeded. Holding costs for other real estate
are expensed as incurred.

ORGANIZATIONAL COSTS

The expenses associated with the formation of the Company were capitalized
as organizational costs and are being amortized on the straight-line method over
five years.

INTANGIBLE ASSETS

Intangible assets, primarily arising from premiums paid in acquiring
deposits of other financial institutions, are amortized on a straight-line basis
over a period of 120 months. Certain legal and other costs incurred in
connection with the acquisition of branch facilities and related deposits from
other financial institutions have been capitalized and are amortized using the
straight-line method over 60 months.

INCOME TAXES

The tax effect of transactions is recorded at current tax rates in the
periods the transactions are reported for financial statement purposes. Deferred
income taxes are established for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities at
enacted tax rates expected to be in effect when such amounts are realized or
settled. The Company files its income tax returns on a consolidated basis.

PENDING ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 107 (SFAS 107) which requires disclosure of current
market value information related to certain assets and liabilities, both on- and
off-balance sheet, and Statement of Financial Accounting Standards No. 119 (SFAS
119) which requires disclosures about derivative financial instruments. These
pronouncements are not effective for the Company until 1995. The adoption of
SFAS 107 and SFAS 119 is not expected to have a significant adverse effect on
the Company.

EARNINGS PER SHARE

Earnings per share is based on the weighted average number of shares
outstanding during the period (1,826,711 in 1994, 1993 and 1992). Stock options
and warrants, as described in Note K, are considered to be common stock
equivalents for purposes of calculating earnings per share. The effect of
including these common stock equivalents in the earnings per share calculation
for 1994, 1993 and 1992 is anti-dilutive.

F-30
<PAGE> 105

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and federal funds sold. Generally, federal
funds are purchased and sold for one-day periods.

RECLASSIFICATIONS

Certain reclassifications have been made in the 1993 and 1992 financial
statements to conform with the 1994 presentation.

NOTE B. BUSINESS COMBINATION AND RESTATEMENT OF FINANCIAL STATEMENTS

On March 2, 1995, the former Commercial Bancorp of Georgia, Inc. merged
with Commercial Bancorp of Gwinnett, Inc., and Commercial Bancorp of Gwinnett,
Inc., the surviving entity, changed its name to Commercial Bancorp of Georgia,
Inc. On September 30, 1995, Commercial Bank of Georgia merged with Commercial
Bank of Gwinnett, and Commercial Bank of Gwinnett, the surviving entity, changed
its name to Commercial Bank of Georgia. A total of 1,236,711 shares of
Commercial Bancorp of Gwinnett, Inc. stock was issued for all of the issued and
outstanding shares of the former Commercial Bancorp of Georgia, Inc. No cash,
except for nominal dissenting shareholders and fractional shares, was paid in
the transaction.

The transaction was accounted for as a pooling of interests. The financial
statements for all periods presented have been restated to include the financial
position and results of operations of the former Commercial Bancorp of Georgia,
Inc.

The Company's consolidated financial data have been restated as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1994 1993 1992
------ ------ ------
(IN THOUSANDS, EXCEPT FOR
PER SHARE DATA)
<S> <C> <C> <C>
Net Interest Income:
Commercial Bancorp of Gwinnett, before merger........... $2,989 $2,264 $1,655
Commercial Bancorp of Georgia........................... 5,901 5,270 3,831
------ ------ ------
Total........................................... $8,890 $7,534 $5,486
====== ====== ======
Net Income:
Commercial Bancorp of Gwinnett, before merger........... $ 341 $ 752(1) $ (29)
Commercial Bancorp of Georgia........................... 357 518 (117)
------ ------ ------
Total........................................... $ 698 $1,270 $ (146)
====== ====== ======
Net Income Per Share:
Commercial Bancorp of Gwinnett, before merger........... $ .55 $ 1.21(1) $ (.05)
Effect of restatement for Commercial Bancorp of
Georgia.............................................. (.17) (.51) (.03)
------ ------ ------
Total........................................... $ .38 $ .70 $ (.08)
====== ====== ======
</TABLE>

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

(1) Includes a $383,691 ($.62 per share) increase in net income for cumulative
effect of change in accounting principle for income taxes.

F-31
<PAGE> 106

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE C. CASH AND DUE FROM BANKS

A bank is required to maintain average reserve balances with the Federal
Reserve Bank, on deposit with national banks or in cash. The Banks' reserve
requirement at December 31, 1994, was approximately $1,048,000. The Banks
maintained cash balances which were adequate to meet this requirement.

NOTE D. INVESTMENT SECURITIES

The carrying value and estimated market value of investment securities held
to maturity are as follows at December 31:

<TABLE>
<CAPTION>
1994
-------------------------------------------------
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ---------- -------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities................. $ 6,042,396 $ -- $262,964 $ 5,779,432
U.S. Government agencies and
corporations........................... 7,558,899 -- 368,318 7,190,581
Mortgage-backed securities............... 4,300,822 -- 198,968 4,101,854
States and political subdivisions........ 894,312 -- 32,789 861,523
Other securities......................... 299,970 -- 7,080 292,890
----------- ---------- -------- -----------
$19,096,399 $ -- $870,119 $18,226,280
========== ======== ======== ==========
</TABLE>

<TABLE>
<CAPTION>
1993
-------------------------------------------------
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ---------- -------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities................. $ 1,003,955 $ 8,451 $ -- $ 1,012,406
U.S. Government agencies and
corporations........................... 4,284,136 29,719 9,826 4,304,029
Mortgage-backed securities............... 3,482,829 85,104 4,879 3,563,054
----------- ---------- -------- -----------
$ 8,770,920 $ 123,274 $ 14,705 $ 8,879,489
========== ======== ======== ==========
</TABLE>

The amortized cost and estimated market value of investment securities
available for sale are as follows at December 31:

<TABLE>
<CAPTION>
1994
------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- -------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities.................. $ 4,697,116 $ -- $110,703 $4,586,413
U.S. Government agencies and
corporations............................ 1,247,515 -- 97,128 1,150,387
Mortgage-backed securities................ 1,597,510 -- 22,510 1,575,000
----------- ---------- -------- ----------
$ 7,542,141 $ -- $230,341 $7,311,800
========== ======== ======== =========
</TABLE>

<TABLE>
<CAPTION>
1993
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities................. $ 8,059,766 $ -- $ 40,890 $ 8,018,876
Mortgage-backed securities............... 2,941,961 15,164 8,726 2,948,399
Other securities......................... 598,331 5,024 3,394 599,961
----------- ---------- ---------- -----------
$11,600,058 $ 20,188 $ 53,010 $11,567,236
========== ======== ======== ==========
</TABLE>

In conjunction with the adoption of SFAS 115 in 1994, Georgia transferred
investment securities totaling $9,286,388 from available for sale to held to
maturity. Gwinnett adopted SFAS 115 in 1994, and transferred

F-32
<PAGE> 107

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

investment securities totaling $2,553,851 to available for sale. The unrealized
loss on available for sale securities, net of the related deferred taxes of
$78,315, is $152,026 at December 31, 1994, and is included as a separate
component of stockholders' equity.

The Government agency securities classified as held to maturity at December
31, 1994, with a market value of approximately $7,191,000, consist of Federal
Home Loan Bank and Federal National Mortgage Association securities.
Approximately $3,196,000 of these securities are derivative securities. These
securities have maturities which range from 1996 through 1999 and have a current
weighted-average net yield of 5.84%. The market value of these securities is
generally affected positively by declining interest rates and negatively by
increasing interest rates. In addition, the market value increases or decreases
based on supply and/or demand for a particular type of security and various
other factors. Presently, the market value of these securities is volatile due
to the above interest and market factors.

The carrying value and estimated market value of investment securities held
to maturity and the amortized cost and estimated market value of investment
securities available for sale at December 31, 1994, by contractual maturity, are
shown below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations without call or
prepayment penalties. Mortgage-backed securities have been allocated based on
stated maturity dates after considering assumed prepayment patterns.

<TABLE>
<CAPTION>
INVESTMENT SECURITIES INVESTMENT SECURITIES
HELD TO MATURITY AVAILABLE FOR SALE
------------------------- -----------------------
CARRYING MARKET AMORTIZED MARKET
VALUE VALUE COST VALUE
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or less....................... $ 3,550,666 $ 3,464,541 $4,988,366 $4,923,950
Due after one year through five years......... 14,337,835 13,655,453 1,947,515 1,797,450
Due after five years through ten years........ 745,723 669,047 606,260 590,400
Due after ten years........................... 462,175 437,239 -- --
----------- ----------- ---------- ----------
$19,096,399 $18,226,280 $7,542,141 $7,311,800
========== ========== ========= =========
</TABLE>

There were no sales of investment securities during 1994. Proceeds from
sales of investment securities during 1993 and 1992 were $6,150,146 and
$5,677,073, respectively, with gross gains of $66,912 and $64,920 and gross
losses of $0 and $307, respectively, realized on those transactions.

Investment securities with carrying values of $1,542,548 and $1,997,551 and
approximate market values of $1,589,798 and $2,028,153 at December 31, 1994 and
1993, respectively, were pledged to secure public funds and certain other
deposits as required by law.

At December 31, 1994, the Company has no outstanding derivative financial
instruments such as swaps, options, futures or forward contracts.

F-33
<PAGE> 108

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE E. LOANS

Major classifications of loans are as follows at December 31:

<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Commercial................................................ $ 56,853,272 $ 54,854,919
Real estate -- construction............................... 61,856,941 34,925,005
Consumer.................................................. 17,692,495 23,189,855
------------ ------------
Total loans..................................... 136,402,708 112,969,779
Less: Net deferred loan fees.............................. (700,053) (611,479)
Allowance for loan losses........................... (1,966,411) (1,412,732)
------------ ------------
Loans, net...................................... $133,736,244 $110,945,568
=========== ===========
</TABLE>

Most of the Bank's business activity is with customers located within the
Atlanta metropolitan area. As of December 31, 1994 and 1993, the Bank had a
concentration of credit risk aggregating approximately $73,856,000 and
$63,561,000, respectively, on loans secured by real estate.

At December 31, 1994 and 1993, non-accrual loans totaled approximately
$770,000 and $1,201,000, respectively. If such loans had been on a full-accrual
basis, interest income would have been approximately $30,000 and $33,000 higher,
respectively. At December 31, 1994 and 1993, renegotiated and/or restructured
loans totaled approximately $1,026,000 and $1,308,000, respectively.

The following is a summary of transactions in the allowance for loan losses
for the years ended December 31:

<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Balance, beginning of year......................... $1,412,732 $1,189,398 $ 764,334
Provision charged to expense....................... 694,967 438,854 652,089
Loans charged off.................................. (216,922) (247,345) (253,265)
Recoveries of loans charged off.................... 75,634 31,825 26,240
---------- ---------- ----------
Balance, end of year............................... $1,966,411 $1,412,732 $1,189,398
========= ========= =========
</TABLE>

NOTE F. PREMISES AND EQUIPMENT

Premises and equipment are comprised of the following at December 31:

<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Land.......................................................... $1,453,814 $1,118,914
Buildings..................................................... 3,820,219 3,479,745
Leasehold improvements........................................ 454,641 446,623
Furniture, fixtures and equipment............................. 1,864,321 1,584,075
Capital lease obligations for furniture, fixtures and
equipment................................................... 121,495 244,895
---------- ----------
7,714,490 6,874,252
Less: Accumulated depreciation and amortization............... (1,719,433) (1,208,652)
---------- ----------
$5,995,057 $5,665,600
========= =========
</TABLE>

The charge to operating expense for depreciation and amortization was
$656,940, $631,128 and $517,462 in 1994, 1993 and 1992, respectively.

F-34
<PAGE> 109

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease payments under capital lease obligations and the
present value of the net minimum lease payments at December 31, 1994, are as
follows:

<TABLE>
<CAPTION>
YEAR AMOUNTS
-------------------------------------------------------------------------- --------
<S> <C>
1995...................................................................... $133,230
1996...................................................................... 34,698
--------
Total minimum lease payments.................................... 167,928
Less amount representing interest......................................... (7,236)
--------
Present value of net minimum lease payments............................... $160,692
========
</TABLE>

The Company leases office space under noncancelable operating lease
agreements with remaining terms in excess of one year. Future minimum annual net
rentals required under the terms of these operating leases at December 31, 1994,
are as follows:

<TABLE>
<CAPTION>
YEAR AMOUNTS
-------------------------------------------------------------------------- --------
<S> <C>
1995...................................................................... $296,362
1996...................................................................... 242,249
1997...................................................................... 106,972
1998...................................................................... 44,376
1999...................................................................... 44,376
Thereafter................................................................ 148,704
--------
$883,039
========
</TABLE>

The Company leases certain portions of the main office building to
unrelated tenants under operating leases. Minimum future lease rentals under
noncancelable leases at December 31, 1994, are as follows:

Rental expense charged to operations was approximately $326,000, $339,000
and $229,000 in 1994, 1993 and 1992, respectively. Rental income of
approximately $125,000, $123,000 and $107,000 for 1994, 1993 and 1992,
respectively, is included as a reduction of net occupancy expense in the
consolidated statements of income.

NOTE G. OTHER REAL ESTATE

The following is a summary of transactions in the valuation allowance for
losses on other real estate for the year ended December 31:

<TABLE>
<CAPTION>
1994
--------
<S> <C>
Balance, beginning of year................................................ $ 4,000
Provision charged to expense.............................................. 231,939
Losses charged off........................................................ (35,939)
--------
Balance, end of year...................................................... $200,000
========
</TABLE>

Net expenses of other real estate totaled $308,872, $142,030 and $143,007
for the years ended December 31, 1994, 1993 and 1992, respectively.

F-35
<PAGE> 110

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE H. SHORT-TERM BORROWINGS

The Banks utilize short-term borrowings as needed for liquidity purposes in
the form of federal funds purchased. The Banks have unsecured lines of credit
for federal funds purchased from other banks totaling $8,000,000 at December 31,
1994.

NOTE I. INCOME TAXES

The following are the components of income tax expense as provided for the
years ended December 31:

<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- ---------
<S> <C> <C> <C>
Current income tax provision......................... $ 940,107 $542,049 $ 97,263
Deferred income tax benefit.......................... (441,699) (63,025) (142,608)
--------- -------- ---------
$ 498,408 $479,024 $ (45,345)
========= ======== =========
</TABLE>

A reconciliation of income tax computed at the Federal statutory income tax
rate to total income taxes is as follows for the years ended December 31:

<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ---------
<S> <C> <C> <C>
Pretax income (loss)............................... $1,196,186 $1,365,212 $(191,162)
========= ========= =========
Income tax computed at Federal statutory rate...... $ 406,704 $ 464,172 $ (64,994)
Increase (decrease) resulting from:
Nondeductible expenses........................... 100,132 4,509 4,447
Other, net....................................... (8,428) 10,343 15,202
---------- ---------- ---------
$ 498,408 $ 479,024 $ (45,345)
========= ========= =========
</TABLE>

The following summarizes the tax effects of temporary differences which
comprise the net deferred tax assets at December 31:

<TABLE>
<CAPTION>
1994 1993
---------- --------
<S> <C> <C>
Allowance for loan losses...................................... $ 575,946 $326,958
Net operating loss carryforward................................ -- 64,730
Net deferred loan fees......................................... 275,416 207,876
Accumulated depreciation....................................... 108,268 58,492
Deferred compensation.......................................... 122,366 84,536
Other real estate.............................................. 110,222 1,360
Market valuation reserve....................................... 78,315 --
Other, net..................................................... 84,851 91,417
---------- --------
$1,355,384 $835,369
========= ========
</TABLE>

At December 31, 1993, the Company had available net loss carryforwards of
approximately $190,000 for financial reporting purposes which were fully
utilized in 1994.

The Company adopted Statement of Financial Accounting Standards No. 109 as
of January 1, 1993. The cumulative effect on prior years of this change in
accounting principles increased net income in 1993 by $383,691 and is reported
separately in the consolidated statement of operations.

NOTE J. SAVINGS AND DEFERRED COMPENSATION PLANS

Georgia has established the Commercial Bank of Georgia 401(k) Savings Plan
(Plan) for the benefit of eligible employees and their beneficiaries. Employees
may elect to contribute up to 20% of their gross salaries

F-36
<PAGE> 111

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in 1994 and 1993 and 10% in 1992, excluding bonuses, to the Plan. Any matching
contributions are made at the discretion of the Company. The Company made no
contribution to the Plan in 1994, 1993 or 1992.

Gwinnett has established the Commercial Bank of Gwinnett 401(k) Savings
Plan (Plan) for the benefit of eligible employees and their beneficiaries.
Employees may elect to contribute up to 15% of their gross salaries, excluding
bonuses, to the Plan. Gwinnett may make an annual matching contribution equal to
a percentage of the amount contributed by the employee. For the years ended
December 31, 1994, 1993 and 1992, Gwinnett contributed $21,000, $10,000 and $0,
respectively, to the Plan.

The Company has established a deferred compensation plan for directors
which provides for the deferral of fees for outside directors. The plan provides
that amounts deferred are treated as if applied to purchase the number of shares
of common stock of the Company that could have been purchased with the fees at
the time of deferral. Participants generally will receive payment in a single
cash distribution upon leaving the Board of Directors. Amounts expensed under
the plan totaled $41,600, $27,150 and $31,350 in 1994, 1993 and 1992,
respectively.

The employment contract between the Company and the President established a
retirement plan (Plan) for the benefit of the President. The Plan provides for a
monthly benefit of $1,500 to be paid to the President commencing on his
sixty-second birthday and continuing until his death. The Plan will remain in
effect regardless of the President's employment status with the Company. For the
years ended December 31, 1994, 1993 and 1992, the Company recorded total
compensation expense of $17,531, $19,000 and $20,585, respectively, and interest
expense of $8,917, $5,901 and $4,644, respectively, related to this Plan. An
annuity contract was purchased by the Company to fund the Plan. At December 31,
1994, the annuity contract was valued at $132,062 and is included in other
assets in the accompanying consolidated balance sheet.

The employment contract between the Company and the President also
established a supplemental deferred compensation benefit (Annuity) for the
President. The agreement provides for a monthly benefit of $1,780 to be paid to
the President commencing on his sixty-second birthday and continuing for a
ten-year period provided the President remains in the Company's employ through
April 25, 1996. For the years ended December 31, 1994, 1993 and 1992, the
Company recorded compensation expense of $13,891, $15,049 and $16,308,
respectively, and interest expense of $7,061, $7,450 and $5,863, respectively,
related to this Annuity.

NOTE K. RELATED PARTY TRANSACTIONS

As of December 31, 1994 and 1993, the Banks had direct and indirect loans
which aggregated $1,055,055 and $1,507,582, respectively, outstanding to or for
the benefit of certain of the Company's officers, directors, and their related
interests. During 1994, $295,428 of such loans were made and repayments totaled
$747,955. These loans were made in the ordinary course of business in conformity
with normal credit terms, including interest rates and collateral requirements
prevailing at the time for comparable transactions with other borrowers.

As of December 31, 1994, the Company had a $50,000 short-term unsecured
note payable to a related party. The note is scheduled to mature in May 1995 and
bears interest at two percentage points above The Wall Street Journal prime rate
(10.5% at December 31, 1994). There were no such borrowings in 1993.

NOTE L. STOCKHOLDERS' EQUITY

The Georgia Board of Directors has approved an aggregate of 63,840 stock
options to be issued to executive officers. No options were granted or exercised
in 1994, 1993 or 1992. A total of 39,840 options with exercise prices ranging
from $9.90 to $10.21 were outstanding at December 31, 1994. These options were
earned based upon criteria relating to the Company's performance and are
exercisable for a period of seven years after the date of grant at the book
value of the Company's stock at the end of the most recent quarter immediately
prior to the award of options. In the event of a change of control of the
Company, all outstanding

F-37
<PAGE> 112

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

options will be considered earned. These stock options were converted into stock
options for the surviving entity's stock and represent options for 66,074
shares.

The Gwinnett Board of Directors has approved an aggregate of 14,000 stock
options to be issued to key employees. These options are earned based upon
criteria established by a committee of the Company's Board of Directors relating
to the Company's performance and are exercisable for a period of seven years
after the date of grant at the greater of the market value of the Company's
stock at the date of grant or $10 per share.

Summarized Gwinnett options data for the year ended December 31, 1994, is
as follows:

<TABLE>
<CAPTION>
1994 1993
--------------------- ---------------------
NUMBER OF PRICE PER NUMBER OF PRICE PER
SHARES SHARE SHARES SHARE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Options outstanding at beginning of year........ 11,500 $ 10.00 6,000 $ 10.00
Options granted................................. 1,000 10.00 5,500 10.00
Options exercised............................... -- -- -- --
Options canceled................................ -- -- -- --
--------- --------- --------- ---------
Options outstanding at end of year.............. 12,500 $ 10.00 11,500 $ 10.00
======== ======= ======== =======
Options available for grant at end of year...... 1,500 2,500
======== ========
</TABLE>

In connection with the Company's formation and initial stock offering,
255,000 non-transferable warrants were issued to organizing stockholders and
certain officers. The warrants allow such individuals to purchase one additional
share of common stock for each share purchased in connection with the initial
offering and are exercisable for ten years from the date that Gwinnett commenced
operations (July 27, 1990) at the greater of the Company's book value per common
share as of the most recent quarter-end or $10 per share. At December 31, 1994
and 1993, all issued warrants were outstanding.

The Company's current employment contract with the President and CEO of the
Company provides for the right to receive cash payments based upon the
appreciation in the value of the Company's common stock over time (Stock
Appreciation Rights). This executive has been granted the right to receive a
total of 13,565 units of Stock Appreciation Rights over three years beginning in
1990. The value of the units depends on the Bank's performance, as defined in
the employment agreement, and the units are exercisable for a period of seven
years after the date of grant. At December 31, 1994, all 13,565 units have been
granted and none have been exercised.

Georgia banking laws limit the amount of dividends which the Banks may pay
to the Parent Company without obtaining prior approval from the Georgia
Department of Banking and Finance. Such approval would be required if either (a)
the Bank's ratio of equity capital to adjusted total assets is less than 6%; (b)
the aggregate amount of dividends declared by the Bank exceeds 50% of net
profits, after taxes but before dividends, for the previous calendar year; or
(c) the percentage of the Bank's assets classified as doubtful as to repayment
exceeds 80% of the Bank's equity capital. At December 31, 1994, total
stockholder's equity of Georgia was $10,605,463 of which approximately $324,000
was available for dividends without prior approval or violation of regulatory
capital requirements. Gwinnett can pay no dividends until its accumulated
deficit is eliminated. The Banks paid no dividends in 1994 or 1993.

The Banks are required to maintain certain capital ratios as defined by the
regulatory authorities. At December 31, 1994, the Banks are required to have a
minimum total risk-based capital ratio of 8% and a minimum leverage ratio of 4%.
Georgia's total risk-based capital ratio at that date was 11.5%, and its
leverage ratio was 7.7%. Gwinnett's risk-based capital ratio at that date was
12.7%, and its leverage ratio was 8.5%.

F-38
<PAGE> 113

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE M. COMMITMENTS AND CONTINGENT LIABILITIES

The Banks are party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
consolidated balance sheets. The contract amounts of these instruments reflect
the extent of involvement the Banks have in particular classes of financial
instruments.

The Banks' exposure to credit loss in the event of nonperformance by the
customer on the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amounts of those
instruments. The Banks use the same credit policies in making commitments and
conditional obligations as they do for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. At December 31, 1994 and 1993, unfunded
commitments to extend credit were approximately $38,317,000 and $35,054,000,
respectively.

Standby letters of credit are conditional commitments issued by the Banks
to guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers. The Banks had approximately
$1,184,000 and $1,607,000 in irrevocable standby letters of credit outstanding
at December 31, 1994 and 1993, respectively.

The Banks evaluate each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the Banks upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral varies but may include accounts receivable, inventory,
property, plant and equipment, and income-producing commercial properties for
those commitments on which collateral is deemed necessary.

The Company is a defendant in certain legal actions arising from its normal
business activities. Management believes that those actions are without merit or
that the ultimate liability, if any, resulting from them will not materially
affect the Company's financial position.

F-39
<PAGE> 114

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE N. CONDENSED FINANCIAL INFORMATION OF COMMERCIAL BANCORP OF
GEORGIA, INC.

CONDENSED BALANCE SHEETS
(PARENT ONLY)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
Cash on deposit with subsidiaries................................... $ 355,160 $ 1,154,794
Investment in subsidiaries.......................................... 16,697,895 15,154,701
Loans to related parties............................................ 31,000 125,803
Other real estate................................................... 936,436 1,167,885
Other assets........................................................ 795,584 622,266
----------- -----------
TOTAL ASSETS.............................................. $18,816,075 $18,225,449
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Note payable...................................................... $ 50,000 $ --
Other liabilities................................................. 34,235 39,361
----------- -----------
TOTAL LIABILITIES......................................... 84,235 39,361
----------- -----------
STOCKHOLDERS' EQUITY
Common stock...................................................... 1,856,711 1,856,711
Surplus........................................................... 16,090,386 16,090,386
Retained earnings................................................. 1,236,769 538,991
Treasury stock.................................................... (300,000) (300,000)
Market valuation reserve on investment securities available for
sale........................................................... (152,026) --
----------- -----------
TOTAL STOCKHOLDERS' EQUITY................................ 18,731,840 18,186,088
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................ $18,816,075 $18,225,449
========== ==========
</TABLE>

F-40
<PAGE> 115

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED STATEMENTS OF INCOME
(PARENT ONLY)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
---------- ---------- ---------
<S> <C> <C> <C>
INCOME
Interest income.......................................... $ 10,558 $ 5,670 $ 9,460
Other income............................................. -- 4,400 --
---------- ---------- ---------
TOTAL INTEREST INCOME............................ 10,558 10,070 9,460
---------- ---------- ---------
EXPENSE
Merger expense........................................... 267,221 14,251 --
Other real estate expense................................ 227,147 91,731 84,232
Other expense............................................ 132,792 132,718 199,368
---------- ---------- ---------
TOTAL EXPENSE.................................... 627,160 238,700 283,600
---------- ---------- ---------
LOSS BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES................................. (616,602) (228,630) (274,140)
INCOME TAX BENEFIT............................... 134,678 64,103 55,732
---------- ---------- ---------
LOSS BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES............................................. (481,924) (164,527) (218,408)
EQUITY IN UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES................................... 1,179,702 1,387,121 72,591
---------- ---------- ---------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLES....................... 697,778 1,222,594 (145,817)
Cumulative effect of change in accounting principles....... -- 47,285 --
---------- ---------- ---------
NET INCOME (LOSS).......................................... $ 697,778 $1,269,879 $(145,817)
========= ========= =========
</TABLE>

F-41
<PAGE> 116

COMMERCIAL BANCORP OF GEORGIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED STATEMENTS OF CASH FLOWS
(PARENT ONLY)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
----------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)...................................... $ 697,778 $ 1,269,879 $ (145,817)
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed earnings of subsidiaries.... (1,179,702) (1,387,121) (72,591)
Provision for losses on other real estate........... 200,000 -- --
(Increase) decrease in other assets................. (78,515) (152,352) 50,835
Increase (decrease) in other liabilities............ (5,126) 39,361 --
----------- ----------- ----------
NET CASH USED BY OPERATING
ACTIVITIES................................... (365,565) (230,233) (167,573)
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiaries............................. (515,518) -- 74,535
Proceeds from sales of other real estate............... 363,347 561,909 --
Capital improvements to other real estate.............. (331,898) (97,378) --
----------- ----------- ----------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES................................... (484,069) 464,531 74,535
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from note payable............................. 50,000 -- --
----------- ----------- ----------
NET CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES................................... 50,000 -- --
----------- ----------- ----------
NET INCREASE (DECREASE) IN CASH.......................... (799,634) 234,298 (93,038)
CASH AT BEGINNING OF YEAR 1,154,794 920,496 1,013,534
----------- ----------- ----------
CASH AT END OF YEAR...................................... $ 355,160 $ 1,154,794 $ 920,496
========== ========== =========
</TABLE>

NOTE O. SUPPLEMENTAL FINANCIAL DATA

Components of other expense in excess of 1% of total interest income and
other income for the years ended December 31, 1994, 1993 and 1992 are as
follows:

<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Legal and professional fees (including merger related
expenses)............................................ $641,420 $271,604 $302,649
FDIC assessment........................................ 350,559 302,211 247,591
Data processing fees................................... 214,957 182,988 138,254
Stationary and supplies................................ 196,004 199,658 170,777
Organizational expense................................. 9,888 168,428 105,745
</TABLE>

F-42
<PAGE> 117

COMMERCIAL BANCORP OF GEORGIA, INC.

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1995 1994 1994 1993
------------- ------------ ------------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks....................... $ 12,682 $ 12,165 $ 11,147 $ 8,066
Federal funds sold............................ 25,900 14,610 10,770 19,187
Investment securities:
Held to maturity............................ 17,873 19,476 19,774 8,951
Available for sale.......................... 17,004 7,312 8,365 11,600
------------- ------------ ------------- ------------
Total securities.............................. 34,877 26,788 28,139 20,551
Loans, net.................................... 141,014 133,926 128,360 113,753
Fixed assets.................................. 5,671 5,995 6,143 5,666
Other real estate owned....................... 1,446 1,481 2,343 1,378
Accrued interest receivable................... 1,707 1,532 1,425 1,081
Other assets.................................. 3,549 2,881 2,823 2,573
------------- ------------ ------------- ------------
Total assets........................ $ 226,846 $199,378 $ 191,150 $172,255
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Noninterest bearing demand.................. $ 30,480 $ 38,075 $ 28,962 $ 25,778
Interest bearing demand and money market.... 48,929 46,423 48,405 45,429
Savings..................................... 5,086 5,745 5,875 5,039
Time deposits of $100,000 or more........... 25,215 18,767 19,404 18,603
Other time deposits......................... 93,197 69,254 67,601 57,206
------------- ------------ ------------- ------------
Total deposits...................... 202,907 178,264 170,247 152,055
Obligations under capital leases.............. 57 161 194 289
Accrued interest payable...................... 1,662 1,066 1,032 845
Other liabilities............................. 1,602 1,155 1,007 880
------------- ------------ ------------- ------------
Total liabilities............................. 206,228 180,646 172,480 154,069
------------- ------------ ------------- ------------
STOCKHOLDERS' EQUITY
Common stock- $1.00 par value; 10,000,000
shares authorized, 1,856,711 issued and
1,826,711 outstanding at Sept. 30, 1994 and
1995 and Dec. 31, 1994 and 1995............. 1,857 1,857 1,857 1,857
Surplus....................................... 16,090 16,090 16,090 16,090
Treasury stock, at cost....................... (300) (300) (300) (300)
Market value on securities available for
sale........................................ 25 (152) (93) --
Retained earnings............................. 2,946 1,237 1,116 539
------------- ------------ ------------- ------------
Total stockholders' equity.......... 20,618 18,732 18,670 18,186
------------- ------------ ------------- ------------
Total liabilities and stockholders'
equity............................ $ 226,846 $199,378 $ 191,150 $172,255
========== ========== ========== ==========
</TABLE>

F-43
<PAGE> 118

COMMERCIAL BANCORP OF GEORGIA, INC.

CONSOLIDATED INCOME STATEMENT

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income
Loans, including fees......................... $ 3,824 $ 3,118 $ 11,820 $ 8,840
Investment securities......................... 461 351 1,171 920
Federal funds sold............................ 435 169 886 453
---------- ---------- ---------- ----------
Total interest income................. 4,720 3,638 13,877 10,213
Interest expense
Deposits...................................... 2,321 1,408 6,089 3,871
Obligations under capital leases.............. 2 3 7 9
Other......................................... 0 13 1 13
---------- ---------- ---------- ----------
Total interest expense................ 2,323 1,424 6,097 3,893
---------- ---------- ---------- ----------
Net interest income............................. 2,397 2,214 7,780 6,320
Provision for loan losses....................... 189 113 633 404
---------- ---------- ---------- ----------
Net interest income after provision
for loan losses..................... 2,208 2,101 7,147 5,916
Other income
Mortgage origination fees..................... 35 49 76 141
Gain on sale of loans......................... 231 104 304 322
Service charges on deposit accounts........... 220 258 702 667
Other income.................................. 365 224 777 501
---------- ---------- ---------- ----------
Total other income.................... 851 635 1,859 1,631
Other expense
Salary and employee benefits.................. 1,096 1,091 3,231 3,338
Net occupancy expense......................... 107 111 464 503
Furniture, fixtures and equipment expense..... 133 166 437 507
Other expense................................. 647 859 2,051 2,302
---------- ---------- ---------- ----------
Total other expense................... 1,983 2,227 6,183 6,650
Income before income taxes...................... 1,076 509 2,823 897
Provision for income taxes...................... 424 146 1,114 320
---------- ---------- ---------- ----------
Net income...................................... $ 652 $ 363 $ 1,709 $ 577
========= ========= ========= =========
Earnings per share.............................. $ 0.36 $ 0.20 $ 0.94 $ 0.32
========= ========= ========= =========
Weighted average shares outstanding............. 1,826,711 1,826,711 1,826,711 1,826,711
========= ========= ========= =========
</TABLE>

F-44
<PAGE> 119

COMMERCIAL BANCORP OF GEORGIA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
------------------------------------------------------------
MARKET
COMMON RETAINED VALUATION TREASURY
STOCK SURPLUS EARNINGS RESERVE STOCK TOTAL
------ ------- -------- --------- -------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994.............. $1,857 $16,090 $1,237 $(152) $ (300) $18,732
Net income................................ -- -- 1,709 -- -- 1,709
Market valuation adjustment............... -- -- -- 177 -- 177
------ ------- -------- --------- -------- -------
Balance at September 30, 1995............. $1,857 $16,090 $2,946 $ 25 $ (300) $20,168
====== ======= ====== ======= ====== =======
</TABLE>

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
------------------------------------------------------------
MARKET
COMMON RETAINED VALUATION TREASURY
STOCK SURPLUS EARNINGS RESERVE STOCK TOTAL
------ ------- -------- --------- -------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993.............. $1,857 $16,090 $ 539 $ -- $ (300) $18,186
Net income................................ -- -- 577 -- -- 577
Market valuation adjustment............... -- -- -- (93) -- (93)
------ ------- -------- --------- -------- -------
Balance at September 30, 1994............. $1,857 $16,090 $1,116 $ (93) $ (300) $18,670
====== ======= ====== ======= ====== =======
</TABLE>

F-45
<PAGE> 120

COMMERCIAL BANCORP OF GEORGIA, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net cash provided by (used in) operating activities...................... $ 3,093 $ (456)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment securities...................................... 1,603 --
Maturities of investment securities.................................... (9,892) (6,592)
Sales of investment securities......................................... -- (996)
Loans originated or acquired, net of principal repayments.............. (7,721) (15,011)
Purchases of premises and equipment.................................... (49) (1,003)
Proceeds from sale of real estate...................................... 35 625
-------- --------
Net cash used in investing activities.................................. (16,024) (22,977)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand, money market and savings accounts... (5,748) 6,996
Time deposits accepted, net of repayments.............................. 30,391 11,196
Repayment of capital lease obligations................................. (104) (95)
-------- --------
Net Cash Provided by Financing Activities.............................. 24,539 18,097
Net Increase (Decrease) in Cash and Cash Equivalents..................... 11,608 (5,336)
Cash and Cash Equivalents at Beginning of Period......................... 26,974 27,253
-------- --------
Cash and Cash Equivalents at End of Period............................... $ 38,582 $ 21,917
======== ========
Supplemental disclosure:
Cash interest paid on deposits and borrowings.......................... $ 5,501 $ 3,717
-------- --------
Cash paid for income taxes............................................. $ 1,131 $ 904
-------- --------
Real estate acquired through foreclosure............................... $ 703 $ 1,254
-------- --------
</TABLE>

F-46
<PAGE> 121

COMMERCIAL BANCORP OF GEORGIA, INC.

NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994

NOTE A. BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, these statements do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. All such adjustments are
of a normal recurring nature. Operating results for the nine month period ended
September 30, 1995, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1995. For further information, refer to
the audited financial statements and footnotes thereto included in the Bank's
annual report to stockholders.

NOTE B. BUSINESS COMBINATION AND RESTATEMENT OF FINANCIAL STATEMENTS

The transaction was accounted for as a pooling of interests. The
accompanying unaudited financial statements for all periods presented have been
restated to include the financial position and results of operations of the
former Commercial Bancorp of Georgia, Inc.

NOTE C. SUPPLEMENTAL FINANCIAL DATA

Components of other operating expense in excess of one percent of total
interest and other income for the periods ended September 30, 1995 and 1994, are
as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1995 1994
-------- --------
<S> <C> <C>
Legal and professional fees (including merger related
expenses)...................................................... $244,171 $379,069
FDIC insurance assessment........................................ 204,993 260,759
Data processing fees............................................. 193,976 162,380
Stationery and supplies.......................................... 140,484 139,519
</TABLE>

NOTE D. EARNINGS PER SHARE

Earnings per share has been computed based on the weighted average number
of common shares outstanding during the periods, which totaled 1,826,711 for the
nine months ended September 30, 1995 and 1994.

NOTE E. ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company is
required to implement SFAS No. 121 by December 31, 1996. The provisions of SFAS
121 will require the Company to review long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. If it is determined that an impairment loss has occurred
based on expected future cash flows, the loss should be recognized in the income
statement and certain disclosures regarding the impairment should be made in the
financial

F-47
<PAGE> 122

COMMERCIAL BANCORP OF GEORGIA, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

statements. The Company has not yet had sufficient time to evaluate the impact,
if any, of the provisions of SFAS No. 121.

NOTE F. ACCOUNTING FOR MORTGAGE SERVICING RIGHTS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 122 (SFAS 122), "Mortgage Servicing Rights," as an
amendment to SFAS 65. The Company is required to implement SFAS 122 by December
31, 1996. The provisions of SFAS 122 eliminate the accounting distinction
between rights to service mortgage loans that are acquired through loan
origination and those acquired through purchase. The cost of mortgage loans sold
should be allocated to the mortgage servicing rights and the loans based on
relative fair values. The adoption of SFAS No. 122 is not expected to have a
significant impact on the Company.

F-48
<PAGE> 123

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors
Southern Banking Corporation and Subsidiary
Altamonte Springs, Florida

We have audited the accompanying consolidated balance sheets of Southern
Banking Corporation and Subsidiary as of December 31, 1994 and 1993, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Southern
Banking Corporation and Subsidiary as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.

As discussed in Note 2, effective January 1, 1994, the Company adopted
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities and as discussed in Note 6, the
Company changed its method of accounting for income taxes in the period ended
December 31, 1993.

COOPERS & LYBRAND, LLP

Orlando, Florida
January 13, 1995

F-49
<PAGE> 124

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks..................................... $ 13,590,206 $ 4,681,644
Federal funds sold.......................................... -- 7,430,000
------------ ------------
Total cash and cash equivalents..................... 13,590,206 12,111,644
Interest-bearing deposits in banks............................ 1,305,057 1,581,426
Investment securities......................................... 34,735,130 14,373,579
Loans, net.................................................... 121,530,420 77,319,960
Premises and equipment, net................................... 5,028,758 2,817,884
Accrued interest receivable................................... 1,136,962 540,665
Goodwill...................................................... 2,211,876 --
Other assets.................................................. 1,823,409 888,919
------------ ------------
Total assets........................................ $181,361,818 $109,634,077
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand.................................. $ 36,665,552 $ 28,912,546
Interest-bearing:
Demand................................................... 22,724,259 11,452,508
Savings.................................................. 43,022,947 28,431,252
Time, $100,000 and over.................................. 16,569,300 14,385,784
Other time............................................... 35,751,950 18,182,594
------------ ------------
Total deposits...................................... 154,734,008 101,364,684
Federal funds purchased....................................... 12,000,000 --
Accrued interest payable...................................... 365,886 346,172
Other liabilities............................................. 526,443 484,735
------------ ------------
Total liabilities................................... 167,626,337 102,195,591
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock, par value $1.00 per share; 10,000,000 shares
authorized; 3,350,000 and 2,200,000 shares issued and
outstanding in 1994 and 1993, respectively............... 3,350,000 2,200,000
Surplus..................................................... 7,382,042 3,397,677
Retained earnings........................................... 3,574,412 1,840,809
Unrealized loss on investment securities available for sale,
net...................................................... (570,973) --
------------ ------------
Total stockholders' equity.......................... 13,735,481 7,438,486
------------ ------------
Total liabilities and stockholders' equity.......... $181,361,818 $109,634,077
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-50
<PAGE> 125

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
----------- ----------- ----------
<S> <C> <C> <C>
Interest and fee income:
Loans................................................ $ 8,793,436 $ 6,045,913 $4,619,947
Investment securities................................ 1,290,968 630,670 663,455
Interest-bearing deposits............................ 84,806 70,377 63,058
Federal funds sold................................... 156,966 184,026 215,255
----------- ----------- ----------
Total interest and fee income................ 10,326,176 6,930,986 5,561,715
----------- ----------- ----------
Interest expense:
Deposits............................................. 2,894,899 2,047,577 1,999,165
----------- ----------- ----------
Total interest expense....................... 2,894,899 2,047,577 1,999,165
----------- ----------- ----------
Net interest income.......................... 7,431,277 4,883,409 3,562,550
Provision for loan losses 330,000 466,425 325,000
----------- ----------- ----------
Net interest income after provision for loan
losses..................................... 7,101,277 4,416,984 3,237,550
----------- ----------- ----------
Other income:
Service charges on deposit accounts.................. 1,061,899 664,047 340,763
Other income......................................... 231,722 214,109 295,966
----------- ----------- ----------
Total other income........................... 1,293,621 878,156 636,729
----------- ----------- ----------
Other expense:
Salaries and wages................................... 2,332,796 1,643,898 1,317,440
Employee benefits.................................... 342,038 250,147 201,626
Net occupancy expense................................ 674,168 515,211 523,522
Equipment expense.................................... 296,650 207,418 176,819
Other noninterest expenses........................... 2,026,742 1,500,022 1,200,013
----------- ----------- ----------
Total other expense.......................... 5,672,394 4,116,696 3,419,420
----------- ----------- ----------
Income before income taxes and cumulative effect of
change in accounting principle....................... 2,722,504 1,178,444 454,859
Income taxes........................................... 988,901 415,250 71,155
----------- ----------- ----------
Income before cumulative effect of change in accounting
principle............................................ 1,733,603 763,194 383,704
Cumulative effect of change in accounting principle.... -- 46,874 --
----------- ----------- ----------
Net Income............................................. $ 1,733,603 $ 810,068 $ 383,704
========== ========== =========
Net Income per common share............................ 0.64 0.37 0.18
========== ========== =========
Weighted average shares outstanding.................... 2,704,109 2,200,000 2,115,739
========== ========== =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-51
<PAGE> 126

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

<TABLE>
<CAPTION>
UNREALIZED
(LOSS) ON
INVESTMENT
SECURITIES TOTAL
COMMON AVAILABLE RETAINED STOCKHOLDERS'
STOCK SURPLUS FOR SALE EARNINGS EQUITY
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991.......... $2,111,112 $3,186,568 $ -- $ 647,037 $ 5,944,717
Issuance of Common Stock (44,444
shares sold at $6.75 per
share)............................ 88,888 211,109 -- -- 299,997
Net Income.......................... -- -- -- 383,704 383,704
---------- ---------- ---------- ---------- -------------
Balance, December 31, 1992.......... 2,200,000 3,397,677 -- 1,030,741 6,628,418
Net income.......................... -- -- -- 810,068 810,068
---------- ---------- ---------- ---------- -------------
Balance, December 31, 1993.......... 2,200,000 3,397,677 -- 1,840,809 7,438,486
Adjustment to beginning balance for
change in accounting principle,
net of income taxes of $4,607..... -- -- (7,636) -- (7,636)
Issuance of common stock (net of
issuance costs of $40,635)........ 1,150,000 3,984,365 -- -- 5,134,365
Change in unrealized losses, net of
income taxes of $344,200.......... -- -- (563,337) -- (563,337)
Net income.......................... -- -- -- 1,733,603 1,733,603
---------- ---------- ---------- ---------- -------------
Balance, December 31, 1994.......... $3,350,000 $7,382,042 $ (570,973) $3,574,412 $ 13,735,481
========= ========= ========= ========= ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-52
<PAGE> 127

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Interest and fees received..................... $ 10,417,993 $ 5,977,885 $ 5,105,314
Service charges received....................... 1,061,899 664,047 346,763
Loan fees collected............................ 321,704 850,631 564,656
Other income received.......................... 136,654 200,359 191,658
Interest paid.................................. (2,992,982) (1,884,709) (2,033,778)
Cash paid to suppliers and employees........... (5,058,693) (3,445,728) (3,059,479)
Income taxes paid.............................. (1,281,284) (485,598) (6,025)
------------ ------------ ------------
Net cash provided by operating
activities........................... 2,605,291 1,876,887 1,109,109
------------ ------------ ------------
Cash Flows from Investing Activities:
Proceeds from sales and maturities of
investment securities....................... 4,173,181 8,114,067 4,171,788
Proceeds from maturities of interest-bearing
deposits in banks........................... 400,000 300,000 500,000
Purchase of investment securities.............. (9,497,570) (13,487,394) (2,765,118)
Purchase of interest-bearing deposits in
banks....................................... -- (996,778) (286,484)
Net increase in loans made to customers........ (20,946,882) (17,994,865) (19,566,510)
Acquisition of Osceola National Bank........... (3,121,275) -- --
Purchase of premises and equipment............. (1,770,970) (1,324,129) (660,330)
------------ ------------ ------------
Net cash used in investing
activities........................... (30,763,516) (25,389,099) (18,606,654)
------------ ------------ ------------
Cash Flows from Financing Activities:
Net increase in demand deposits and savings
accounts.................................... 13,750,315 22,525,126 11,102,615
Net increase (decrease) in time deposits....... (1,247,893) 751,746 3,518,852
Proceeds from (payments on) note payable....... -- (75,000) 75,000
Net increase in federal funds purchased........ 12,000,000 -- --
Net proceeds from the issuance of common
stock....................................... 5,134,365 -- 299,997
------------ ------------ ------------
Net cash provided by financing
activities........................... 29,636,787 23,201,872 14,996,464
------------ ------------ ------------
Net Increase (Decrease) in Cash and Cash
Equivalents.................................... 1,478,562 (310,340) (2,501,081)
Cash and Cash Equivalents:
Beginning of year.............................. 12,111,644 12,421,984 14,923,065
------------ ------------ ------------
End of year.................................... $ 13,590,206 $ 12,111,644 $ 12,421,984
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-53
<PAGE> 128

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income............................................ $1,733,603 $ 810,068 $ 383,704
---------- ---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting
principle...................................... -- (46,874) --
Depreciation and amortization.................... 368,458 225,989 166,921
Losses (gains) on sales of investments........... 5,264 (13,750) (104,308)
Net increase in allowance for loan losses........ 330,000 466,425 262,731
Amortization of premiums and accretion of
discounts on investment securities............. 456,555 (1,321) (15,159)
Increase in deferred loan fees................... 226,636 47,285 134,048
Decrease (increase) in accrued interest
receivable..................................... (364,738) (148,433) 109,255
Decrease (increase) in other assets.............. 241,434 218,143 (76,331)
(Decrease) increase in accrued interest
payable........................................ (98,083) 162,868 (34,613)
(Decrease) increase in other liabilities......... (293,838) 156,487 282,861
---------- ---------- ----------
Total adjustments........................... 871,688 1,066,819 725,405
---------- ---------- ----------
Net Cash Provided by Operating Activities.................. $2,605,291 $1,876,887 $1,109,109
========= ========= =========
</TABLE>

Supplemental Schedule of Noncash Investment and Financing Activities:

In June 1994, the Board approved a two-for-one stock split of the
Company's common stock.

On July 3, 1992, Southern Banking Corporation exchanged 1,055,556
shares of its common stock with the shareholders of Southern Bank of
Central Florida in a two-for-one stock exchange.

See accompanying notes to consolidated financial statements.

F-54
<PAGE> 129

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

1. ORGANIZATION

Southern Bank Corporation (the Company) is a bank holding company with a
wholly-owned subsidiary, Southern Bank of Central Florida (the Bank), a
state-chartered bank headquartered in Altamonte Springs, Florida. The Company
commenced operations on August 29, 1988. As of December 31, 1994,the bank
operates eight branches: four in Seminole County, two in Osceola County and two
in Orange County. The Company's deposits are insured by the Federal Deposit
Insurance Corporation.

On September 30, 1994, the Bank acquired substantially all of the
outstanding common stock of Osceola National Bank (ONB). The acquisition has
been accounted for under the purchase method, whereby the purchase price of
$6,069,000 has been allocated to the underlying assets and liabilities based on
their respective fair values at the date of acquisition. A summary of the
purchase price allocation as reflected in the accompanying Consolidated Balance
Sheets is as follows:

<TABLE>
<S> <C>
Cash and cash equivalents............................................... $ 2,948,000
Investment securities................................................... 16,542,000
Loans, net.............................................................. 23,820,000
Premises and equipment.................................................. 1,053,000
Goodwill................................................................ 2,242,000
Other assets............................................................ 784,000
Deposits................................................................ 40,867,000
Other liabilities....................................................... 453,000
</TABLE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of the Company are in accordance with
generally accepted accounting principles, and conform to general practices
within the banking industry.

Method of Consolidation. In consolidation, all significant intercompany
accounts and transactions are eliminated.

Cash and Cash Equivalents. Cash and cash equivalents include cash on hand,
amounts due from banks, and federal funds sold.

Investment Securities. Investment securities are carried at cost adjusted
for amortization of premium and accretion of discount. Gains and losses on the
sale of securities are computed by specific identification.

Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 115 (SFAS No. 115), Accounting for Certain
Investments in Debt and Equity Securities, that addresses the accounting and
reporting for investments in marketable equity securities and for all
investments in debt securities. SFAS No. 115 requires investments in debt and
marketable equity securities to be classified in three categories and accounted
for as follows: held to maturity (recorded at amortized cost), available for
sale (recorded at fair value with unrealized gains and losses reported as a
separate component of stockholder's equity), and trading securities (recorded at
fair value with unrealized gains and losses included in earnings).

In accordance with the Statement, prior period financial statements have
not been restated to reflect the change in accounting principle. The cumulative
effect of adopting SFAS No. 115 as of January 1, 1994 was a decrease in the
opening balance of stockholders' equity of $7,636 (net of $4,607 in deferred
income taxes) to reflect the unrealized losses on securities classified as
available-for-sale that were previously classified as investment securities and
carried at amortized cost.

Loans and Allowance for Loan Losses. Interest on loans is accrued by the
simple interest method. Loan origination fees and incremental costs are deferred
and amortized over the life of the loans as a yield

F-55
<PAGE> 130

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

adjustment. The interest recognition methods produce relatively constant yields
over the terms of the loans. Accrual of interest is discontinued on a loan when
management believes, after considering economic and business conditions and
collection efforts, that the borrower's financial condition is such that
collection of interest is doubtful.

The allowance for loan losses is maintained at a level determined to be
adequate for potential loan losses and considers delinquencies, recent loss
experience and the general condition of the loan portfolio, as well as
prevailing and anticipated economic conditions.

In May 1993, the FASB issued SFAS No. 114, Accounting by Creditors for
Impairment of a Loan, which establishes new guidance for all creditors in
determining allowances for credit losses related to certain loans. The standard
requires impaired loans to be recorded using one of the following basis: the
present value of expected future cash flows, the loan's observable market price,
or the fair value of the collateral. This statement is effective for fiscal
years beginning after December 31, 1994. The Company has elected not to
implement SFAS No. 114 for 1994. The effect of this standard is not expected to
be adverse or material.

Premises and Equipment. Depreciable assets are stated at cost, less
accumulated depreciation and amortization. Depreciation and amortization is
provided on the straight-line basis over the estimated useful lives of the
assets. Maintenance and repairs are charged to expense as incurred and major
renewals and betterments are capitalized. Gains or losses are credited or
charged to income upon disposition.

Goodwill. The Bank recorded goodwill for the excess of the purchase price
of Osceola National Bank over the estimated fair value of the net assets
acquired. The goodwill is being amortized on a straight-line basis over 20
years. Amortization expense for 1994 was $30,541.

Income Taxes. Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes currently
due plus deferred taxes resulting from temporary differences. Such temporary
differences result from differences in the carrying value of assets and
liabilities for tax and financial reporting purposes. The deferred tax assets
and liabilities represent the future tax consequences of those differences,
which will either be taxable or deductible when the assets and liabilities are
recovered or settled. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable for the period and the change during the period in
deferred tax assets and liabilities.

Net Income per Common Share. Net Income per common share has been computed
using the weighted average number of shares outstanding during the year.

3. INVESTMENT SECURITIES

The amortized cost and estimated market value of investments in debt
securities at December 31, 1994 and 1993 were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Investments Held-to-Maturity:
Federal Home Loan Bank and Federal Reserve
Stock...................................... $ 694,300 $ -- $ -- $ 694,300
U.S. Treasury securities and obligations of
U.S. Government corporations and
agencies................................... 3,963,351 -- (105,823) 3,857,528
</TABLE>

F-56
<PAGE> 131

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Mortgage-backed securities.................... 8,690,465 15,393 (303,798) 8,402,060
Obligations of states and political
subdivisions............................... 3,282,476 -- (185,958) 3,096,518
----------- ---------- ---------- -----------
$16,630,592 $ 15,393 $ (595,579) $16,050,406
========== ======== ========= ==========
Investments Available-for-Sale:
U.S. Treasury securities and obligations of
U.S. Government corporations and
agencies................................... $12,917,751 $ 941 $ (403,886) $12,514,806
Mortgage-backed securities.................... 5,506,567 -- (384,120) 5,122,447
Obligations of states and political
subdivisions............................... 100,000 -- (3,965) 96,035
Other debt securities......................... 500,000 -- (128,750) 371,250
----------- ---------- ---------- -----------
$19,024,318 $ 941 $ (920,721) $18,104,538
========== ======== ========= ==========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1993
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. Government corporations and
agencies................................... $ 9,650,818 $ 17,190 $ (43,016) $ 9,624,992
Mortgage-backed securities.................... 2,615,552 22,328 (26,204) 2,611,676
Obligations of states and political
subdivisions............................... 1,507,209 17,887 (7,013) 1,518,083
Other debt securities......................... 600,000 5,476 -- 605,476
----------- ---------- ---------- -----------
$14,373,579 $ 62,881 $ (76,233) $14,360,227
========== ======== ========= ==========
</TABLE>

The amortized cost and estimated market value of investments in debt
securities at December 31, 1994, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.

<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST MARKET VALUE
----------- ------------
<S> <C> <C>
Investments Held-to-Maturity:
Due in one year or less....................................... $ 200,000 $ 198,818
Due after one year through five years......................... 3,994,398 3,861,022
Due after five years through ten years........................ 2,942,448 2,787,890
Due in more than ten years.................................... 108,981 106,316
----------- ------------
7,245,827 6,954,046
Federal Home Loan Bank and Federal Reserve Stock.............. 694,300 694,300
Mortgage-backed securities.................................... 8,690,465 8,402,060
----------- ------------
$16,630,592 $ 16,050,406
========== ==========
Investments Available-For-Sale:
Due in one year or less....................................... $ 2,506,656 $ 2,473,076
Due after one year through five years......................... 11,011,095 10,509,015
----------- ------------
13,517,751 12,982,091
Mortgage-backed securities.................................... 5,506,567 5,122,447
----------- ------------
$19,024,318 $ 18,104,538
========== ==========
</TABLE>

F-57
<PAGE> 132

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Proceeds from the sales and maturities of investments during 1994 and 1993
were $4,173,181 and $8,114,067, respectively. Net realized gains (losses) on the
sale of investments during 1994, 1993 and 1992 were $(5,264), $13,750 and
$104,308, respectively.

Investment securities with book values of $1,505,226 and $2,019,300 at
December 31, 1994 and 1993, respectively, and with market values of
approximately $1,479,843 and $2,013,800 at December 31, 1994 and 1993,
respectively, were pledged as collateral for public funds and treasury tax and
loan deposits.

4. LOANS AND ALLOWANCE FOR LOAN LOSSES

A summary of loan distribution at December 31, 1994 and 1993 follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1993
------------ -----------
<S> <C> <C>
Commercial............................................... $ 32,148,230 $25,633,524
Mortgage................................................. 11,211,674 12,622,583
Real estate.............................................. 69,836,655 34,228,496
Installment.............................................. 10,120,846 5,942,271
------------ -----------
123,317,405 78,426,874
Overdrafts............................................... 297,396 42,175
Unearned discount........................................ (33,255) (15,180)
Deferred loan fees....................................... (442,470) (233,909)
------------ -----------
123,139,076 78,219,960
Allowance for loan losses (1,608,656) (900,000)
------------ -----------
$121,530,420 $77,319,960
=========== ==========
</TABLE>

Changes in the allowance for loan losses follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1994 1993
---------- --------
<S> <C> <C>
Allowance, beginning of year................................. $ 900,000 $639,860
ONB loan loss reserve at acquisition......................... 473,645 --
Provision charged to expense................................. 330,000 466,425
Recoveries on loans previously charged off................... -- 3,755
Loans charged off............................................ (94,989) (210,040)
---------- --------
Allowance, end of year....................................... $1,608,656 $900,000
========= ========
</TABLE>

Loans on which the accrual of interest has been discontinued or reduced,
amounted to $199,614 and $43,241 at December 31, 1994 and 1993, respectively. If
interest on those loans had been accrued, such income would have approximated
$25,000, $2,500 and $3,798 for 1994, 1993 and 1992, respectively.

F-58
<PAGE> 133

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. PREMISES AND EQUIPMENT

A summary of premises and equipment at December 31, 1994 and 1993 follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
---------- ----------
<S> <C> <C>
Land........................................................ $ 827,004 $ 527,004
Bank premises............................................... 2,433,116 1,449,630
Leasehold improvements...................................... 575,274 266,722
Furniture, fixtures and equipment........................... 2,066,183 1,109,430
---------- ----------
5,901,577 3,352,786
Less accumulated depreciation and amortization.............. (872,819) (534,902)
---------- ----------
$5,028,758 $2,817,884
========= =========
</TABLE>

Depreciation and amortization expense for premises and equipment for the
years ended December 31, 1994, 1993 and 1992 was $337,917, $225,989 and
$166,921, respectively.

6. INCOME TAXES

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under the
provisions of SFAS 109, the Company elected not to restate the prior year. The
financial effect of this statement has been reported in the 1993 statement of
income as the cumulative effect of a change in accounting principle. The effect
was a net increase in income of $46,874 and a corresponding increase in the net
deferred tax asset as of December 31, 1993.

The components of the net deferred tax asset recognized in the accompanying
balance sheet at December 31, 1994 and 1993 are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1993
---------- ----------
<S> <C> <C>
Deferred tax asset.......................................... $ 969,684 $ 391,287
Deferred tax liability...................................... (104,046) (64,218)
Valuation allowance......................................... -- --
---------- ----------
$ 865,638 $ 327,069
========= =========
</TABLE>

The types of temporary differences between the tax bases of assets and
liabilities and their financial statement reporting amounts are attributable
principally to depreciation methods, loan loss provisions, and deferred loan
fees.

Reconciliations of the effective income tax rate and the statutory federal
income tax rate are as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1994 1993 1992
---- ---- -----
<S> <C> <C> <C>
Statutory federal income tax rate............................. 34.0% 34.0% 34.0%
State taxes................................................... 2.3 1.9 2.9
Net operating loss utilized................................... -- -- (18.4)
Other......................................................... -- (0.7) (2.9)
---- ---- -----
Effective income tax rate..................................... 36.3% 35.2% 15.6%
</TABLE>

F-59
<PAGE> 134

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The provision (benefit) for income taxes consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Current:
Federal............................................. $ 999,859 $456,679 $220,379
State............................................... 114,010 41,304 22,055
---------- -------- --------
1,113,869 497,983 242,434
---------- -------- --------
Deferred:
Federal............................................. (106,703) (74,752) (171,279)
State............................................... (18,265) (7,981) --
---------- -------- --------
(124,968) (82,733) (171,279)
---------- -------- --------
$ 988,901 $415,250 $ 71,155
========= ======== ========
</TABLE>

The Bank recognized the tax benefit of approximately $247,000 in net
operating loss carryforwards for financial reporting purposes in the year ended
December 31, 1992.

As of December 31, 1992, the Bank had approximately $70,000 in net
operating loss carryforwards and approximately $26,000 in alternative minimum
tax credit carryforwards for financial reporting purposes. As of December 31,
1994 and 1993, the Bank had no income tax carryforwards or alternative minimum
tax carryforward.

7. STOCK BASED COMPENSATION PLANS

The Company's stock option plans adopted prior to December 31, 1992
authorize the granting of options for up to 160,000 shares of common stock to
organizing directors and key officers and employees of the Company. Under the
plans, options are granted at a price determined in each case by the committee
of the Board of Directors, but shall not be less than one hundred (100%) percent
of the fair market value of a share of common stock on the date the option is
granted, the book value thereof or $5.825 per share, whichever is greater. Such
options are exercisable over a period of ten years from the date of grant.

During the year ended December 31, 1993, the Company adopted a stock option
plan authorizing the granting of options of shares of common stock to directors
and certain key employees of the Company. The total number of shares which may
be issued under this plan and other plans adopted by the Company shall not
exceed twenty percent (20%) of the Company's total authorized shares. Under the
plan, the options are granted at a price determined in each case by the
committee of the Board of Directors, but shall not be less than one hundred
percent (100%) of the fair market value of the stock as of the date the option
is granted or the par value of such shares, whichever is greater. Such options
are exercisable over a period of ten years from the date of grant.

F-60
<PAGE> 135

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Information with respect to the Company's organizing director stock option
plan is as follows:

<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES UNDER OPTION: SHARES PER SHARE
--------------------------------------------------------------- --------- ------------
<S> <C> <C>
Outstanding at December 31, 1991............................... 216,000 $ 2.92
Granted........................................................ -- --
Exercised...................................................... -- --
Cancelled...................................................... -- --
--------- ------
Outstanding at December 31, 1992............................... 216,000 $ 2.92
Granted........................................................ -- --
Exercised...................................................... -- --
Cancelled...................................................... -- --
--------- ------
Outstanding at December 31, 1993............................... 216,000 $ 2.92
Granted........................................................ -- --
Exercised...................................................... -- --
Cancelled...................................................... -- --
--------- ------
Outstanding at December 31, 1994............................... 216,000 $ 2.92
======== =========
</TABLE>

Options exercisable at December 31, 1994, 1993 and 1992 are 216,000.

Information with respect to the Company's employee incentive stock option
plan is as follows:

<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES UNDER OPTION: SHARES PER SHARE
------------------------------------------------------------- --------- -------------
<S> <C> <C>
Outstanding at December 31, 1991............................. 104,000 $2.92 - $3.38
Granted...................................................... -- --
Exercised.................................................... -- --
Cancelled.................................................... -- --
--------- -------------
Outstanding at December 31, 1992............................. 104,000 $2.92 - $3.38
Granted...................................................... -- --
Exercised.................................................... -- --
Cancelled.................................................... -- --
--------- -------------
Outstanding at December 31, 1993............................. 104,000 $2.92- $3.38
Granted...................................................... -- --
Exercised.................................................... -- --
Cancelled.................................................... -- --
--------- -------------
Outstanding at December 31, 1994............................. 104,000 $2.92 - $3.38
======== ===========
</TABLE>

Options exercisable at December 31, 1994, 1993 and 1992 are 104,000.

F-61
<PAGE> 136

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Information with respect to the Company's director and key employee stock
option plan is as follows:

Options exercisable at December 31, 1994 and 1993 are 814,000 and 584,000,
respectively.

During 1994, the Company adopted an employee stock appreciation plan in
which hypothetical investments in shares of the Company's common stock are
awarded to key employees. The benefits vest over 5 years and are paid at the
close of the vesting period based upon the appreciation of the shares between
the date of grant and the exercise date. Under the plan, 79,000 shares were
granted, none of which were exercised or cancelled as of December 31, 1994.
Compensation expense pursuant to the plan was immaterial in 1994.

8. EMPLOYEE BENEFIT PLAN

Effective January 1, 1993, the Company adopted a deferred savings plan
under Internal Revenue Code Section 401(k), which covers substantially all of
the Company's employees who meet minimum length of service requirements. Under
the provisions of the plan, employees may contribute up to 15% of their
compensation on a pre-tax basis. The Company matches the employee contribution
25% up to a maximum of 4%. The Company's contribution to the plan was $26,431
and $13,955 for the years ended December 31, 1994 and 1993, respectively.

9. COMMITMENTS AND CONTINGENCIES

Lease Commitments -- The Bank leases several of its facilities under
operating leases which expire at various periods through August, 1998. Future
minimum lease payments, by year and in the aggregate, under all operating leases
as of December 31, 1994 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-------------------------------------------------------------------------
<S> <C>
1995..................................................................... $ 392,490
1996..................................................................... 410,800
1997..................................................................... 277,355
1998..................................................................... 286,963
Thereafter............................................................... 271,545
----------
$1,639,153
=========
</TABLE>

Rent expense was approximately $385,000, $342,000 and $417,000 for 1994,
1993 and 1992, respectively.

In November 1994, the Bank entered into an option for assignment of lease
and purchase of fixed assets related to the leased property formerly known as
the Orlando branch. As of December 31, 1994, this option has not been exercised
by the sublessee.

Financial Instruments with Off-Balance Sheet Risks. The Bank is a party to
financial instruments with off-balance sheet risk in the normal course of its
business to meet the financing needs of its customers and to

F-62
<PAGE> 137

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reduce its own exposure to fluctuations in interest rates. These financial
instruments include loan commitments and stand-by letters of credit. These
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the financial statements.

The Bank's exposure to credit loss in the event of nonperformance by the
other party to its financial instrument for loan commitments and stand-by
letters of credit is represented by the contracted amount of those instruments.
The Bank uses the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.

At December 31, 1994 and 1993, the Bank has commitments to customers of
approximately $1,877,000 and $928,000 for standby letters of credit and
$33,162,000 and $17,948,000 for unfunded firm loan commitments, respectively.
Since many of the loan commitments may expire without being drawn upon, the
total commitment amount does not necessarily represent future cash requirements.

Financial Instruments with Off-Balance Sheet Risks. The Bank has no
significant concentration of credit risk with any individual counterparty to
originate loans. Bank loan customers are principally closely-held businesses and
residents concentrated in the central Florida area and as such, the debtors'
ability to honor their contract is substantially dependent upon the general
economic conditions of the region.

The Bank evaluates each customer's credit worthiness on a case-by-case
basis. It is the Bank's policy to obtain adequate collateral in accordance with
internal lending guidelines on all loans. Unsecured loans are made based upon
the judgment of Company management in accordance with authorized lending limits,
Bank lending policies and credit criteria. Collateral on the Bank's loans depend
on the nature of the loan, and are principally commercial and residential real
property and other commercial tangible assets (inventory and equipment). It is
the Bank's policy to perfect its interest in the collateral through the filing
of mortgage deeds and uniform commercial code (UCC) filings, or taking physical
possession of the collateral, if appropriate. Bank management believes it has
access to collateral in the event of loan default to minimize its credit risk.

Stand-by letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The collateral varies for those
commitments, but may include a certificate of deposit held by the Bank if
collateral is deemed necessary.

During 1994 and 1993, the Bank has approximately $35,594,000 and
$17,514,000, respectively, in fixed rate loans with interest rates ranging from
5.5% to 18%, and $19,215,000 and $191,000, respectively, in variable rate loans
with interest rate ceilings ranging from 9% to 18%.

The Bank is required to maintain a minimum leverage capital ratio of Tier I
capital, as defined, to total assets based upon the Company's ratings under the
regulatory CAMEL rating system. Banks with CAMEL ratings of one are required to
maintain a minimum leverage capital ratio of 3 percent. An additional 100 to 200
basis points are required for banks with CAMEL ratings other than one.

The Bank must also maintain a ratio of total capital to risk-weighted
assets of 8 percent, and a ratio Tier I capital to risk-weighted assets of 4
percent.

10. RETAINED EARNINGS

The Company's retained earnings account at December 31, 1994 and 1993
includes $1,060,000 of initial paid-in capital.

The payment of dividends by the Bank is subject to certain regulatory
restrictions.

F-63
<PAGE> 138

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. RELATED-PARTY TRANSACTIONS

Loans. Loans receivable from principal stockholders, directors, executive
officers and companies in which they have a 10% or more beneficial interest
aggregated approximately $3,672,000 and $4,006,000 at December 31, 1994 and
1993, respectively.

Deposits. Deposits of principal stockholders directors executive officers
and companies in which they have a 10% or more beneficial interest aggregated
approximately $10,196,000 and $13,324,000 at December 31, 1994 and 1993,
respectively.

12. SOUTHERN BANKING CORPORATION (PARENT COMPANY ONLY):

Presented below are the financial statements of Southern Banking
Corporation.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................ $ 31,266 $ 12,312
Investment in subsidiary bank, Southern Bank of Central Florida*..... 13,645,379 7,382,421
Other assets......................................................... 58,836 43,753
----------- ----------
Total assets............................................... $13,735,481 $7,438,486
========== =========
STOCKHOLDERS' EQUITY
Common Stock, par value $1.00 per share; 10,000,000 shares
authorized; 3,350,000 and 2,111,112 shares issued and outstanding
in 1994 and 1993, respectively..................................... $ 3,350,000 $2,200,000
Surplus.............................................................. 7,382,042 3,397,677
Retained earnings.................................................... 3,574,412 1,840,809
Unrealized loss on investments available for sale, net............... (570,973) --
----------- ----------
Total stockholders' equity................................. $13,735,481 $7,438,486
========== =========
</TABLE>

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

* Eliminated in consolidation.

STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993

<TABLE>
<CAPTION>
1994 1993
----------- ----------
<S> <C> <C>
Equity in subsidiary's undistributed net income...................... $ 1,746,870 $ 831,515
Dividends received................................................... 10,000
Interest income...................................................... 4,184 --
Other expense........................................................ (41,489) (34,386)
Income tax benefits.................................................. 14,038 12,939
----------- ----------
Net income................................................. 1,733,603 810,068
Retained earnings, beginning of period............................... 1,840,809 1,030,741
----------- ----------
Retained earnings, end of year....................................... $ 1,817,542 $1,840,809
========== =========
</TABLE>

F-64
<PAGE> 139

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993

<TABLE>
<CAPTION>
1994 1993
----------- ---------
<S> <C> <C>
Operating activities:
Net income......................................................... $ 1,733,603 $ 810,068
Adjustments to reconcile net income to net cash used by operating
activities:
Undistributed earnings of subsidiary............................ (1,746,870) (831,515)
Amortization.................................................... 11,894 11,895
Increase in other assets........................................ (26,977) --
----------- ---------
Net cash provided by (used in) operating activities........ (28,350) (9,552)
----------- ---------
Investing activities:
Dividends received from bank....................................... -- 94,811
Investment in bank................................................. (5,087,061) --
----------- ---------
Net cash used in investing activities...................... (5,087,061) 94,811
----------- ---------
Financing activities:
Proceeds from the issuance of common stock......................... 5,134,365 --
Retirement of note payable......................................... -- (75,780)
----------- ---------
5,134,365 (75,780)
----------- ---------
Net cash provided (used in) by financing activities:
Increase (decrease) in cash and cash equivalents................ 18,954 9,479
Cash and cash equivalents, beginning of year.................... 12,312 2,833
----------- ---------
Cash and cash equivalents, end of year.......................... $ 31,266 $ 12,312
========== =========
</TABLE>

F-65
<PAGE> 140

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks........................................... $ 14,832,448 $ 18,933,933
Federal funds sold................................................ 9,500,000 2,485,000
Investment securities............................................. 34,844,191 36,132,691
Loans receivable, net............................................. 140,414,731 114,433,739
Loans receivable for sale, approximate market value of............ -- --
Federal Home Loan Bank stock, at cost............................. 544,300 --
Real estate acquired through foreclosure.......................... 155,690 274,890
Office properties and equipment, net.............................. 4,957,333 4,635,615
Accrued interest receivable....................................... 1,360,357 1,001,784
Other assets...................................................... 4,116,250 3,328,205
------------ ------------
Total assets............................................ $210,725,300 $181,225,917
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits.......................................................... $193,055,915 $167,083,155
Federal Home Loan Bank advances................................... -- --
Note payable...................................................... -- --
Advance payments by borrowers for property taxes and insurance.... -- --
Accrued expenses and other liabilities............................ 1,475,333 866,883
------------ ------------
Total liabilities....................................... 194,531,248 167,950,038
------------ ------------
Stockholders' Equity:
Common stock, $1.00 par value, authorized 10,000,000 shares;
issued and outstanding shares 3,362,000 at 09/30/95 and
3,350,000 at 09/30/94........................................... $ 3,362,000 $ 3,350,000
Additional paid-in capital........................................ 7,405,082 7,382,042
Net unrealized gain (loss) on AFS Securities...................... (117,075) (305,137)
Retained earnings................................................. 5,544,045 2,848,974
------------ ------------
Total stockholders' equity.............................. 16,194,052 13,275,879
------------ ------------
Total liabilities and stockholders' equity.............. $210,725,300 $181,225,917
=========== ===========
</TABLE>

F-66
<PAGE> 141

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1995 1994
----------- ----------
(UNAUDITED)
<S> <C> <C>
INTEREST INCOME:
Loans................................................................ $ 9,719,958 $5,140,656
Other investments.................................................... 2,106,102 942,136
----------- ----------
Total interest income...................................... 11,826,060 6,082,701
----------- ----------
INTEREST EXPENSE:
Deposits............................................................. 4,357,928 1,810,335
Advance and other borrowings......................................... 73,819 --
----------- ----------
Total Interest Expense..................................... 4,431,747 1,810,335
----------- ----------
Net Interest Income........................................ 7,394,313 4,272,366
Provision for possible loan losses................................... 245,000 270,000
----------- ----------
Net interest income after provision for possible loan losses......... 7,149,313 4,002,366
----------- ----------
OTHER INCOME:
Loan fees and service charges........................................ 1,918,009 1,338,395
Mortgage loan servicing fees......................................... 16,989 --
Gain on sale of loans................................................ -- --
Gain (loss) on sale of loan servicing................................ -- --
Gain (loss) on real estate acquired through foreclosure.............. (6,457) --
Gain (loss) on sale of securities.................................... (36,905) 34
Other operating income, net.......................................... 213,313 84,605
----------- ----------
2,104,949 1,423,034
----------- ----------
GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation, payroll taxes, and fringe benefits..................... 2,966,570 1,700,273
Occupancy and equipment expense...................................... 1,023,285 607,136
Other................................................................ 2,147,577 1,441,580
----------- ----------
Total general and administrative expenses.................. 6,137,432 3,748,989
----------- ----------
Income before income taxes................................. 3,116,830 1,676,411
----------- ----------
Income tax expense................................................... 1,147,200 668,515
----------- ----------
Net income...................................................... $ 1,969,630 $1,007,896
========== =========
</TABLE>

F-67
<PAGE> 142

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995

<TABLE>
<CAPTION>
COMMON STOCK
------------------------- ADDITIONAL NET UNREALIZED TOTAL
NUMBER OF PAID-IN RETAINED GAIN/LOSS STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ON AFS EQUITY
------------ ---------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1994............ 3,350,000 $3,350,000 $7,382,042 $3,574,415 $ (573,033) $ 13,733,424
Purchase and
retirement of common
stock............... 12,000 12,000 23,040 -- -- 35,040
MVA to AFS
Securities.......... -- -- -- -- 455,958 455,958
Net income............ -- -- -- 1,969,630 -- 1,969,630
------------ ---------- ---------- ---------- -------------- -------------
Balance at September
30, 1995............ 3,362,000 $3,362,000 $7,405,082 $5,544,045 $ (117,075) $ 16,194,052
=========== ========= ========= ========= =========== ==========
</TABLE>

F-68
<PAGE> 143

SOUTHERN BANKING CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net cash provided (used) by operating activities.................. $ 2,989,436 $ (886,641)
------------ ------------
Cash flows from investing activities:
Net (increase) decrease in investment securities................ 1,391,548 (20,655,041)
Net increase in loans made to customers......................... (19,701,208) (37,978,062)
Purchase of premises and equipment.............................. (294,482) (2,025,738)
------------ ------------
Net cash used in investing activities................... (18,604,142) (60,658,841)
------------ ------------
Cash flows from financing activities:
Net increase in demand deposits and savings accounts............ 20,037,363 46,178,665
Net increase in time deposits................................... 18,284,545 19,539,806
Net decrease in federal funds purchased......................... (12,000,000) 0
Net proceeds from the issuance of common stock.................. 35,040 5,134,365
------------ ------------
Net cash provided by financing activities............... 26,356,948 70,852,836
------------ ------------
Net increase in cash and cash equivalents......................... 10,742,242 9,307,354
Cash and cash equivalents: beginning of year...................... 13,590,206 12,111,639
------------ ------------
Cash and cash equivalents: September 30, 1995 and 1994............ 24,332,448 $ 21,418,993
------------ ------------
Reconciliation of net income to net cash provided (used) by
operating activities:
Net income...................................................... 1,969,630 1,007,896
------------ ------------
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Depreciation and amortization................................ 365,907 208,007
(Gains) losses on sales of investments....................... 36,905 (34)
Net increase in allowance for loan losses.................... 106,677 660,048
Amortization of premiums and accretion of discounts on
investment securities....................................... (34,543) 15,060
Increase (decrease) in deferred loan fees.................... (32,083) 204,236
Increase in accrued interest receivable...................... (223,395) (461,119)
(Increase) decrease in other assets.......................... 217,331 (2,543,773)
Increase (decrease) in accrued interest payable.............. 322,927 (20,180)
Increase in other liabilities................................ 260,080 43,218
------------ ------------
Total adjustments....................................... 1,019,806 (1,894,537)
------------ ------------
Net cash provided (used) by operating activities.................. $ 2,989,436 $ (886,641)
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest..................................................... $ 4,108,820 $ 1,830,515
------------ ------------
Income taxes................................................. $ 1,005,189 $ 936,600
=========== ===========
Supplemental disclosures of noncash investing activities:
Loans receivable transferred to real estate acquired through
foreclosure.................................................. $ 0 $ 274,890
=========== ===========
Loan originations to finance the sale of real estate acquired
through foreclosure.......................................... $ 0 $ 0
=========== ===========
</TABLE>

F-69
<PAGE> 144

APPENDIX A

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

THE COLONIAL BANCGROUP, INC.,

COLONIAL BANK

AND

DOTHAN FEDERAL SAVINGS BANK

DATED AS OF

JANUARY 22, 1996
<PAGE> 145

TABLE OF CONTENTS

<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
ARTICLE 1 -- NAME
1.1 Name.......................................................................... A-5
ARTICLE 2 -- MERGER -- TERMS AND CONDITIONS
2.1 Applicable Law................................................................ A-5
2.2 Corporate Existence........................................................... A-5
2.3 Articles of Incorporation and Bylaws.......................................... A-5
2.4 Resulting Corporation's Officers and Board.................................... A-6
2.5 Shareholder Approval.......................................................... A-6
2.6 Further Acts.................................................................. A-6
2.7 Effective Date and Closing.................................................... A-6
ARTICLE 3 -- CONVERSION OF BANK STOCK
3.1 Conversion of Bank Stock...................................................... A-6
3.2 Surrender of Bank Stock....................................................... A-7
3.3 Fractional Shares............................................................. A-7
3.4 Adjustments................................................................... A-7
3.5 Colonial Bank Stock........................................................... A-7
3.6 Dissenting Rights............................................................. A-7
ARTICLE 4 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP
4.1 Organization.................................................................. A-8
4.2 Capital Stock................................................................. A-8
4.3 Financial Statements; Taxes................................................... A-8
4.4 No Conflict with Other Instrument............................................. A-9
4.5 Absence of Material Adverse Change............................................ A-9
4.6 Approval of Agreements........................................................ A-9
4.7 Tax Treatment................................................................. A-9
4.8 Title and Related Matters..................................................... A-9
4.9 Subsidiaries.................................................................. A-9
4.10 Contracts..................................................................... A-10
4.11 Litigation.................................................................... A-10
4.12 Compliance.................................................................... A-10
4.13 Registration Statement........................................................ A-10
4.14 Filings Incorporated by Reference............................................. A-10
4.15 Form S-4...................................................................... A-10
4.16 Disclosure.................................................................... A-10
4.17 Brokers....................................................................... A-11
ARTICLE 5 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BANK
5.1 Organization.................................................................. A-11
5.2 Capital Stock................................................................. A-11
5.3 Subsidiaries.................................................................. A-11
5.4 Financial Statements; Taxes................................................... A-11
5.5 Absence of Certain Changes or Events.......................................... A-12
5.6 Title and Related Matters..................................................... A-13
5.7 Commitments................................................................... A-13
5.8 Charter and Bylaws............................................................ A-14
5.9 Litigation.................................................................... A-14
5.10 Material Contract Defaults.................................................... A-14
</TABLE>

A-2
<PAGE> 146

<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<S> <C> <C>
5.11 No Conflict with Other Instrument............................................. A-14
5.12 Governmental Authorization.................................................... A-14
5.13 Absence of Regulatory Communications.......................................... A-14
5.14 Absence of Material Adverse Change............................................ A-14
5.15 Insurance..................................................................... A-14
5.16 Pension and Employee Benefit Plans............................................ A-15
5.17 Buy-Sell Agreement............................................................ A-15
5.18 Brokers....................................................................... A-15
5.19 Approval of Agreements........................................................ A-15
5.20 Disclosure.................................................................... A-15
5.21 Registration Statement........................................................ A-15
5.22 Loans; Adequacy of Allowance for Loan Losses.................................. A-16
5.23 Environmental Matters......................................................... A-16
5.24 Transfer of Shares............................................................ A-16
5.25 Collective Bargaining......................................................... A-16
5.26 Labor Disputes................................................................ A-16
5.27 Derivative Contracts.......................................................... A-16
ARTICLE 6 -- ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup............................................. A-17
6.2 Additional Covenants of the Bank.............................................. A-17
ARTICLE 7 -- MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation..................................................... A-18
7.2 Press Release................................................................. A-19
7.3 Mutual Disclosure............................................................. A-19
7.4 Access to Properties and Records.............................................. A-19
ARTICLE 8 -- CONDITIONS TO OBLIGATIONS OF ALL PARTIES
8.1 Approval by Shareholders...................................................... A-19
8.2 Regulatory Authority Approval................................................. A-19
8.3 Litigation.................................................................... A-19
8.4 Registration Statement........................................................ A-19
8.5 Tax Opinion................................................................... A-20
ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF THE BANK
9.1 Representations, Warranties and Covenants..................................... A-20
9.2 Adverse Changes............................................................... A-20
9.3 Closing Certificate........................................................... A-20
9.4 Opinion of Counsel............................................................ A-21
9.5 Other Matters................................................................. A-21
9.6 Material Events............................................................... A-21
ARTICLE 10 -- CONDITIONS TO OBLIGATIONS OF BANCGROUP
10.1 Representations, Warranties and Covenants..................................... A-21
10.2 Adverse Changes............................................................... A-21
10.3 Closing Certificate........................................................... A-21
10.4 Opinion of Counsel............................................................ A-22
10.5 Controlling Shareholders...................................................... A-22
10.6 Other Matters................................................................. A-22
10.7 Material Events............................................................... A-22
ARTICLE 11 -- TERMINATION OF REPRESENTATIONS AND WARRANTIES......................... A-22
ARTICLE 12 -- NOTICES............................................................... A-23
</TABLE>

A-3
<PAGE> 147

<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
ARTICLE 13 -- AMENDMENT OR TERMINATION
13.1 Amendment..................................................................... A-23
13.2 Termination................................................................... A-23
13.3 Damages....................................................................... A-23
ARTICLE 14 -- DEFINITIONS........................................................... A-24
ARTICLE 15 -- MISCELLANEOUS
15.1 Expenses...................................................................... A-27
15.2 Benefit....................................................................... A-27
15.3 Governing Law................................................................. A-27
15.4 Counterparts.................................................................. A-27
15.5 Headings...................................................................... A-28
15.6 Severability.................................................................. A-28
15.7 Construction.................................................................. A-28
15.8 Return of Information......................................................... A-28
15.9 Equitable Remedies............................................................ A-28
15.10 Attorneys' Fees............................................................... A-28
15.11 No Waiver..................................................................... A-28
15.12 Remedies Cumulative........................................................... A-28
15.13 Entire Contract............................................................... A-28
</TABLE>

A-4
<PAGE> 148

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of this the
22nd day of January 1996, by and among DOTHAN FEDERAL SAVINGS BANK, a federal
savings bank ("Bank"), COLONIAL BANK ("Colonial Bank"), an Alabama state banking
corporation, and THE COLONIAL BANCGROUP, INC. ("BancGroup"), a Delaware
corporation.

WITNESSETH

WHEREAS, the Bank operates as a federal savings bank in Dothan, Alabama;
and

WHEREAS, BancGroup is a bank holding company with subsidiary banks in
Alabama, Georgia and Tennessee; and

WHEREAS, the Bank wishes to merge with Colonial Bank, a wholly-owned
subsidiary of BancGroup; and

WHEREAS, it is the intention of BancGroup, Colonial Bank and the Bank that
such merger shall qualify for federal income tax purposes as a "reorganization"
within the meaning of section 368(a) of the Code, as defined herein;

NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Parties hereto agree as follows:

ARTICLE 1

NAME

1.1 Name. The name of the corporation resulting from the Merger shall be
"Colonial Bank."

ARTICLE 2

MERGER -- TERMS AND CONDITIONS

2.1 Applicable Law. On the Effective Date, the Bank shall be merged with
and into Colonial Bank (herein referred to as the "Resulting Corporation"
whenever reference is made to it as of the time of merger or thereafter). The
Merger shall be undertaken pursuant to the provisions of and with the effect
provided in the ABCA. The offices and facilities of the Bank and of Colonial
Bank shall become the offices and facilities of the Resulting Corporation.

2.2 Corporate Existence. On the Effective Date, the corporate existence of
the Bank and of Colonial Bank shall, as provided in the ABCA, be merged into and
continued in the Resulting Corporation, and the Resulting Corporation shall be
deemed to be the same corporation as the Bank and Colonial Bank. All rights,
franchises and interests of the Bank and Colonial Bank, respectively, in and to
every type of property (real, personal and mixed) and choses in action shall be
transferred to and vested in the Resulting Corporation by virtue of the Merger
without any deed or other transfer. The Resulting Corporation on the Effective
Date, and without any order or other action on the part of any court or
otherwise, shall hold and enjoy all rights of property, franchises and
interests, including appointments, designations and nominations and all other
rights and interests as trustee, executor, administrator, transfer agent and
registrar of stocks and bonds, guardian of estates, assignee, and receiver and
in every other fiduciary capacity and in every agency, and capacity, in the same
manner and to the same extent as such rights, franchises and interests were held
or enjoyed by the Bank and Colonial Bank, respectively, on the Effective Date.

2.3 Articles of Incorporation and Bylaws. On the Effective Date, the
articles of incorporation and bylaws of the Resulting Corporation shall be the
articles of incorporation and bylaws of Colonial Bank as they exist immediately
before the Effective Date.

A-5
<PAGE> 149

2.4 Resulting Corporation's Officers and Board. The board of directors and
the officers of the Resulting Corporation on the Effective Date shall consist of
those persons serving in such capacities of Colonial Bank as of the Effective
Date.

2.5 Shareholder Approval. This Agreement shall be submitted to the
shareholders of the Bank at the Stockholders Meeting to be held as promptly as
practicable consistent with the satisfaction of the conditions set forth in this
Agreement. Upon approval by the requisite vote of the shareholders of the Bank
as required by applicable Law and the Bank's stock charter and bylaws, this
Agreement shall become effective as soon as practicable thereafter in the manner
provided in section 2.7 hereof.

2.6 Further Acts. If, at any time after the Effective Date, the Resulting
Corporation shall consider or be advised that any further assignments or
assurances in law or any other acts are necessary or desirable (i) to vest,
perfect, confirm or record, in the Resulting Corporation, title to and
possession of any property or right of the Bank or Colonial Bank, acquired as a
result of the Merger, or (ii) otherwise to carry out the purposes of this
Agreement, the Bank or Colonial Bank and its officers and directors shall
execute and deliver all such proper deeds, assignments and assurances in law and
do all acts necessary or proper to vest, perfect or confirm title to, and
possession of, such property or rights in the Resulting Corporation and
otherwise to carry out the purposes of this Agreement; and the proper officers
and directors of the Resulting Corporation are fully authorized in the name of
the Bank or Colonial Bank, or otherwise, to take any and all such action.

2.7 Effective Date and Closing. Subject to the terms of all requirements
of Law and the conditions specified in this Agreement, the Merger shall become
effective on the date specified in the Certificate of Merger to be issued by the
Secretary of State of the State of Alabama (such time being herein called the
"Effective Date"). The Closing shall take place at the offices of BancGroup, in
Montgomery, Alabama, at 11:00 a.m. on the date that the Effective Date occurs or
at such other place and time that the Parties may mutually agree.

ARTICLE 3

CONVERSION OF BANK STOCK

3.1 Conversion of Bank Stock. (a) (i) On the Effective Date, and subject
to sections 3.1(a)(ii), 3.3 and 3.6, each share of common stock of the Bank
outstanding and held by the Bank's shareholders (the "Bank Stock"), shall be
converted into shares of BancGroup Common Stock and cash (the "Merger
Consideration") as specified below. Unless specified otherwise by a holder of
Bank Stock in accordance with section 3.1(a)(ii), each outstanding share of Bank
Stock on the Effective Date shall be converted into the number of shares, or
such fractions of a share (subject to section 3.3 hereof), of BancGroup Common
Stock which shall be equal to $2,600,000 divided by the total number of shares
of Bank Stock outstanding, divided in turn by the Market Value. The Market Value
shall represent the per share market value of the BancGroup Common Stock at the
Effective Date and shall be determined by calculating the average of the closing
prices of the Common Stock of BancGroup as reported by the NYSE on each of the
ten (10) trading days ending on the trading day immediately preceding the
Effective Date. In addition, BancGroup will pay an aggregate of $2,600,000 in
cash for the outstanding shares of Bank Stock, with the amount of cash to be
paid for each one share of Bank Stock equal to $2,600,000 divided by the number
of shares of Bank Stock outstanding.

(ii) A holder of Bank Stock may, prior to the Stockholders Meeting, file a
written election form (an "Election Form") with the Bank specifying whether such
holder prefers to have the Merger Consideration paid to such holder in shares of
BancGroup Common Stock only, cash only, or a proportion of cash and BancGroup
Common Stock that is other than 50% for each, provided that, notwithstanding any
elections made pursuant to such Election Forms, the aggregate number of shares
of BancGroup Common Stock to be distributed in the Merger shall equal 50% of the
total Merger Consideration and the aggregate amount of cash to be paid in the
Merger shall equal 50% of the total Merger Consideration. Elections made shall
apply to all shares of record of Bank Stock held by a record holder making the
election. If the aggregate amount of cash to be paid in the Merger is less than
50% of the Merger Consideration based upon the Election Forms which have been
properly filed, then a sufficient amount of additional cash shall be distributed
pro rata to all

A-6
<PAGE> 150

stockholders of the Bank who have not elected to receive 100% of the Merger
Consideration in cash, regardless of whether such stockholders have filed an
Election Form, so that the aggregate amount of Merger Consideration to be paid
in cash in the Merger will equal 50%, and the number of shares of BancGroup
Common Stock otherwise required to be distributed shall be reduced pro rata as
to all stockholders who have not elected to receive 100% of the Merger
Consideration in cash. If the aggregate amount of cash to be paid in the Merger
is greater than 50% of the Merger Consideration based upon the Election Forms
which have been properly filed, then a sufficient amount of cash shall be
distributed pro rata to all stockholders of the Bank who have not elected to
receive 100% of the Merger Consideration in BancGroup Common Stock, regardless
of whether such stockholders have filed an Election Form, so that the aggregate
amount of Merger Consideration to be paid in cash in the Merger will equal 50%,
and the number of shares of BancGroup Common Stock otherwise required to be
distributed shall be increased pro rata as to all stockholders who have not
elected to receive 100% of the Merger Consideration in BancGroup Common Stock.
For purposes of this section 3.1(a), and in accordance with section 3.6, cash to
be paid to holders exercising dissenter's rights of appraisal under section 3.6
hereof shall be included as part of the Merger Consideration for determining the
amount of cash to be paid under section 3.1(a). Interest will not be paid on any
cash to be paid as part of the Merger Consideration.

3.2 Surrender of Bank Stock. After the Effective Date, each holder of an
outstanding certificate or certificates which prior thereto represented shares
of Bank Stock who is entitled to receive BancGroup Common Stock shall be
entitled, upon surrender to BancGroup of their certificate or certificates
representing shares of Bank Stock, to receive in exchange therefor a certificate
or certificates representing the number of whole shares of BancGroup Common
Stock into and for which the shares of Bank Stock so surrendered shall have been
converted, such certificates to be of such denominations and registered in such
names as such holder may reasonably request. Until so surrendered and exchanged,
each such outstanding certificate which, prior to the Effective Date,
represented shares of Bank Stock and which is to be converted into BancGroup
Common Stock shall for all purposes evidence ownership of the BancGroup Common
Stock into and for which such shares shall have been so converted, except that
no dividends or other distributions with respect to such BancGroup Common Stock
shall be made until the certificates previously representing shares of Bank
Stock shall have been properly tendered.

3.3 Fractional Shares. No fractional shares of BancGroup Common Stock
shall be issued, and each holder of shares of Bank Stock having a fractional
interest arising upon the conversion of such shares into shares of BancGroup
Common Stock shall, at the time of surrender of the certificates previously
representing Bank Stock, be paid by BancGroup an amount in cash equal to the
Market Value of such fractional share.

3.4 Adjustments. In the event that prior to the Effective Date BancGroup
Common Stock shall be changed into a different number of shares or a different
class of shares by reason of any recapitalization or reclassification, stock
dividend, combination, stock split, or reverse stock split of the Common Stock,
an appropriate and proportionate adjustment shall be made in the number of
shares of BancGroup Common Stock into which the Bank Stock shall be converted.

3.5 Colonial Bank Stock. The shares of common stock of Colonial Bank
issued and outstanding immediately before the Effective Date shall continue to
be issued and outstanding shares of the Resulting Corporation.

3.6 Dissenting Rights. Any shareholder of the Bank who shall not have
voted in favor of this Agreement and has complied with the applicable procedures
set forth in the regulations of the Office of Thrift Supervision, relating to
rights of dissenting shareholders, shall be entitled to receive payment for the
fair value of his Bank Stock. If after the Effective Date a dissenting
shareholder of the Bank fails to perfect, or effectively withdraws or loses, his
right to appraisal and payment for his shares of Bank Stock, BancGroup shall
issue and deliver the consideration to which such holder of shares of Bank Stock
is entitled under Section 3(a) (without interest) upon surrender of such holder
of the certificate or certificates representing shares of Bank Stock held by
him. The $2,600,000 figure stated in section 3.1(a) used for calculating the
cash to be distributed to holders of Bank Stock shall be reduced by an amount
that equals the number of shares of Bank Stock properly exercising dissenting
rights of appraisal under this section multiplied by $13.01.

A-7
<PAGE> 151

ARTICLE 4

REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP

BancGroup represents, warrants and covenants to and with the Bank as
follows:

4.1 Organization. BancGroup is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware. BancGroup
has the necessary corporate powers to carry on its business as presently
conducted and is qualified to do business in every jurisdiction in which the
character and location of the Assets owned by it or the nature of the business
transacted by it requires qualification or in which the failure to qualify
could, individually or in the aggregate, have a Material Adverse Effect on the
condition (financial or other), earnings, business, affairs, Assets, properties,
prospects or results of operations of BancGroup or of BancGroup and its
Subsidiaries taken as a whole.

4.2 Capital Stock. (a) The authorized capital stock of BancGroup consists
of (A) 44,000,000 shares of Common Stock, $2.50 par value per share, of which as
of September 30, 1995, 12,267,143 shares were validly issued and outstanding,
fully paid and nonassessable and are not subject to preemptive rights, (B) and
1,000,000 shares of Preference Stock, $2.50 par value per share, none of which
are issued and outstanding. The shares of Common Stock to be issued upon the
Merger are duly authorized and, when so issued, will be validly issued and
outstanding, fully paid and nonassessable.

(b) The authorized capital stock of each Subsidiary of BancGroup is duly
authorized, validly issued and outstanding, fully paid and nonassessable, and
each Subsidiary is wholly owned, directly or indirectly, by BancGroup.

4.3 Financial Statements; Taxes. (a) BancGroup has delivered to the Bank
true and complete copies of the following financial statements of BancGroup
(together with related opinions of auditors, as appropriate).

(i) Consolidated balance sheets as of December 31, 1993, and December
31, 1994, and for the nine months ending September 30, 1995;

(ii) Consolidated statements of operations for each of the three years
ended December 31, 1992, 1993 and 1994, and for the nine months ending
September 30, 1995;

(iii) Consolidated statements of cash flows for each of the three
years ended December 31, 1992, 1993 and 1994, and for the nine months
ending September 30, 1995; and

(iv) Consolidated statements of changes in shareholders' equity for
the three years ended December 31, 1992, 1993 and 1994, and for the nine
months ending September 30, 1995.

All such financial statements are in all material respects in accordance with
the books and records of BancGroup and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, all as more particularly set forth in the
notes to such statements. Each of the consolidated balance sheets presents
fairly as of its date the consolidated financial condition of BancGroup and its
Subsidiaries. Except as and to the extent reflected or reserved against in such
balance sheets (including the notes thereto), BancGroup did not have, as of the
dates of such balance sheets, any material Liabilities or obligations (absolute
or contingent) of a nature customarily reflected in a balance sheet or the notes
thereto, other than Liabilities (including reserves) in the amount set forth in
such balance sheets and the notes thereto. The statements of consolidated
income, shareholders' equity and changes in consolidated financial position
present fairly the results of operations and changes in financial position of
BancGroup and its Subsidiaries for the periods indicated.

A-8
<PAGE> 152

for which BancGroup may at said dates have been liable in its own right or as
transferee of the Assets of, or as successor to, any other corporation or other
party. No audit, examination or investigation is presently being conducted or,
to the Knowledge of BancGroup, threatened by any taxing authority which is
likely to result in a material Tax Liability, no material unpaid Tax
deficiencies or additional liabilities of any sort have been proposed by any
governmental representative and no agreements for extension of time for the
assessment of any material amount of Tax have been entered into by or on behalf
of BancGroup. BancGroup has withheld from its employees (and timely paid to the
appropriate governmental entity) proper and accurate amounts for all periods in
material compliance with all Tax withholding provisions of applicable federal,
state, foreign and local Laws (including without limitation, income, social
security and employment Tax withholding for all types of compensation).

4.4 No Conflict with Other Instrument. The consummation of the
transactions contemplated by this Agreement will not result in a breach of or
constitute a Default (without regard to the giving of notice or the passage of
time, or both) under any material indenture, mortgage, deed of trust or other
material agreement or instrument to which BancGroup or any of its Subsidiaries
is a party or by which they or any material portion of their Assets may be
bound; will not conflict with any provision of the restated certificate of
incorporation or bylaws of BancGroup or the articles of incorporation or bylaws
of any of its Subsidiaries; and will not violate any provision of any Law,
regulation, judgment or decree binding on them or any of their Assets.

4.5 Absence of Material Adverse Change. Since the date of the most recent
balance sheet provided under section 4.3(a)(i) above, there have been no events,
changes or occurrences which have had or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BancGroup.

4.6 Approval of Agreements. The board of directors of BancGroup has, or
will have prior to the Effective Date, approved this Agreement and the
transactions contemplated by it and have, or will have prior to the Effective
Date, authorized the execution and delivery by BancGroup of this Agreement.
Subject to the matters referred to in section 8.2, BancGroup has full power,
authority and legal right to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. Subject to the conditions stated
herein, this Agreement represents a legal, valid and binding obligation of
BancGroup and Colonial Bank, enforceable against BancGroup and Colonial Bank in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).

4.7 Tax Treatment. Colonial Bank will acquire, pursuant to the Merger,
substantially all of the properties of the Bank within the meaning of Treasury
Regulations Section 1.368-2(b)(2). BancGroup and Colonial Bank have no intention
to sell or otherwise dispose of any of the Assets of the Bank acquired pursuant
to the Merger. Colonial Bank shall continue the Bank's historic business and
shall use a significant portion of the Bank's historic business assets in a
business, all within the meaning of Treasury Regulations Section 1.368-1(d).
BancGroup controls Colonial Bank with the meaning of section 368(c) of the Code.

4.8 Title and Related Matters. BancGroup has good and marketable title to
all the properties, interests in properties and Assets, real and personal,
reflected in the most recent balance sheet referred to in section 4.3(a), or
acquired after the date of such balance sheet (except properties, interests and
Assets sold or otherwise disposed of since such date, in the ordinary course of
business), free and clear of all mortgages, Liens, pledges, charges or
encumbrances except (i) mortgages and other encumbrances referred to in the
notes of such balance sheet, (ii) liens for current Taxes not yet due and
payable and (iii) such imperfections of title and easements as do not materially
detract from or interfere with the present use of the properties subject thereto
or affected thereby, or otherwise materially impair present business operations
at such properties. To the Knowledge of BancGroup, the material structures and
equipment of BancGroup comply in all material respects with the requirements of
all applicable Laws.

4.9 Subsidiaries. Each Subsidiary of BancGroup has been duly incorporated
and is validly existing as a corporation in good standing under the Laws of the
jurisdiction of its incorporation (which, in the case of Colonial Bank, is the
State of Alabama) and each Subsidiary has been duly qualified as a foreign
corporation

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to transact business and is in good standing under the Laws of each other
jurisdiction in which it owns or leases properties, or conducts any business so
as to require such qualification and in which the failure to be duly qualified
could have a Material Adverse Effect upon BancGroup and its Subsidiaries
considered as one enterprise; each of the banking Subsidiaries of BancGroup has
its deposits fully insured by the Federal Deposit Insurance Corporation to the
extent provided by the Federal Deposit Insurance Act; and the businesses of the
non-bank Subsidiaries of BancGroup are permitted to subsidiaries of registered
bank holding companies.

4.10 Contracts. Neither BancGroup nor any of its Subsidiaries is in
violation of its respective certificate of incorporation or by-laws or in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any Contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or by which it
or its property may be bound.

4.11 Litigation. Except as disclosed in or reserved for in BancGroup's
financial statements, there is no Litigation before or by any court or Agency,
domestic or foreign, now pending, or, to the Knowledge of BancGroup, threatened
against or affecting BancGroup or any of its Subsidiaries (nor is BancGroup
aware of any facts which could give rise to any such Litigation) which is
required to be disclosed in the Registration Statement (other than as disclosed
therein), or which is likely to have any Material Adverse Effect or prospective
Material Adverse Effect in the condition, financial or otherwise, or in the
general affairs, management, stockholders' equity or results of operations of
BancGroup and its Subsidiaries considered as one enterprise, or which is likely
to materially and adversely affect the properties or Assets thereof or which is
likely to materially affect the consummation of the transactions contemplated by
this Agreement; all pending legal or governmental proceedings to which BancGroup
or any Subsidiary is a party or of which any of their properties is the subject
which are not described in the Registration Statement, including ordinary
routine litigation incidental to the business, are, considered in the aggregate,
not material; and neither BancGroup nor any of its Subsidiaries have any
contingent obligations which could be considered material to BancGroup and its
Subsidiaries considered as one enterprise which are not disclosed in the
Registration Statement as it may be amended or supplemented.

4.12 Compliance. BancGroup and its Subsidiaries in the conduct of their
businesses are to the Knowledge of BancGroup in material compliance with all
material federal, state or local Laws applicable to their or the conduct of
their businesses.

4.13 Registration Statement. At the time the Registration Statement
becomes effective and at the time of the Stockholders' Meeting, the Registration
Statement, including the Proxy Statement which shall constitute a part thereof,
will comply in all material respects with the requirements of the 1933 Act and
the rules and regulations thereunder, will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the representations and warranties
in this subsection shall not apply to statements in or omissions from the Proxy
Statement made in reliance upon and in conformity with information furnished in
writing to BancGroup by the Bank or any of its representatives expressly for use
in the Proxy Statement or information included in the Proxy Statement regarding
the business of the Bank, its operations, Assets and capital.

4.14 Filings Incorporated by Reference. The documents incorporated by
reference into the Registration Statement, at the time they were filed with the
SEC, complied in all material respects with the requirements of the 1934 Act and
Regulations thereunder and when read together and with the other information in
the Registration Statement will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading at the time the Registration
Statement becomes effective or at the time of the Stockholders Meeting.

4.15 Form S-4. The conditions for use of a registration statement on SEC
Form S-4 set forth in the General Instructions on Form S-4 have been or will be
satisfied with respect to BancGroup and the Registration Statement.

4.16 Disclosure. No representation or warranty, or any statement or
certificate furnished or to be furnished to the Bank by BancGroup, contains or
will contain any untrue statement of a material fact, or omits

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or will omit to state a material fact necessary to make the statements contained
in this Agreement or in any such statement or certificate not misleading.

4.17. Brokers. All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by BancGroup
directly with the Bank and without the intervention of any other person, either
as a result of any act of BancGroup, or otherwise, in such manner as to give
rise to any valid claim against BancGroup for a finder's fee, brokerage
commission or other like payment except for the services of Steven Johnson &
Associates.

ARTICLE 5

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BANK

The Bank represents, warrants and covenants to and with BancGroup, as
follows:

5.1 Organization. The Bank is a federal savings bank duly organized,
validly existing and in good standing under the Laws of the United States and
the regulations of the Office of Thrift Supervision and has all requisite
corporate power and authority to carry on its business as it is now being
conducted and is qualified to do business in every jurisdiction in which the
character and location of the Assets owned by it or the nature of the business
transacted by it requires qualification or in which the failure to qualify
could, individually, or in the aggregate, have a Material Adverse Effect on the
condition (financial or other) earnings, business, affairs, Assets, properties,
prospects or results of operations of the Bank.

5.2 Capital Stock. (i) As of September 30, 1995, the authorized capital
stock of the Bank consisted of 4,000,000 shares of common stock, $.01 par value
per share, 399,688 shares of which are issued and outstanding. All of such
shares which are outstanding are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. The Bank has no shares of
its common stock subject to exercise under any stock option. The Bank does not
have any other arrangements or commitments obligating it to issue shares of its
capital stock or any securities convertible into or having the right to purchase
shares of its capital stock.

5.3 Subsidiaries. (a) The Bank has no Subsidiaries.

(b) The Bank does not own directly or indirectly any equity interest in any
bank, corporation or other entity, except in a fiduciary capacity.

5.4 Financial Statements; Taxes. (a) The Bank has delivered to BancGroup
true and complete copies of the following financial statements of the Bank
(together with related opinions of auditors, as appropriate):

(i) Statements of financial condition as of June 30, 1994 and 1995 and
for the six months ending September 30, 1995;

(ii) Statements of income for each of the three years ended June 30,
1993, 1994 and 1995 and for the six months ending September 30, 1995;

(iii) Statements of cash flows for each of the three years ending June
30, 1993, 1994 and 1995, and for the six months ending September 30, 1995;
and

(iv) Statements of changes in equity capital for each of the three
years ended June 30, 1993, 1994, and 1995 and for the six months ending
September 30, 1995.

All of the foregoing financial statements are in all material respects in
accordance with the books and records of the Bank. Each of the balance sheets of
the Bank presents fairly as of its date the financial condition of the Bank.
Except as and to the extent reflected or reserved against in such balance sheets
(including the notes thereto), the Bank did not have, as of the date of such
balance sheets, any material Liabilities or obligations (absolute or contingent)
of a nature customarily reflected in a balance sheet or the notes thereto, other
than Liabilities (including reserves) in the amount set forth in such balance
sheets and the notes thereto. The statements of income, stockholders' equity and
changes in financial position present fairly the results of operation of the
Bank for the periods indicated.

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(b) All Tax returns required to be filed by or on behalf of the Bank have
been timely filed (or requests for extensions therefor have been timely filed
and granted and have not expired), and all returns filed are complete and
accurate in all material respects. All Taxes shown on said returns to be due and
all additional assessments received have been paid. The amounts recorded for
Taxes on the balance sheets provided under section 5.4(a) are, to the Knowledge
of the Bank, sufficient in all material respects for the payment of all unpaid
federal, state, county, local, foreign and other Taxes (including any interest
or penalties) of the Bank accrued for or applicable to the period ended on the
dates thereof, and all years and periods prior thereto and for which the Bank
may at said dates have been liable in its own right or as a transferee of the
Assets of, or as successor to, any other corporation or other party. No audit,
examination or investigation is presently being conducted or, to the Knowledge
of the Bank, threatened by any taxing authority which is likely to result in a
material Tax Liability, no material unpaid Tax deficiencies or additional
liability of any sort have been proposed by any governmental representative and
no agreements for extension of time for the assessment of any material amount of
Tax have been entered into by or on behalf of the Bank. The Bank has not
executed an extension or waiver of any statute of limitations on the assessment
or collection of any Tax due that is currently in effect.

(c) The Bank has withheld from its employees (and timely paid to the
appropriate governmental entity) proper and accurate amounts for all periods in
material compliance with all Tax withholding provisions of applicable federal,
state, foreign and local Laws (including without limitation, income, social
security and employment Tax withholding for all types of compensation). The Bank
is in compliance with, and its records contain all information and documents
(including properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under federal,
state and local Tax Laws, and such records identify with specificity all
accounts subject to backup withholding under section 3406 of the Code.

5.5 Absence of Certain Changes or Events. Since the date of the most
recent balance sheet provided under section 5.4(a)(i) above, the Bank has not

(i) issued, delivered or agreed to issue or deliver any stock, bonds
or other corporate securities (whether authorized and unissued or held in
the treasury) except shares issued as director's qualifying shares;

(ii) except as disclosed on Schedule 5.5(ii), borrowed or agreed to
borrow any funds or incurred, or become subject to, any Liability (absolute
or contingent) except borrowings, obligations and Liabilities incurred in
the ordinary course of business and consistent with past practice;

(iii) except as may be reasonable and necessary in connection with the
Merger, paid any material obligation or Liability (absolute or contingent)
other than current Liabilities reflected in or shown on the most recent
balance sheet referred to in section 5.4(a)(i) and current Liabilities
incurred since that date in the ordinary course of business and consistent
with past practice;

(iv) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any Assets of any kind whatsoever to
shareholders, or purchased or redeemed, or agreed to purchase or redeem,
any of its outstanding securities;

(v) except in the ordinary course of business, sold or transferred, or
agreed to sell or transfer, any of its Assets, property or rights or
canceled, or agreed to cancel, any debts or claims;

(vi) except in the ordinary course of business, entered or agreed to
enter into any agreement or arrangement granting any preferential rights to
purchase any of its Assets, property or rights or requiring the consent of
any party to the transfer and assignment of any of its Assets, property or
rights;

(vii) suffered any Losses or waived any rights of value which in the
aggregate are material;

(viii) except in the ordinary course of business, made or permitted
any amendment or termination of any Contract, agreement or license to which
it is a party if such amendment or termination is material considering its
business as a whole;

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(ix) except as disclosed on Schedule 5.5(ix) made any accrual or
arrangement for or payment of bonuses or special compensation of any kind
or any severance or termination pay to any present or former officer or
employee;

(x) except in accordance with normal and usual practice, increased the
rate of compensation payable to or to become payable to any of its officers
or employees or made any material increase in any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan, payment or arrangement made to, for or with any of
its officers or employees;

(xi) except as set forth on Schedule 5.5(xi), received notice or had
Knowledge or reason to believe that any of its substantial customers has
terminated or intends to terminate its relationship, which termination
would have a Material Adverse Effect on its financial condition, results of
operations, business, Assets or properties;

(xii) failed to operate its business in the ordinary course so as to
preserve its business intact and to preserve the goodwill of its customers
and others with whom it has business relations;

(xiii) entered into any other material transaction other than in the
ordinary course of business; or

(xiv) agreed in writing, or otherwise, to take any action described in
clauses (i) through (xiii) above.

Between the date hereof and the Effective Date, the Bank, without the
express written approval of BancGroup, will not do any of the things listed in
clauses (i) through (xiii) of this section 5.5 except as permitted therein or as
contemplated in this Agreement.

5.6 Title and Related Matters.

(a) Title. The Bank has good and marketable title to all the properties,
interest in properties and Assets, real and personal, reflected in the most
recent balance sheet referred to in section 5.4(a)(i), or acquired after the
date of such balance sheet (except properties, interests and Assets sold or
otherwise disposed of since such date, in the ordinary course of business), free
and clear of all mortgages, Liens, pledges, charges or encumbrances except (i)
mortgages and other encumbrances referred to in the notes to such balance sheet,
(ii) Liens for current Taxes not yet due and payable and (iii) such
imperfections of title and easements as do not materially detract from or
interfere with the present use of the properties subject thereto or affected
thereby, or otherwise materially impair present business operations at such
properties. To the Knowledge of the Bank, the material structures and equipment
of the Bank, comply in all material respects with the requirements of all
applicable Laws.

(b) Leases. Schedule 5.6(b) sets forth a list and description of all real
and personal property owned or leased by the Bank, either as lessor or lessee.

(c) Personal Property. Schedule 5.6(c) sets forth a depreciation schedule
of the Bank's fixed Assets as of December 31, 1994.

(d) Computer Hardware and Software. Schedule 5.6(d) contains a description
of all agreements relating to data processing computer software and hardware now
being used in the business operations of the Bank. The Bank is not aware of any
defects, irregularities or problems with any of its computer hardware or
software which renders such hardware or software unable to satisfactorily
perform the tasks and functions to be performed by them in the business of the
Bank.

5.7 Commitments. Except as set forth in Schedule 5.7, the Bank is not a
party to any oral or written (i) Contracts for the employment of any officer or
employee which is not terminable on 30 days' (or less) notice, (ii) profit
sharing, bonus, deferred compensation, savings, stock option, severance pay,
pension or retirement plan, agreement or arrangement, (iii) loan agreement,
indenture or similar agreement relating to the borrowing of money by such party,
(iv) guaranty of any obligation for the borrowing of money or otherwise,
excluding endorsements made for collection, and guaranties made in the ordinary
course of business, (v) consulting or other similar Contracts, (vi) collective
bargaining agreement, (vii) agreement with any present or former officer,
director or shareholder of such party, or (viii) other Contract, agreement or
other

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commitment which is material to the business, operations, property, prospects or
Assets or to the condition, financial or otherwise, of the Bank. Complete and
accurate copies of all Contracts, plans and other items so listed have been made
or will be made available to BancGroup for inspection. Prior to the Effective
Date, the Bank will not enter into or amend any Contract, agreement or other
instrument of any of the types listed in this section without giving five days
prior written notice to BancGroup, provided that such notice shall not impair
BancGroup's right to determine whether such action which is the subject of such
notice constitutes a Material Adverse Effect under section 10.2 hereof.

5.8 Charter and Bylaws. Schedule 5.8 contains true and correct copies of
the Bank's federal stock charter and bylaws, including all amendments thereto,
as currently in effect. There will be no changes in such charter or bylaws prior
to the Effective Date, without the prior written consent of BancGroup.

5.9 Litigation. There is no Litigation (whether or not purportedly on
behalf of the Bank) pending or, to the Knowledge of the Bank, threatened against
or affecting (nor is the Bank aware of any facts which could give rise to any
such Litigation) at law or in equity, or before or by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind, which involves the possibility of
any judgment or Liability not fully covered by insurance in excess of a
reasonable deductible amount or which may have a Material Adverse Effect on the
business operations, properties or Assets or in the condition, financial or
otherwise, of the Bank, and the Bank is not in Default with respect to any
judgment, order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental department, commission, board, bureau, agency
or instrumentality, which Default would have a Material Adverse Effect on the
business operations, properties or Assets or in the condition, financial or
otherwise, of such party. To the Knowledge of the Bank, the Bank has complied in
all material respects with all material applicable Laws including those imposing
Taxes, or any applicable jurisdiction and of all states, municipalities, other
political subdivisions and Agencies, in respect of the ownership of its
properties and the conduct of its business, which, if not complied with, would
have a Material Adverse Effect in the business operations, properties or Assets
or in the condition, financial or otherwise, of the Bank.

5.10 Material Contract Defaults. The Bank is not in Default in any
material respect under the terms of any Contract, agreement, lease or other
commitment which is or may be, material to the business, operations, properties
or Assets, or the condition, financial or otherwise, of the Bank and, to the
Knowledge of the Bank, there is no event which, with notice or lapse of time, or
both, may be or become an event of Default under any such Contract, agreement,
lease or other commitment in respect of which adequate steps have not been taken
to prevent such a Default from occurring.

5.11 No Conflict with Other Instrument. The consummation of the
transactions contemplated by this Agreement will not result in the breach of or
constitute a Default (without regard to the giving of notice or the passage of
time, or both) under any term or provision of any Contract, indenture, mortgage,
deed of trust or other material agreement or instrument to which the Bank is a
party or its Assets may be bound and will not conflict with any provision of the
stock charter or bylaws of the Bank.

5.12 Governmental Authorization. The Bank has all licenses, franchises,
permits and other governmental authorizations that, to the Knowledge of the
Bank, are or will be legally required to enable the Bank to conduct its business
in all material respects as now conducted by the Bank.

5.13 Absence of Regulatory Communications. The Bank is not subject to, nor
has the Bank received during the past three years, any written communication
directed specifically to it from any Agency to which it is subject or pursuant
to which such Agency has imposed or has indicated it may impose any material
restrictions on the operations of it or the business conducted by it or in which
such Agency has raised any material question concerning the condition, financial
or otherwise, of the Bank.

5.14 Absence of Material Adverse Change. Since the date of the most recent
balance sheet provided under section 5.4(a)(i), there have been no events,
changes or occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Bank.

5.15 Insurance. The Bank has in effect insurance coverage and bonds with
reputable insurers which, in respect to amounts, types and risks insured,
management of the Bank reasonably believes to be adequate for

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the type of business conducted by such company. The Bank is not liable for any
material retroactive premium adjustment. All insurance policies and bonds are
valid, enforceable and in full force and effect, and the Bank has not received
any notice of a premium increase or cancellation with respect to any of its
insurance policies or bonds. Within the last three years, the Bank has not been
refused any insurance coverage which it has sought or applied for, and it has no
reason to believe that existing insurance coverage cannot be renewed as and when
the same shall expire, upon terms and conditions as favorable as those presently
in effect, other than possible increases in premiums that do not result from any
extraordinary loss experience. All policies of insurance presently held or
policies containing substantially equivalent coverage will be outstanding and in
full force with respect to the Bank at all times from the date hereof to the
Effective Date.

5.16 Pension and Employee Benefit Plans. (a) To the Knowledge of the Bank,
all employee benefit plans of the Bank have been established in compliance with,
and such plans have been operated in material compliance with, all applicable
Laws. Except as set forth on Schedule 5.16, the Bank has no pension or other
retirement plan or any other plan or agreement subject to ERISA or Section 401
of the Code, and no unfunded Liabilities exist with respect to any employee
benefit plan, past or present. To the Knowledge of the Bank, no employee benefit
plan, any trust created thereunder or any trustee or administrator thereof has
engaged in a "prohibited transaction," as defined in section 4975 of the Code,
which may have a Material Adverse Effect on the condition, financial or
otherwise, of the Bank.

(b) The Bank has no reason to believe that any amount payable to any
employee of the Bank will fail to be deductible for federal income tax purposes
by virtue of Section 280G of the Code and regulations thereunder.

5.17 Buy-Sell Agreement. The Bank is not aware of any agreement among any
of its shareholders granting to any person or persons a right of first refusal
in respect of the sale, transfer, or other disposition of shares of outstanding
securities by any shareholder of the Bank, any similar agreement or any voting
agreement or voting trust in respect of any such shares.

5.18 Brokers. All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by the Bank
directly with BancGroup and without the intervention of any other person, either
as a result of any act of the Bank, or otherwise, in such manner as to give rise
to any valid claim against the Bank for a finder's fee, brokerage commission or
other like payment, except for the services of Steven Johnson & Associates.

5.19 Approval of Agreements. The board of directors of the Bank has
approved this Agreement and the transactions contemplated by this Agreement and
has authorized the execution and delivery by the Bank of this Agreement. Subject
to the matters referred to in section 8.2, the Bank has full power, authority
and legal right to enter into this Agreement, and, upon appropriate vote of the
shareholders of the Bank in accordance with this Agreement, the Bank shall have
full power, authority and legal right to consummate the transactions
contemplated by this Agreement. Subject to the conditions set forth herein, this
Agreement represents a legal, valid, and binding obligation of the Bank,
enforceable against the Bank in accordance with its terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).

5.20 Disclosure. No representation or warranty, nor any statement or
certificate furnished or to be furnished to BancGroup by the Bank, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements contained in this
Agreement or in any such statement or certificate not misleading.

5.21 Registration Statement. At the time the Registration Statement
becomes effective and at the time of the Stockholders Meeting, the Registration
Statement, including the Proxy Statement which shall constitute part thereof,
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this section shall only

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apply to statements in or omissions from the Proxy Statement relating to
descriptions of the business of the Bank, its Assets, properties, operations,
and capital stock or to information furnished by the Bank or its representatives
expressly for inclusion in the Proxy Statement.

5.22 Loans; Adequacy of Allowance for Loan Losses. All reserves for loan
losses shown on the most recent financial statements furnished by the Bank are
adequate in all material respects, and the Bank has no Knowledge of any fact
which is likely to require a future material increase in the provision for loan
losses or a material decrease in the loan loss reserve reflected in such
financial statements. Each loan reflected as an Asset on the financial
statements of the Bank is the legal, valid and binding obligation of the obligor
of each loan, enforceable in accordance with its terms subject to the effect of
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
relating to creditors' rights generally and to general equitable principles.
Except as disclosed on Schedule 5.22, the Bank does not have in its portfolio
any loan exceeding its legal lending limit, and the Bank has no known
significant delinquent, substandard, loss, or nonperforming loans.

5.23 Environmental Matters. To the Knowledge of the Bank, the Bank is in
compliance with all Laws, and other governmental requirements relating to the
generation, management, handling, transportation, treatment, disposal, storage,
delivery, discharge, release or emission of any waste, pollution, or toxic,
hazardous or other substance (the "Environmental Laws"), and the Bank has no
Knowledge that the Bank has not complied with all regulations and requirements
promulgated by the Occupational Safety and Health Administration that are
applicable to the Bank. To the Knowledge of the Bank, there is no Litigation
proceeding, suit or investigation pending or threatened with respect to any
violation or alleged violation of the Environmental Laws. To the Knowledge of
the Bank, with respect to properties or Assets of or owned by the Bank,
including any Loan Property, (i) there has been no spillage, leakage,
contamination or release of any substances for which the appropriate remedial
action has not be completed; (ii) no owned or leased property is contaminated
with or contains any hazardous substance or waste; and (iii) there are no
underground storage tanks on any premises owned or leased by the Bank. The Bank
has no Knowledge of any facts which might suggest that the Bank has engaged in
any management practice with respect to any of its past or existing borrowers
which could reasonably be expected to subject the Bank to any Liability, either
directly or indirectly, under the principles of law as set forth in United
States v. Fleet Factors Corp., 901 F.2d 1550 (11th Cir. 1990) or any similar
principles. Moreover, to the Knowledge of the Bank, the Bank has not extended
credit, either on a secured or unsecured basis, to any person or other entity
engaged in any activities which would require or requires such person or entity
to obtain any Permits, licenses, and other authorizations which are required
under any Environmental Law.

5.24 Transfer of Shares. The Bank has no Knowledge of any plan or
intention on the part of the Bank's shareholders to sell or otherwise dispose of
any of the BancGroup Common Stock to be received by them in the Merger that
would reduce such shareholders' ownership to a number of shares having, in the
aggregate, a fair market value of less than fifty (50%) percent of the total
fair market value of Bank common stock outstanding immediately before the
Merger.

5.25 Collective Bargaining. There are no labor contracts, collective
bargaining agreements, letters of understanding or other arrangements, formal or
informal, between the Bank and any union or labor organization covering any of
the Bank's employees and none of said employees are represented by any union or
labor organization.

5.26 Labor Disputes. The Bank is in material compliance with all federal
and state laws respecting employment and employment practices, terms and
conditions of employment, wages and hours. The Bank is not and has not been
engaged in any unfair labor practice, and, to the Knowledge of the Bank, no
unfair labor practice complaint against the Bank is pending before the National
Labor Relations Board. Relations between management and the employees are
amicable and there have not been, nor to the Knowledge of the Bank are there
presently, any attempts to organize employees, nor to the Knowledge of the Bank
are there plans for any such attempts.

5.27 Derivative Contracts. The Bank is not a party to and has not agreed
to enter into a swap, forward, future, option, cap, floor or collar financial
contract, or any other interest rate or foreign currency protection

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contract or derivative security not included in the Bank's financial statements
delivered under section 4.3 hereof which is a financial derivative contract
(including various combinations thereof).

ARTICLE 6

ADDITIONAL COVENANTS

6.1 Additional Covenants of BancGroup. BancGroup covenants to and with the
Bank as follows:

(a) Registration Statement and Other Filings. BancGroup shall prepare and
file with the SEC the Registration Statement on Form S-4 (or such other form as
may be appropriate) and all amendments and supplements thereto, in form
reasonably satisfactory to the Bank and its counsel, with respect to the Common
Stock to be issued pursuant to this Agreement. BancGroup shall use reasonable
good faith efforts to prepare all necessary filings with any Agencies which may
be necessary for approval to consummate the transactions contemplated by this
Agreement.

(b) Blue Sky Permits. BancGroup shall use its best efforts to obtain,
prior to the effective date of the Registration Statement, all necessary state
securities Law or "blue sky" Permits and approvals required to carry out the
transactions contemplated by this Agreement.

(i) As soon as practicable and in any event within forty-five (45)
days after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, consolidated statements of operations of
BancGroup for such period and for the period beginning at the commencement
of the fiscal year and ending at the end of such quarterly period, and a
consolidated statement of financial condition of BancGroup as of the end of
such quarterly period, setting forth in each case in comparative form
figures for the corresponding periods ending in the preceding fiscal year,
subject to changes resulting from year-end adjustments;

(ii) Promptly upon receipt thereof, copies of all audit reports
submitted to BancGroup by independent auditors in connection with each
annual, interim or special audit of the books of BancGroup made by such
accountants;

(iii) As soon as practicable, copies of all such financial statements
and reports as it shall send to its stockholders and of such regular and
periodic reports as BancGroup may file with the SEC or any other Agency;
and

(iv) With reasonable promptness, such additional financial data as the
Bank may reasonably request.

(d) No Control of the Bank by BancGroup. Notwithstanding any other
provision hereof, until the Effective Date, the authority to establish and
implement the business policies of the Bank shall continue to reside solely
in the Bank's officers and board of directors.

(e) Listing. Prior to the Effective Date, BancGroup shall use its
reasonable efforts to list the shares of BancGroup Common Stock to be
issued in the Merger on the NYSE or other quotations system on which such
shares are primarily traded.

6.2 Additional Covenants of the Bank. The Bank covenants to and with
BancGroup as follows:

(a) Operations. The Bank will conduct its business in a proper and
prudent manner and will use its best efforts to maintain its relationships
with its depositors, customers and employees. The Bank will not engage in
any material transaction outside the ordinary course of business or make
any material change in its accounting policies or methods of operation, nor
will the Bank permit the occurrence of any change or event which would
render any of the representations and warranties in Article 5 hereof untrue
in any material respect at and as of the Effective Date with the same
effect as though such representations and warranties had been made at and
as of such Effective Date.

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(b) Stockholders Meeting; Best Efforts. The Bank will cause the
Stockholders Meeting to be held for the purpose of approving the Merger as
soon as practicable after the effective date of the Registration Statement,
and will use its best efforts to bring about the transactions contemplated
by this Agreement, including stockholder approval of this Agreement, as
soon as practicable unless this Agreement is terminated as provided herein.

(c) Prohibited Negotiations. Until the termination of this Agreement,
neither the Bank nor any of the Bank's directors or officers (or any person
representing any of the foregoing) shall solicit or encourage inquiries or
proposals with respect to, furnish any information relating to or
participate in any negotiations or discussions concerning, any acquisition
or purchase of all or of a substantial portion of the Assets of, or of a
substantial equity interest in, the Bank or any business combination
involving the Bank other than as contemplated by this Agreement. The Bank
will notify BancGroup immediately if any such inquiries or proposals are
received by the Bank, if any such information is requested from the Bank,
or if any such negotiations or discussions are sought to be initiated with
the Bank, and the Bank shall instruct the Bank's officers, directors,
agents or affiliates or their subsidiaries to refrain from doing any of the
above; provided, however, that nothing contained herein shall be deemed to
prohibit any officer or director of the Bank from fulfilling his fiduciary
duty or from taking any action that is required by Law; and provided
further that nothing in the foregoing proviso clause shall be deemed a
waiver by BancGroup that any action taken by the Bank pursuant to such
proviso constitutes a breach of this Agreement.

(d) Director Voting. The members of the Board of Directors of the
Bank agree to support publicly the Merger, and the Bank shall on the date
of execution of this Agreement obtain an agreement from each of its
directors substantially in the form set forth in Exhibit A.

(e) Financial Statements. The Bank shall furnish to BancGroup:

(i) As soon as practicable and in any event within 30 days after
the end of each quarterly period in each fiscal year, consolidated
statements of operations of the Bank for such period and for the period
beginning at the commencement of the fiscal year and ending at the end
of such quarterly period, and a consolidated statement of financial
condition of the Bank as of the end of such quarterly period, setting
forth in each case in comparative form figures for the corresponding
periods ending in the preceding fiscal year, subject to changes
resulting from year-end adjustments;

(ii) Promptly upon receipt thereof, copies of all audit reports
submitted to the Bank by independent auditors in connection with each
annual, interim or special audit of the books of the Bank made by such
accountants;

(iii) As soon as practicable, copies of all such financial
statements and reports as it shall send to its stockholders and of such
regular and periodic reports as the Bank may file with the SEC or any
other Agency; and

(iv) With reasonable promptness, such additional financial data as
BancGroup may reasonably request.

ARTICLE 7

MUTUAL COVENANTS AND AGREEMENTS

7.1 Best Efforts; Cooperation. Subject to the terms and conditions herein
provided, BancGroup and the Bank each agrees to use its best efforts promptly to
take, or cause to be taken, all actions and do, or cause to be done, all things
necessary, proper or advisable under applicable Laws or otherwise, including,
without limitation, promptly making required deliveries of stockholder lists and
stock transfer reports and attempting to obtain all necessary Consents and
waivers and regulatory approvals, to consummate and make effective, as soon as
practicable, the transactions contemplated by this Agreement. The officers of
each Party to this Agreement shall fully cooperate with officers and employees,
accountants, counsel and other representatives of the other Parties not only in
fulfilling the duties hereunder of the Party of which they are officers but also
in assisting, directly or through direction of employees and other persons under
their supervision or control, such

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as stock transfer agents for the Party, the other Parties requiring information
which is reasonably available from such Party.

7.2 Press Release. Each Party hereto agrees that, unless approved by the
other Parties in advance, such Party will not make any public announcement,
issue any press release or other publicity or confirm any statements by any
person not a party to this Agreement concerning the transactions contemplated
hereby. Notwithstanding the foregoing, each Party hereto reserves the right to
make any disclosure if such Party, in its reasonable discretion, deems such
disclosure required by Law. In that event, such Party shall provide to the other
Party the text of such disclosure sufficiently in advance to enable the other
Party to have a reasonable opportunity to comment thereon.

7.3 Mutual Disclosure. Each Party hereto agrees to promptly furnish to
each other Party hereto its public disclosures and filings not precluded from
disclosure by Law including but not limited to call reports, Form 8-K, Form 10-Q
and Form 10-K filings, Y-2 applications, reports on Form Y-6, quarterly or
special reports to shareholders, Tax returns, Form S-8 registration statements
and similar documents.

7.4 Access to Properties and Records. Each Party hereto shall afford the
officers and authorized representatives of each of the other Parties full access
to the properties, books and records of such Party in order that such other
Parties may have full opportunity to make such investigation as they shall
desire of the affairs of such Party and shall furnish to such Parties such
additional financial and operating data and other information as to its
businesses and Assets as shall be from time to time reasonably requested.

ARTICLE 8

CONDITIONS TO OBLIGATIONS OF ALL PARTIES

The obligations of BancGroup and the Bank to cause the transactions
contemplated by this Agreement to be consummated shall be subject to the
satisfaction, in the sole discretion of the Party relying upon such conditions,
on or before the Effective Date of all the following conditions, except as such
Parties may waive such conditions in writing:

8.1 Approval by Shareholders. At the Stockholders Meeting, this Agreement
and the matters contemplated by this Agreement shall have been duly approved by
the vote of the holders of not less than the requisite number of the issued and
outstanding voting securities of the Bank as is required by applicable Law and
the Bank's stock charter and by-laws.

8.2 Regulatory Authority Approval. Orders, Consents and approvals, in form
and substance reasonably satisfactory to BancGroup and the Bank shall have been
entered by the Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation and other appropriate bank regulatory Agencies (i)
granting the authority necessary for the consummation of the transactions
contemplated by this Agreement and (ii) satisfying all other requirements
prescribed by Law.

8.3 Litigation. There shall be no pending or threatened Litigation in any
court or any pending or threatened proceeding by any governmental commission,
board or Agency, with a view to seeking or in which it is sought to restrain or
prohibit consummation of the transactions contemplated by this Agreement or in
which it is sought to obtain divestiture, rescission or damages in connection
with the transactions contemplated by this Agreement and no investigation by any
Agency shall be pending or threatened which might result in any such suit,
action or other proceeding.

8.4 Registration Statement. The Registration Statement shall be effective
under the 1933 Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect; no proceedings for such purpose, or
under the proxy rules of the SEC or any bank regulatory authority pursuant to
the 1934 Act, as amended, and with respect to the transactions contemplated
hereby, shall be pending before or threatened by the SEC or any bank regulatory
authority; and all approvals or authorizations for the offer of BancGroup Common
Stock shall have been received or obtained pursuant to any applicable state
securities Laws, and no stop order or proceeding with respect to the
transactions contemplated hereby shall be pending or threatened under any such
state Law.

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8.5 Tax Opinion. An opinion of Miller, Hamilton, Snider & Odom, counsel to
BancGroup, shall have been received in form and substance reasonably
satisfactory to the Bank and BancGroup to the effect that (i) the Merger will
constitute a "reorganization" within the meaning of section 368 of the code;
(ii) no gain or loss will be recognized by the Bank; (iii) no gain or loss will
be recognized to the shareholders of the Bank who receive shares of BancGroup
Common Stock except to the extent of any taxable "boot" received by such persons
from BancGroup, and except to the extent of any dividends received from the Bank
prior to the Effective Date; (iv) the basis of the BancGroup Common Stock
received in the Merger will be equal to the sum of the basis of the shares of
Bank common stock exchanged in the Merger and the amount of gain, if any, which
was recognized by the exchanging Bank shareholder, including any portion treated
as a dividend, less the value of taxable boot, if any, received by such
shareholder in the Merger; (v) the holding period of the BancGroup Common Stock
will include the holding period of the shares of Bank common stock exchanged
therefor if such shares of bank common stock were capital assets in the hands of
the exchanging Bank shareholder; and (vi) cash received by a Bank stockholder in
lieu of a fractional share interest of BancGroup stock will be treated as having
been received as a distribution in full payment in exchange for the fractional
share interest of BancGroup Common Stock which he would otherwise be entitled to
receive and will qualify as capital gain or loss (assuming the Bank common stock
was a capital asset in his hands as of the Effective Date).

ARTICLE 9

CONDITIONS TO OBLIGATIONS OF THE BANK

The obligations of the Bank to cause the transactions contemplated by this
Agreement to be consummated shall be subject to the satisfaction on or before
the Effective Date of all the following conditions except as the Bank may waive
such conditions in writing:

9.1 Representations, Warranties and Covenants. Notwithstanding any
investigation made by or on behalf of the Bank, all representations and
warranties of BancGroup contained in this Agreement shall be true in all
material respects on and as of the Effective Date as if such representations and
warranties were made on and as of such Effective Date, and BancGroup shall have
performed in all material respects all agreements and covenants required by this
Agreement to be performed by it on or prior to the Effective Date.

9.2 Adverse Changes. There shall have been no changes after the date of
the most recent balance sheet provided under section 4.3(a)(i) hereof in the
results of operations (as compared with the corresponding period of the prior
fiscal year), Assets, Liabilities, financial condition or affairs of BancGroup
which in their total effect constitute a Material Adverse Effect, nor shall
there have been any material changes in the Laws governing the business of
BancGroup or which would impair the rights of the Bank or its stockholders
pursuant to this Agreement.

9.3 Closing Certificate. In addition to any other deliveries required to
be delivered hereunder, the Bank shall have received a certificate from the
President or a Vice President and from the Secretary or Assistant Secretary of
BancGroup dated as of the Closing certifying that:

(a) the Board of Directors of BancGroup has duly adopted resolutions
(copies of which shall be attached to such certificate) approving the
substantive terms of this Agreement and authorizing the consummation of the
transactions contemplated by this Agreement and such resolutions have not
been amended or modified and remain in full force and effect;

(b) each person executing this Agreement on behalf of BancGroup is an
officer of BancGroup holding the office or offices specified therein and
the signature of each person set forth on such certificate is his or her
genuine signature;

(c) the certificate of incorporation and bylaws of BancGroup
referenced in section 4.4 hereof remain in full force and effect;

(d) such persons have no knowledge of a basis for any material claim,
in any court or before any Agency or arbitration and or otherwise against,
by or affecting BancGroup or the business, prospects,

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condition (financial or otherwise), or Assets of BancGroup or which would
prevent the performance of this Agreement or the transactions contemplated
by this Agreement or declare the same unlawful or cause the recision
thereof;

(e) to such persons' knowledge, the Proxy Statement delivered to the
Bank's stockholders, or any amendments or revisions thereto so delivered,
as of the date thereof, did not contain or incorporate by reference, any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
not misleading in light of the circumstances under which they were made (it
being understood that such persons need not express a statement as to
information concerning or provided by the Bank for inclusion in such Proxy
Statement); and

(f) the conditions set forth in this Article 9 insofar as they relate
to BancGroup have been satisfied.

9.4 Opinion of Counsel. The Bank shall have received an opinion of Miller,
Hamilton, Snider & Odom, L.L.C. counsel to BancGroup, dated as of the Closing,
in form reasonably satisfactory to the Bank, as to matters set forth in Exhibit
B hereto.

9.5 Other Matters. There shall have been furnished to such counsel for the
Bank certified copies of such corporate records of BancGroup and copies of such
other documents as such counsel may reasonably have requested for such purpose.

9.6 Material Events. There shall have been no determination by the board
of directors of the Bank that the transactions contemplated by this Agreement
have become impractical because of any state of war, national emergency,
declaration of a banking moratorium in the United States or a general suspension
of trading on the NYSE or any other major stock exchange.

ARTICLE 10

CONDITIONS TO OBLIGATIONS OF BANCGROUP

The obligations of BancGroup to cause the transactions contemplated by this
Agreement to be consummated shall be subject to the satisfaction by the Bank on
or before the Effective Date of the following conditions except as BancGroup may
waive such conditions in writing:

10.1 Representations, Warranties and Covenants. Notwithstanding any
investigation made by or on behalf of BancGroup, all representations and
warranties of the Bank contained in this Agreement shall be true in all material
respects on and as of the Effective Date as if such representations and
warranties were made on and as of the Effective Date, and the Bank shall have
performed in all material respects all agreements and covenants required by this
Agreement to be performed by it on or prior to the Effective Date.

10.2 Adverse Changes. There shall have been no changes after the date of
the most recent balance sheet provided under section 5.4(a)(i) hereof in the
results of operations (as compared with the corresponding period of the prior
fiscal year), Assets, Liabilities, financial condition, or affairs of the Bank
which constitute a Material Adverse Effect, nor shall there have been any
material changes in the Laws governing the business of the Bank which would
impair BancGroup's rights pursuant to this Agreement.

10.3 Closing Certificate. In addition to any other deliveries required to
be delivered hereunder, BancGroup shall have received a certificate from the
President or Vice President and from the Secretary or Assistant Secretary of the
Bank dated as of the Closing certifying that:

(a) the Board of Directors has duly adopted resolutions (copies of
which shall be attached to such certificate) approving the substantive
terms of this Agreement and authorizing the consummation of the
transactions contemplated by this Agreement and such resolutions have not
been amended or modified and remain in full force and effect;

(b) the shareholders of the Bank have duly adopted resolutions (copies
of which shall be attached to such certificate) approving the substantive
terms of the Merger and the transactions contemplated thereby and such
resolutions have not been amended or modified and remain in full force and
effect;

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(c) each person executing this Agreement on behalf of the Bank is an
officer of the Bank holding the office or offices specified therein and the
signature of each person set forth on such certificate is his or her
genuine signature;

(d) the charter documents of the Bank and the bank referenced in
section 5.8 hereof were in full force and effect and have not been amended
or modified since the date hereof;

(e) to such persons' knowledge, the Proxy Statement delivered to the
Bank's stockholders, or any amendments or revisions thereto so delivered,
as of the date thereof, did not contain or incorporate by reference any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
not misleading in light of the circumstances under which they were made (it
being understood that such persons need not express a statement as to any
information concerning or provided by BancGroup for inclusion in such Proxy
Statement); and

(f) the conditions set forth in this Article 10 insofar as they relate
to the Bank have been satisfied.

10.4 Opinion of Counsel. BancGroup shall have received an opinion of Lee &
McInish, counsel to the Bank, dated as of the Closing, in form reasonably
satisfactory to BancGroup, as to matters set forth in Exhibit C hereto.

10.5 Controlling Shareholders. Each shareholder of the Bank who may be an
"affiliate" of the Bank, within the meaning of Rule 145 of the general rules and
regulations under the 1933 Act shall have executed and delivered a commitment
and undertaking to the effect that such person shall not make a "distribution"
(within the meaning of Rule 145) of the Common Stock which he receives upon the
Effective Date and that such Common Stock will be held subject to all applicable
provisions of the 1933 Act and the rules and regulations of the SEC thereunder.
The Bank recognizes and acknowledges that Common Stock issued to such persons
may bear a legend evidencing the undertakings described above.

10.6 Other Matters. There shall have been furnished to counsel for
BancGroup certified copies of such corporate records of the Bank and copies of
such other documents as such counsel may reasonably have requested for such
purpose.

10.7 Material Events. There shall have been no determination by the board
of directors of BancGroup that the transactions contemplated by this Agreement
have become impractical because of any state of war, national emergency,
declaration of a banking moratorium in the United States or a general suspension
of trading on the NYSE or any other major stock exchange.

ARTICLE 11

TERMINATION OF REPRESENTATIONS AND WARRANTIES

All representations and warranties provided in Articles 4 and 5 of this
Agreement, except for those of sections 4.2(a) and 4.7, or in any closing
certificate provided pursuant to Articles 9 and 10 shall terminate and be
extinguished at and shall not survive the Effective Date. All covenants,
agreements and undertakings required by this Agreement to be performed by any
Party hereto following the Effective Date shall survive such Effective Date and
be binding upon such Party. If the Merger is not consummated, all
representations, warranties, obligations, covenants, or agreements hereunder or
in any certificate delivered hereunder relating to the transaction which is not
consummated shall be deemed to be terminated or extinguished except that section
7.2, Article 11 and Article 15, and any applicable definitions of Article 14,
shall survive. Items disclosed in the Exhibits and Schedules attached hereto are
incorporated into this Agreement and form a part of the representations,
warranties, covenants or agreements to which they relate. Information provided
in such Exhibits and Schedules is provided only in response to the specific
section of this Agreement which calls for such information.

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ARTICLE 12

NOTICES

All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given at the
time given or mailed, first class postage prepaid:

(a) If to the Bank to Charles Williams, P.O. Box 6886, Dothan, Alabama
36302, facsimile (334) 794-8036, with copies to William C. Carn, III, Lee &
McInish, 238 West Main Street, P.O. Box 1665, Dothan, Alabama 36301,
facsimile (334) 794-8342, or as may otherwise be specified by the Bank in
writing to BancGroup.

(b) If to BancGroup, to W. Flake Oakley, IV, One Commerce Street,
Suite 800, Montgomery, Alabama, 36104, facsimile (334) 240-6040, with a
copy to Michael D. Waters, Miller, Hamilton, Snider & Odom, One Commerce
Street, Suite 802, Montgomery, Alabama 36104, facsimile (334) 265-4533, or
as may otherwise be specified in writing by BancGroup to the Bank.

ARTICLE 13

AMENDMENT OR TERMINATION

13.1 Amendment. This Agreement may be amended by the mutual consent of
BancGroup, Colonial Bank and the Bank before or after approval of the
transactions contemplated herein by the shareholders of the Bank.

13.2 Termination. This Agreement may be terminated at any time prior to or
on the Effective Date whether before or after action thereon by the shareholders
of the Bank, as follows:

(a) by the mutual consent of the respective boards of directors of the
Bank and BancGroup;

(b) by the board of directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event of a breach by the other Party of any representation or warranty
contained in this Agreement which cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching Party
of such breach and which breach would provide the non-breaching party the
ability to refuse to consummate the Merger under the standard set forth in
section 10.1 of this Agreement in the case of BancGroup and section 9.1 of
this Agreement in the case of the Bank;

(c) by the board of directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event of a material breach by the other Party of any covenant or agreement
contained in this Agreement which cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching Party
of such breach, or if any of the conditions to the obligations of such
Party contained in this Agreement shall not have been satisfied in full; or

(d) by the board of directors of BancGroup or the Bank if all
transactions contemplated by this Agreement shall not have been consummated
on or prior to December 31, 1996, if the failure to consummate the
transactions provided for in this Agreement on or before such date is not
caused by any breach of this Agreement by the Party electing to terminate
pursuant to this section 13.2(d).

13.3 Damages. In the event of termination pursuant to section 13.2, the
Bank and BancGroup shall not be liable for damages for any breach of warranty or
representation contained in this Agreement made in good faith, and, in that
case, the expenses incurred shall be borne as set forth in section 15.1 hereof.

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ARTICLE 14

DEFINITIONS

The following terms, which are capitalized in this Agreement, shall have
the meanings set forth below for the purpose of this Agreement:

ABCA The Alabama Business Corporation Act, and to the
extent applicable, the Alabama Banking Code.

Agencies Shall mean, collectively, the Federal Trade
Commission, the United States Department of
Justice, the Board of the Governors of the Federal
Reserve System, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, all
state regulatory agencies having jurisdiction over
the Parties and their respective Subsidiaries, the
NYSE and the SEC.

Agreement Shall mean this Agreement and Plan of Merger and
the Exhibits and Schedules delivered pursuant
hereto and incorporated herein by reference.

Assets Of a Person shall mean all of the assets,
properties, businesses and rights of such Person of
every kind, nature, character and description,
whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise
relating to or utilized in such Person's business,
directly or indirectly, in whole or in part,
whether or not carried on the books and records of
such Person, and whether or not owned in the name
of such Person or any Affiliate of such Person and
wherever located.

BancGroup The Colonial BancGroup, Inc., a Delaware
corporation with its principal offices in
Montgomery, Alabama.

Bank Dothan Federal Savings Bank, a federal savings bank
with offices in Dothan, Alabama.

Bank Stock Shares of Common stock, par value $.01 per share,
of the Bank.

Closing The closing of the transactions contemplated hereby
as described in section 2.7 of this Agreement.

Common Stock BancGroup's Common Stock authorized and defined in
the restated certificate of incorporation of
BancGroup, as amended.

Code The Internal Revenue Code of 1986, as amended.

Consent Any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any
Person pursuant to any Contract, Law, Order, or
Permit.

Contract Any written or oral agreement, arrangement,
authorization, commitment, contract, indenture,
instrument, lease, obligation, plan, practice,
restriction, understanding or undertaking of any
kind or character, or other document to which any
Person is a party or that is binding on any Person
or its capital stock, Assets or business.

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giving of notice would give rise to a right to
terminate or revoke, change the current terms of,
or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order or
Permit.

Effective Date Means the date and time at which the Merger becomes
effective as defined in section 2.7 hereof.

Election Form A written election filed pursuant to section
3.1(a)(i) hereof.

Environmental Laws Means the laws, regulations and governmental
requirements referred to in section 5.23 hereof.

ERISA The Employee Retirement Income Security Act of
1974, as amended.

Exhibits A through C, inclusive, shall mean the Exhibits so
marked, copies of which are attached to this
Agreement. Such Exhibits are hereby incorporated by
reference herein and made a part hereof, and may be
referred to in this Agreement and any other related
instrument or document without being attached
hereto.

GAAP Generally Accepted Accounting Principles.

Knowledge Means the knowledge of the Chairman, President,
Chief Financial Officer, Chief Accounting Officer,
Chief Credit Officer, General Counsel or any Senior
or Executive Vice President of BancGroup, in the
case of knowledge of BancGroup, or of the Bank, in
the case of knowledge of the Bank.

Law Any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities or business,
including those promulgated, interpreted or
enforced by any Agency.

Liability Any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost
or expense (including costs of investigation,
collection and defense), deficiency, guaranty or
endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts
presented for collection or deposit in the ordinary
course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated,
matured or unmatured, or otherwise.

Lien Any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation,
infringement, lien, mortgage, pledge, reservation,
restriction, security interest, title retention or
other security arrangement, or any adverse right or
interest, charge, or claim of any nature whatsoever
of, on, or with respect to any property or property
interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) for depository
institution Subsidiaries of a Party, pledges to
secure deposits and other Liens incurred in the
ordinary course of the banking business, and (iii)
Liens in the form of easements and restrictive
covenants on real property which do not materially
adversely affect the use of such property by the
current owner thereof.

Litigation Any action, arbitration, complaint, criminal
prosecution, governmental or other examination or
investigation, hearing, inquiry, administrative or
other proceeding relating to or affecting a Party,
its business, its Assets (including Contracts
related to it), or the transactions contemplated by
this Agreement.

A-25
<PAGE> 169

Loan Property Any property owned by the Party in question or by
any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest, and, where
required by the context, includes the owner or
operator of such property, but only with respect to
such property.

Loss Any and all direct or indirect payments,
obligations, recoveries, deficiencies, fines,
penalties, interest, assessments, losses,
diminution in the value of Assets, damages,
punitive, exemplary or consequential damages
(including, but not limited to, lost income and
profits and interruptions of business),
liabilities, costs, expenses (including without
limitation, reasonable attorneys' fees and
expenses, and consultant's fees and other costs of
defense or investigation), and interest on any
amount payable to a third party as a result of the
foregoing.

Market Value Shall be the market value of BancGroup Common Stock
as determined in section 3.1 hereof.

material For purposes of this Agreement shall be determined
in light of the facts and circumstances of the
matter in question; provided that any specific
monetary amount stated in this Agreement shall
determine materiality in that instance.

Material Adverse Effect On a Party shall mean an event, change or
occurrence which has a material adverse impact on
(i) the financial position, business, or results of
operations of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party
to perform its obligations under this Agreement or
to consummate the Merger or the other transactions
contemplated by this Agreement provided that
"material adverse impact" shall not be deemed to
include the impact of (x) changes in banking and
similar laws of general applicability or
interpretations thereof by courts or governmental
authorities, (y) changes in generally accepted
accounting principles or regulatory accounting
principles generally applicable to banks and their
holding companies, and (z) the Merger and
compliance with the provisions of this Agreement on
the operating performance of the Parties.

Merger The merger of the Bank with Colonial Bank as
contemplated in this Agreement.

Merger Consideration The consideration to be paid by BancGroup for a
share of Bank Stock under section 3.1(a).

NYSE The New York Stock Exchange.

Order Any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial
decision or award, ruling, or writ of any federal,
state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or
Agency.

Party Shall mean the Bank, Colonial Bank or BancGroup,
and "Parties" shall mean collectively the Bank,
Colonial Bank and BancGroup.

Permit Any federal, state, local, and foreign governmental
approval, authorization, certificate, easement,
filing, franchise, license, notice, permit, or
right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any
Person or its securities, Assets or business.

A-26
<PAGE> 170

Person A natural person or any legal, commercial or
governmental entity, such as, but not limited to, a
corporation, general partnership, joint venture,
limited partnership, limited liability company,
trust, business association, group acting in
concert, or any person acting in a representative
capacity.

Proxy Statement The proxy statement used by the Bank to solicit the
approval of its stockholders of the transactions
contemplated by this Agreement, which shall include
the prospectus of BancGroup relating to the
issuance of the BancGroup Common Stock to the
shareholders of the Bank.

Registration Statement The registration statement on Form S-4, or such
other appropriate form, to be filed with the SEC by
BancGroup, and which has been agreed to by the
Bank, to register the shares of BancGroup Common
Stock offered to stockholders of the Bank pursuant
to this Agreement, including the Proxy Statement.

Resulting Corporation Colonial Bank, as the surviving corporation
resulting from the Merger.

SEC United States Securities and Exchange Commission.

Stockholders Meeting The special meeting of stockholders of the Bank
called to approve the transactions contemplated by
this Agreement.

Subsidiaries Shall mean all those corporations, banks,
associations, or other entities of which the entity
in question owns or controls 5% or more of the
outstanding equity securities either directly or
through an unbroken chain of entities as to each of
which 5% or more of the outstanding equity
securities is owned directly or indirectly by its
parent; provided, however, there shall not be
included any such entity acquired through
foreclosure or any such entity the equity
securities of which are owned or controlled in a
fiduciary capacity.

Tax or Taxes Means any federal, state, county, local, foreign,
and other taxes, assessments, charges, fares, and
impositions, including interest and penalties
thereon or with respect thereto.

1933 Act The Securities Act of 1933, as amended.

1934 Act The Securities Exchange Act of 1934, as amended.

ARTICLE 15

MISCELLANEOUS

15.1 Expenses. Each Party hereto shall bear its own legal, auditing,
trustee, investment banking, regulatory and other expenses in connection with
this Agreement and the transactions contemplated hereby, except that BancGroup
will pays the costs of filing fees for the Registration Statement and any
applications filed with Agencies seeking approval of the Merger.

15.2 Benefit. This Agreement shall inure to the benefit of and be binding
upon the Bank, Colonial Bank and BancGroup, and their respective successors.

15.3 Governing Law. This Agreement shall be governed by, and construed in
accordance with the Laws of the State of Alabama without regard to any conflict
of Laws.

15.4 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to constitute an original. Each such counterpart shall
become effective when one counterpart has been signed by each Party thereto.

A-27
<PAGE> 171

15.5 Headings. The headings of the various articles and sections of this
Agreement are for convenience of reference only and shall not be deemed a part
of this Agreement or considered in construing the provisions thereof.

15.6 Severability. Any term or provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining terms and provisions thereof or affecting the
validity or enforceability of such provision in any other jurisdiction, and if
any term or provision of this Agreement is held by any court of competent
jurisdiction to be void, voidable, invalid or unenforceable in any given
circumstance or situation, then all other terms and provisions, being severable,
shall remain in full force and effect in such circumstance or situation and the
said term or provision shall remain valid and in effect in any other
circumstances or situation.

15.7 Construction. Use of the masculine pronoun herein shall be deemed to
refer to the feminine and neuter genders and the use of singular references
shall be deemed to include the plural and vice versa, as appropriate. No
inference in favor of or against any Party shall be drawn from the fact that
such Party or such Party's counsel has drafted any portion of this Agreement.

15.8 Return of Information. In the event of termination of this Agreement
prior to the Effective Date, each Party shall return to the other, without
retaining copies thereof, all confidential or non-public documents, work papers
and other materials obtained from the other Party in connection with the
transactions contemplated in this Agreement and shall keep such information
confidential, not disclose such information to any other person or entity, and
not use such information in connection with its business.

15.9 Equitable Remedies. The parties hereto agree that, in the event of a
breach of this Agreement by either Party, the other Party may be without an
adequate remedy at law owing to the unique nature of the contemplated
transactions. In recognition thereof, in addition to (and not in lieu of) any
remedies at law that may be available to the non-breaching Party, the
non-breaching Party shall be entitled to obtain equitable relief, including the
remedies of specific performance and injunction, in the event of a breach of
this Agreement by the other Party, and no attempt on the part of the
non-breaching Party to obtain such equitable relief shall be deemed to
constitute an election of remedies by the non-breaching Party that would
preclude the non-breaching Party from obtaining any remedies at law to which it
would otherwise be entitled.

15.10 Attorneys' Fees. If any Party hereto shall bring an action at law or
in equity to enforce its rights under this Agreement (including an action based
upon a misrepresentation or the breach of any warranty, covenant, agreement or
obligation contained herein), the prevailing Party in such action shall be
entitled to recover from the other Party its costs and expenses incurred in
connection with such action (including fees, disbursements and expenses of
attorneys and costs of investigation).

15.11 No Waiver. No failure, delay or omission of or by any Party in
exercising any right, power or remedy upon any breach or Default of any other
Party shall impair any such rights, powers or remedies of the Party not in
breach or Default, nor shall it be construed to be a wavier of any such right,
power or remedy, or an acquiescence in any similar breach or Default; nor shall
any waiver of any single breach or Default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any Party of any
provisions of this Agreement must be in writing and be executed by the Parties
to this Agreement and shall be effective only to the extent specifically set
forth in such writing.

15.12 Remedies Cumulative. All remedies provided in this Agreement, by law
or otherwise, shall be cumulative and not alternative.

15.13 Entire Contract. This Agreement and the documents and instruments
referred to herein constitute the entire contract between the parties to this
Agreement and supersede all other understandings with respect to the subject
matter of this Agreement.

A-28
<PAGE> 172

IN WITNESS WHEREOF, the Bank, Colonial Bank and BancGroup have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.

<TABLE>
<S> <C>
ATTEST: DOTHAN FEDERAL SAVINGS BANK
BY: Charles A. Wilson BY: William M. Lee
ITS: President ITS: Chairman
(CORPORATE SEAL)

ATTEST: COLONIAL BANK
BY: Teresa R. Skipper BY: W. Flake Oakley
ITS: Secretary ITS: Chief Financial Officer
(CORPORATE SEAL)

ATTEST: THE COLONIAL BANCGROUP, INC.
BY: Teresa R. Skipper BY: W. Flake Oakley
ITS: Assistant Secretary ITS: Chief Financial Officer
(CORPORATE SEAL)
</TABLE>

A-29
<PAGE> 173

APPENDIX B

OTS REGULATION REGARDING DISSENTERS' RIGHTS OF APPRAISAL

SEC. 552.14 DISSENTER AND APPRAISAL RIGHTS.

(a) Right to demand payment of fair or appraised value. Except as provided
in paragraph (b) of this section, any stockholder of a Federal stock association
combining in accordance with sec. 552.13 of this part shall have the right to
demand payment of the fair or appraised value of his stock: Provided, That such
stockholder has not voted in favor of the combination and complies with the
provisions of paragraph (c) of this section.

(b) Exceptions. No stockholder required to accept only qualified
consideration for his or her stock shall have the right under this section to
demand payment of the stock's fair or appraised value, if such stock was listed
on a national securities exchange or quoted on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") on the date of the
meeting at which the combination was acted upon or stockholder action is not
required for a combination made pursuant to sec. 552.13(h)(2) of this part.
"Qualified consideration" means cash, shares of stock of any association or
corporation which at the effective date of the combination will be listed on a
national securities exchange or quoted on NASDAQ, or any combination of such
shares of stock and cash.

(c) Procedure-(1) Notice. Each constituent Federal stock association shall
notify all stockholders entitled to rights under this section, not less than
twenty days prior to the meeting at which the combination agreement is to be
submitted for stockholder approval, of the right to demand payment of appraised
value of shares, and shall include in such notice a copy of this section. Such
written notice shall be mailed to stockholders of record and may be part of
management's proxy solicitation for such meeting.

(2) Demand for appraisal and payment. Each stockholder electing to make a
demand under this section shall deliver to the Federal stock association, before
voting on the combination, a writing identifying himself or herself and stating
his or her intention thereby to demand appraisal of and payment for his or her
shares. Such demand must be in addition to and separate from any proxy or vote
against the combination by the stockholder.

(3) Notification of effective date and written offer. Within ten days
after the effective date of the combination, the resulting association shall:

(i) Give written notice by mail to stockholders of constituent Federal
stock associations who have complied with the provisions of paragraph
(c)(2) of this section and have not voted in favor of the combination, of
the effective date of the combination;

(ii) Make a written offer to each stockholder to pay for dissenting
shares at a specified price deemed by the resulting association to be the
fair value thereof; and

(iii) Inform them that, within sixty days of such date, the respective
requirements of paragraphs (c)(5) and (c)(6) of this section (set out in
the notice) must be satisfied.

The notice and offer shall be accompanied by a balance sheet and statement
of income of the association the shares of which the dissenting stockholder
holds, for a fiscal year ending not more than sixteen months before the date of
notice and offer, together with the latest available interim financial
statements.

(4) Acceptance of offer. If within sixty days of the effective date of the
combination the fair value is agreed upon between the resulting association and
any stockholder who has complied with the provisions of paragraph (c)(2) of this
section, payment therefor shall be made within ninety days of the effective date
of the combination.

(5) Petition to be filed if offer not accepted. If within sixty days of
the effective date of the combination the resulting association and any
stockholder who has complied with the provisions of paragraph (c)(2) of this
section do not agree as to the fair value, then any such stockholder may file a
petition with the Office, with a copy by registered or certified mail to the
resulting association, demanding a determination of the fair market

B-1
<PAGE> 174

value of the stock of all such stockholders. A stockholder entitled to file a
petition under this section who fails to file such petition within sixty days of
the effective date of the combination shall be deemed to have accepted the terms
offered under the combination.

(6) Stock certificates to be noted. Within sixty days of the effective
date of the combination, each stockholder demanding appraisal and payment under
this section shall submit to the transfer agent his certificates of stock for
notation thereon that an appraisal and payment have been demanded with respect
to such stock and that appraisal proceedings are pending. Any stockholder who
fails to submit his or her stock certificates for such notation shall no longer
be entitled to appraisal rights under this section and shall be deemed to have
accepted the terms offered under the combination.

(7) Withdrawal of demand. Notwithstanding the foregoing, at any time
within sixty days after the effective date of the combination, any stockholder
shall have the right to withdraw his or her demand for appraisal and to accept
the terms offered upon the combination.

(8) Valuation and payment. The Director shall, as he or she may elect,
either appoint one or more independent persons or direct appropriate staff of
the Office to appraise the shares to determine their fair market value, as of
the effective date of the combination, exclusive of any element of value arising
from the accomplishment or expectation of the combination. Appropriate staff of
the Office shall review and provide an opinion on appraisals prepared by
independent persons as to the suitability of the appraisal methodology and the
adequacy of the analysis and supportive data. The Director after consideration
of the appraisal report and the advice of the appropriate staff shall, if he or
she concurs in the valuation of the shares, direct payment by the resulting
association of the appraised fair market value of the shares, upon surrender of
the certificates representing such stock. Payment shall be made, together with
interest from the effective date of the combination, at a rate deemed equitable
by the Director.

(9) Costs and expenses. The costs and expenses of any proceeding under
this section may be apportioned and assessed by the Director as he or she may
deem equitable against all or some of the parties. In making this determination
the Director shall consider whether any party has acted arbitrarily,
vexatiously, or not in good faith in respect to the rights provided by this
section.

(10) Voting and distribution. Any stockholder who has demanded appraisal
rights as provided in paragraph (c)(2) of this section shall thereafter neither
be entitled to vote such stock for any purpose nor be entitled to the payment of
dividends or other distributions on the stock (except dividends or other
distribution payable to, or a vote to be taken by stockholders of record at a
date which is on or prior to, the effective date of the combination): Provided,
That if any stockholder becomes unentitled to appraisal and payment of appraised
value with respect to such stock and accepts or is deemed to have accepted the
terms offered upon the combination, such stockholder shall thereupon be entitled
to vote and receive the distributions described above.

(11) Status. Shares of the resulting association into which shares of the
stockholders demanding appraisal rights would have been converted or exchanged,
had they assented to the combination, shall have the status of authorized and
unissued shares of the resulting association.

B-2
<PAGE> 175

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Pursuant to section 145 of the Delaware General Corporation Law, as
amended, and the Restated Certificate of Incorporation of the Registrant,
officers, directors, employees, and agents of the Registrant are entitled to
indemnification against liabilities incurred while acting in such capacities on
behalf of the Registrant, including reimbursement of certain expenses. In
addition, the Registrant maintains an officers and all of its directors
insurance policy pursuant to which officers and directors of the Registrant are
entitled to indemnification against certain liabilities, including
reimbursement of certain expenses, and the Registrant has indemnity agreements
with certain officers and all of its directors pursuant to which such persons
may be indemnified by the Registrant against certain liabilities, including
expenses.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) The following is a list of exhibits that are included in Part
II of the Registration Statement. Such exhibits are
separately indexed elsewhere in the Registration Statement.

DESCRIPTION

Exhibit 2 Plan of acquisition, reorganization, arrangement, liquidation
of successor:

Agreement and Plan of Merger by and among The Colonial
BancGroup, Inc., Colonial Bank and Dothan Federal Savings
Bank, dated as of January 22, 1996, included in the Prospectus
portion of this Registration Statement at Appendix A and
incorporated herein by reference.

Exhibit 3 Articles of Incorporation and Bylaws:

(A) Restated Certificate of Incorporation of the Registrant, filed
as Exhibit 4.1 to the Registrant's Current Report on Form 8-K,
dated February 21, 1995, and incorporated herein by reference.

(B) Bylaws of the Registrant, filed as Exhibit 4.2 to the
Registrant's Current Report on Form 8-K, dated February 21,
1995, and incorporated herein by reference.

II-1
<PAGE> 176

Exhibit 4 Instruments defining the rights of security holders:

(A) Article 4 of the Restated Certificate of Incorporation of the
Registrant filed as Exhibit 4.1 to the Registrant's Current
Report on Form 8-K, dated February 21, 1995, and incorporated
herein by reference.

(B) Article II of the Bylaws of the Registrant filed as Exhibit
4.2 to the Registrant's Current Report on Form 8-K, dated
February 21, 1995, and incorporated herein by reference.

Exhibit 5 Opinion of Miller, Hamilton, Snider & Odom, L.L.C., as to
certain Delaware law issues of the securities being
registered.

Exhibit 8 Tax Opinion of Miller, Hamilton, Snider & Odom, L.L.C.

Exhibit 10 Material Contracts:

(A)(1) Second Amendment and Restatement of 1982 Incentive Stock Plan
of the Registrant, filed as Exhibit 4-1 to the Registrant's
Registration Statement on Form S-8 (Commission Registration
No. 33-41036), effective June 4, 1991, and incorporated herein
by reference.

(A)(2) Second Amendment and Restatement to 1982 Nonqualified Stock
Option Plan of the Registrant filed as Exhibit 4-2 to the
Registrant's Registration Statement on Form S-8 (Commission
Registration No. 33-41036), effective June 4, 1991, and
incorporated herein by reference).

(A)(3) 1992 Incentive Stock Option Plan of the Registrant, filed as
Exhibit 4-1 to Registrant's Registration Statement on Form S-8
(File No. 33-47770), effective May 8, 1992, and incorporated
herein by reference.

(A)(4) 1992 Nonqualified Stock Option Plan of the Registrant, filed
as Exhibit 4-2 to Registrant's Registration Statement on Form
S-8 (File No. 33-47770), effective May 8, 1992, and
incorporated herein by reference.

(B)(1) Residential Loan Funding Agreement between Colonial Bank and
Colonial Mortgage Company dated January 18, 1988, included as
Exhibit 10(B)(1) to
<PAGE> 177

the Registrant's Registration Statement as Form S-4, file no.
33-52952, and incorporated herein by reference.

(B)(2) Loan Agreement between the Registrant and SunBank,
National Association, dated August 29, 1995.

(C)(1) The Colonial BancGroup, Inc. First Amended and Restated
Restricted Stock Plan for Directors, as amended, included as
Exhibit 10(C)(1) to the Registrant's Registration Statement as
Form S-4, file no. 33-52952, and incorporated herein by
reference.

(C)(2) The Colonial BancGroup, Inc., Stock Bonus and Retention Plan,
included as Exhibit 10(C)(2) to the Registrant's Registration
Statement as Form S-4, file no. 33-52952, and incorporated
herein by reference.

(D) Stock Purchase Agreement dated as of July 20, 1994, by and
among The Colonial BancGroup, Inc., Colonial Bank, The
Colonial Company, Colonial Mortgage Company, and Robert E.,
James K. and Thomas H. Lowder, included as Exhibit 2 in
Registrant's registration statement on Form S-4, Registration
No. 33-83692 and incorporated herein by reference.

(E) Agreement and Plan of Merger between The Colonial BancGroup,
Inc., and Commercial Bancorp of Georgia, Inc., dated as of
December 21, 1995.

(F) Amended and Restated Agreement and Plan of Merger between The
Colonial BancGroup, Inc. and Southern Banking Corporation
dated as of February 15, 1996.

Exhibit 13 Registrant's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1995, June 30, 1995 and September 30, 1995,
and incorporated herein by reference.

Exhibit 21 List of subsidiaries of the Registrant.

Exhibit 23 Consents of experts and counsel:

(A) Consent of Coopers & Lybrand, L.L.P.

(B) Consent of Miller, Hamilton, Snider & Odom, L.L.C.

(D) Consent of Bricker & Melton, P.A.

(E) Consent of Coopers & Lybrand, L.L.P.

(F) Consent and report of Price Waterhouse LLP

Exhibit 24 Power of Attorney.

Exhibit 99 Additional exhibits:

(A) Form of Proxy of Dothan Federal Savings Bank

(B) Election Form (for Merger Consideration)

(b) Financial Statement Schedules

The financial statement schedules required to be included
pursuant to this Item are not included herein because they are
not applicable or the required information is shown in the
financial statements or notes thereto.

ITEM 22. UNDERTAKINGS.

(a) The undersigned hereby undertakes as follows as required by
Item 512 of Regulation S-K:

(1) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus
which is a part of this Registration Statement, by
any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus
will contain the information called for by the
applicable registration form with respect to
reofferings by persons who may be deemed
underwriters, in addition to the information called
for by the other Items of the applicable form.

(2) That every prospectus (i) that is filed pursuant to
paragraph (1) immediately above, or (ii) that
purports to meet the requirements of section 10(a)(3)
of the Act and is used in connection with an offering
of securities subject to Rule 415, will be filed as a
part of an amendment to the Registration Statement
and will not be used until such amendment is
effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
Registration Statement relating to such securities
offered therein, and the offering of such
<PAGE> 179

securities at that time shall be deemed to be the
initial bona fide offering thereof.

(3) Insofar as indemnification for liabilities arising
under the Act may be permitted to directors,
officers, and controlling persons of the Registrant,
the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such
indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant
of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the
successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling
person in connection with the securities being
registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the
final adjudication of such issue.

(b) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or 13 of
Form S-4, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or
other equally prompt means. This includes information
contained in documents filed subsequent to the effective date
of the Registration Statement through the date of responding
to the request.

(c) The undersigned Registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
Registration Statement when it became effective.

(d) The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement:

(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the Registration Statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the Registration
Statement;
<PAGE> 180

(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the Registration
Statement or any material change to such
information in the Registration Statement;

Provided, however, that paragraphs (d)(1)(i) and (d)(1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to section
13 or section 15(d) of the Exchange Act that are incorporated
by reference in the Registration Statement.

(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration relating to the securities offered
therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide
offering thereof.

(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.

(e) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
<PAGE> 181

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Montgomery, Alabama, on the 20th day of February, 1996.

THE COLONIAL BANCGROUP, INC.

By: /s/ Robert E. Lowder
--------------------------
Robert E. Lowder
Its Chairman of the Board
of Directors, Chief
Executive Officer, and
President

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/ Robert E. Lowder Chairman of the Board **
- --------------------------- of Directors, President
Robert E. Lowder and Chief Executive
Officer

/s/ W. Flake Oakley, IV Chief Financial **
- --------------------------- Officer, Secretary
W. Flake Oakley, IV and Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)

* Director **
- ---------------------------
Young J. Boozer

</TABLE>

<PAGE> 182

<TABLE>
<S> <C> <C>
* Director **
- ---------------------------
William Britton

* Director **
- ---------------------------
Jerry J. Chesser

* Director
- ---------------------------
Augustus K. Clements, III

* Director **
- ---------------------------
Robert C. Craft

Director
- ---------------------------
Patrick F. Dye

* Director **
- ---------------------------
Clinton O. Holdbrooks

* Director **
- ---------------------------
D. B. Jones

* Director **
- ---------------------------
Harold D. King
</TABLE>
<PAGE> 183

<TABLE>
<S> <C> <C>
* Director **
- ---------------------------
John Ed Mathison

* Director **
- ---------------------------
Milton E. McGregor

* Director **
- ---------------------------
John C. H. Miller, Jr.

* Director **
- ---------------------------
Joe D. Mussafer

* Director **
- ---------------------------
William E. Powell

* Director **
- ---------------------------
Jack H. Rainer

* Director **
- ---------------------------
Frances E. Roper

* Director **
- ---------------------------
Ed V. Welch
</TABLE>
<PAGE> 184

* The undersigned, acting pursuant to a power of attorney, has signed
this Registration Statement on Form S-4 for and on behalf of the
persons indicated above as such persons' true and lawful
attorney-in-fact and in their names, places and stead, in the
capacities indicated above and on the date indicated below.

/s/ W. Flake Oakley, IV
- ---------------------------
W. Flake Oakley, IV
Attorney-in-Fact

** Dated: February 20, 1996
<PAGE> 185

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT PAGE
- ------- ----
<S> <C>
Exhibit 2 Plan of acquisition, reorganization, arrangement, liquidation
of successor:

Agreement and Plan of Merger by and among The Colonial
BancGroup, Inc., Colonial Bank, and Dothan Federal Savings
Bank, dated as of January 22, 1996, included in the Prospectus
portion of this registration statement at Appendix A and
incorporated herein by reference.

Exhibit 3 Articles of Incorporation and Bylaws:

(A) Restated Certificate of Incorporation of the Registrant, filed
as Exhibit 4.1 to the Registrant's Current Report on Form 8-K,
dated February 21, 1995, and incorporated herein by reference.

(B) Bylaws of the Registrant, as amended, filed as Exhibit 4.2 to
the Registrant's Current Report on Form 8-K, dated February
21, 1995, and incorporated herein by reference.

Exhibit 4 Instruments defining the rights of security holders:

(B) Article II of the Bylaws of the Registrant filed as Exhibit
4.2 to the Registrant's Current Report on Form 8-K, dated
February 21, 1995, and incorporated herein by reference.

(C) Dividend Reinvestment and Class A Common Stock Purchase Plan
of the Registrant dated January 15, 1986, and Amendment No. 1
thereto dated as of June 10, 1986, filed as Exhibit 4(C) to
the Registrant's Registration Statement on Form S-4 (File No.
33-07015), effective July 15, 1986, and incorporated herein
by reference.
</TABLE>
<PAGE> 186
<TABLE>
<S> <C>
Exhibit 5 Opinion of Miller, Hamilton, Snider & Odom, L.L.C. as to
certain Delaware law issues of the securities being
registered.

Exhibit 8 Tax Opinion of Miller, Hamilton, Snider & Odom, L.L.C.

Exhibit 10 Material Contracts:

(A)(1) Second Amendment and Restatement of 1982 Incentive Stock Plan of the
Registrant, filed as Exhibit 4-1 to the Registrant's Registration
Statement on Form S-8 (Commission Registration No. 33-41036),
effective June 4, 1991, and incorporated herein by reference.

(A)(2) Second Amendment and Restatement to 1982 Nonqualified Stock Option
Plan of the Registrant filed as Exhibit 4-2 to the Registrant's
Registration Statement on Form S-8 (Commission Registration No. 33-
41036), effective June 4, 1991, and incorporated herein by reference).

(A)(3) 1992 Incentive Stock Option Plan of the Registrant, filed as Exhibit
4-1 to Registrant's Registration Statement on Form S-8 (File No.
33-47770), effective May 8, 1992, and incorporated herein by
reference.

(A)(4) 1992 Nonqualified Stock Option Plan of the Registrant, filed as
Exhibit 4-2 to Registrant's Registration Statement on Form S-8 (File
No. 33-47770), effective May 8, 1992, and incorporated herein by
reference.

(B)(1) Residential Loan Funding Agreement between Colonial Bank and Colonial
Mortgage Company dated January 18, 1988, included as Exhibit 10(B)(1)
to the Registrant's Registration Statement as Form S-4, file no.
33-52952, and incorporated herein by reference.

(B)(2) Loan Agreement between the Registrant and SunBank, National
Association, dated August 29, 1995.

(C)(1) The Colonial BancGroup, Inc. First Amended and Restated Restricted
Stock Plan for Directors, as amended, included as Exhibit 10(C)(1) to
the Registrant's Registration Statement as
</TABLE>
<PAGE> 187
<TABLE>
<S> <C>
Form S-4, file no. 33-52952, and incorporated herein by reference.

(C)(2) The Colonial BancGroup, Inc., Stock Bonus and Retention Plan, included
as Exhibit 10(C)(2) to the Registrant's Registration Statement as Form
S-4, file no. 33-52952, and incorporated herein by reference.

(E) Agreement and Plan of Merger between The Colonial BancGroup,
Inc., and Commercial Bancorp of Georgia, Inc., dated as of
December 21, 1996.

(F) Amended and Restated Agreement and Plan of Merger
between The Colonial BancGroup, Inc. and Southern Banking
Corporation dated as of February 15, 1996.

Exhibit 13 Registrant's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1995, June 30, 1995, and September 30, 1995,
and incorporated herein by reference.

Exhibit 21 List of subsidiaries of the Registrant.

Exhibit 23 Consents of experts and counsel:

(A) Consent of Coopers & Lybrand, L.L.P.

(B) Consent of Miller, Hamilton, Snider & Odom, L.L.C.

(D) Consent of Bricker & Melton, P.A.

(E) Consent of Coopers & Lybrand, L.L.P.

(F) Consent and report of Price Waterhouse LLP

Exhibit 24 Power of Attorney.
</TABLE>
<PAGE> 188
<TABLE>
<S> <C>
Exhibit 99 Additional exhibits:

(A) Form of Proxy of Dothan Federal Savings Bank

(B) Election Form (For Merger Consideration)
</TABLE>

<PAGE> 1

EXHIBIT 5

(On Miller, Hamilton, Snider & Odom, L.L.C. Letterhead)

February 8, 1996

Montgomery Office

The Colonial BancGroup, Inc.
P. O. Box 1108
Montgomery, AL 36101

Re: Registration Statement on Form S-4 relating to the issuance of
shares of Common Stock of The Colonial BancGroup, Inc., in
connection with the acquisition by merger of Dothan Federal
Savings Bank ("Merger")

Gentlemen:

We are familiar with the proceedings taken and proposed to be taken by
The Colonial BancGroup, Inc., a Delaware corporation (the "Company"), in
connection with the proposed issuance by the Company of shares of its Common
Stock, par value of $2.50 per share, in connection with the Merger and in
accordance with an Agreement and Plan of Merger, dated as of January 22, 1996
(the "Agreement"), by and between the Company, Colonial Bank and Dothan Federal
Savings Bank. We have also acted as counsel for the Company in connection with
the preparation and filing with the Securities and Exchange Commission under
the Securities Act of 1933, of the Registration Statement on Form S-4 referred
to in the caption above. In this connection we have reviewed such documents
and matters of law as we have deemed relevant and necessary as a basis for the
opinions expressed herein.

Upon the basis of the foregoing, we are of the opinion that:

(i) The Company is a corporation duly organized and existing under
the laws of the State of Delaware;
<PAGE> 2
The Colonial BancGroup
February 8, 1996
Page 2

(ii) The shares of Common Stock of the Company referred to above,
to the extent actually issued pursuant to the Agreement will, when so issued,
be duly and validly authorized and issued and will be fully paid and
nonassessable shares of Common Stock of the Company;

(iii) Under the laws of the State of Delaware, no personal liability
attaches to the ownership of the shares of Common Stock of the Company.

We hereby consent to the filing of this opinion as an exhibit to the
above-referenced registration statement. In consenting to the inclusion of our
opinion in the Registration Statement, we do not thereby admit that we are a
person whose consent is required pursuant to Section 7 of the Securities Act of
1933, as amended.

Sincerely yours,

MILLER, HAMILTON, SNIDER & ODOM, L.L.C.

By: /s/ Michael D. Waters
---------------------------------
Michael D. Waters

MDW/lwb

<PAGE> 1
EXHIBIT 8

[On Miller, Hamilton, Snider & Odom, L.L.C. Letterhead]

February 8, 1996

Montgomery Office

Dothan Federal Savings Bank
1962 West Main Street
Dothan, Alabama 36302

Re: Tax Opinion

Gentlemen:

We have acted as counsel to The Colonial BancGroup, Inc., a Delaware
corporation ("BancGroup"), in connection with the merger (the "Merger") of
Dothan Federal Savings Bank (the "Bank") with and into BancGroup's wholly-owned
subsidiary, Colonial Bank ("Colonial Bank"), pursuant to the Agreement and Plan
of Merger, dated as of January 22, 1996 (the "Agreement") by and between
BancGroup, Colonial Bank and the Bank. This opinion is being rendered to you
pursuant to paragraph 8.5 of the Agreement.

In rendering this opinion, we have relied upon the facts, which are
not restated herein, but rather, as they have been presented to us in the
Agreement, and in a preliminary joint proxy statement-prospectus of the Bank,
Colonial Bank and BancGroup to be filed with the Securities and Exchange
Commission. We have assumed, with your consent, that the facts presented to us
provide an accurate and complete description of the facts and circumstances
concerning the proposed transaction. Any changes to the facts,
representations, or documents referred to in this opinion may affect the
conclusions stated herein.

In connection with this opinion, we have assumed, with your consent,
the following:

(1) BancGroup does not plan to sell or otherwise dispose of any of
the stock of
<PAGE> 2
February 8, 1996
Page 2

Colonial Bank or to liquidate Colonial Bank after the Merger.

(2) Colonial Bank will continue the historic business of the Bank
or will use a significant portion of the historic business assets of the Bank
in a business.

(3) The Bank has no knowledge of any plan or intention on the part
of its shareholders to sell or otherwise dispose of the BancGroup common stock
to be received by them that would reduce their holdings to a number of shares
having, in the aggregate, a fair market value of less than fifty percent of the
total fair market value of the Bank common stock outstanding immediately before
the Merger.

(4) As a result of the Merger, each share of the issued and
outstanding Bank common stock will be converted into the right to receive
BancGroup common stock.

(5) No fractional shares will be issued in the Merger. In the
event fractional shares result in the exchange, the Bank shareholders entitled
to fractional shares will be paid cash by BancGroup for their fractional
shares.

(6) The fair market value of the BancGroup common stock to be
received by the Bank shareholders will be approximately equal to the fair
market value of the Bank stock exchanged therefor.

(7) The proposed Merger will be effected for substantial non-tax
business purposes.

(8) Colonial Bank will acquire at least 90% of the fair market
value of the net assets and at least 70% of the fair market value of the gross
assets held by the Bank immediately prior to the Merger. For purposes of this
representation, Bank assets used to pay its reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends) made by
the Bank immediately preceding the Merger and all payments to dissenters, if
any, will be included as assets of the Bank held immediately prior to the
Merger.

(9) The Bank is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").

On the basis of the foregoing and our consideration of such other
matters as we have considered necessary, we advise you that, in our opinion,
for federal income tax purposes:

(1) The merger of the Bank with and into Colonial Bank in
accordance with the terms of the Agreement will constitute a reorganization
within the meaning of Sections 368(a)(1)(A) and 368 (a)(2)(D) of the Code. The
Bank, Colonial Bank and BancGroup will
<PAGE> 3
February 8, 1996
Page 3

each be a "party to a reorganization" under Section 368(b) of the Code.

(2) No gain or loss will be recognized by the Bank upon the
transfer of its assets and liabilities to Colonial Bank. Sections 357(a) and
361(a) of the Code.

(3) A Bank shareholder who exchanges shares of Bank stock for a
combination of BancGroup common stock and cash as described in the Agreement
shall recognize gain, if any, but in an amount not in excess of the sum of such
cash received. The amount of the gain realized will be the excess of (a) the
sum of (i) the amount of cash received and (ii) the fair market value of the
shares of BancGroup common stock received, over (b) the tax basis of the shares
of Bank stock exchanged therefore. No loss shall be recognized. Sections
356(a)(1), (c).

(4) Any gain recognized by a shareholder of the Bank will be
characterized as a capital gain if the Bank stock is a capital asset in the
hands of such shareholder and the receipt of the cash does not have "the effect
of the distribution of a dividend" within the meaning of Section 356 (a)(2) of
the Code as interpreted by the United States Supreme Court in Commissioner v.
Clark, 489 U.S. 726 (1989). Pursuant to Clark, it will be assumed that
BancGroup issued all stock to each of the Bank shareholders and then BancGroup
redeemed a portion of such stock for the amount of cash that was actually
issued. If that hypothetical redemption satisfies any of the tests of Section
302(b) of the Code, the hypothetical redemption will be treated as an exchange.
Otherwise, the receipt of the cash will be treated as a dividend under Section
356(a)(2) of the Code. In the present case, the Bank shareholders should be
able to satisfy one or more of the tests of Section 302(b) of the Code.
However, the application of such provisions is dependent upon each
shareholders' facts and circumstances and is affected by the attribution rules
of Section 318 of the Code. Consequently, shareholders should seek independent
tax advice as to the tax effect of the Merger, including the receipt of the
cash, to them.

(5) A dissenting Bank shareholder, who is not deemed to own any
shares of BancGroup under the constructive ownership rules of Section 318 of
the Code (see the discussion below of Section 318 of the Code), and who
receives only cash in exchange for his shares of Bank stock, will recognize
gain or loss equal to the difference between the amount of cash received and
the shareholder's basis in the shares of Bank stock surrendered. Section 1001
of the Code. Such gain or loss will be capital gain or loss if the shares are
capital assets in the hands of the shareholder.

(6) The constructive ownership rules of Section 318 of the Code
apply in determining whether the receipt of cash has "the effect of the
distribution of a dividend" and whether a dissenting Bank shareholder who
actually has received all cash is deemed to have received a combination of cash
and BancGroup common stock. Under these rules, shares subject to options and
shares owned (or, in some cases, constructively owned) by members of the
shareholder's family, and by related entities (such as corporations,
partnerships,
<PAGE> 4
February 8, 1996
Page 4

trusts, and estates) in which the shareholder, a member of his family, or a
related entity has an interest may be counted as owned by the shareholder.
Similarly, an entity may be treated as owning shares owned by related persons
or entities (such as shareholders, partners, or beneficiaries).

(7) The tax basis of the BancGroup common stock received by a Bank
shareholder will be the same as the adjusted tax basis of the shares of Bank
stock exchanged, decreased by the amount of cash received and increased by the
amount treated as a dividend and the amount of gain recognized on the exchange.
Section 358(a)(1) of the Code.

(8) The holding period of the BancGroup common stock received by a
Bank shareholder will include the holding period of the shares of Bank stock
exchanged therefor if such shares were capital assets in the hands of the
exchanging shareholder. Section 1223(1) of the Code.

(9) Cash received in lieu of a fractional share interest in
BancGroup common stock will be treated as received in payment for such
interest. Rev. Rul. 66-365, 1966 - 2 C.B. 116. The shareholder will recognize
gain or loss equal to the difference between the cash received and the basis of
such fractional share interest.

(10) Payment of cash for fractional shares should not effect the
classification of the Merger as a reorganization under Section 368(a) of the
Code, even though the total amount of cash paid in the Merger may exceed 50% of
the total consideration paid. Though the IRS specifies for advance ruling
purposes that no more than 50% of the total consideration may consist of cash
or property other than the acquiring corporation's stock, that position is not
a rule of substantive law and courts have held that Merger transactions
qualified as reorganizations with cash and non-stock payments of greater than
50%. In the present case, the total cash consideration should be only slightly
greater than 50% of the total consideration and the merger should not fail to
qualify as a reorganization under Section 368(a) of the Code as a result of
cash payments to holders of fractional shares.

Very truly yours,

/s/ MILLER, HAMILTON, SNIDER & ODOM, L.L.C.

<PAGE> 1
EXHIBIT 10(B)(2)

================================================================================

LOAN AGREEMENT

By and Between

THE COLONIAL BANCGROUP, INC.
(the Company)

AND

SUN BANK NATIONAL ASSOCIATION
(the Bank)

August 29, 1995

================================================================================
<PAGE> 2

TABLE OF CONTENTS

(The Table of Contents for this Loan Agreement is for convenience of reference
only and is not intended to define, limit or describe the scope or intent of
any provisions of this Loan Agreement.)

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE ONE
DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.2 Accounting Terms; Testing of Financial
Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.3 Subsidiary Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE TWO
AMOUNT AND TERM OF THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.1 The Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.2 Interest on The Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.3 Prepayment of the Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.4 Calculation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.5 Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.6 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.8 Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.1 Organization, Corporate Powers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.2 Authorization of Loan, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.3 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.4 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.6 Changes in Financial Conditions; Adverse
Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.7 Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.8 Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.9 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.10 Title to Properties and Assets, Liens,
Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.11 Outstanding Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.12 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.13 Regulation G, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

ARTICLE FOUR
COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE FIVE
CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5.2 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5.3 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5.4 Supporting Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>

<PAGE> 3

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE SIX
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE SEVEN
RIGHTS UPON DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 7.1 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 7.2 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7.3 Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7.4 Uniform Commercial Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

ARTICLE EIGHT
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.1 Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.2 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.3 Addresses for Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.4 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8.5 Survival of Representations and
Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8.6 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8.10 Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8.11 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8.12 Cross Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8.13 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8.14 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8.15 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 8.16 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 8.17 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 8.18 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 8.19 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

LIST OF SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . 27

</TABLE>
<PAGE> 4

LOAN AGREEMENT

THIS LOAN AGREEMENT is made and entered into this 29th
day of August, 1995, by and between:

THE COLONIAL BANCGROUP, INC., a Delaware corporation, Post
Office Box 1108, Montgomery, Alabama 36192 (hereinafter
referred to as the "Company");

and

SUN BANK, NATIONAL ASSOCIATION, a national banking
association, 200 South Orange Avenue, P.O. Box 3833, Orlando,
Florida 32802 (hereinafter referred to as the "Bank").

W I T N E S S E T H:

WHEREAS, the Company has requested the Bank to extend a line of credit
loan to it up to the maximum principal amount of $15,000,000; and

WHEREAS, the Bank is willing to make such loan upon the terms and
conditions set forth in this Agreement;

NOW, THEREFORE, for and in consideration of the above premises and the
mutual covenants and agreements contained herein, the Company and the Bank
agree as follows:

ARTICLE ONE

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.1 Definitions. For the purposes of this Agreement, the
following terms shall have the respective meanings specified in this Section
1.1 (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):

"Agreement" shall mean this Loan Agreement as originally executed by
the parties hereto and all permitted amendments, modifications and restatements
hereof.

"Average Total Assets" shall mean twenty-five percent (25%) of the
aggregate sum of the Company's consolidated total assets as indicated on the
Company's four (4) most recent quarterly financial statements submitted
pursuant to Section 4.1 hereof.

"Banking Day" shall mean any day other than a Saturday, Sunday or Day
on which commercial banks are authorized to close under the laws of State of
Florida.
<PAGE> 5

"Collateral" shall mean one hundred percent (100%) of all of the
issued and outstanding shares of common stock of all present and future
Subsidiaries of the Company.

"Day" shall mean a calendar day, unless the context
indicates otherwise.

"Default Rate" shall mean the lesser of (i) twenty-five percent (25%)
per annum or (ii) the highest rate of interest permitted from time to time by
applicable law.

"Dollars" shall mean lawful money of the United States of America.

"Due Date" shall mean the date any payment of principal or interest is
due and payable on the Loan or Note.

"Event of Default" shall mean an event of default specified in Article
Six of this Agreement.

"GAAP" shall mean generally accepted accounting principles
consistently applied to the particular item.

"Interest Period" shall mean any interest period applicable to the
Loan as determined pursuant to Section 2.2 hereof.

"Interest Rate" shall mean the applicable interest rate as determined
pursuant to Section 2.2 hereof; provided, however, the Interest Rate shall
never exceed the maximum rate allowed by law from time to time.

"Interest Rate Determination Date" shall mean each date for
calculating the LIBOR for purposes of determining the interest rate in respect
of an Interest Period. The Interest Rate Determination Date shall be the
Banking Day prior to the first Day of the related Interest Period.

"LIBOR" shall mean, with respect to any Interest Period, the thirty
(30) Day, sixty (60) Day, ninety (90) Day or one hundred eighty (180) Day LIBOR
Rate (in accordance with the length of the designated Interest Period) in
effect on the Interest Rate Determination Date as published from time to time
in Telerate or such other publication as may be designated by the Bank from
time to time.

"Liabilities" shall mean all liabilities and obligations of the
Company, all as determined in accordance with GAAP.

"Loan" shall mean the revolving line of credit loan made by the Bank
to the Company pursuant to the terms of this Agreement.

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<PAGE> 6
"Loan Documents" shall mean this Agreement, the Note, the First
Amendment to Pledge Agreement, and all of the other documents, agreements,
certificates, schedules, notes, statements and opinions, however described,
referenced herein or executed or delivered pursuant hereto or in connection
with or arising with the Loan or the transactions contemplated by this
Agreement.

"Margin Securities" shall mean any margin securities within the
meaning of Regulation G of the Board of Governors of the Federal Reserve System
(12 C.F.R. Part 207).

"Maturity Date" shall mean (i) August 29, 1997 or (ii) the earlier
occurrence of an Event of Default.

"Net Income" shall mean, for any period, the aggregate of the net
income of the Company, determined in accordance with GAAP.

"Net Loans" shall mean the sum of Company's (i) total loans less
unearned income, (ii) Other Real Estate and (iii) repossessions, less (iv)
mortgages held for sale in the ordinary course of business.

"Non-accrual Loans" shall mean loans in which the accrual of interest
has been discontinued due to a deterioration in the financial condition of any
borrower.

"Nonperforming Assets" shall mean the sum of the Company's (i)
Non-accrual Loans, (ii) Other Real Estate, (iii) Restructured Loans and (iv)
repossessions.

"Nonperforming Assets to Net Loans Ratio" shall mean the ratio of
Company's Nonperforming Assets to its Net Loans calculated as set forth in
Section 1.2 of this Agreement.

"Note" shall mean the Company's promissory note evidencing the Loan
together with all amendments, modifications, supplements or renewals thereto or
thereof.

"Obligations", with respect to the Company, shall mean, individually
and collectively, all payment and performance duties, obligations and
liabilities of the Company to the Bank, however and whenever incurred, acquired
or evidenced, whether primary or secondary, direct or indirect, absolute or
contingent, sole or joint and several, or due or to become due, including,
without limitation, all such duties, obligations and liabilities of the Company
to the Bank, under and pursuant to the Loan Documents and all renewals,
modifications or extensions of any thereof.

"Other Real Estate" shall mean real estate acquired by the Company or
any of the Subsidiaries as a result of a deterioration in the financial
position of any borrower.

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<PAGE> 7

"Person" shall mean any individual, joint venturer, partnership, firm,
corporation, trust, unincorporated organization or other organizational entity,
or a governmental body or any department or agency thereof, and shall include
both the singular and the plural.

"Pledge Agreement" shall mean, collectively, that certain Pledge
Agreement dated August 6, 1993 and that certain First Amendment to Pledge
Agreement dated of even date herewith executed by the Company in favor of the
Bank pledging the Collateral, together with all amendments and modifications
thereof.

"Primary Capital" shall mean the sum of Company's (i) total equity
capital, (ii) allowance for loan and lease losses and (iii) minority interests
in consolidated Subsidiaries.

"Primary Capital to Total Assets Ratio" shall mean the ratio of
Company's Primary Capital to its total assets calculated as set forth in
Section 1.2 of this Agreement.

"Principal Place of Business" shall mean the principal place of
business and the headquarters of the Company at which all of its records are
kept which is noted in the preamble of this Agreement.

"Restructured Loans" shall mean loans classified as restructured on
the Company financial statements, in accordance with the requirements of the
Federal Deposit Insurance Corporation.

"Return on Assets Ratio" shall mean the ratio of Company's Net Income
for the current quarter and preceding three (3) quarters to its Average Total
Assets calculated as set forth in Section 1.2 of this Agreement.

"Subsidiary" or "Subsidiaries" shall mean, individually or
collectively, as the context may require, any national or state banking
association, corporation or other entity whose assets and income are at any
time includible in the financial statements of the Company in accordance with
GAAP, and shall include subsidiaries of a Subsidiary.

"UCC" shall mean the Florida Uniform Commercial Code, Chapters 671 to
680, inclusive.

SECTION 1.2 Accounting Terms; Testing of Financial Ratios. All
accounting terms used herein shall be construed in accordance with GAAP and all
financial data submitted pursuant to this Agreement shall be prepared in
accordance with GAAP. In the event of ambiguities in GAAP, the more
conservative principle or interpretation shall be used. All financial ratios
and covenants contained herein shall be tested quarterly, as at the end of each
fiscal quarter of the Company, commencing with the fiscal quarter ending as at
June 30, 1995. Compliance with such ratios and

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<PAGE> 8

covenants shall be tested on a "rolling four (4) quarters" basis by calculating
the average of each such ratio for the most recently ended fiscal quarter and
the three (3) fiscal quarters immediately preceding the most recently ended
fiscal quarter.

SECTION 1.3 Subsidiary Compliance. Whenever the term "Company"
is used throughout this Agreement, it shall mean to include, if applicable in
the context as so used, the Subsidiaries such that the Company and each of the
Subsidiaries shall perform, be in compliance with or otherwise discharge the
applicable term or condition of this Agreement.

ARTICLE TWO

AMOUNT AND TERM OF THE LOAN

SECTION 2.1 The Loan. Upon the execution hereof and the
Company's compliance with the terms of Article Five hereof, the Bank shall
extend to the Company, subject to the terms and conditions set forth in this
Agreement, a revolving line of credit loan in the maximum principal amount of
Fifteen Million Dollars ($15,000,000.00). During the term of the Loan, and
provided the Loan is not in default, the sums borrowed under the Note may from
time to time be repaid, in full or in part, and thereafter reborrowed.

SECTION 2.2 Interest on The Note. The Loan shall be evidenced by
the Note and shall be due and payable in accordance with and as required by
Section 2.7. The Note shall bear interest from the date thereof on the unpaid
principal balance thereof from time to time outstanding as follows:

(a) The Interest Rate for each Interest Period shall be:

(i) floating at the Prime Rate; or

(ii) floating at one and one-half (1 1/2) percentage
points (i.e., 150 basis points) in excess of the
thirty (30) Day, sixty (60) Day, ninety (90) Day,
one hundred twenty (120) Day or one hundred eighty
(180) Day LIBOR; or

(iii) fixed at one and one-half (1 1/2) percentage
points (i.e., 150 basis points) in excess of the
annual yield on the highest yielding United States
Treasury issue maturing in the calendar month closest
to the maturity date of the Note, as published in the
Wall Street Journal on the fifth (5th) Banking Day
prior to selection of this rate.

8
<PAGE> 9

(b) The Interest Rate set forth in a) (i) and (iii)
above, shall be selected by the Company for thirty (30) day Interest Periods
only.

(c) The Interest Rate set forth in a) (ii) above, shall
be determined with reference to the LIBOR for the Interest Period selected.

(d) The Company shall give the Bank notice (in writing or
by telephone confirmed in writing) of the selection of the applicable Interest
Rate at least five (5) Banking Days prior to the end of the next preceding
Interest Period. If the Company does not so provide notice to the Bank of the
selection of any Interest Rate, then the Company's selection for the
immediately preceding Interest Period shall carry over until changed by the
Company in accordance with the procedure contained in this Article 2.2.

(e) Each Interest Period shall commence on the Day on
which the next preceding Interest Period expires unless any Interest Period
would otherwise expire on a Day which is not a Banking Day, in which event it
shall be extended to expire on the next succeeding Banking Day; provided, that
if any Interest Period would otherwise expire on a Day which is not a Banking
Day, but is a day of the month after which no further Banking Day occurs in
that month, that Interest Period shall expire on the next preceding Banking
Day. Any Interest Period which begins on the last Banking Day of a calendar
month (or on a day for which there is no numerically corresponding day on the
calendar month at the end of such Interest Period) shall end on the last
Banking Day of a calendar month.

(f) As soon as practicable after 11:00 a.m. (Orlando,
Florida time) on each Interest Rate Determination Date, the Bank shall
determine (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) the Interest Rate which shall apply
for the next succeeding Interest Period and shall promptly give notice thereof
(in writing or by telephone confirmed in writing) to the Company.

From and after the Due Date, interest shall accrue on the unpaid
principal balance of the Loan and on all accrued but unpaid interest thereon,
or on such defaulted payment, from the Due Date at the Default Rate. Such
interest shall continue to accrue until the date of payment in full of all
principal and accrued but unpaid interest of such defaulted payment, if
applicable.

SECTION 2.3 Prepayment of the Loan. The Company may prepay all
or any part of the principal amount of the Loan outstanding; provided, however,
that each permitted partial prepayment shall be applied to the reduction of the
Loan, in such manner as the Bank may, in its sole discretion, elect and,
further provided, that on the date of the prepayment, there shall exist no
Default and all

9
<PAGE> 10

accrued but unpaid interest on the amount of the prepayment through the
prepayment date, whether or not due and payable, shall be paid in full prior to
any prepayment. Each prepayment other than full payment shall be made prior to
2:00 p.m. (Orlando time) on the date of the prepayment, and shall be made on a
Banking Day in immediately available funds. Any prepayment made by the Company
shall be applied to amounts due under the Loan in such manner as the Bank may
designate in its absolute discretion.

SECTION 2.4 Calculation of Interest. Any interest due on the
Loan or any other Obligations shall be calculated on the basis of a year
containing 365 Days. The interest due on any date for payment of interest
hereunder shall be that interest to the extent accrued as of midnight on the
last Day immediately prior to that interest payment date. Notwithstanding
anything herein or in any Loan Document to the contrary, the sum of all
interest and all other amounts deemed interest under Florida or other
applicable law which may be collected by the Bank hereunder shall not exceed
the maximum lawful interest rate permitted by such law from time to time. The
Bank and the Company intend and agree that under no circumstance shall the
Company be required to pay interest on the Loan or on any other Obligations at
a rate in excess of the maximum interest rate permitted by applicable law from
time to time, and in the event any such interest is received or charged by the
Bank in excess of that rate, the Company shall be entitled to an immediate
refund of any such excess interest by a credit to and payment toward the unpaid
balance of the Loan (such credit to be considered to have been made at the time
of the payment of the excess interest) with any excess interest not so credited
to be immediately paid to the Company by the Bank.

SECTION 2.5 Place of Payment. All payments by the Company under
the Loan Documents shall be made to the Bank at its banking house at Orlando,
Florida, in lawful money of the United States of America and in immediately
available funds.

SECTION 2.6 Set-Off. The Company hereby grants to the Bank a
lien on, and a security interest in, the deposit balances, accounts, items,
certificates of deposit and monies of the Company in the possession of or on
deposit with the Bank to secure and as collateral for the payment and
performance of the Obligations. Upon default, the Bank may at any time and
from time to time, without demand or notice, appropriate and set-off against
and apply the same to the Obligations when and as due and payable.

SECTION 2.7 Payment of Note. The Company shall pay the Note
together with interest at the rate determined in accordance with Section 2.2
as follows:

(a) Interest on the unpaid principal amount of the Note
shall be payable quarterly on the last Day of each quarter during the term of
this Agreement, commencing September 30, 1995 and

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<PAGE> 11

continuing on the same Day of each and every succeeding quarter during the term
hereof until the Maturity Date.

(b) The outstanding principal balance of the Loan,
together with all accrued but unpaid interest, shall be payable in full on the
Maturity Date.

SECTION 2.8 Application of Payments. All payments made on the
Note shall be applied first to interest accrued to the date of payment and next
to the unpaid principal balance; provided, however, in the event an Event of
Default occurs, payments shall be applied first to any costs or expenses,
including attorneys fees, that the Bank may incur in exercising its rights
under the Loan Documents, as the Bank may determine.

ARTICLE THREE

REPRESENTATIONS AND WARRANTIES

The Company represents and warrants to the Bank that:

SECTION 3.1 Organization, Corporate Powers, Etc.

(a) The Company (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
(ii) has all requisite power and authority, corporate and otherwise, to own its
properties and assets and to carry on its business as now conducted and
proposed to be conducted, (iii) is duly qualified to do business and is in good
standing in every jurisdiction in which the character of its properties or
assets owned or the nature of its activities conducted makes such qualification
necessary, and (iv) has the corporate power and authority to execute and
deliver, and to perform its obligations under this Agreement, the Note, the
Pledge Agreement and the other Loan Documents.

(b) Each Subsidiary (i) is a duly organized, validly
existing corporation and in good standing under the laws of the United States
of America in the jurisdiction in which formed, (ii) has all requisite power
and authority, corporate and otherwise, to own its properties and assets and to
carry on its business as now conducted and proposed to be conducted, (iii) is
duly qualified to do business and is in good standing in every jurisdiction in
which the character of its properties or assets owned or the nature of its
activities conducted makes such qualification necessary, and (iv) has the
corporate power and authority to execute and deliver, and to perform its
obligations under those Loan Documents to which it is a party.

SECTION 3.2 Authorization of Loan, Etc. The execution, delivery
and performance of the Loan Documents by the Company (a)

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<PAGE> 12

have been duly authorized by all requisite corporate action (no shareholder
action being required pursuant to applicable law) and (b) will not (i) violate
(1) any provision of law, any governmental rule or regulation, any order of any
court or other agency of government or the Articles of Incorporation or bylaws
of the Company or (2) any provision of any indenture, agreement or other
instrument to which the Company is a party or by which it or any of its
properties or assets are bound, (ii) be in conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
such indenture, agreement or other instrument, or (iii) result in the creation
or imposition of any lien, charge or encumbrance of any nature whatsoever upon
any of the properties or assets of the Company other than as permitted by the
terms hereof.

SECTION 3.3 Tax Returns and Payments. All federal, state and
local tax returns and reports of the Company required to be filed have been
filed, and all taxes, assessments, fees and other governmental charges upon the
Company, or upon any of its properties, assets, incomes or franchises, which
are due and payable in accordance with such returns and reports, have been
paid, other than those presently (a) payable without penalty or interest, or
(b) contested in good faith and by appropriate and lawful proceedings
prosecuted diligently. The aggregate amount of the taxes, assessments, charges
and levies so contested is not material to the condition (financial or
otherwise) and operations of the Company. The charges, accruals, and reserves
on the books of the Company in respect of federal, state and local taxes for
all fiscal periods to date are adequate and the Company knows of no other
unpaid assessment for additional federal, state or local taxes for any such
fiscal period or of any basis therefor.

SECTION 3.4 Agreements.

(a) The Company is not a party to any agreement,
indenture, lease or instrument or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree, rule or
regulation materially and adversely affecting its business, properties, assets,
operations or condition (financial or otherwise). There are no unrealized
losses with respect to any such agreement, indenture, lease or instrument.

(b) The Company is not in default in the performance,
observance or fulfillment of any of the material obligations, covenants or
conditions contained in any material agreement or instrument to which it is a
party.

SECTION 3.5 Financial Statements. The Company has furnished the
Bank with its financial statements as of December 31, 1994. Such financial
statements are true and correct in all material respects. There has been no
material adverse change in the business, condition or operations (financial or
otherwise) of

12
<PAGE> 13

the Company and the Subsidiaries taken as a whole since the date of the
financial statements referred to above.

SECTION 3.6 Changes in Financial Conditions; Adverse
Developments. From the date of the annual financial statements referenced in
Section 3.5 hereof, to the date of this Agreement, there has been no change in
the properties, assets, liabilities, financial condition, business, operations,
affairs or prospects of the Company and the Subsidiaries from that set forth or
reflected in the Company's most recent federal income tax return or in the
fiscal year-end financial statements referred to in Section 3.5. other than
changes in the ordinary course of business, including acquisitions, none of
which have been, either in any case or in the aggregate, materially adverse.

SECTION 3.7 Litigation, Etc. Except as noted in the financial
statements there are no actions, proceedings or investigations pending or
threatened, against the Company or affecting the Company (or any basis therefor
known to the Company) which, either in any case or in the aggregate, might
result in any material adverse change in the financial condition, business,
prospects, affairs or operations of the Company or in any of its properties or
assets, or in any material impairment of the right or ability of the Company to
carry on its operations as now conducted or proposed to be conducted, or in any
material liability on the part of the Company and none which questions the
validity of this Agreement, the Note, the Pledge Agreement or any of the other
Loan Documents or of any action taken or to be taken in connection with the
transactions contemplated hereby or thereby.

SECTION 3.8 Principal Place of Business. The Principal Place of
Business of the Company is at the address noted in the preamble of this
Agreement.

SECTION 3.9 Consents and Approvals. No authorization, license,
consent, approval, or undertaking is required under any applicable law in
connection with the execution, delivery and performance by the Company of this
Agreement, the Note or any of the other Loan Documents.

SECTION 3.10 Title to Properties and Assets, Liens, Etc. The
Company has good and marketable title to its respective real properties other
than properties which it leases and good title to all of its other personal
property and assets including, but not limited to the Collateral, subject to no
encumbrances, liens, security interests or other rights of third parties except
as previously disclosed to the Bank in the financial statements provided to the
Bank. The Company enjoys peaceful and undisturbed possession of all leases
necessary in any material respect for the operation of its properties and
assets, none of which contains any unusual or burdensome provisions which might
materially affect or

13
<PAGE> 14

impair the operation of such properties and assets. All such leases are valid
and subsisting and are in full force and effect.

SECTION 3.11 Outstanding Debt. On the date hereof, the Company
has no outstanding indebtedness except as reflected on the financial statements
of the Company which have been provided to the Bank.

SECTION 3.12 Subsidiaries. The only presently existing
Subsidiaries of the Company are those listed on Exhibit "A" attached hereto.

SECTION 3.13 Regulation G, Etc. The Company does not own any
Margin Securities. Neither the Company nor the Subsidiaries nor any agent
acting on behalf of the Company or the Subsidiaries has taken any action that
might cause this Agreement or the Loan Documents to violate Regulation G, T, U
or X or any other regulation of the Board of Governors of the Federal Reserve
System or to violate the Securities Act of 1933 or the Securities Act of 1934,
in each case as the same is now in effect or as the same may hereafter be in
effect.

ARTICLE FOUR

COVENANTS OF THE COMPANY

SECTION 4.1 Affirmative Covenants. The Company covenants, for so
long as any of the principal amount of or interest on the Note is outstanding
and unpaid or any duty or obligation of the Company or the Bank hereunder or
under any other Obligation remains unpaid or unperformed, as follows:

(a) Accounting; Financial Statements; Etc. The Company
will deliver to the Bank copies of each of the following:

(i) As soon as practicable and in any event
within forty-five (45) Days after the end of each quarterly period during the
term of this Agreement, financial statements, all in reasonable detail and
certified by the Chief Financial Officer of the Company;

(ii) As soon as practicable and in any event
within ninety (90) Days after the end of each fiscal year, year end audited
financial statements (consisting of profit and lose statement, balance sheet
and report on changes in stockholders equity) that are reviewed by a certified
public accountant acceptable to the Bank, all in reasonable detail and
certified by the Chief Financial Officer of the Company;

(iii) Promptly upon the preparation thereof, copies
of all quarterly call reports submitted by the Subsidiaries to the appropriate
federal regulatory agency;

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<PAGE> 15

(iv) Promptly upon transmission thereof, copies of
all such financial statements, proxy statements, notices, and reports as it
shall send to its stockholders and of all registration statements (with
exhibits) and all reports which it is or may be required to file with the
Securities and Exchange Commission or any governmental body or agency
succeeding to the functions of such Commission;

(v) Promptly upon receipt thereof, a copy of each
other report submitted to the Company or any Subsidiary by independent
accountants in connection with any annual, interim or special audit made by
them of the books of the Company or any Subsidiary;

(vi) With reasonable promptness, such other data
and information as from time to time may be reasonably required by the Bank.

(b) Inspection. The Company will permit the Bank or
Bank's designated representative to (i) visit any place of business, (ii)
inspect its properties, (iii) inspect and make extracts from the Company's
books and records, and (iv) discuss the affairs, finances and accounts of the
Company with the officers of the Company, all at such reasonable times and as
often as may reasonably be requested.

(c) Maintenance of Corporate Existence; Compliance with
Laws. The Company shall at all times preserve and maintain in full force and
effect its corporate existence, powers, rights, licenses, permits and
franchises in the jurisdiction of its incorporation; continue to conduct and
operate its business substantially as conducted and operated during the present
and preceding fiscal year of the Company; operate in full compliance with all
applicable laws, statutes, regulations, certificates of authority and orders in
respect of the conduct of its business; and qualify and remain qualified as a
foreign corporation in each jurisdiction in which such qualification is
necessary or appropriate in view of its business and operations.

(d) Notice of Default. The Company shall immediately
notify the Bank in writing upon the happening, occurrence or existence of any
Event of Default, or any event or condition which with the passage of time or
giving of notice, or both, would constitute an Event of Default, and shall
provide the Bank with such written notice, a detailed statement by a
responsible officer of the Company of all relevant facts and the action being
taken or proposed to be taken by the Company with respect thereto.

(e) Maintenance of Properties. The Company shall
maintain or cause to be maintained in good repair, working order and condition
all properties used or useful in its businesses and from time to time will make
or cause to be made all appropriate

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<PAGE> 16

repairs, renewals, improvements and replacements thereof so that the businesses
carried on in connection therewith may be properly and advantageously conducted
at all times. The Company will not do or permit any act or thing which might
impair the value or commit or permit any waste of its properties or any part
thereof (other than acts of nature beyond their control), or permit any
unlawful occupation, business or trade to be conducted on or from any of its
properties. To the extent the Company leases any of its places of business, it
shall maintain and keep current at all times all leases for said places of
business.

(f) Notice of Suit, Proceedings, Adverse Change. The
Company shall promptly give the Bank notice in writing (a) of all threatened or
actual actions or suits (at law or in equity) and of all threatened or actual
investigations or proceedings by or before any court, arbitrator or any
governmental department, commission, board, bureau, agency or other
instrumentality, state, federal or foreign, affecting the Company or its
Subsidiaries, the rights or other properties of the Company or its
Subsidiaries, (i) which involves potential liability of the Company in an
amount of $2,500,000 or more, or (ii) which the Company believes in good faith
is likely to materially and adversely affect the financial condition of the
Company or to impair the right or ability of the Company to carry on its
businesses as now conducted or to pay the Obligations or perform the duties
under the Loan Documents; (b) of any material adverse change in the condition
(financial or otherwise) of the Company; (c) of any seizure or levy upon any
part of the properties of the Company or its Subsidiaries under any process or
by a receiver and (d) of any memorandum of understanding, cease and desist
order or similar action taken by any state or federal regulatory against the
Company or any of its Subsidiaries.

(g) Execution and Delivery of Loan Documents. The
Company shall execute and deliver to the Bank all Loan Documents (to be
executed by the Company) as and when requested by the Bank.

(h) Insurance. The Company shall timely procure and
maintain and comply with such insurance and policies of insurance (including
without limitation public liability insurance) as may be required by law and
such other insurance including, but not limited to, coverage of real property
and improvements, to such extent and against such hazards and liabilities, as
is customarily maintained by companies similarly situated, or as the Bank may
from time to time reasonably request, and, if requested by the Bank, to furnish
to the Bank a certificate of said insurance and further providing for thirty
(30) Days notice to the Bank prior to any material amendment, expiration or
cancellation.

(i) Debts and Taxes and Liabilities. Except for
indebtedness, obligations, taxes, assessments, governmental charges and claims,
the amount or validity of which is contested by the

16
<PAGE> 17

Company in good faith and by appropriate and lawful proceedings prosecuted
diligently (the aggregate amount of which items shall not be material to the
condition (financial or otherwise) and operations of the Company), the Company
shall pay and discharge (i) all of its indebtedness and obligations in
accordance with their terms and before they shall become in default, (ii) all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income and profits or against its properties, prior to the date on which
penalties attach thereto, and (iii) all lawful claims which, if unpaid, might
become a lien or charge upon any of its properties. The Company shall also set
aside and/or pay as and when due all monies required to be set aside and/or
paid by any federal, state or local statute or agency in regard to F.I.C.A.,
withholding, sales or excise or other similar taxes.

(j) Notification of Change of Name or Business. The Company shall
notify the Bank of each change in the name of the Company and of each change of
the location of any place of business and the office where the records of the
Company are kept, and, in such case, shall execute such documents as the Bank
may reasonably request to reflect said change of name or change of location, as
the case may be; provided, however, the Principal Place of Business of the
Company and the office where the records of the Company are kept may not be
kept out of or removed from Montgomery County, Alabama without the prior
written consent of the Bank.

(k) Financial Covenants. As at the end of each of the Company's
fiscal quarters, commencing with the fiscal quarter ending September 30, 1993,
the Company shall comply with the following financial covenants:

(i) The Company shall maintain a Primary Capital to Total
Assets Ratio of at least 0.065 to 1.0, or shall maintain total risk-based
capital of at least 10.0%; and

(ii) The Company shall maintain a Return on Assets Ratio of at
least (A) 0.009 to 1.0 through its fiscal year ending in 1995 and (B) 0.0095 to
1.0 thereafter; and

(iii) The Company shall maintain a Nonperforming Assets to
Net Loans Ratio of less than 0.015 to 1.0.

Compliance with each of the financial covenants contained in this
Section 4.1(k) shall be calculated in the manner set forth in Section 1.2 of
this Agreement.

SECTION 4.2 Negative Covenants. The Company covenants, for so
long as any of the principal amount of or interest on the Note is outstanding
and unpaid or any Obligation remains unpaid or unperformed, as follows:

17
<PAGE> 18

(a) Sale of Assets. The Company will not sell, lease,
assign, transfer, convey or otherwise dispose of its assets or properties,
tangible or intangible, without prior written notice to the Bank other than the
sale of mortgages in the usual course of business, or permit any of its
Subsidiaries to do the same; provided, however, in the event the Company or any
of its Subsidiaries propose to sell certain real estate equities which it or
they now or at any time during the term hereof own or acquire in connection
with conducting its or their respective business operations, the Bank shall not
unreasonably withhold approval with respect to the sale of any such real estate
equities, such prior notice shall not be required for assets having a book
value of less than $1,000,000 per transaction.

(b) Acquisition or Mergers. During the term of this
Agreement, the Company shall notify the Bank in writing of any Company
acquisition, merger or consolidation with any other Person, provided however,
the Company shall not, without the Bank's prior written consent, which consent
shall not be unreasonably withheld, become a party to a merger or consolidation
with any other Person in which the Company is not the surviving entity.

(d) Changes in Business. The primary business of the
Company will not change from that conducted by it on the date of this Agreement
without the consent of the Bank.

(e) Other Agreements. The Company will not enter into
any arrangements, contractual or otherwise, which would materially and
adversely affect its duties or the rights of the Bank under the Loan Documents,
or which is inconsistent with or limits or abrogates the Loan Documents.

(f) Additional Indebtedness. The Company and/or any
Subsidiary shall not create or assume any liability for money borrowed or the
equivalent in excess of the aggregate amount of $10,000,000.00 during the term
of this Agreement, except for real estate assets pledged to the Federal Home
Loan Bank Board of Atlanta in the usual course of business, the indebtedness
permitted by this Agreement, indebtedness that is subordinated to the
Obligations and indebtedness that results from the sale of commercial paper or
similar short term borrowings that arise in the normal and ordinary course of
business.

18
<PAGE> 19

ARTICLE FIVE

CONDITIONS OF LENDING

The obligations of the Bank to lend hereunder and to make any Advance
from time to time are subject to the following conditions precedent:

SECTION 5.1 Representations and Warranties. The representations
and warranties set forth in the Loan Documents are true and correct on and as
of the date hereof, and on the date of each Advance or disbursement hereunder.

SECTION 5.2 No Default. On the date hereof and on the date of
each Advance or disbursement, the Company shall be in compliance with all the
terms and provisions set forth in the Loan Documents on its part to be observed
or performed, and no Event of Default nor any event that, upon notice or lapse
of time or both, would constitute such an Event of Default, shall have occurred
and be continuing at such time.

SECTION 5.3 Loan Documents. The Company shall have delivered or
caused to be delivered to the Bank, in fully executed form, all the Loan
Documents, in form and substance satisfactory to the Bank, as the Bank may
request and all of the Loan Documents shall be in full force and effect.

SECTION 5.4 Supporting Documents. On or prior to the date
hereof, the Bank shall have received the following supporting documents, all of
which shall be satisfactory in form and substance to the Bank:

(a) a certificate or certificates, dated as of the date
hereof, of (i) the Secretary or any Assistant Secretary of the Company
certifying (A) that attached thereto is a true and correct copy of certain
resolutions adopted by the Board of Directors of the Company authorizing the
execution, delivery and performance of the Loan Documents and the performance
of the obligations of the Company and the borrowings thereunder, which
resolutions have not been altered or amended in any respect, and remain in full
force and effect at all times since their adoption; (B) that attached thereto
is a true and correct copy of the Certificate of Incorporation of the Company,
and that such Certificate of Incorporation has not been altered or amended, and
no other charter documents have been filed, since the date of the filing of the
last amendment thereto or other charter document as indicated on the
certificate of the Secretary of State of the State of Florida or other
appropriate public official in any other state of incorporation attached
thereto; (C) that attached thereto is a true and correct copy of the Bylaws of
the Company and that such Bylaws are in full force and effect and no amendment
thereto is pending which would in any way affect the ability of the Company to
enter

19
<PAGE> 20

into and perform the obligations contemplated hereby; and (D) the incumbency
and signatures of the officers of the Company signing the Loan Documents and
any report, certificate, letter or other instrument or document furnished by
the Company in connection therewith, and (ii) another authorized officer of the
Company certifying the incumbency and signature of the Secretary or Assistant
Secretary of the Company; and

(b) a certificate or certificates of the Delaware
Secretary of State or other appropriate public official in any other state of
incorporation, dated as of a recent date, as to the good standing of the
Company.

ARTICLE SIX

EVENTS OF DEFAULT

SECTION 6.1 Events of Default. The following each and all are
Events of Default hereunder:

(a) Monetary Default. If the Company shall default in
any payment of the principal of or interest on the Loan when and as the same
shall become due and payable, whether at maturity, by acceleration at the
discretion of the Bank or otherwise; or

(b) Non-Monetary Default. If the Company or any of the
Subsidiaries shall default in the performance of or compliance with any term or
covenant contained in the Loan Documents which default or non-compliance shall
continue and not be cured within ten (10) Days of the occurrence thereof; or

(c) Third Party Default. If the Company or any
Subsidiary shall suffer a material default in the performance of any agreement
with any Person other than the Bank; or

(d) Misrepresentation. If any representation or warranty
made in writing by or on behalf of the Company or any Subsidiary or in any
other Loan Document shall prove to have been false or incorrect in any material
respect on the date as of which made or reaffirmed; or

(e) Dissolution. Any order, judgment, or decree is
entered in any proceedings against Company or any Subsidiary decreeing the
dissolution of Company or any Subsidiary and such order, judgment, or decree
remains unstayed and in effect for more than thirty (30) days; or

(f) Default Under Pledge Agreement. If the Company fails
to fulfill or comply with the terms of the Pledge Agreement or there shall be a
default under the Pledge Agreement.

20
<PAGE> 21

(g) Bankruptcy, Failure to Pay Debts, Etc. If the
Company or any Subsidiary shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or shall make an assignment for the
benefit of creditors, file a petition in bankruptcy, petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for the
Company or any Subsidiary or a substantial part of assets, or shall commence
any proceeding under any bankruptcy, reorganization, arrangement, readjustment
of debt, dissolution or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect, or if there shall have been filed any such petition
or application, or any such proceeding shall have been commenced against the
Company or any Subsidiary, in which an order for relief is entered or which
remains undismissed for a period of thirty (30) Days or more, or the Company or
any Subsidiary by any act or omission shall indicate its consent to, approval
of or acquiescence in any such petition, application, or proceeding or order
for relief or the appointment of a custodian, receiver or any trustee for the
Company or any Subsidiary or any substantial part of any of its properties, or
shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of thirty (30) Days or more; or

(h) Fraudulent Conveyance. The Company or any Subsidiary
shall have concealed, removed, or permitted to be concealed or removed, any
part of its properties, with intent to hinder, delay or defraud its creditors
or any of them, or made or suffered a transfer of any of its properties which
may be fraudulent under any bankruptcy, fraudulent conveyance or similar law,
or shall have made any transfer of its properties to or for the benefit of a
creditor at a time when other creditors similarly situated have not been paid,
or shall have suffered or permitted, while insolvent, any creditor to obtain a
lien upon any of its properties through legal proceedings or distraint which is
not vacated within thirty (30) Days from the date thereof.

ARTICLE SEVEN

RIGHTS UPON DEFAULT

Upon the occurrence or continuing of any Event of Default, the Bank
shall have and may exercise any or all of the rights set forth herein
(provided, however, the Bank shall be under no duty or obligation to do so):

SECTION 7.1 Acceleration. To declare the indebtedness evidenced
by the Note and all other Obligations to be forthwith due and payable,
whereupon the Note and all other Obligations shall become forthwith due and
payable, both as to principal and interest, without presentment, demand,
protest or any other notice or grace period of any kind, all of which are
hereby expressly waived, anything contained herein or in the Note or in such
other

21
<PAGE> 22
Obligations to the contrary notwithstanding, and, upon such acceleration, the
unpaid principal balance and accrued interest upon the Note shall from and
after such date of acceleration bear interest at the Default Rate.

SECTION 7.2 Right of Setoff. To exercise its right of setoff as
permitted under Section 2.6.

SECTION 7.3 Other Rights. To exercise such other rights as may
be permitted under any of the Loan Documents or applicable law.

SECTION 7.4 Uniform Commercial Code. To exercise from time to
time any and all rights and remedies of a secured creditor under the UCC and
any and all rights and remedies available to it under any other applicable law.

ARTICLE EIGHT

MISCELLANEOUS

SECTION 8.1 Cumulative Remedies. The remedies provided in this
Agreement and in the Loan Documents are cumulative and not exclusive of any
remedies provided by law or in equity. Upon an Event of Default, the Bank may
elect to exercise any one or more of such remedies and such election shall not
waive or cause the Bank to have elected not to subsequently exercise any other
such remedies available to it under the Agreement or any Loan Document.

SECTION 8.2 Amendments, Etc. No amendment, modification,
termination or waiver of any provision of this Agreement, the Note or the other
Loan Documents, nor consent to any departure by the Company therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Bank, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

SECTION 8.3 Addresses for Notices, Etc. All notices, requests,
demands and other communications provided for hereunder shall be in writing and
shall be deemed to have been given (i) in the case of delivery, when addressed
to the other party and delivered to the address set forth below, (ii) in the
case of mailing, three (3) Days after said notice has been deposited in the
United States Mails, postage prepaid, by certified or return mail, and
addressed to the other party as set forth below, and (iii) in all of the cases,
when received by the other party. The address at which notices may be sent
under this Section 8.3 are the following:

If to the Company: THE COLONIAL BANCGROUP, INC.
Post Office Box 1108
Montgomery, Alabama 36192
Attention: W. Flake Oakley CFO

22
<PAGE> 23

If to the Bank: SUN BANK, NATIONAL ASSOCIATION
200 South Orange Avenue
Post Office Box 3833
Orlando, Florida 32802-3833
Attention: Michael D. Reynolds
Vice President

With a copy to: A. Guy Neff, Esq.
Maguire, Voorhis & Wells, P.A.
P.O. Box 633
Orlando, FL 32802

Any party may at any time change the address to which notices may be sent under
this Section by the giving of notice of such change to the other party in the
manner set forth herein.

SECTION 8.4 Applicable Law. This Agreement, and each of the Loan
Documents and transactions contemplated herein (unless specifically stipulated
to the contrary in such document) shall be governed by and interpreted in
accordance with the laws of the State of Florida.

SECTION 8.5 Survival of Representations and Warranties. All
representations, warranties, covenants and agreements contained herein or made
in writing by the Company in connection herewith shall survive the execution
and delivery of this Agreement, the Note and the other Loan Documents and be
true and correct during the term of the Loan.

SECTION 8.6 Time of the Essence. Time is of the essence of this
Agreement, the Note and the other Loan Documents.

SECTION 8.7 Headings. The headings in this Agreement are
intended to be for convenience of reference only, and shall not define or limit
the scope, extent or intent or otherwise affect the meaning of any portion
hereof.

SECTION 8.8 Severability. In case any one or more of the
provisions contained in this Agreement, the Note or the other Loan Documents
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, the same shall not affect any other provision of this Agreement, the
Note or the other Loan Documents, but this Agreement, the Note and the other
Loan Documents shall be construed as if such invalid or illegal or
unenforceable provision had never been contained therein; provided, however, in
the event said matter would in the reasonable opinion of the Bank adversely
effect the rights of the Bank under any or all of the Loan Documents, the same
shall be an Event of Default.

SECTION 8.9 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall

23
<PAGE> 24

constitute one and the same instrument and any of the parties hereto may
execute this Agreement by signing any such counterpart.

SECTION 8.10 Conflict. In the event any conflict arises between
the terms of this Agreement and the terms of any other Loan Document, the Bank
shall have the option of selecting which conditions shall govern the loan
relationship evidenced by this Agreement and, if the Bank does not so indicate,
the terms of this Agreement shall govern in all instances-of such conflict.

SECTION 8.11 Term. The term of this Agreement shall be for such
period of time until the Loan and Note have been repaid in full, the Company
has no further right to request any Advance on the Loan and all Obligations
have been paid to the Bank in full.

SECTION 8.12 Cross Defaults. A default under any Loan Document,
including a default under this Agreement, shall be and constitute a default
under each and every Loan Document, including this Agreement. A default under
any other obligation of the Company or any of its affiliates to the Bank shall
be and constitute a default under this Loan and a default under this Loan shall
be and constitute a default under all other obligations of the Company or any
of its affiliates to the Bank.

SECTION 8.13 Expenses. The Company agrees, whether or not the
transactions hereby contemplated shall be consummated, to pay, and save Bank
harmless against liability for the payment of, all out-of-pocket expenses
arising in connection with this transaction, all taxes, together in each case
with interest and penalties, if any, and any income tax payable by Bank in
respect of any reimbursement therefor, which may be payable in respect of the
execution, delivery and performance of this Agreement or the execution,
delivery, acquisition and performance of any Note issued under or pursuant to
this Agreement (excepting only any tax on or measured by net income of Bank
determined substantially in the same manner, other than the rate of tax, as net
income is presently determined under the Federal Internal Revenue Code), and
the reasonable fees and expenses of any special counsel to Bank in connection
with this Agreement and any subsequent modification or enforcement thereof or
consent thereunder including, without limitation, attorneys fees and court
costs incurred in any legal proceeding whether at the trial or appellate level
or in any bankruptcy proceeding. The obligations of Company under this Section
8.13 shall survive the payment of any Note.

SECTION 8.14 Successors and Assigns. All covenants and agreements
in this Agreement contained by or on behalf of either of the parties hereto
shall bind and inure to the benefit of the respective successors and assigns of
the parties hereto whether so expressed or not; provided, however, this clause
shall not by itself authorize any delegation of duties by the Company or any

24
<PAGE> 25
other assignment which may be prohibited by the terms and conditions of this
Agreement.

SECTION 8.15 Further Assurances. The Company shall, from time to
time, execute such additional documents as may reasonably be requested by the
Bank or the counsel, to carry out and fulfill the intent and purpose of this
Agreement and the Loan Documents.

SECTION 8.16 No Third Party Beneficiaries. The parties intend
that this Agreement is solely for their benefit and no Person not a party
hereto shall have any rights or privileges under this Agreement whatsoever
either as the third party beneficiary or otherwise.

SECTION 8.17 WAIVER OF JURY TRIAL. THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY, AFTER CAREFUL CONSIDERATION AND AN OPPORTUNITY
TO SEEK LEGAL ADVICE, WAIVES ITS RIGHT TO HAVE A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION ARISING OUT OF OR IN ANY WAY CONNECTED WITH ANY OF THE
PROVISIONS OF THIS AGREEMENT, THE NOTE, THE PLEDGE AGREEMENT OR ANY OTHER LOAN
DOCUMENT EXECUTED IN CONJUNCTION WITH THE LOAN EVIDENCED BY THIS AGREEMENT.

SECTION 8.18 No Waiver. No failure or delay on the part of the
Bank in exercising any right, power or remedy hereunder, or under the Note or
the other Loan Documents shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder or thereunder.

SECTION 8.19 Entire Agreement. Except as otherwise expressly
provided, this Agreement and the other Loan Documents embody the entire
agreement and understanding between the parties hereto and supersede all prior
agreements and understandings relating to the subject matter hereof.

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed, sealed and delivered, as applicable, by their duly
authorized officers on the day and year first above written.

COMPANY:

WITNESSES: THE COLONIAL BANCGROUP, INC.

- ------------------------- By:
-------------------------------
Name: W. FLAKE OAKLEY
-------------------- Secretary

- ------------------------- (CORPORATE SEAL)

Name:
--------------------

25
<PAGE> 26

SUN BANK, NATIONAL ASSOCIATION

- ------------------------- By:
------------------------------
Name: Michael D. Reynolds
-------------------- Vice President

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

Name:
--------------------

26
<PAGE> 27

EXHIBIT A

LIST OF SUBSIDIARIES

Colonial Bank
The Colonial BancGroup Building Corporation

<PAGE> 1

EXHIBIT 10(E)

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER is made and entered into and is
effective as of the 21st day of December, 1995 (the "Agreement"), by and among
The Colonial BancGroup, Inc., a Delaware corporation ("Acquiror"), and
Commercial Bancorp of Georgia, Inc., a Georgia corporation ("CBG"). Certain
capitalized terms used herein shall have the meanings ascribed to such terms in
Appendix A hereto.

W I T N E S S E T H:

WHEREAS, Acquiror owns all of the issued and outstanding shares of
capital stock of Colonial Bank; and

WHEREAS, CBG is a one-bank holding company that owns all of the issued
and outstanding capital stock of Commercial Bank; and

WHEREAS, the Boards of Directors of Acquiror, and CBG have approved
the merger of CBG with and into Acquiror (the "Merger") upon the terms and
subject to the conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon and subject to the terms and the
conditions hereinafter set forth, the parties do hereby agree as follows:

ARTICLE I

THE MERGER

1.01 The Merger. Upon the terms and subject to the conditions of
this Agreement and in accordance with applicable law, at the Effective Time (as
defined in Section 1.02 below) CBG shall be merged with and into Acquiror and
the separate existence of CBG shall thereupon cease. Acquiror shall be the
surviving corporation in the Merger (hereinafter sometimes referred to as the
"Surviving Corporation") and the name of the Surviving Corporation shall be
"The Colonial BancGroup, Inc." As a result of the Merger, Commercial Bank will
become a wholly-owned subsidiary of Acquiror.

1.02 Effective Time of the Merger. The Merger shall become
effective at the time (the "Effective Time") specified in the Certificate of
Merger to be issued by the Secretary of State of the State of Delaware. The
filing of the Certificate of Merger shall be made simultaneously with or as
soon as possible following the closing of the transactions contemplated by this
Agreement in accordance with Article XII hereof. It is the intent of the
parties hereto that the Effective Time shall be within five business days from
the date of the last required approval and the expiration of any applicable
waiting periods or as soon
<PAGE> 2

as practicable thereafter.

1.03 Further Acts. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further assignments
or assurances in law or any other acts are necessary or desirable (i) to vest,
perfect, confirm or record, in the Surviving Corporation, title to and
possession of any property or right of CBG or Acquiror, acquired as a result of
the Merger, or (ii) otherwise to carry out the purposes of this Agreement, CBG
or Acquiror and its officers and directors shall execute and deliver all such
proper deeds, assignments and assurances in law and do all reasonable acts
necessary or proper to vest, perfect or confirm title to, and possession of,
such property or rights in the Surviving Corporation and otherwise to carry
out the purposes of this Agreement; and the proper officers and directors of
the Surviving Corporation are fully authorized in the name of CBG or Acquiror,
or otherwise, to take any and all such action.

ARTICLE II

THE SURVIVING CORPORATION

2.01 Articles of Incorporation. The Certificate of Incorporation
of Acquiror in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation after the Effective
Time until otherwise amended or repealed.

2.02 Bylaws. The Bylaws of Acquiror in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation after the
Effective Time until otherwise amended or repealed.

2.03 Directors and Officers of the Surviving Corporation. The
directors of Acquiror in office immediately prior to the Effective Time shall
serve as the directors of the Surviving Corporation following the Effective
Time. The officers of Acquiror in office immediately prior to the Effective
Time shall serve as the officers of the Surviving Corporation following the
Effective Time.

ARTICLE III

CONVERSION OF SHARES

3.01 Conversion of Shares. Subject to the provisions of this
Article III, at the Effective Time, by virtue of the Merger and without any
action on the part of Acquiror, Colonial Bank, CBG, Commercial Bank, or the
stockholders of any of the foregoing, the shares of the constituent
corporations shall be converted as follows:

(a) Each share of capital stock of Acquiror (the
"Acquiror Capital Stock"), including the Common Stock, $2.50 par value per
share of Acquiror ("Acquiror Common Stock"), and any associated rights to
acquire Acquiror Capital Stock, issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding from and after the Effective
Time.
<PAGE> 3

(b) Each share of Common Stock of Colonial Bank issued
and outstanding immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.

(c) Each share of Common Stock, $1.00 par value per
share, of CBG ("CGB Common Stock") issued and outstanding at the Effective Time
(other than treasury stock or shares held by Acquiror which shares shall be
canceled) shall cease to be outstanding and shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
exchanged for the right to receive the number of shares of Acquiror Common
Stock equal to $21.07 divided by the Market Value (subject to appropriate
adjustment in the event of a stock split, stock dividend or recapitalization or
other similar event applicable to shares of Acquiror Common Stock prior to the
Effective Time) (the "Exchange Ratio") upon surrender of the certificate
representing such shares of CBG Common Stock. The Market Value shall represent
the per share market value of the Acquiror Common Stock at the Effective Time
and shall be equal to the average of the Daily Average Value (as defined below)
of the Acquiror Common Stock as reported by The New York Stock Exchange
("NYSE") on the thirty (30) trading days ending on the trading day immediately
preceding the Effective Time. The Daily Average Value on each trading day
shall be the average of the high and low sales price of the Acquiror Common
Stock for such trading day as reported by the NYSE.

(d) Each share of Common Stock of Commercial Bank issued
and outstanding immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time and shall be wholly owned by the
Surviving Corporation.

3.02 Anti-Dilution Provisions. In the event Acquiror changes the
number of shares of Acquiror Common Stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, or similar
recapitalization with respect to such stock and the record date therefor (in
the case of a stock dividend) or the effective date thereof (in the case of a
stock split or similar recapitalization for which a record date is not
established) shall be prior to the Effective Time, the Market Value and, as a
result, the Exchange Ratio shall be proportionately adjusted to reflect such
stock split, stock dividend or other recapitalization.

3.03 Fractional Shares. Notwithstanding any other provision of
this Agreement, each holder of shares of CBG Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of Acquiror Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Acquiror
Common Stock multiplied by the Market Value. No such holder will be entitled
to dividends, voting rights, or any other rights as a stockholder in respect of
any fractional shares.

3.04 Conversion of Stock Options, Warrants and Stock Appreciation
Rights.

(a) At the Effective Time, all rights with respect to
CBG Common Stock pursuant to stock options, stock purchase warrants or similar
rights, including rights under contracts with employees of Commercial Bank
(collectively, "CBG Options"), granted by
<PAGE> 4

CBG or Commercial Bank, which are outstanding at the Effective Time, whether or
not exercisable, shall be converted into and become rights with respect to
Acquiror Common Stock, and Acquiror shall assume each CBG Option, in accordance
with the terms of the agreement or plan by which it is evidenced, except that
from and after the Effective Time, (i) each CBG Option assumed by Acquiror may
be exercised solely for shares of Acquiror Common Stock, (ii) the number of
shares of Acquiror Common Stock subject to such CBG Option shall be equal to
the number of shares of CBG Common Stock subject to such CBG Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, and (iii) the per
share exercise price under each such CBG Option shall be adjusted by dividing
the per share exercise price under each such CBG Option by the Exchange Ratio
and rounding up to the nearest cent. Notwithstanding the provisions of clause
(ii) of the preceding sentence, Acquiror shall not be obligated to issue any
fraction of a share of Acquiror Common Stock upon exercise of CBG Options and
any fraction of a share of Acquiror Common Stock that otherwise would be issued
upon the exercise of a converted CBG Option shall represent the right to
receive a cash payment upon exercise of such converted CBG Option equal to the
product of such fraction and the difference between the market value of one
share of Acquiror Common Stock at the time of exercise of such Option and the
per share exercise price of such CBG Option as adjusted pursuant to clause
(iii) of the preceding sentence. The market value of one share of Acquiror
Common Stock at the time of exercise of a CBG Option shall be the last sale
price of such common stock on the NYSE (as reported by The Wall Street Journal
or, if not reported thereby, any other authoritative source selected by
Acquiror) on the last trading day preceding the date of exercise. As soon as
practicable after the Effective Time, Acquiror shall file a registration
statement on Form S-3 or Form S-8, as the case may be (or any successor or
other appropriate forms), with respect to the shares of Acquiror Common Stock
subject to such options and shall use its reasonable best efforts to maintain
the effectiveness of such registration statement (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
CBG Options remain outstanding. Schedule 3.04(a) lists the names of all
persons holding CBG Options, the number of shares of CBG Common Stock issuable
upon exercise of such CBG Options and the per share exercise price of such CBG
Options.

As soon as practicable after the Effective Time, Acquiror
shall deliver to the holders of each CBG Option an appropriate notice setting
forth such holder's rights pursuant to such CBG Option following the Merger.
At or prior to the Effective Time, Acquiror shall take all corporate action
necessary to reserve for issuance sufficient shares of Acquiror Common Stock
for delivery upon the exercise of CBG Options assumed by it in accordance with
this Section 3.04.

(b) At the Effective Time, all obligations of CBG or
Commercial Bank under stock appreciation rights or similar rights, including
rights under the Commercial Bancorp of Georgia, Inc. and Commercial Bank of
Georgia Deferred Compensation Plan for Directors, as amended, the Commercial
Bancorp of Georgia, Inc., Commercial Bank of Georgia and Commercial Bank of
Gwinnett 1995 Deferred Compensation Plan for Directors (such plans are referred
to herein collectively as the "Deferred Compensation Plans") and under
contracts with employees of CBG or Commercial Bank (such stock appreciation
rights and similar rights are referred to as "CBG Stock Appreciation Rights"),
granted by
<PAGE> 5

CBG or Commercial Bank shall be assumed by Acquiror. Within ten (10) days
following the Effective Time, Acquiror shall pay to each holder of CBG Stock
Appreciation Rights cash equal to the value of such holder's CBG Stock
Appreciation Right(s) determined in accordance with the terms of the plan or
agreement under which such rights were granted except that, solely for purposes
of determining the amount of cash to be paid to participants in the Deferred
Compensation Plans, each Stock Unit (as defined in the respective Deferred
Compensation Plan) credited to a participant's account under the Deferred
Compensation Plans shall be deemed to have a value of $21.07 without regard to
the fair market value of the CBG Common Stock on the immediately preceding
Valuation Date (as defined in the Deferred Compensation Plans). Schedule
3.04(b) sets forth the names of all persons holding CBG Stock Appreciation
Rights, the number of units of stock appreciation rights and the current method
of determining the value of such stock appreciation rights.

3.05 Exchange Procedures. Promptly after the Effective Time,
Acquiror shall cause the exchange agent selected by Acquiror (the "Exchange
Agent") to mail to the former stockholders of CBG appropriate transmittal
materials. After the Effective Time, each holder of shares of CBG Common Stock
issued and outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the consideration provided
in Section 3.01 of this Agreement, together with all undelivered dividends or
distributions in respect of such shares (without interest thereon) pursuant to
Section 3.06 of this Agreement. To the extent required by Section 3.03 of this
Agreement, each holder of shares of CBG Common Stock issued and outstanding at
the Effective Time also shall receive, upon surrender of the certificate or
certificates representing such shares, cash in lieu of any fractional share of
Acquiror Common Stock to which such holder may be otherwise entitled (without
interest). Acquiror shall not be obligated to deliver the consideration to
which any former holder of CBG Common Stock is entitled as a result of the
Merger until such holder surrenders such holder's certificate or certificates
representing the shares of CBG Common Stock for exchange as provided in this
Section 3.05. The certificate or certificates of CBG Common Stock so
surrendered shall be duly endorsed as the Exchange Agent may require. Any
other provision of this Agreement notwithstanding, neither Acquiror, the
Surviving Corporation nor the Exchange Agent shall be liable to a holder of CBG
Common Stock for any amounts paid or property delivered in good faith to a
public official pursuant to any applicable abandoned property law.

3.06 Rights of Former CBG Stockholders. At the Effective Time, the
stock transfer books of CBG shall be closed as to holders of CBG Common Stock
immediately prior to the Effective Time and no transfer of CBG Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 3.05 of this Agreement,
each certificate theretofore representing shares of CBG Common Stock shall from
and after the Effective Time represent for all purposes only the right to
receive the consideration provided in Sections 3.01 and 3.03 of this Agreement
in exchange therefor. Whenever a dividend or other distribution is declared by
Acquiror on the Acquiror Common Stock, the record date for which is at or after
the Effective Time, the declaration shall include dividends or other
distributions on all shares issuable pursuant to this Agreement, but beginning
60 days after the Effective Time no
<PAGE> 6

dividend or other distribution payable to the holders of record of Acquiror
Common Stock as of any time subsequent to the Effective Time shall be delivered
to the holder of any certificate representing shares of CBG Common Stock issued
and outstanding at the Effective Time until such holder surrenders such
certificate for exchange as provided in Section 3.05 of this Agreement.
However, upon surrender of such CBG Common Stock certificate, both the Acquiror
Common Stock certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered dividends and cash payments
to be paid for fractional share interests (without interest) shall be delivered
and paid with respect to each share represented by such certificate.

3.07 Dissenters' Rights. Notwithstanding Section 3.01, no
outstanding share of CBG Common Stock shall be converted into or represent a
right to receive any shares of Acquiror Common Stock pursuant to Section 3.01
if the holder thereof has demanded and perfected his demand for payment of the
fair value of such share in accordance with the applicable provisions of
Article 13 of the Georgia Business Corporation Code (the "Dissenter
Provisions") and has not effectively withdrawn or lost his right to such
payment. All such shares of CBG Common Stock shall represent only the rights
granted with respect to such shares pursuant to the Dissenter Provisions. CBG
shall give notice to Acquiror upon receipt by CBG of any written demands for
payment of the fair value of CBG Common Stock and of withdrawals of such
demands and any other written communications provided in accordance with or
pursuant to the Dissenter Provisions (any stockholder duly making such a demand
being hereinafter called a "Dissenting Stockholder"). Acquiror shall have the
right to participate in all negotiations and proceedings with respect to any
Dissenting Stockholder. CBG agrees that it will not, except with the prior
consent of Acquiror, make any determination of fair value or any payment with
respect to, or settle or offer to settle any matter arising out of, any
dissent. Each Dissenting Stockholder, if any, who becomes entitled to payment
for his shares of CBG Common Stock pursuant to the Dissenter Provisions shall
receive payment therefor from Acquiror (but only after the amount thereof shall
have been agreed upon or finally determined pursuant to the Dissenter
Provisions) and such dissenting shares of CBG Common Stock shall be canceled.
If any holder of shares of CBG Common Stock who demands payment of the fair
value of his shares under the Dissenter Provisions shall effectively withdraw
or lose (through failure to perfect or otherwise) his right to such payment at
any time, the shares of CBG Common Stock of such holder shall be converted into
a right to receive the consideration set forth in Section 3.01 hereof.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF CBG

CBG represents and warrants to Acquiror as follows:

4.01 Organization. CBG is a corporation validly existing and in
good standing under the laws of the State of Georgia. CBG has all requisite
corporate power and authority to
<PAGE> 7

carry on and conduct its business as now being conducted and to own, lease or
operate its material properties and assets. CBG is duly qualified as a foreign
corporation, and is in good standing, in each state and foreign jurisdiction
where the character of its assets or the nature or conduct of its business
requires it to be so qualified except for such states and jurisdictions in
which the failure to be so qualified will not have a Material Adverse Effect on
CBG.

4.02 Power and Authority. CBG has the corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby, have been duly and validly authorized by
all necessary corporate action on the part of CBG (subject to receipt of
appropriate approval by the stockholders of CBG). Subject to such stockholder
approval, this Agreement constitutes CBG's legal, valid and binding obligation,
enforceable against CBG in accordance with its terms.

4.03 Capitalization.

(a) The authorized capital stock of CBG consists of (i)
10,000,000 shares of CBG Common Stock, of which 1,826,708 shares are issued and
outstanding (not including shares reserved for issuance upon the exercise of
CBG Options) and 35,000 shares were held as treasury shares as of the date of
this Agreement, and (ii) 10,000,000 shares of serial preferred stock, $1.00 par
value per share, none of which are issued and outstanding. All of the issued
and outstanding shares of capital stock of CBG are duly and validly issued and
outstanding and are fully paid and nonassessable under the Georgia Business
Corporation Code. None of the outstanding shares of capital stock of CBG has
been issued in violation of any preemptive rights of the current or past
stockholders of CBG. CBG has reserved 348,351 shares of CBG Common Stock for
issuance upon the exercise of outstanding CBG Options.

(b) Except as set forth in Schedule 4.03(b) hereto, there
are no outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement, obligating CBG to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the capital stock of CBG or
obligating CBG to grant, extend or enter into any such agreement or commitment.

4.04 Subsidiaries. CBG has no direct or indirect Subsidiaries
other than Commercial Bank, which is a commercial bank duly organized, validly
existing and in good standing under the laws of the State of Georgia and has
the corporate power and authority necessary for it to own, lease and operate
its assets and properties and to carry on its business as it is now being
conducted. Commercial Bank is qualified to do business, and is in good
standing, in each jurisdiction in which the properties owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary except for jurisdictions in which the failure to so
qualify would not have a Material Adverse Effect on CBG. Commercial Bank is an
"insured institution" as defined in the Federal Deposit
<PAGE> 8

Insurance Act and applicable regulations thereunder, and its deposits are
insured by the Bank Insurance Fund to the extent permitted by applicable law.
All of the outstanding shares of capital stock of Commercial Bank are validly
issued, fully paid, nonassessable and free of preemptive rights and are owned
by CBG free and clear of any liens, claims, encumbrances, security interests,
equities, charges and options of any nature whatsoever. There are no
subscriptions, options, warrants, rights, calls, contracts, proxies or other
commitments, understandings, restrictions or arrangements relating to the
issuance, sale, voting, transfer, ownership or other rights with respect to any
shares of capital stock of Commercial Bank, including any right of conversion
or exchange under any outstanding security, instrument or agreement.

4.05 Information Supplied for Use in Registration Statement.
Written information supplied by CBG to Acquiror and designated specifically for
use in the Registration Statement (as hereinafter defined) or any amendment or
supplement thereto, will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading. The Registration Statement on Form
S-4 including the Proxy Statement/Prospectus set forth therein, to be filed by
Acquiror with the Commission in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of the Acquiror
Common Stock, as amended at the time it becomes effective and as thereafter
amended, is referred to herein as the "Registration Statement." The Proxy
Statement/Prospectus in the form included in the Registration Statement at the
time it becomes effective and at the time it is delivered to the stockholders
of CBG is referred to herein as the "Proxy Statement/Prospectus."

4.06 Financial Statements.

(a) CBG has filed and made available to Acquiror all
forms, reports, and documents filed by CBG with the Commission since December
31, 1994 (collectively the "CBG SEC Reports"). The CBG SEC Reports (i) at the
time filed, complied in all material respects with the applicable requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated in such CBG SEC Reports or necessary in order to
make the statements in such CBG SEC Reports, in light of the circumstances
under which they were made, not misleading in any material respects.

(b) Schedule 4.06(b) contains (i) the audited
consolidated balance sheets (including related notes and schedules) of CBG as
of December 31, 1994, the related audited consolidated statements of income,
retained earnings, and cash flows (including related notes and schedules) for
each of the three years in the period ended December 31, 1994 (the "Audited
Financial Statements"); and (ii) the unaudited consolidated balance sheet
(including related notes and schedules) of CBG as of September 30, 1995, the
related unaudited consolidated statements of income, retained earnings, and
cash flows (including related notes and schedules), for the three and nine
month periods then ended (such
<PAGE> 9

unaudited consolidated financial statements hereinafter are referred to as the
"Interim Financial Statements," and the Interim Financial Statements and the
Audited Financial Statements are referred to collectively as the "CBG Financial
Statements"). The Audited Financial Statements present fairly in all material
respects the consolidated financial position of CBG and the results of its
operations as of the respective dates and for the respective periods covered by
the Audited Financial Statements. The Audited Financial Statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
or regulatory accounting principles applicable to banks and bank holding
companies applied on a consistent basis. The Interim Financial Statements have
been prepared in accordance with GAAP or regulatory accounting principles
applicable to banks and bank holding companies (in each case as applicable to
interim unaudited financial statements) and present fairly in all material
respects the consolidated financial position of CBG and the results of its
operations as of the respective dates and for the respective periods covered by
the Interim Financial Statements, subject to normal and recurring year-end
adjustments which are not expected to be material in amount.

(c) Since September 30, 1995, except as disclosed in the
CBG Financial Statements, the CBG and SEC Reports or in Schedule 4.06(c)
hereto, there have been no events, changes, or occurrences which have had, or
will have, a Material Adverse Effect on CBG.

4.07 No Undisclosed Liabilities. Except as reflected and reserved
against in the CBG Financial Statements, or disclosed in the notes thereto, or
as shown in Schedule 4.07, neither CBG nor Commercial Bank has incurred since
September 30, 1995 any material liability or obligation which will have a
Material Adverse Effect on CBG, except for liabilities and obligations incurred
by CBG or Commercial Bank in the ordinary course of its business. Except as
set forth in Schedule 4.07, since September 30, 1995, neither CBG nor
Commercial Bank has incurred or paid any material liability or obligation which
would have a Material Adverse Effect on CBG except for liabilities and
obligations incurred by CBG or Commercial Bank in the ordinary course of its
business.

4.08 No Violation of Law. Each of CBG and Commercial Bank has in
effect all Permits necessary for it to carry on its business as now conducted,
except for those Permits the absence of which will not have a Material Adverse
Effect on CBG, and there has occurred no Default under any such Permit, other
than defaults which will not have a Material Adverse Effect on CBG. Except as
disclosed in Schedule 4.08 hereto, neither CBG nor Commercial Bank:

(a) to the knowledge of CBG, is in violation of any Laws,
Orders, or Permits applicable to its business or employees conducting its
business, except for violations which will not have a Material Adverse Effect
on CBG; and

(b) since January 1, 1994, has received any notification
or communication from any agency or department of federal, state, or local
government or any Agency or the staff thereof (i) asserting that CBG or
Commercial Bank is not in compliance with any of the Laws or Orders which such
governmental authority or Agency enforces, where such noncompliance will have a
Material Adverse Effect on CBG, (ii) threatening to revoke any
<PAGE> 10

Permits, the revocation of which will have a Material Adverse Effect on CBG or
(iii) requiring CBG or Commercial Bank to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment, or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business, or relates
to its capital adequacy, its credit or reserve policies, its management, or the
payment of dividends.

4.09 Assets.

(a) Except as disclosed in Schedule 4.09 hereto or as
disclosed or reserved against in the CBG Financial Statements, CBG and
Commercial Bank have good and marketable title, free and clear of all Liens, to
all of their respective material Assets reflected in CBG's most recent balance
sheet referred to in Section 4.06.

(b) Schedule 4.09(b) sets forth a list and description of
all material real and personal property owned or leased by CBG or Commercial
Bank, either as lessor or lessee.

(c) Except as disclosed in Schedule 4.09(c) hereto, there
are presently no claims pending under any policies of insurance and no notices
have been given by CBG or Commercial Bank under such policies.

4.10 Indebtedness. Schedule 4.10 sets forth a complete and
accurate list and description of all instruments or other documents relating to
any direct or indirect indebtedness for borrowed money of CBG and Commercial
Bank (other than deposit liabilities), as well as indebtedness by way of
lease-purchase arrangements, guarantees, undertakings on which others rely in
extending credit and all conditional sales contracts, chattel mortgages and
other security arrangements with respect to personal property used or owned by
CBG or Commercial Bank. CBG has made available to Acquiror a true, correct and
complete copy of each of the items listed in Schedule 4.10.

4.11 Litigation. Except as set forth in Schedule 4.11 or in the
CBG SEC Reports, there are no claims, suits, actions or known investigations,
indictments or informations, proceedings or arbitrations, grievances or other
procedures (including grand jury investigations, actions or proceedings, and
product liability and workers' compensation suits, actions or proceedings) of
which CBG has received notice pending or, to the knowledge of CBG, threatened
in writing, before any court, commission, arbitration tribunal, or judicial,
governmental or administrative department, body, agency, administrator or
official, grand jury, or any other forum for the resolution of grievances,
against CBG or Commercial Bank or involving any of its property or business
which, if determined adversely to CBG or Commercial Bank, would have a Material
Adverse Effect on CBG. There are no judgments, orders, writs, injunctions,
decrees or known indictments or informations, grand jury subpoenas or civil
investigative demands, plea agreements, stipulations or awards (whether
rendered by a court, commission, arbitration tribunal, or judicial,
governmental or administrative department, body, agency, administrator or
official, grand jury or any other forum for the resolution of grievances)
against or relating to CBG or Commercial Bank or involving any of its property
or business.
<PAGE> 11
4.12 Employees. Schedule 4.12 sets forth the names and current
compensation (broken down by category, e.g., salary, bonus, commission) of all
employees of CBG and Commercial Bank. Other than as set forth in Schedule
4.12 or as contemplated by this Agreement, neither CBG nor Commercial Bank is a
party to any employment or other contracts with any of its employees.

4.13 Employee Benefits.

(a) To the knowledge of CBG, all employee benefit plans
of CBG and Commercial Bank have been established in compliance with, and such
plans have been operated in material compliance with, all applicable laws.
Except as set forth on Schedule 4.13, neither CBG nor Commercial Bank sponsors
or otherwise maintains a "pension plan" within the meaning of section 3(2) of
ERISA or any other retirement plan other than the CBG 401(k) plan that is
intended to qualify under section 401 of the Code, nor do any unfunded
liabilities exist with respect to any employee benefit plan, past or present.
Schedule 4.13 includes a copy of the Internal Revenue Service determination
letter respecting the CBG 401(k) plan. To the knowledge of CBG, no employee
benefit plan, any trust created thereunder nor any trustee or administrator
thereof has engaged in a "prohibited transaction," as defined in section 4975
of the Code, which may have a Material Adverse Effect on CBG.

(b) CBG has no reason to believe that any amount payable
to any employee of CBG or Commercial Bank will fail to be deductible for
federal income tax purposes by virtue of Section 280G of the Code and
regulations thereunder.

4.14 Collective Bargaining. There are no labor contracts,
collective bargaining agreements, letters of understanding or other
arrangements, formal or informal, between CBG or Commercial Bank and any union
or labor organization covering any of CBG's or Commercial Bank's employees and
none of said employees are represented by any union or labor organization.

4.15 Labor Disputes. CBG and Commercial Bank are in material
compliance with all federal and state laws respecting employment and employment
practices, terms and conditions of employment, wages and hours. CBG and
Commercial Bank are not and have not been engaged in any unfair labor practice,
and, to the knowledge of CBG, no unfair labor practice complaint against CBG or
Commercial Bank is pending before the National Labor Relations Board.
Relations between management and the employees are amicable and there have not
been, nor to the knowledge of CBG are there presently, any attempts to organize
employees, nor to the knowledge of CBG are there plans for any such attempts.

4.16 Bank Accounts. Schedule 4.16 sets forth a complete and
accurate list of each bank or financial institution in which CBG or Commercial
Bank has an account or safe deposit box (giving the address and account
numbers) and the names of the persons authorized to draw thereon or to have
access thereto.

4.17 Environmental Requirements. To the knowledge of CBG, except
as disclosed in
<PAGE> 12

Schedule 4.17, neither CBG nor Commercial Bank owns any property (including
other real estate owned but excluding any property in which CBG or Commercial
Bank has only a security interest), which is in violation of any federal or
state law, regulation, or treaty relating to the storage, handling,
transportation, treatment or disposal of hazardous substances (as defined in 42
U.S.C. Section 9601) or hazardous materials (as defined by any federal or state
law or regulation) or other waste products, which violation will result in or
have a Material Adverse Effect on CBG, and CBG and Commercial Bank have
received all permits, licenses or other approvals as may be required of and
under applicable federal and state environmental laws and regulations to
conduct its respective business as currently conducted, except where the
failure to have such permits, licenses or other approvals will not have a
Material Adverse Effect on CBG. CBG and Commercial Bank are in compliance in
all material respects with the terms and conditions of any such permit, license
or approval, and has not received any notices or claims that it is a
responsible party or a potentially responsible party in connection with any
claim or notice asserted pursuant to 42 U.S.C. Section 9601 et. seq. or any
state superfund law except where such failure to comply with the terms and
conditions of any such permit, license or approval will not have a Material
Adverse Effect on CBG. CBG and Commercial Bank have complied in all material
respects with applicable laws and regulations with respect to the disposal of
all of its hazardous substances, hazardous materials and other waste products.

4.18 Contracts and Commitments. Except as set forth in Schedule
4.18 or in the CBG SEC Reports and contracts made in the ordinary course of
business:

(a) Neither CBG nor Commercial Bank has any agreement or
contract that is material to its business, operations or prospects other than
those agreements which have been furnished to Acquiror;

(b) Neither CBG nor Commercial Bank has any outstanding
material agreement or contract, written or oral, with any officer, employee,
agent, consultant, advisor, or broker that is not cancelable by CBG or
Commercial Bank, on notice of not longer than thirty (30) days and without
liability, penalty or premium of any kind; and

(c) Except as noted in Schedule 4.10 and except for
negotiable instruments in the process of collection, neither CBG nor Commercial
Bank has any power of attorney outstanding or any material contract, commitment
or liability (whether absolute, accrued, contingent or otherwise), as
guarantor, surety, co-signer, endorser, co-maker or indemnitor in respect of
the contract or commitment of any other person, corporation, partnership, joint
venture, association, organization or other entity.

4.19 No Conflict. The execution and delivery of this Agreement by
CBG and Commercial Bank, the consummation of the transactions contemplated
herein by CBG and Commercial Bank, and the performance of the covenants and
agreements of CBG and Commercial Bank herein, subject to fulfillment of the
conditions set forth in this Agreement, will not, with or without the giving of
notice or the lapse of time, or both, (i) violate or conflict with any of the
provisions of any charter document or bylaw of CBG or Commercial Bank; or (ii)
conflict with or result in a breach or default under or cause termination of
any term or condition of any material mortgage, indenture, contract, license,
permit, instrument, or other material agreement, document or instrument to
which CBG or
<PAGE> 13

Commercial Bank is a party or by which CBG or Commercial Bank or its properties
may be bound which breach, default or violation would cause a Material Adverse
Effect to CBG; or (iii) violate any provision of law, statute, regulation,
court order or ruling of any governmental authority to which CBG or Commercial
Bank is a party or by which it or its properties may be bound and which
violation would have a Material Adverse Effect on CBG.

4.20 Agreements in Full Force and Effect. All material contracts,
agreements, plans, leases, policies and licenses to which CBG or Commercial
Bank is a party and which are described in the Proxy Statement/Prospectus
and/or referred to, or required to be referred to, in any Schedule delivered
hereunder are valid and binding, and are in full force and effect in all
material respects and are enforceable in accordance with their material terms,
except to the extent that the validity or enforceability thereof may be limited
by bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally.

4.21 Required Consents and Approvals. Other than the approval of
the consummation of the Merger by CBG's stockholders and by applicable bank
regulatory agencies, no Consent or approval is required by virtue of the
execution hereof by CBG or Commercial Bank or the consummation of any of the
transactions contemplated herein by CBG or Commercial Bank the failure of which
to obtain would have a Material Adverse Effect on CBG or on the transactions
contemplated by this Agreement.

4.22 Absence of Certain Changes and Events. Except as set forth in
Schedule 4.22 or in the ordinary course of business, since September 30, 1995,
CBG and Commercial Bank, taken as a whole, have not :

(a) suffered any damage or destruction adversely and
materially affecting CBG;

(b) made any declaration, setting aside or payment of any
dividend or other distribution of assets (whether in cash, stock or property)
with respect to its capital stock, or any direct or indirect redemption,
purchase or other acquisition of such stock, or otherwise made any payment of
cash or any transfer of other assets;

(c) suffered any material adverse change in its working
capital, assets, liabilities, financial condition or business prospects other
than as a result of this Agreement and the transactions contemplated hereby;

(d) suffered any material adverse change in the
collectibility of its loan portfolio not subject to loan loss reserves;

(e) except for customary increases based on term of
service, performance or regular promotion of employees, increased (or announced
any increase in) the compensation payable or to become payable to any employee,
or increased (or announced any increase in) any bonus, insurance, pension or
other employee benefit plan, payment or arrangement for such employees, or
entered into or amended any employment, consulting, severance or similar
agreement;
<PAGE> 14

(f) incurred, assumed or guaranteed any liability or
obligation (absolute, accrued, contingent or otherwise) other than in the
ordinary course of business consistent with past practice or in connection with
this transaction;

(g) paid, discharged, satisfied or renewed any claim,
liability or obligation other than payment in the ordinary course of business
consistent with past practice;

(h) permitted any of its assets to be subjected to any
Lien;

(i) waived any material claims or rights;

(j) sold, transferred or otherwise disposed of any of its
material Assets, except in the ordinary course of business consistent with past
practice;

(k) made any material capital expenditure or investment
except in the ordinary course of business consistent with past practice;

(l) made any change in any material method, practice or
principle of financial or tax accounting;

(m) managed working capital components, including cash,
loans, deposits and other current liabilities in a fashion inconsistent in any
material respect with past practice, including failing to make all budgeted and
other normal capital expenditures, repairs, improvements and dispositions;

(n) paid, loaned, advanced, sold, transferred or leased
any asset to any employee, except for normal compensation involving salary and
benefits and except for loans to officers and directors;

(o) issued or sold any of its capital stock (other than
pursuant to the exercise of any CBG Options) or issued any warrant, option or
other right to purchase shares of its capital stock, or any security
convertible into its capital stock;

(p) received notice that any of its substantial customers
has terminated or intends to terminate its deposit or lending relationship with
Commercial Bank other than in the ordinary course of business, which
termination would have a Material Adverse Effect on CBG;

(q) failed to operate its business in the ordinary course
in all material respects;

(r) except in the ordinary course of business, made or
permitted any amendment or termination of any material contract, agreement or
license to which it is a party if such amendment or termination would have a
Material Adverse Effect on CBG; or

(s) agreed in writing, or otherwise, to take any action
described in this Section.
<PAGE> 15

4.23 Tax Matters.

(a) Definitions. For purposes of this Agreement, the
term "Taxes" shall mean all taxes, however denominated, including any interest,
penalties or other additions to tax that may become payable in respect thereof,
imposed by any federal, territorial, state, local or foreign government or any
agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income or
profits taxes (including, but not limited to, federal income taxes and state
income taxes), payroll and employee withholding taxes, unemployment insurance,
social security taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, business license taxes, occupation
taxes, real and personal property taxes, stamp taxes, environmental taxes,
transfer taxes, workers' compensation, PBGC premiums and other governmental
charges, and other obligations of the same or of a similar nature to any of the
foregoing, which CBG or Commercial Bank is required to pay, withhold or
collect.

(b) Returns Filed and Taxes Paid. (i) All Tax returns
required to be filed by or on behalf of CBG or Commercial Bank have been duly
filed on a timely basis and such Tax returns are true, complete and correct in
all material respects; (ii) all Taxes shown to be payable on the returns or on
subsequent assessments with respect thereto have been paid in full on a timely
basis, and no other Taxes are payable by CBG and Commercial Bank with respect
to items or periods covered by such returns (whether or not shown on or
reportable on such returns) or with respect to any period prior to the date of
this Agreement; (iii) CBG and Commercial Bank have withheld and paid over all
Taxes required to have been withheld and paid over, and complied with all
information reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party; and (iv) there are no liens on any of the assets of CBG or
Commercial Bank with respect to Taxes, other than liens for Taxes not yet due
and payable.

(c) Tax Deficiencies; Audits; Statutes of Limitations.
(i) The Tax returns of CBG and Commercial Bank have never been audited by a
government or taxing authority, nor is any such audit in process, pending or,
to the knowledge of CBG, threatened; (ii) no deficiencies exist or have been
asserted or are expected to be asserted with respect to Taxes of CBG or
Commercial Bank and neither CBG nor Commercial Bank has received notice that it
has not filed a Tax return or paid Taxes required to be filed or paid by it;
(iii) neither CBG nor Commercial Bank is a party to any action or proceeding
for assessment or collection of Taxes, nor has such event been asserted or, to
the knowledge of CBG, threatened against CBG or Commercial Bank; (iv) no waiver
or extension of any statute of limitations is in effect with respect to Taxes
or Tax returns of CBG or Commercial Bank; (v) CBG and Commercial Bank have
disclosed on its federal income tax returns all positions taken therein that
could give rise to a "substantial understatement of income tax" within the
meaning of Section 6662 of the Code; and (vi) neither CBG nor Commercial Bank
has made an application or request (either in writing or verbally, formally or
informally) to the Internal Revenue Service to change methods of accounting or
taxable year.

(d) Tax Sharing Agreements. Except as otherwise
disclosed in Schedule 4.23(d),
<PAGE> 16

neither CBG nor Commercial Bank is (or have they ever been) a party to any tax
sharing agreement.

4.24 Loan Loss Reserves. Commercial Bank's allowances for possible
loan losses is reasonably adequate as of the date hereof in all material
respects based upon the classification of the outstanding loans to provide for
all anticipated losses, net of recoveries related to loans previously
charged-off, on loans outstanding as of the date hereof.

4.25 Brokers. Except for services provide for CBG by The
Robinson-Humphrey Company, Inc., all negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on by CBG directly
with Acquiror and without intervention of any other person, either as a result
of any act of CBG or Commercial Bank, or otherwise, in such manner as to give
rise to any valid claim against CBG or Commercial Bank for a finder's fee,
brokerage commission or other like payment.

4.26 Derivative Contracts. Neither CBG nor Commercial Bank is a
party to or has agreed to enter into a swap, forward, future, option, cap,
floor or collar financial contract, or any other interest rate or foreign
currency protection contract or derivative security not included in the CBG
Financial Statements which is a financial derivative contract (including
various combinations thereof).

4.27 Material Contract Defaults. Neither CBG nor Commercial Bank
is in default in any material respect under the terms of any contract,
agreement, lease or other commitment which is material to the business,
operations, properties or Assets, or the condition, financial or otherwise, of
such company and which default will have a Material Adverse Effect on CBG and,
to the knowledge of CBG, there is no event which, with notice or lapse of
time, or both, may be or become an event of default under such material
contract, agreement, lease or other commitment in respect of which reasonable
steps have not been taken to prevent such a default from occurring.

4.28 Insurance. Schedule 4.28 sets forth a list of all insurance
policies and bonds in effect for CBG or Commercial Bank. All such insurance
policies and bonds are valid, enforceable and in full force and effect, and
neither CBG nor Commercial Bank has received any notice of a premium increase
or cancellation with respect to any of such insurance policies or bonds. Since
January 1, 1994, to the knowledge of CBG, neither CBG nor Commercial Bank has
been refused any insurance coverage which it has sought or applied for, and CBG
has no knowledge that existing insurance coverage cannot be renewed as and when
the same shall expire, upon terms and conditions as favorable in all material
respects as those presently in effect, other than possible increases in
premiums that do not result from any extraordinary loss experience. All
policies of insurance presently held or policies containing substantially
equivalent coverage will be outstanding and in full force with respect to each
such company at all times from the date hereof to the Effective Time. To the
knowledge of CBG, there are no pending or threatened claims against CBG's or
Commercial Bank's director's and officer's liability insurance policy.

4.29 Buy-Sell Agreement. To the knowledge of CBG, there are no
agreements among
<PAGE> 17

any of its shareholders granting to any person or persons a right of first
refusal in respect of the sale, transfer, or other disposition of shares of
outstanding securities by any shareholder of CBG (other than in connection with
the pledge of such shares), any similar agreement or any voting agreement or
voting trust in respect of any such shares.

4.30 Transfer of Shares. CBG has not received written notice of
any plan or intention on the part of CBG's shareholders to sell or otherwise
dispose of any of the Acquiror Common Stock to be received by them in the
Merger that would reduce such shareholders' aggregate ownership to a number of
shares having, in the aggregate, a fair market value of less than fifty (50%)
percent of the total fair market value of CBG common stock outstanding
immediately before the Merger.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND COLONIAL BANK

Acquiror hereby represents and warrants to CBG as follows:

5.01 Organization. Acquiror is a corporation validly existing and
in good standing under the laws of the State of Delaware. Colonial Bank has
been duly incorporated and is validly existing as a commercial bank under the
laws of the State of Alabama. Each of Acquiror and its Subsidiaries has all
requisite corporate power and authority to carry on and conduct its respective
business as now being conducted and to own, lease or operate its material
properties and assets. Acquiror and each of its Subsidiaries is duly qualified
as a foreign corporation, and is in good standing, in each state (including, in
the case of Acquiror, the State of Georgia) and foreign jurisdiction where the
character of its assets or the nature or conduct of its business requires it to
be so qualified except for such states and jurisdictions in which the failure
to be so qualified will not have a Material Adverse Effect on Acquiror.

5.02 Power and Authority. Acquiror has the corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby, have been duly and validly authorized by
all necessary corporate action on the part of Acquiror. This Agreement
constitutes Acquiror's legal, valid and binding obligation, enforceable against
Acquiror in accordance with its terms.

5.03 Authorized and Outstanding Stock. The authorized Acquiror
Capital Stock and the number of issued and outstanding shares thereof as of the
date hereof is set forth in Schedule 5.03 hereto. All of such issued and
outstanding shares of capital stock of Acquiror are duly and validly issued and
outstanding and are fully paid and nonassessable. The shares of Acquiror
Common Stock to be issued and delivered to the stockholders of CBG pursuant to
the Merger have been duly reserved for issuance and, upon issuance to the
stockholders of CBG pursuant to the terms of this Agreement, will be validly
issued, fully paid and nonassessable. All issuances of the capital stock of
Acquiror have been, and the issuance of shares to the stockholders of CBG will
be, in compliance with all applicable
<PAGE> 18

agreements and all applicable laws, including federal and state securities
laws, and all taxes thereon have been paid.

5.04 No Conflict. The execution and delivery of this Agreement by
Acquiror and Colonial Bank, the consummation of the transactions contemplated
herein by Acquiror and Colonial Bank, and the performance of the covenants and
agreements of Acquiror and Colonial Bank, subject to the fulfillment of the
conditions to Acquiror's and Colonial Bank's obligations set forth in this
Agreement, will not, with or without the giving of notice or the lapse of time,
or both, (i) violate or conflict with any of the provisions of any charter
document or bylaws of Acquiror or Colonial Bank; (ii) violate, conflict with or
result in breach or default under or cause termination of any term or condition
of any material mortgage, indenture, contract, license, permit, instrument, or
other material agreement, document or instrument to which Acquiror or any of
its Subsidiaries is a party or by which Acquiror or any of its Subsidiaries or
any of their properties may be bound which breach, default or violation would
cause a Material Adverse Effect on Acquiror; or (iii) violate any provision of
law, statute, rule, regulation, court order, judgment or decree, or ruling of
any governmental authority, to which Acquiror or Colonial Bank is a party or by
which Acquiror or Colonial Bank or their properties may be bound.

5.05 Financial Statements.

(a) Acquiror has filed and made available to CBG all
forms, reports and documents required to be filed by Acquiror with the
Commission since December 31, 1994, other than registration statements on Form
S-8 (collectively, the "Acquiror SEC Reports"). The Acquiror SEC Reports (i)
at the time filed, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be,
and (ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated in such Acquiror SEC Reports or necessary in order
to make the statements in such Acquiror SEC Reports, in light of the
circumstances under which they were made, not misleading.

(b) Each of the financial statements of Acquiror
(including, in each case, any related notes) contained in the Acquiror SEC
Reports, including any Acquiror SEC Reports filed after the date of this
Agreement until the Effective Time (collectively, the "Acquiror Financial
Statements"), complied as to form in all material respects with the applicable
published rules and regulations of the Commission with respect thereto, was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q
of the Commission), and fairly presented the consolidated financial position of
Acquiror and its Subsidiaries as at the respective dates and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount.
<PAGE> 19

(c) Since September 30, 1995, except as disclosed in the
Acquiror SEC Reports, there have been no events, changes or occurrences which
have had, or will have, a Material Adverse Effect on Acquiror.

5.06 No Material Changes. Neither Acquiror nor any of its
Subsidiaries has sustained, directly or indirectly, since September 30, 1995,
any material loss or interference with its business. Except as set forth on
Schedule 5.06, since September 30, 1995, there has not been any change in the
capital stock or long-term debt of Acquiror or any of its Subsidiaries, or any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the collectibility of the loan portfolio of
Acquiror or its Subsidiaries or in or affecting the general affairs,
management, financial position, stockholders' equity, assets, results of
operations or prospects of Acquiror or any of its subsidiaries, whether or not
arising in the ordinary course of business. Except as disclosed in the notes
to the latest audited consolidated financial statements of Acquiror included in
the Acquiror SEC Reports or on Schedule 5.06, neither Acquiror nor any of its
subsidiaries has incurred or undertaken any liability or obligation, direct,
indirect or contingent, which is material to the business or condition
(financial or other) of Acquiror, except for liabilities or obligations
incurred in the ordinary course of business.

5.07 Required Consents and Approvals. Other than the approval of
the consummation of the Merger by applicable bank regulatory agencies, no
consent or approval is required by virtue of the execution hereof by Acquiror
or Colonial Bank or the consummation of any of the transactions contemplated
herein by Acquiror or Colonial Bank.

5.08 No Undisclosed Liabilities. Except as and to the extent
reflected and adequately reserved against in the financial statements included
in the Acquiror SEC Reports, neither Acquiror nor any subsidiary of Acquiror
has any material liability or obligation whatsoever, whether accrued, absolute,
contingent or otherwise.

5.09 No Violation of Law. Neither Acquiror nor any subsidiary of
Acquiror, to its knowledge, is, has been and will be (by virtue of any past or
present action, omission to act, contract to which it is a party or any
occurrence or state of facts whatsoever) in violation of any applicable local,
state or federal law, ordinance, regulation, order, injunction or decree, or
any other requirement of any governmental body, agency or authority or court
binding on any of them, or relating to their property or business or their
advertising, sales or pricing practices (including, without limitation, any
banking laws or regulations, antitrust laws or regulations, and the statutes,
rules and regulations commonly referred to as the Environmental Protection Act,
the Americans With Disabilities Act, and the statutes and regulations of any
state or other jurisdiction in which Acquiror or any of its Subsidiaries does
business), nor will Acquiror or any of its Subsidiaries hereafter suffer or
incur any material loss, liability, penalty or expense (including, without
limitation, attorneys' fees) by virtue of any such violation.
<PAGE> 20

5.10 Litigation. Other than as disclosed in the Acquiror SEC
Reports, the are no charges, suits, actions, investigations of a material
nature pending or threatened against Acquiror or any of its Subsidiaries.

5.11 Securities and Exchange Commission Matters. On the effective
date of the Registration Statement, at all times subsequent thereto and
including the closing date and when any post-effective amendment to the
Registration Statement becomes effective or any amendment or supplement to the
Prospectus is filed with the Commission, the Registration Statement and the
Proxy Statement/Prospectus (as amended or as supplemented), including the
financial statements included or incorporated by reference in the Proxy
Statement/Prospectus, did or will comply with all applicable provisions of the
Securities Act, the Exchange Act, the rules and regulations of the Commission
under the Securities Act and the Exchange Act (collectively, the "Rules and
Regulations"), and will contain all statements required to be stated therein in
accordance with the Securities Act, the Exchange Act, and the Rules and
Regulations. On the effective date of the Registration Statement and when any
post-effective amendment to the Registration Statement becomes effective, no
part of the Registration Statement, the Proxy Statement/Prospectus, any such
amendment or supplement or any documents incorporated therein by reference did
or will contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. At the effective date of the Registration
Statement, the date the Proxy Statement/Prospectus or any amendment or
supplement to the Proxy Statement Prospectus is filed with the Commission and
at the Effective Time the Proxy Statement/Prospectus did not or will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The foregoing representations and
warranties in this Section 5.11 do not apply to any statements or omissions
made in reliance on and in conformity with information relating to CBG
furnished in writing to Acquiror by CBG specifically for inclusion in the
Registration Statement or Proxy Statement/Prospectus or any amendment or
supplement thereto.

Any documents or filings that are incorporated by reference, when they
were or shall be filed with the Commission, as the case may be, complied or
will comply in all material respects with the requirements of the Securities
Act, or the Exchange Act, as applicable, and the Rules and Regulations.

5.12 Loan Loss Reserves. Acquiror's allowances for possible loan
losses is reasonably adequate as of the date hereof in all material respects to
provide for all anticipated losses based on the classification of such loans,
net of recoveries related to loans previously charged-off, on loans outstanding
as of the date hereof.

5.13 Assets. Except as disclosed in the Acquiror SEC Reports or as
disclosed or reserved against in the Acquiror Financial Statements, Acquiror
and its Subsidiaries have good and marketable title, free and clear of all
Liens, to all of their respective material Assets reflected in Acquiror's most
recent balance sheet referred to in Section 5.05.
<PAGE> 21

5.14 Tax Matters.

(a) Returns Filed and Taxes Paid. (i) All Tax returns
required to be filed by or on behalf of Acquiror and any of its Subsidiaries
have been duly filed on a timely basis and such Tax returns are true, complete
and correct in all material respects; (ii) all Taxes shown to be payable on the
returns or on subsequent assessments with respect thereto have been paid in
full on a timely basis, and no other Taxes are payable by Acquiror or its
Subsidiaries with respect to items or periods covered by such returns (whether
or not shown on or reportable on such returns) or with respect to any period
prior to the date of this Agreement; (iii) Acquiror and its Subsidiaries have
withheld and paid over all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto,
in connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party; and (iv) there are no liens on any of the
assets of Acquiror or its Subsidiaries with respect to Taxes, other than liens
for Taxes not yet due and payable.

(b) Tax Deficiencies; Audits; Statutes of Limitations.
(i) No deficiencies exist or have been asserted or are expected to be asserted
with respect to Taxes of Acquiror or any of its Subsidiaries and neither
Acquiror nor any of its Subsidiaries has received notice that it has not filed
a Tax return or paid Taxes required to be filed or paid by it; (ii) neither
Acquiror nor any of its Subsidiaries is a party to any action or proceeding for
assessment or collection of Taxes, nor has such event been asserted or, to the
knowledge of Acquiror, threatened against Acquiror or any of its Subsidiaries;
(iii) no waiver or extension of any statute of limitations is in effect with
respect to Taxes or Tax returns of Acquiror or any of its Subsidiaries; (iv)
Acquiror and its Subsidiaries have disclosed on its federal income tax returns
all positions taken therein that could give rise to a "substantial
understatement of income tax" within the meaning of Section 6662 of the Code;
and (v) neither Acquiror nor any of its Subsidiaries has made an application or
request (either in writing or verbally, formally or informally) to the Internal
Revenue Service to change methods of accounting or taxable year.

5.15 Tax Treatment. Acquiror has no present plans to sell or
otherwise dispose of any of the Assets of CBG, or to liquidate any Subsidiaries
(except that Acquiror may merge Commercial Bank into a subsidiary of Acquiror),
subsequent to the Merger and Acquiror intends to continue the historic business
of CBG.

5.16 Employee Benefits. To the knowledge of Acquiror, all employee
benefit plans of Acquiror and each of its Subsidiaries have been established in
compliance with, and such plans have been operated in material compliance with,
all applicable laws. Except as set forth on Schedule 5.16, neither Acquiror
nor any of its Subsidiaries sponsors or otherwise maintains a "pension plan"
within the meaning of section 3(2) of ERISA or any other retirement plan other
than the Acquiror 401(k) plan that is intended to qualify under section 401 of
the Code, nor do any unfunded liabilities exist with respect to any employee
benefit plan, past or present. To the knowledge of Acquiror, no employee
benefit plan, any trust created thereunder nor any trustee or administrator
thereof has engaged in a
<PAGE> 22

"prohibited transaction," as defined in section 4975 of the Code, which may
have a Material Adverse Effect on Acquiror.

5.17 Environmental Requirements. To the knowledge of Acquiror,
except as disclosed in Schedule 5.17, neither Acquiror nor any of its
Subsidiaries owns any property (including other real estate owned but excluding
any property in which Acquiror or any of its Subsidiaries has only a security
interest), which is in violation of any federal or state law, regulation, or
treaty relating to the storage, handling, transportation, treatment or disposal
of hazardous substances (as defined in 42 U.S.C. Section 9601) or hazardous
materials (as defined by any federal or state law or regulation) or other waste
products, which violation will result in or have a Material Adverse Effect on
Acquiror, and Acquiror and its Subsidiaries have received all permits, licenses
or other approvals as may be required of and under applicable federal and state
environmental laws and regulations to conduct its respective business as
currently conducted, except where the failure to have such permits, licenses or
other approvals will not have a Material Adverse Effect on Acquiror. Acquiror
and its Subsidiaries are in compliance in all material respects with the terms
and conditions of any such permit, license or approval, and has not received
any notices or claims that it is a responsible party or a potentially
responsible party in connection with any claim or notice asserted pursuant to
42 U.S.C. Section 9601 et. seq. or any state superfund law except where such
failure to comply with the terms and conditions of any such permit, license or
approval will not have a Material Adverse Effect on Acquiror. Acquiror and its
Subsidiaries have complied in all material respects with applicable laws and
regulations with respect to the disposal of all of its hazardous substances,
hazardous materials and other waste products.

5.18 Derivative Contracts. Neither Acquiror nor any of its
Subsidiaries is a party to or has agreed to enter into a swap, forward, future,
option, cap, floor or collar financial contract, or any other interest rate or
foreign currency protection contract or derivative security not included in the
Acquiror Financial Statements which is a financial derivative contract
(including various combinations thereof).

5.19 Material Contract Defaults. Neither Acquiror nor any of its
Subsidiaries is in default in any material respect under the terms of any
contract, agreement, lease or other commitment which is material to the
business, operations, properties or Assets, or the condition, financial or
otherwise, of such company and which default will have a Material Adverse
Effect on Acquiror and, to the knowledge of Acquiror, there is no event which,
with notice or lapse of time, or both, may be or become an event of default
under such material contract, agreement, lease or other commitment in respect
of which reasonable steps have not been taken to prevent such a default from
occurring.
<PAGE> 23

ARTICLE VI

COVENANTS OF CBG

6.01 Pre-Closing Operations of CBG. CBG hereby covenants and
agrees that, except as consented to in writing by Acquiror, pending the
Closing, CBG and Commercial Bank will operate and conduct its business only in
the ordinary course consistent in all material respects with prior practices.
Pursuant thereto and not in limitation of the foregoing, from and after the
date hereof:

(a) CBG and Commercial Bank shall manage its working
capital, including cash, loans, other current assets, deposits and other
current liabilities, in a fashion consistent in all material respects with past
practice.

(b) CBG and Commercial Bank shall maintain its physical
Assets in their present state of repair (ordinary wear and tear excepted).

(c) CBG and Commercial Bank shall not take any of the
following actions after the date of this Agreement without the prior written
consent of Acquiror, which consent shall not be unreasonably withheld,
conditioned or delayed:

(i) Incur any additional debt obligation or other
obligation for borrowed money in excess of an aggregate of $25,000 except in
the ordinary course of the business consistent in all material respects with
past practices (which shall include, for Commercial Bank, creation of deposit
liabilities, purchases of federal funds, advances from the Federal Reserve
Bank, and entry into repurchase agreements fully secured by U.S. government or
agency securities), or impose or suffer the imposition, on any asset of CBG or
Commercial Bank of any Lien or permit any such Lien to exist (other than in
connection with deposits, repurchase agreements, bankers acceptances, "treasury
tax and loan" accounts established in the ordinary course of business, the
satisfaction of legal requirements in the exercise of trust powers, and Liens
in effect as of the date hereof);

(ii) Mortgage, pledge or subject to Liens any
assets having a value of $25,000 or more in the aggregate; except Liens that
exist as of the date of this Agreement;

(iii) Except for purchases of U.S. Treasury
securities or U.S. Government agency securities, which in either case have
maturities of three years or less, purchase any securities or make any material
investment, either by purchase of stock or securities, contributions to
capital, asset transfers, or purchase of any assets, in any Person, or
otherwise acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, or (ii)
acquisitions of control by Commercial Bank in its fiduciary capacity;

(iv) Except as set forth in Schedule 4.12,
increase (or announce any increase of) any salaries, wages or employee
benefits, modify, alter or amend any CBG Options or hire any new employees with
individual salaries in excess of $35,000 (except to replace existing employees)
other than in the ordinary course of business consistent in all material
respects with past practice;

(v) Amend any charter document or bylaw;
<PAGE> 24

(vi) Issue or sell any of its capital stock (other
than upon exercise of outstanding CBG Options or warrants), redeem, purchase or
otherwise acquire any shares of its capital stock, or make any other change in
its issued and outstanding capital stock, or, except as set forth in Schedule
6.01(c)(vi), issue any warrant, option or other right to purchase shares of its
capital stock or any security convertible into its capital stock, or declare
any dividends or make any other distribution with respect to its capital stock;

(vii) Adjust, split, combine or reclassify any
capital stock of CBG or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of CBG Common Stock, or sell,
lease, mortgage or otherwise dispose of or otherwise encumber any shares of
capital stock of Commercial Bank;

(viii) Incur, assume or guarantee any obligation or
liability for borrowed money, or exchange, refund or renew any outstanding
indebtedness of CBG or Commercial Bank in such a manner as to reduce the
principal amount of such indebtedness or increase the interest rate or balance
outstanding other than in the ordinary course of business consistent in all
material respects with past practice;

(ix) Amend or terminate any material agreement,
excluding loan contracts but including any insurance policy, in force on the
date hereof;

(x) Except as set forth in Schedule 6.01(c)(x),
enter into or amend any employment contract or agreement between any CBG or
Commercial Bank and any person (unless such amendment is required by applicable
law) that CBG or Commercial Bank does not have the unconditional right to
terminate without liability (other than liability for services already
rendered) at any time on or after the Effective Time;

(xi) Adopt any new employee benefit plan of CBG or
Commercial Bank or make any material change in or to any existing employee
benefit plans of CBG or Commercial Bank other than any such change that is
required by law or that, in the opinion of counsel, is necessary or advisable
to maintain the tax qualified status of any such plan; or

(xii) Make any material changes in financial or tax
accounting methods, principles or practices except as may be appropriate to
conform to changes in applicable law or regulatory accounting requirements or
GAAP.

6.02 Access. From the date of this Agreement through the Closing
Date, CBG and Commercial Bank shall (i) provide Acquiror and its respective
designees (officers, employees, counsel, accountants, and other authorized
representatives who shall be bound by Section 8.03 hereof) with such
information as Acquiror may from time to time reasonably request with respect
to CBG and Commercial Bank and the transactions contemplated by this Agreement;
(ii) provide Acquiror and its designees reasonable access during regular
business hours and upon reasonable notice to the books, records, offices,
personnel, counsel, accountants and actuaries of CBG and Commercial Bank as
Acquiror or its designees may from time to time reasonably request; and (iii)
permit Acquiror and its designees to make
<PAGE> 25

such inspections thereof as Acquiror may reasonably request. Any investigation
shall be conducted in such a manner so as not to interfere unreasonably with
the operation of the business of CBG and Commercial Bank.

6.03 Interim Financials. As promptly as practicable after each
regular accounting period subsequent to September 30, 1995 and prior to the
Closing Date, CBG will deliver to Acquiror periodic financial reports
concerning CBG and Commercial Bank in the form which it customarily prepares
for its internal purposes and, if available, unaudited statements of the
financial position of CBG and Commercial Bank as of the last day of each
accounting period and unaudited statements of income and cash flows of CBG and
Commercial Bank for the period then ended.

6.04 Meeting of Stockholders. As soon as practicable following the
execution of this Agreement, CBG shall call a meeting of its stockholders to be
held after the effective date of the Registration Statement for the purpose of
considering and voting upon the Merger.

6.05 Notice of Breach or Potential Breach or Adverse Change. CBG
shall promptly notify Acquiror of any change, circumstance or event which would
cause any of the representations or warranties made by CBG and Commercial Bank
pursuant to this Agreement to be untrue as of the date hereof or at the Closing
or which prevents CBG and Commercial Bank from complying with any of its
obligations hereunder.

6.06 Director Voting. CBG shall on the date of execution of this
Agreement, or as soon as practicable thereafter, obtain an agreement from each
of its directors substantially in the form set forth in Exhibit A.

ARTICLE VII

COVENANTS OF ACQUIROR

Acquiror hereby covenants and agrees as follows:

7.01 Access. From the date of this Agreement through the Closing
Date, Acquiror and Colonial Bank shall (i) provide CBG and its designees
(officers, employees, counsel, accountants, actuaries, and other authorized
representatives) with such information as CBG and Commercial Bank may from time
to time reasonably request with respect to Acquiror and its Subsidiaries and
the transactions contemplated by this Agreement; (ii) provide CBG and its
designees access during regular business hours and upon reasonable notice to
the books, records, offices, personnel, counsel, accountants and actuaries of
Acquiror and its Subsidiaries, as CBG or its designees may from time to time
reasonably request; and (iii) permit CBG and its designees to make such
inspections thereof as CBG may reasonably request. Any investigation shall be
conducted in such a manner so as not to interfere unreasonably with the
operation of the business of Acquiror and its Subsidiaries.

7.02 Interim Financials. As promptly as practicable after each
quarterly accounting period subsequent to September 30, 1995 and prior to the
Closing Date, Acquiror will
<PAGE> 26

deliver to CBG periodic financial reports in the form which it customarily
prepares for its internal purposes and, if available, Acquiror will deliver to
CBG unaudited statements of the consolidated financial position of Acquiror as
of the last day of each accounting period and unaudited consolidated statements
of income and cash flow of Acquiror for the period then ended.

7.03 Notice of Breach or Potential Breach or Adverse Change.
Acquiror shall promptly notify CBG of any change, circumstance or event which
would cause any of the representations or warranties made by Acquiror or
Colonial Bank pursuant to this Agreement to be untrue as of the date hereof or
at the Closing or which prevents Acquiror or Colonial Bank from complying with
any of its obligations hereunder.

7.04 New York Stock Exchange Listing. Acquiror shall cause the
shares of Acquiror Common Stock to be issued in the Merger to be listed for
trading on the NYSE on or before the Effective Time.

7.05 Employee Benefit Matters. At the Effective Time, all
employees of CBG or Commercial Bank shall, at Acquiror's option, either (i)
remain employees of Commercial Bank or become employees of the Surviving
Corporation or its Subsidiaries ("Retained Employees") or (ii) be entitled to
severance benefits in accordance with [Colonial Bank's] severance policy as of
the date of this Agreement. All Retained Employees shall be entitled, to the
extent permitted by applicable law, to participate in all benefit plans of
Acquiror and/or Colonial Bank to the same extent as Colonial Bank employees.
Retained Employees shall be allowed to participate as of the Effective Time in
the medical and dental benefits plans of Acquiror and/or Colonial Bank as new
employees of Colonial Bank with a waiver of the any waiting period and of any
pre-existing condition limitations. To the extent permitted by applicable
law, the period of service with CBG and Commercial Bank of all Retained
Employees shall be recognized for vesting and eligibility purposes under
Colonial Bank's benefit plans. In addition, if the Effective Time falls within
an annual period of coverage under any group health plan or group dental plan
of the Surviving Corporation or its Subsidiaries, each Retained Employee shall
be given credit for covered expenses paid by that employee under the comparable
employee benefit plans of CBG and Commercial Bank during the applicable
coverage period through the Effective Time towards the satisfaction of any
deductible limitation and out-of-pocket maximum that may apply under the group
health plan or group dental plan of the Surviving Corporation and its
Subsidiaries.

7.06 Georgia Board of Directors. Effective as of the Effective
Time, Acquiror shall cause to be elected to the Board of Directors of
Commercial Bank certain of the current directors of CBG who shall be agreed
upon by Acquiror and CBG prior to the Effective Time.
<PAGE> 27

ARTICLE VIII

COVENANTS OF THE PARTIES

Acquiror and CBG hereby covenant to and agree with one another as
follows:

8.01 Approvals of Third Parties; Satisfaction of Conditions to
Closing. Acquiror, Colonial Bank, CBG and Commercial Bank will use their
reasonable efforts, and will cooperate with one another, to secure all
necessary consents, approvals, authorizations and exemptions from governmental
agencies and other third parties, including, without limitation, all consents
required by Sections 9.05 and 9.06 hereof. In connection therewith, Acquiror
shall promptly prepare and file applications with all regulatory authorities
having jurisdiction over the transactions contemplated by this Agreement
seeking the requisite consents and approvals to such transactions. Acquiror,
Colonial Bank, CBG and Commercial Bank will use their reasonable, good faith
efforts to cause or obtain the satisfaction of the conditions specified in
Article X. Acquiror and Colonial Bank will use their reasonable, good faith
efforts to cause or obtain the satisfaction of the conditions specified in
Article IX.

8.02 Preparation of Registration Statement and the Proxy
Statement/Prospectus. Acquiror and CBG shall promptly prepare the Proxy
Statement/Prospectus and Acquiror shall promptly prepare and file with the
Commission the Registration Statement, in which the Proxy Statement/Prospectus
will be included. Each of CBG and Acquiror shall use all reasonable efforts to
file the Registration Statement on or before February 9, 1995 (or such later
date as is mutually agreed by the parties hereto) and to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing. Acquiror shall also take any action (other than
qualifying to do business in any jurisdiction in which it is now not so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of the Acquiror Common Stock in the Merger.

8.03 Confidentiality. In connection with this Agreement, the
parties may have access to information which is nonpublic, confidential or
proprietary in nature. All of such information, in whole or in part, together
with any analyses, compilations, studies or other documents prepared by any
party, which contain or otherwise reflect any such information is hereinafter
referred to as the "Information". Each party hereby agrees that the
Information will be kept confidential and shall not, without the prior mutual
written consent of the parties, be disclosed, in any manner whatsoever, in
whole or in part, and shall not be used by any party following the termination
of this Agreement. Each party agrees to transmit the Information only to its
respective employees and representatives who need to know the Information and
who shall agree to be bound by the terms and conditions of this Agreement. In
any event, each party shall be responsible for any breach of this Agreement by
its respective employees or representatives. If the transactions contemplated
hereunder are not consummated, the parties shall return the Information to the
other promptly upon request and no party shall retain any copies. In the
event any party becomes legally compelled to disclose any of the Information,
such party will provide to the other parties prompt notice so that each other
party may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. In the event that such
protective order or other remedy is not obtained, or compliance with the
provisions of this Agreement is waived, a party will furnish only that portion
of the Information which
<PAGE> 28

is legally required, and to the extent requested by the other party, will
exercise its best efforts to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the Information. The
term "Information" does not include information which (i) was known to any
party about another party prior to its disclosure, provided that such
information was lawfully obtained or developed, (ii) becomes generally
available to the public other than as a result of a disclosure by a party in
violation of this Agreement, or (iii) becomes available from a source other
than a party to this Agreement, if the source is not bound by a confidentiality
agreement and such source lawfully obtained such information.

8.04 Press Releases. Prior to the Effective Time, CBG and Acquiror
shall consult with each other as to the form and substance of any press release
or other public disclosure related to this Agreement or to transactions
contemplated hereby; provided that nothing in this Section 8.04 shall be deemed
to prohibit any party hereto from making any disclosure which its counsel deems
necessary or advisable in order to satisfy such party's disclosure obligations
imposed by law.

ARTICLE IX

CONDITIONS TO OBLIGATIONS OF CBG

Each of the obligations of CBG to be performed hereunder shall be
subject to the satisfaction (or waiver by CBG) at or prior to the Effective
Time of the covenants of Acquiror set forth herein and of each of the following
conditions:

9.01 Representations and Warranties True at Closing Date. Each of
Acquiror's and Colonial Bank's representations and warranties contained in this
Agreement shall be true in all material respects on and as of the Closing Date
with the same force and effect as though made on and as of such date; Acquiror
and Colonial Bank shall have complied in all material respects with the
covenants and agreements set forth herein to be performed or complied with by
them on or before the Effective Time; and Acquiror and Colonial Bank shall have
delivered to CBG and Commercial Bank a certificate in form and substance
reasonably satisfactory to CBG confirming such matters and such other matters
as may be reasonably requested by CBG.

9.02 Litigation. There shall not be any litigation or threat of
Litigation against any party hereto (a) challenging the validity or legality of
this Agreement or (b) seeking damages in respect of or seeking to restrain or
invalidate the transactions contemplated by this Agreement which, in the
judgment of CBG, based upon advice of counsel, would have a Material Adverse
Effect on Acquiror, Colonial Bank, CBG, Commercial Bank or the consummation of
the transactions contemplated by this Agreement.

9.03 Opinion of Counsel. CBG and Commercial Bank shall have
received from counsel to Acquiror an opinion, dated as of the Closing Date, in
form and substance reasonably satisfactory to CBG and its counsel.
<PAGE> 29

9.04 Tax Opinion. CBG and Commercial Bank shall have received from
Miller, Hamilton, Snider & Odom, L.L.C., counsel to Acquiror, an opinion in
form and substance reasonably satisfactory to CBG and its counsel to the effect
that (i) the Merger will constitute a "reorganization" within the meaning of
Section 368 of the Code, (ii) no gain or loss will be recognized by CBG or
Commercial Bank in connection with the Merger, (iii) no gain or loss will be
recognized by the shareholders of CBG who receive shares of Acquiror Common
Stock in the Merger except to the extent of any taxable "boot" received by such
persons from Acquiror, and except to the extent of any dividends received from
CBG prior to the Effective Time, (iv) the tax basis of the Acquiror Common
Stock received by such shareholders from Acquiror in connection with the Merger
will be equal to the sum of the tax basis of their shares of CBG Common Stock
exchanged in the Merger and the amount of gain, if any, which was recognized by
the exchanging CBG shareholder, including any portion treated as a dividend,
less the value of taxable boot, if any, received by such shareholder in the
Merger, (v) the holding period of the Acquiror Common Stock will include the
holding period of the shares of CBG Common Stock exchanged therefor if such
shares of CBG Common Stock were capital assets in the hands of the exchanging
CBG shareholder, and (vi) cash received by a CBG shareholder in lieu of a
fractional share interest of Acquiror Common Stock will be treated as having
been received as a distribution in full payment in exchange for the fractional
share interest of Acquiror Common Stock which he would otherwise be entitled to
receive and will qualify as capital gain or loss (assuming the CBG Common Stock
was a capital asset in his hands as of the Effective Time).

9.05 Documents Satisfactory in Form and Substance. All agreements,
certificates, opinions and other documents delivered by Acquiror or Colonial
Bank to CBG and Commercial Bank hereunder or in connection herewith shall be in
form and substance satisfactory to counsel for CBG and Commercial Bank, in the
exercise of such counsel's reasonable judgment.

9.06 Required Governmental Approvals. All governmental
authorizations, consents and approvals necessary for the valid consummation of
the transactions contemplated hereby shall have been obtained and shall be in
full force and effect. All applicable governmental pre-acquisition filing,
information furnishing and waiting period requirements shall have been met or
such compliance shall have been waived by the governmental authority having
authority to grant such waivers.

9.07 Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the affirmative
vote of the holders of a majority of the outstanding shares of CBG Common
Stock entitled to vote thereon.

9.08 Absence of Adverse Facts. No fact, event or condition shall
exist, or shall be reasonably likely to occur or has occurred that (a) has had
a Material Adverse Effect on, or which may be reasonably foreseen to have a
Material Adverse Effect on Acquiror or the consummation of the transactions
contemplated by this Agreement which has not been waived by CBG (in the
exercise of its sole and exclusive discretion), (b) would be materially adverse
to the interests of CBG or its stockholders, or (c) would render the
transactions
<PAGE> 30

contemplated by this Agreement impractical because of any material event
including but not limited to a state of war, national emergency, banking
moratorium or general suspension of trading on the NYSE, or other national
securities exchange.

9.09 Fairness Opinion. CBG shall have received from The
Robinson-Humphrey Company, Inc. a letter in form and substance satisfactory
to CBG which provides that this Agreement and the transactions contemplated
thereby are fair to the stockholders of CBG from a financial point of view.

ARTICLE X

CONDITIONS TO OBLIGATIONS OF ACQUIROR

The obligations of Acquiror to be performed hereunder shall be subject
to the satisfaction (or waiver by Acquiror) on or before the Effective Time of
each of the Covenants of CBG set forth herein and of each of the following
conditions:

10.01 Representations and Warranties True at Closing Date. Each of
the representations and warranties of CBG and Commercial Bank contained in this
Agreement shall be true in all material respects on and as of the Closing Date
with the same force and effect as though made on and as of such date; CBG and
Commercial Bank shall have performed and complied in all respects with the
covenants and agreements set forth herein to be performed or complied with by
CBG or Commercial Bank on or before the Effective Time; and CBG and Commercial
Bank shall have delivered to Acquiror and Colonial Bank a certificate in form
and substance reasonably satisfactory to Acquiror confirming such matters and
confirming such other matters as may be reasonably requested by Acquiror.

10.02 No Material Change. Other than changes relating to, or
resulting from, the existence of, or the terms of, this Agreement and the
transactions contemplated hereby, including any related loss of employees or
customers of CBG or Commercial Bank, neither Acquiror nor any of its
Subsidiaries shall have suffered any material adverse change since September
30, 1995 in its business, operations, prospects, financial condition, working
capital, assets, liabilities (absolute, accrued, contingent or otherwise),
reserves or operations.

10.03 Litigation. There shall not be any litigation or threat of
litigation against any party hereto (a) challenging the validity or legality of
this Agreement or (b) seeking damages in respect of or seeking to restrain or
invalidate the transactions contemplated by this Agreement which, in the
judgment of either Acquiror or Colonial Bank, would have a material adverse
effect on Acquiror, Colonial Bank, Commercial Bank or the consummation of the
transactions contemplated by this Agreement.

10.04 Required Governmental Approvals. All governmental
authorizations, consents and approvals necessary for the valid consummation of
the transactions contemplated hereby shall have been obtained and shall be in
full force and effect. All applicable governmental pre-acquisition filing,
information furnishing and waiting period requirements
<PAGE> 31

shall have been met or such compliance shall have been waived by the
governmental authority having authority to grant such waivers.

10.05 Opinion of Counsel to CBG. Acquiror shall have received from
counsel to CBG an opinion, dated the Closing Date, in form and substance
reasonably satisfactory to Acquiror, and its counsel.

10.06 Documents Satisfactory in Form and Substance. All agreements,
certificates, opinions and other documents delivered by CBG and Commercial Bank
to Acquiror and Colonial Bank hereunder shall be in form and substance
satisfactory to counsel for Acquiror, in the exercise of such counsel's
reasonable judgment.

10.07 Accountants' Letters. Acquiror and Colonial Bank shall have
received a letter from CBG's independent accountants with respect to the
financial, accounting and statistical data regarding CBG and Commercial Bank
set forth in the Registration Statement dated within five days prior to the
Closing Date.

10.08 Limitation on Dissenting Stockholders. All periods for
notification of demands by Dissenting Stockholders pursuant to the Dissenter
Provisions shall have expired. Neither CBG, Commercial Bank, Acquiror nor
Colonial Bank shall have received notification of demands from Dissenting
Stockholders who hold an aggregate of ten percent (10%) or more of the
outstanding CBG Common Stock.

10.09 Controlling Shareholders. Each shareholder of CBG who may be
an "affiliate" of CBG within the meaning of Rule 145 of the Rules and
Regulations under the Securities Act shall have executed and delivered to
Acquiror a commitment and undertaking to the effect that such person shall not
make a "distribution" (within the meaning of Rule 145) of the Acquiror Common
Stock which he receives upon the Effective Time and that such Acquiror Common
Stock will be held subject to all applicable provisions of the Securities Act
and the rules and regulations of the Commission thereunder.

10.10 Pooling of Interests. Acquiror shall have received the
written opinion of Coopers & Lybrand, L.L.P. that the Merger will qualify for
the pooling of interests method of accounting under generally accepted
accounting principles.

ARTICLE XI

INDEMNIFICATION

11.01 Indemnification.

(a) Acquiror shall, and shall cause the Surviving
Corporation to, indemnify, defend, and hold harmless the present and former
directors, officers, employees and agents of the CBG and Commercial Bank (each
an "Indemnified Party") against all Liabilities arising out of or in connection
with actions or omissions, or alleged actions or omissions, occurring at or
prior to the Effective Time or alleged to have occurred at or prior to the
<PAGE> 32

Effective Time (including the transactions contemplated by this Agreement) to
the full extent provided in the Articles of Incorporation of CBG in effect
immediately prior to the Effective Time.

(b) If Acquiror or the Surviving Corporation or any of
their successors or assigns shall consolidate with or merge into any other
entity and shall not be the continuing or surviving entity of such
consolidation or merger or shall transfer all or substantially all of its
assets to any person or entity, then and in each case, proper provision shall
be made so that the successors and assigns of Acquiror or Surviving
Corporation, as the case may be, shall assume the obligations set forth in this
Article XI.

(c) The provisions of this Article XI are intended to be
for the benefit of, and enforceable by, each Indemnified Party, his or her
heirs and representatives.

(d) In addition to the foregoing provisions of this
Section 11.01, Acquiror shall purchase from a reputable insurance company
director and officer liability insurance that will provide "tail" liability
insurance coverage during the two year period following the Closing for the
benefit of all of the current directors and officers of CBG and/or Commercial
Bank, which coverage shall provide substantially the same coverage for such
persons as CBG's and Commercial Bank's existing director and officer insurance
policy. In the event such insurance policy is not available from any insurance
company, Acquiror shall not be required to comply with this subsection (d).
Acquiror shall not be required to purchase such a policy if the annual premium
exceeds two times the annual premiums currently paid by CBG or Commercial Bank.

ARTICLE XII

CLOSING

12.01 Closing Date. Subject to the satisfaction or waiver of the
conditions set forth herein, the consummation of the Merger (the "Closing")
shall take place at 10:00 a.m. on June 28, 1996 in the offices of Long,
Aldridge & Norman, Suite 5300, One Peachtree Center, 303 Peachtree Street,
Atlanta, Georgia, or on such other date or at such other time and place as the
parties shall agree (the "Closing Date").

ARTICLE XIII

TERMINATION PRIOR TO CLOSING

13.01 Termination of Agreement. This Agreement may be terminated at
any time prior to the Closing:

(a) By the mutual written consent of Acquiror and CBG;

(b) By CBG in writing, without liability, if Acquiror or
Colonial Bank shall (i) fail
<PAGE> 33

to perform in any material respect its agreements contained herein required to
be performed by it on or prior to the Closing Date, or (ii) materially breach
any of its representations, warranties or covenants contained herein, which
failure or breach is not cured within thirty (30) days after CBG and Commercial
Bank has notified Acquiror or Colonial Bank of its intent to terminate this
Agreement pursuant to this subparagraph (b);

(c) By Acquiror or in writing, without liability, if CBG
shall (i) fail to perform in any material respect its agreements contained
herein required to be performed by it on or prior to the Closing Date, or (ii)
materially breach any of its representations, warranties or covenants contained
herein, which failure or breach is not cured within thirty (30) days after
Acquiror has notified CBG of its intent to terminate this Agreement pursuant to
this subparagraph (c).

(d) By either Acquiror or CBG in writing, without
liability, if there shall be any order, writ, injunction or decree of any court
or governmental or regulatory agency binding on Acquiror, Colonial Bank, CBG or
Commercial Bank, which prohibits or restrains Acquiror, Colonial Bank, CBG or
Commercial Bank from consummating the transactions contemplated hereby,
provided that Acquiror, Colonial Bank, CBG or Commercial Bank shall have used
their reasonable, good faith efforts to have any such order, writ, injunction
or decree lifted, and the same shall not have been lifted within 30 days after
entry, by any such court or governmental or regulatory agency;

(e) By either Acquiror or CBG, in writing, without
liability, if for any reason the Closing has not occurred by September 30, 1996;

(f) By either Acquiror or CBG if any event has occurred
which would have a Material Adverse Effect on any other party to this Agreement
or their respective Subsidiaries;

(g) By Acquiror or CBG in the event that any conditions
precedent to the obligations of such party to consummate the transactions
contemplated hereby cannot be satisfied or fulfilled by September 30, 1996.

13.02 Termination of Obligations. Termination of this Agreement
pursuant to this Article XIII shall terminate all obligations of the parties
hereunder; provided, however, that termination pursuant to subparagraphs (b) or
(c) of Section 13.01 hereof shall not relieve a defaulting or breaching party
from any liability to the other party hereto for knowing or willful defaults or
breaches.

ARTICLE XIV

EXPENSES

14.01 Expenses. Acquiror, Colonial Bank, CGB and Commercial Bank
each agrees to pay its own fees and expenses incurred in connection with the
transactions contemplated
<PAGE> 34

by this Agreement. The Surviving Corporation shall pay the fees and expenses
of The Robinson-Humphrey Company, Inc. in connection with the transactions
contemplated hereby.

ARTICLE XV

MISCELLANEOUS

15.01 Survival. The representations and warranties of Acquiror,
Colonial Bank, CBG and Commercial Bank contained herein or in any certificate
or other document delivered pursuant hereto or in connection herewith shall not
survive the Closing.

15.02 Entire Agreement. This Agreement (including the Schedules)
constitutes the sole understanding of the parties with respect to the subject
matter hereof; provided, however, that this provision is not intended to
abrogate any other written agreement between the parties executed with or after
this Agreement.

15.03 Amendment. No amendment, modification or alteration of the
terms or provisions of this Agreement shall be binding unless the same shall be
in writing and duly executed by the parties hereto.

15.04 Parties Bound by Agreement; Successors and Assigns. The
terms, conditions and obligations of this Agreement shall inure to the benefit
of and be binding upon the parties hereto and the respective successors and
assigns thereof.

15.05 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.

15.06 Headings. The headings of the Sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.

15.07 Modification and Waiver. Any of the terms or conditions of
this Agreement may be waived in writing at any time by the party which is
entitled to the benefits thereof. No waiver of any of the provisions of this
Agreement shall be deemed to or shall constitute a waiver of any other
provision hereof (whether or not similar).

15.08 Notices. Any notice, request, instruction or other document
to be given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally or sent by registered or certified mail
(including by overnight courier or express mail service), postage or fees
prepaid,
<PAGE> 35

if to CBG or Commercial Bank, to:

Commercial Bancorp of Georgia, Inc.
390 Crogan Street
Lawrenceville, Georgia 30245
Attention: Richard Sikes, President
and Chief Executive Officer

with a copy to:

Long, Aldridge & Norman
Suite 5300
303 Peachtree Street
Atlanta, Georgia 30308
Attention: David M. Calhoun

if to Acquiror or Colonial Bank, to:

W. Flake Oakley, IV
Chief Financial Officer
One Commerce Street, Suite 800
Montgomery, Alabama 36104

with a copy to:

Miller, Hamilton, Snider & Odem
One Commerce Street, Suite 802
Montgomery, Alabama 36104
Attention: Michael D. Waters

or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or the office of such party. Any notice which is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fourth business day
after the day it is so placed in the mail or, if earlier, the time of actual
receipt.

15.09 Governing Law. This Agreement is executed by the parties in,
and shall be construed in accordance with and governed by the laws of, the
State of Georgia without giving effect to the principles of conflicts of law
thereof.

15.10 Acquisition Proposals. From and after the date of this
Agreement and until any termination pursuant to Article XIII, CBG and
Commercial Bank shall not (and shall use its best efforts to ensure that its
directors and officers shall not), directly or indirectly, solicit or encourage
any inquiries or proposals from any Person (other than Acquiror a Subsidiary
<PAGE> 36

thereof) or (ii) knowingly furnish any information about or with respect to CBG
or its Subsidiaries or participate in any negotiations or discussions
concerning any acquisition, merger, combination or sale of a significant amount
of assets of CBG or Commercial Bank (collectively, a "Business Combination");
except in a situation in which a majority of the full Board of Directors of CBG
has determined upon advice of counsel that such Board has a fiduciary duty to
consider and respond to a bona fide proposal by a third party, regardless of
whether such proposal was directly or indirectly received as a result of
conduct sought to be prohibited by this Section 15.10. Upon the occurrence of
such determination by the Board of Directors of CBG, such Board shall provide
written notice of its determination and intention to consider such proposal to
Acquiror at least two business days before responding to the proposal or
providing any information with respect to CBG or Commercial Bank in response
to the proposal, indicating the material terms of such proposal; provided,
however, that if such proposal by its terms requires a response in a shorter
period, CBG shall provide such notice, information and undertaking to Acquiror
as promptly as practicable in the circumstances. Notwithstanding the
foregoing, nothing in this Section 15.10 relating to fiduciary duties shall
preclude an action by Acquiror against CBG for breach by CBG of any other
provision of this Agreement provided that this sentence shall not confir upon
Acquiror any additional rights other than such rights as it otherwise would
have pursuant to such other provisions of this Agreement.

15.11 No Third-Party Beneficiaries. With the exception of the
parties to this Agreement and the Indemnified Parties, there shall exist no
right of any person to claim a beneficial interest in this Agreement or any
rights occurring by virtue of this Agreement.

15.12 "Including." Words of inclusion shall not be construed as
terms of limitation herein, so that references to "included" matters shall be
regarded as non-exclusive, non-characterizing illustrations.

15.13 Severability. Any term or provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining terms and provisions thereof or affecting the
validity or enforceability of such provision in any other jurisdiction, and if
any term or provision of this Agreement is held by any court to be void,
voidable, invalid or unenforceable in any given circumstance or situation, then
all other terms and provisions, being severable, shall remain in full force and
effect in such circumstance or situation and the said term or provision shall
remain valid and in effect in any other circumstances or situation.

15.14 Return of Information. In the event of termination of this
Agreement prior to the Effective Time, each party shall return to the other,
without retaining copies thereof, all confidential or non-public documents,
work papers and other materials obtained from the other party in connection
with the transactions contemplated in this Agreement and shall keep such
information confidential, not disclose such information to any other person or
entity, and not use such information in connection with its business.

15.15 Equitable Remedies. The parties hereto agree that, in the
event of a breach of
<PAGE> 37

this Agreement by either party, the other party may be without an adequate
remedy at law owing to the unique nature of the contemplated transactions. In
recognition thereof, in addition to (and not in lieu of) any remedies at law
that may be available to the non-breaching party, the non-breaching party shall
be entitled to obtain equitable relief, including the remedies of specific
performance and injunction, in the event of a breach of this Agreement by the
other party, and no attempt on the part of the non-breaching party to obtain
such equitable relief shall be deemed to constitute an election of remedies by
the non-breaching party that would preclude the non-breaching party from
obtaining any remedies at law to which it would otherwise be entitled.

15.16 No Waiver. No failure, delay or omission of or by any party
in exercising any right, power or remedy upon any breach or default of any
other party shall impair any such rights, powers or remedies of the party not
in breach or default, nor shall it be construed to be a waiver of any such
right, power or remedy, or an acquiescence in any similar breach or default;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of any party
of any provisions of this Agreement must be in writing and be executed by the
parties to this Agreement and shall be effective only to the extent
specifically set forth in such writing.

15.18 Remedies Cumulative. All remedies provided in this Agreement,
by law or otherwise, shall be cumulative and not alternative.
<PAGE> 38

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date indicated on the
first page hereof.

ATTEST:
COLONIAL BANCGROUP, INC.
By: /s/ Walter Thompson
-----------------------------
Title: Senior Vice President
--------------------------

By: /s/ W. Flake Oakley, IV
------------------------------------
W. Flake Oakley, IV
Chief Financial Officer

ATTEST: COMMERCIAL BANCORP OF GEORGIA, INC.

By: /s/ John P. Hopkins
-----------------------------
Title: Secretary
--------------------------
By: /s/ Richard Sikes
------------------------------------
Richard Sikes
President and
Chief Executive Officer
<PAGE> 39

APPENDIX A

DEFINITIONS

(a) The following terms, which are capitalized in the Agreement,
shall have the meanings set forth below for the purpose of the Agreement:

"Acquiror " shall mean The Colonial BancGroup, Inc., a Delaware
corporation with its principal offices in Montgomery, Alabama.

"Acquiror Common Stock" shall mean Acquiror's Common Stock, $2.50 par
value per share, authorized and defined in the Restated Certificate of
Incorporation of Acquiror, as amended.

"Agency" or "Agencies" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Federal Deposit Insurance Corporation, all
state regulatory agencies having jurisdiction over the parties to the Agreement
and their respective Subsidiaries, and the Commission.

"Agreement" shall mean this Agreement and Plan of Merger and the
Exhibits and Schedules delivered pursuant hereto and incorporated herein by
reference.

"Assets" of a party shall mean all of the assets, properties, and
rights of such party of every kind, nature, character and description, whether
real, personal or mixed, tangible or intangible, accrued or contingent, or
otherwise relating to or utilized in such party's business, directly or
indirectly, in whole or in part, whether or not carried on the books and
records of such party, and whether or not owned in the name of such party or
any Subsidiary of such party and wherever located.

"CBG" shall mean Commercial Bancorp of Georgia, Inc., a Georgia
corporation with its principal offices in Georgia.

"CBG Common Stock" shall mean CBG's Common Stock, $1.00 par value per
share, authorized and defined in the Articles of Incorporation of CBG.

"Closing" shall mean the closing of the transactions contemplated
hereby as described in Section 12.01 of the Agreement.

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

"Commercial Bank" shall mean Commercial Bank of Georgia, a Georgia
state chartered commercial bank with its home office in Georgia.
<PAGE> 40

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

"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order or Permit.

"Contract" shall mean any material written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument, lease
or obligation, of any kind or character, or other material agreement to which
any Person is a party or that is binding on any Person or its capital stock,
Assets or business.

"Default" shall mean (i) any material breach or violation of or
default under any Contract, Order or Permit, (ii) any occurrence of any event
that with the passage of time or the giving of notice or both would constitute
a material breach or violation of or default under any Contract, Order or
Permit, or (iii) any occurrence of any event that with or without the passage
of time or the giving of notice would give rise to a right to terminate or
revoke, change the current terms of, or renegotiate, or to accelerate,
increase, or impose any liability under, any Contract, Order or Permit.

"Effective Time" shall mean the date and time at which the Merger
becomes effective as defined in Section 1.02 of the Agreement.

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

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

"GAAP" shall mean generally accepted accounting principles as
applicable to banks and their holding companies.

"Knowledge" shall mean, in the case of CBG or Commercial Bank, the
actual knowledge of the Chairman of the Board, President, Chief Financial
Officer and Chief Credit Officer of CBG or Commercial Bank and, in the case of
Acquiror or Colonial Bank, means the knowledge of the Chairman, President,
Chief Financial Officer, Chief Accounting Officer, Chief Credit Officer or any
Senior or Executive Vice President of Acquiror or it Subsidiaries.

"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
liabilities or business, including those promulgated, interpreted or enforced
by any Agency.

"Liability" shall, unless otherwise defined, mean any direct or
indirect, primary or secondary, liability, indebtedness, obligation, penalty,
cost or expense (including costs of investigation, collection and defense),
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated, matured or unmatured, or
otherwise.
<PAGE> 41

"Lien" shall mean any conditional sale agreement, default or title,
easement, encroachment, encumbrance, hypothecating, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to, any property or
property interest, other than (i) Liens for current property taxes not yet due
and payable, (ii) for depository institution Subsidiaries of a party, pledges
to secure deposits and other Liens incurred in the ordinary course of the
banking business, and (iii) Liens in the form of easements, restrictive
covenants and other encumbrances on real property which do not materially
adversely affect the use of such property by the current owner thereof.

"Litigation" shall mean any action, arbitration, complaint, criminal
prosecution, governmental or other examination or investigation, hearing,
inquiry, administrative or other proceeding relating to or affecting a party,
its business, its Assets (including Contracts related to it), or the
transactions contemplated by this Agreement.

The term "material," for purposes of this Agreement, shall be
determined in light of the facts and circumstances of the matter in question;
provided that any specific monetary amount stated in this Agreement shall
determine materiality in that instance.

"Material Adverse Effect" with respect to any party shall mean an
event, change or occurrence which has a material adverse impact on (i) the
financial position, business or results or operations of such party and its
Subsidiaries, taken as a whole, or (ii) the ability of such party to perform
its obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that "material adverse
impact" shall not be deemed to include the impact of (x) changes in banking and
similar laws of general applicability or interpretations thereof by courts or
governmental authorities, (y) changes in GAAP or regulatory accounting
principles generally applicable to banks and their holding companies, (y)
actions or omissions of a party (or any of its Subsidiaries) taken with the
prior written consent of the other party in contemplation of the transactions
contemplated hereby, (z) the effect of this Agreement, including compliance
with this Agreement, on the operating performance of the parties, including
expenses incurred by the parties in connection with this Agreement and the loss
of employees and/or customers of a party as a result of this Agreement and the
transactions contemplated thereby.

"Merger" shall mean the merger of CBG with Acquiror as contemplated in
this Agreement.

"NYSE" shall mean The New York Stock Exchange.

"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Agency.

"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which
<PAGE> 42

any Person is a party or that is or may be binding upon or inure to the benefit
of any Person or its securities, Assets or business.

"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.

"Proxy Statement/Prospectus" shall mean the proxy statement/prospectus
used by CBG to solicit the approval of its stockholders of the transactions
contemplated by this Agreement and used by Acquiror in connection with the
issuance of the Acquiror Common Stock to the stockholders of CBG.

"Registration Statement" shall mean the registration statement on Form
S-4, or such other appropriate form, to be filed with the Commission by
Acquiror, and which has been agreed to by CBG, to register the shares of
Acquiror Common Stock offered to stockholders of CBG pursuant to this
Agreement, including the Proxy Statement/Prospectus).

"Resulting Corporation" shall mean the Acquiror as the surviving
corporation resulting from the Merger.

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

"Subsidiaries" shall mean those corporations, banks, associations, or
other entities of which the entity in question owns or controls 5% or more of
the outstanding equity securities either directly or through an unbroken chain
of entities as to each of which 5% or more of the outstanding equity securities
is owned directly or indirectly by its parent; provided, however, there shall
not be included any such entity acquired through foreclosure or any such entity
the equity securities of which are owned or controlled in a fiduciary capacity.

(b) The following terms shall have the meanings ascribed to such terms
in the Section of the Agreement referenced below:

<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
"Acquiror Capital Stock" 3.01
"Acquiror Financial Statements" 5.05(b)
"Acquiror SEC Reports" 5.05(a)
"Audited Financial Statements" 4.06(b)
"CBG Financial Statements" 4.06(b)
"CBG Option" 3.04(a)
"CBG SEC Reports" 4.06(a)
"CBG Stock Appreciation Rights" 3.04(b)
"Dissenter Provisions" 3.07

</TABLE>
<PAGE> 43

<TABLE>
<S> <C>
"Dissenting Stockholder" 3.07
"Exchange Agent" 3.05
"Exchange Ratio" 3.01(c)
"Indemnified Party" 11.01(a)
"Interim Financial Statements" 4.06(b)
"Market Value" 3.01(c)
"Retained Employees" 7.05
"Rules and Regulations" 3.11
"Surviving Corporation" 1.01
"Taxes" 4.23(a)

</TABLE>

<PAGE> 1

EXHIBIT 10(F)

AMENDED AND RESTATED

AGREEMENT AND PLAN OF MERGER

BY AND BETWEEN

THE COLONIAL BANCGROUP, INC.,

AND

SOUTHERN BANKING CORPORATION

DATED AS OF

FEBRUARY 15, 1996
<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<S> <C>
ARTICLE 1 -- NAME

1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE 2 -- MERGER -- TERMS AND CONDITIONS

2.1 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Articles of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Resulting Corporation's Officers and Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Further Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7 Effective Date and Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE 3 -- CONVERSION OF SOUTHERN STOCK

3.1 Conversion of Southern Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Surrender of Southern Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 BancGroup Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Dissenting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE 4 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP

4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Financial Statements; Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 No Conflict with Other Instrument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Absence of Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Approval of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Title and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.9 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.10 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.12 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 Form S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

</TABLE>
<PAGE> 3

<TABLE>
<S> <C>
4.16 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.17 Government Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 Absence of Regulatory Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.19 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE 5 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF SOUTHERN

5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Financial Statements; Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.5 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Title and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.7 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.8 Charter and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.10 Material Contract Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.11 No Conflict with Other Instrument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.12 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.13 Absence of Regulatory Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.14 Absence of Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.16 Pension and Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.17 Buy-Sell Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.18 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.19 Approval of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.20 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.21 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.22 Loans; Adequacy of Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.23 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.24 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.25 Collective Bargaining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.26 Labor Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.27 Derivative Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE 6 -- ADDITIONAL COVENANTS

6.1 Additional Covenants of BancGroup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2 Additional Covenants of Southern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

ARTICLE 7 -- MUTUAL COVENANTS AND AGREEMENTS

7.1 Best Efforts; Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Press Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

</TABLE>
<PAGE> 4

<TABLE>
<S> <C>
7.3 Mutual Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.4 Access to Properties and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

ARTICLE 8 -- CONDITIONS TO OBLIGATIONS OF ALL PARTIES

8.1 Approval by Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Regulatory Authority Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.4 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.5 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.6 Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF SOUTHERN

9.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2 Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.3 Closing Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.5 Comfort Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.6 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.7 NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.8 Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

ARTICLE 10 -- CONDITIONS TO OBLIGATIONS OF BANCGROUP

10.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.2 Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.3 Closing Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.5 Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.6 Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.7 Dissenters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.8 Pooling of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.9 Material Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

ARTICLE 11 -- TERMINATION OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

ARTICLE 12 -- NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

ARTICLE 13 -- AMENDMENT OR TERMINATION

13.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.3 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

</TABLE>
<PAGE> 5

<TABLE>
<S> <C>
ARTICLE 14 -- DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

ARTICLE 15 -- MISCELLANEOUS

15.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
15.2 Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
15.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
15.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
15.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
15.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
15.7 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.8 Return of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.9 Equitable Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.10 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.11 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.12 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
15.13 Entire Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

</TABLE>
<PAGE> 6

AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER

THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER is made and
entered into as of this the 15th day of February 1996, by and between SOUTHERN
BANKING CORPORATION ("Southern"), a Florida corporation, and THE COLONIAL
BANCGROUP, INC. ("BancGroup"), a Delaware corporation. This Agreement replaces
and supersedes in its entirety the Agreement and Plan of Merger dated as of
January 25, 1996 by and between BancGroup and Southern (the "original
agreement"), except that whenever a section of this Agreement refers to a
Schedule or Exhibit, the Schedule or Exhibit provided with the original
agreement in response to the comparable section of the original agreement shall
be deemed to have also been provided pursuant to this Agreement.

WITNESSETH

WHEREAS, Southern operates as a bank holding company for its wholly
owned subsidiary, Southern Bank of Central Florida (the "Bank"), with its
principal office in Orlando, Florida; and

WHEREAS, BancGroup is a bank holding company with subsidiary banks in
Alabama, Georgia and Tennessee; and

WHEREAS, Southern wishes to merge with BancGroup; and

WHEREAS, it is the intention of BancGroup and Southern that such
merger shall qualify for federal income tax purposes as a "reorganization"
within the meaning of section 368(a) of the Code, as defined herein;

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Parties hereto agree as follows:

ARTICLE 1
NAME

1.1 NAME. The name of the corporation resulting from the Merger
shall be "The Colonial BancGroup, Inc."

ARTICLE 2
MERGER -- TERMS AND CONDITIONS

2.1 APPLICABLE LAW. On the Effective Date, Southern shall be
merged with and into BancGroup (herein referred to as the "Resulting
Corporation" whenever reference is made to it as of the time of merger or
thereafter). The Merger shall be undertaken pursuant to the provisions of and
with the effect provided in the DGCL and the FBCA. The offices and facilities
of Southern and of BancGroup shall become the offices and facilities of the
Resulting Corporation.

2.2 CORPORATE EXISTENCE. On the Effective Date, the corporate
existence of Southern and of BancGroup shall, as provided in the DGCL and the
FBCA, be merged into and continued in the Resulting Corporation, and the
Resulting Corporation shall be deemed to be the same corporation as Southern
and BancGroup. All rights, franchises and interests

<PAGE> 7

of Southern and BancGroup, respectively, in and to every type of property
(real, personal and mixed) and choses in action shall be transferred to and
vested in the Resulting Corporation by virtue of the Merger without any deed or
other transfer. The Resulting Corporation on the Effective Date, and without
any order or other action on the part of any court or otherwise, shall hold and
enjoy all rights of property, franchises and interests, including appointments,
designations and nominations and all other rights and interests as trustee,
executor, administrator, transfer agent and registrar of stocks and bonds,
guardian of estates, assignee, and receiver and in every other fiduciary
capacity and in every agency, and capacity, in the same manner and to the same
extent as such rights, franchises and interests were held or enjoyed by
Southern and BancGroup, respectively, on the Effective Date.

2.3 ARTICLES OF INCORPORATION AND BYLAWS. On the Effective Date,
the certificate of incorporation and bylaws of the Resulting Corporation shall
be the restated certificate of incorporation and bylaws of BancGroup as they
exist immediately before the Effective Date.

2.4 RESULTING CORPORATION'S OFFICERS AND BOARD. The board of
directors and the officers of the Resulting Corporation on the Effective Date
shall consist of those persons serving in such capacities of BancGroup as of
the Effective Date.

2.5 SHAREHOLDER APPROVAL. This Agreement shall be submitted to
the shareholders of Southern at the Stockholders Meeting to be held as promptly
as practicable consistent with the satisfaction of the conditions set forth in
this Agreement. Upon approval by the requisite vote of the shareholders of
Southern as required by applicable Law, this Agreement shall become effective
as soon as practicable thereafter in the manner provided in section 2.7 hereof.

2.6 FURTHER ACTS. If, at any time after the Effective Date, the
Resulting Corporation shall consider or be advised that any further assignments
or assurances in law or any other acts are necessary or desirable (i) to vest,
perfect, confirm or record, in the Resulting Corporation, title to and
possession of any property or right of Southern or BancGroup, acquired as a
result of the Merger, or (ii) otherwise to carry out the purposes of this
Agreement, Southern or BancGroup and its officers and directors shall execute
and deliver all such proper deeds, assignments and assurances in law and do all
acts necessary or proper to vest, perfect or confirm title to, and possession
of, such property or rights in the Resulting Corporation and otherwise to carry
out the purposes of this Agreement; and the proper officers and directors of
the Resulting Corporation are fully authorized in the name of Southern or
BancGroup, or otherwise, to take any and all such action.

2.7 EFFECTIVE DATE AND CLOSING. Subject to the terms of all
requirements of Law and the conditions specified in this Agreement, the Merger
shall become effective on the date specified in the Certificate of Merger to be
issued by the Secretary of State of the State of Delaware (such time being
herein called the "Effective Date"). The Closing shall take place at the
offices of BancGroup, in Montgomery, Alabama, at 11:00 a.m. on the date that
<PAGE> 8
the Effective Date occurs or at such other place and time that the Parties may
mutually agree.

ARTICLE 3
CONVERSION OF SOUTHERN STOCK

3.1 CONVERSION OF SOUTHERN STOCK. (a) On the Effective Date, and
subject to sections 3.3 and 3.6, each share of common stock of Southern
outstanding and held by Southern's shareholders (the "Southern Stock"), shall
be converted into .3919 of a share of BancGroup Common Stock (i.e., the
"Exchange Ratio"). Shares of Southern common stock that may be issued pursuant
to the exercise of options under Southern's stock option plans (the "Southern
Options") shall be converted as provided in section 3.1(b).

(b)(i) Southern shall cancel and exchange all Southern Options
outstanding at the Effective Date as to which, at least five days prior to the
Effective Date, the holders thereof have consented in writing to the
cancellation and conversion thereof. In exchange therefor, Southern shall
distribute shares of BancGroup common stock as determined below. BancGroup
shall issue such shares of BancGroup common stock to Southern for delivery to
the holders of Southern Options on the Effective Date. Notwithstanding the
foregoing, Southern Options granted pursuant to the 1989 Employee Incentive
Stock Option Plan (the "ISOs") may not be exchanged for shares of BancGroup
common stock pursuant to this section but shall be converted into BancGroup
options pursuant to section 3.1(b)(ii). The number of shares of BancGroup
Common Stock to be issued in exchange for the cancellation of the Southern
Options, excluding the ISOs, is set forth in the following table:

<TABLE>
<CAPTION>
BancGroup Shares
Number of Shares Subject Exercise Price Conversion To Be Issued for
To Southern Options Per Share Rate Southern Options
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
204,000 $2.92 .2965 60,486

584,000 $3.04 .2926 170,878

230,000 $4.50 .2448 56,304
- ------------------------------------------------------------------------------------------------------------------------
1,018,000 287,668
--------- -------
</TABLE>

No fractions of shares of BancGroup Common Stock shall be issued and fractions
shall be exchanged for cash in accordance with section 3.3 hereof. As of the
date hereof, the number of shares of common stock of Southern outstanding and
held of record is 3,362,000 and the number of shares subject to Southern
Options, including the ISOs, is 1,112,000. Assuming no Southern Options are
exercised prior to the Effective Date, and all Southern Options other than the
ISOs are converted in accordance with this section 3.1(b)(i), the number of
shares of BancGroup Common Stock to be issued in the Merger shall be 1,605,235.
Schedule 3.1(b) hereto sets forth the names of all persons holding Southern
Options, the number of shares of Southern common stock subject to such options
and the exercise price per share for such options.

(b)(ii) On the Effective Date, BancGroup shall assume all Southern
Options outstanding as to which the holders thereof have not consented to the
cancellation and
<PAGE> 9

conversion thereof as provided by section 3.1(b)(i) and each such option shall
represent the right to acquire BancGroup Common Stock on substantially the same
terms applicable to the Southern Options except as specified below in this
section. The number of shares of BancGroup Common Stock to be issued pursuant
to such options shall equal the number of shares of Southern common stock
subject to such Southern Options multiplied by .3919. The exercise price for
the acquisition of BancGroup Common Stock shall be the exercise price for each
share of Southern common stock subject to such options divided by .3919.
Assuming that none of the holders of the Southern Options consent to the
cancellation and conversion thereof as provided by Section 3.1(b)(i), then the
Southern Options would be converted into BancGroup Options with the following
terms:

<TABLE>
<CAPTION>
Number of Number of
Shares of Shares of
Southern BancGroup
CommonStock Common Stock
Currently to be Subject
Subject to Current to New Adjusted
Southern Exercise BancGroup Exercise Expiration
Options Price Options Price Date
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
268,000 $2.92 105,029 $ 7.45 March 14, 1999

584,000 $3.04 228,870 $ 7.76 April 21, 2003

30,000 $3.38 11,757 $ 8.62 March 14, 1999

230,000 $4.50 90,137 $11.48 October 5, 2004
- ---------------------------------------------------------------------------------------------------------------------
1,112,000 435,793
</TABLE>

Notwithstanding the foregoing, no fractions of shares of BancGroup Common Stock
shall be issued upon exercise of such options and any fraction of a share of
BancGroup Common Stock that would otherwise be issued upon the exercise of such
options shall be converted into cash upon the exercise of such option in an
amount equal to the product of such fraction and the difference between the
market value of one share of BancGroup Common Stock at the time of exercise of
such option and the per share exercise price of such option. The market value
of one share of BancGroup Common Stock at the time of exercise of such options
shall be the closing sales price of BancGroup Common Stock on the NYSE on the
last trading day preceding the date of exercise. As soon as practicable after
the Effective Date, BancGroup shall file at its expense a registration
statement with the SEC on Form S-8 or other appropriate form with respect to
the shares of BancGroup Common Stock to be issued pursuant to such options and
shall use its reasonable best efforts to maintain the effectiveness of such
registration statement for so long as such options remain outstanding. Such
shares shall also be registered or qualified for sale under the securities laws
of any state in which registration or qualification is necessary.
<PAGE> 10

3.2 SURRENDER OF SOUTHERN STOCK. After the Effective Date, each
holder of an outstanding certificate or certificates which prior thereto
represented shares of Southern Stock who is entitled to receive BancGroup
Common Stock shall be entitled, upon surrender to BancGroup of their
certificate or certificates representing shares of Southern Stock, to receive
in exchange therefor a certificate or certificates representing the number of
whole shares of BancGroup Common Stock into and for which the shares of
Southern Stock so surrendered shall have been converted, such certificates to
be of such denominations and registered in such names as such holder may
reasonably request. Until so surrendered and exchanged, each such outstanding
certificate which, prior to the Effective Date, represented shares of Southern
Stock and which is to be converted into BancGroup Common Stock shall for all
purposes evidence ownership of the BancGroup Common Stock into and for which
such shares shall have been so converted, except that no dividends or other
distributions with respect to such BancGroup Common Stock shall be made until
the certificates previously representing shares of Southern Stock shall have
been properly tendered.

3.3 FRACTIONAL SHARES. No fractional shares of BancGroup Common
Stock shall be issued, and each holder of shares of Southern Stock having a
fractional interest arising upon the conversion of such shares into shares of
BancGroup Common Stock shall, at the time of surrender of the certificates
previously representing Southern Stock, be paid by BancGroup an amount in cash
equal to the market value of such fractional share. For this purpose, "market
value" shall mean the average of the closing prices of BancGroup Common Stock
on each of the 20 trading days ending on the trading day immediately prior to
the Effective Date as reported by the NYSE.

3.4 ADJUSTMENTS. In the event that prior to the Effective Date
BancGroup Common Stock shall be changed into a different number of shares or a
different class of shares by reason of any recapitalization or
reclassification, stock dividend, combination, stock split, or reverse stock
split of the Common Stock, an appropriate and proportionate adjustment shall be
made in the number of shares of BancGroup Common Stock into which the Southern
Stock and Southern Options shall be converted, and the market values stated in
section 8.6 hereof shall be appropriately adjusted.

3.5 BANCGROUP STOCK. The shares of Common Stock of BancGroup
issued and outstanding immediately before the Effective Date shall continue to
be issued and outstanding shares of the Resulting Corporation.

3.6 DISSENTING RIGHTS. Any shareholder of Southern who shall not
have voted in favor of this Agreement and who has complied with the applicable
procedures set forth in the FBCA, relating to rights of dissenting
shareholders, shall be entitled to receive payment for the fair value of his
Southern Stock. If after the Effective Date a dissenting shareholder of
Southern fails to perfect, or effectively withdraws or loses, his right to
appraisal and payment for his shares of Southern Stock, BancGroup shall issue
and deliver the consideration to which such holder of shares of Southern Stock
is entitled under Section 3.1 (without interest) upon surrender of such holder
of the certificate or certificates representing shares of Southern Stock held
by him.
<PAGE> 11

ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP

BancGroup represents, warrants and covenants to and with Southern as follows:

4.1 ORGANIZATION. BancGroup is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware.
BancGroup has the necessary corporate powers to carry on its business as
presently conducted and is qualified to do business in every jurisdiction in
which the character and location of the Assets owned by it or the nature of the
business transacted by it requires qualification or in which the failure to
qualify could, individually or in the aggregate, have a Material Adverse Effect
on the condition (financial or other), earnings, business, affairs, Assets,
properties, prospects or results of operations of BancGroup or of BancGroup and
its Subsidiaries taken as a whole.

4.2 CAPITAL STOCK.

(a) The authorized capital stock of BancGroup consists of
(A) 44,000,000 shares of Common Stock, $2.50 par value per share, of which as
of September 30, 1995, 12,267,143 shares were validly issued and outstanding,
fully paid and nonassessable and are not subject to preemptive rights, and (B)
1,000,000 shares of Preference Stock, $2.50 par value per share, none of which
are issued and outstanding. The shares of Common Stock to be issued upon the
Merger are duly authorized and, when so issued, will be validly issued and
outstanding, fully paid and nonassessable, will have been registered under the
1933 Act, and will have been registered or qualified under the securities laws
of all jurisdictions in which such registration or qualification is required,
based upon information provided by Southern.

(b) The authorized capital stock of each Subsidiary of
BancGroup is validly issued and outstanding, fully paid and nonassessable, and
each Subsidiary is wholly owned, directly or indirectly, by BancGroup.

4.3 FINANCIAL STATEMENTS; TAXES. (a) BancGroup has delivered to
Southern copies of the following financial statements of BancGroup.

(i) Consolidated balance sheets as of December
31, 1993, and December 31, 1994, and for the nine months ending September 30,
1995;

(ii) Consolidated statements of operations for
each of the three years ended December 31, 1992, 1993 and 1994, and for the
nine months ending September 30, 1995;

(iii) Consolidated statements of cash flows for each
of the three years ended December 31, 1992, 1993 and 1994, and for the nine
months ending September 30, 1995; and
<PAGE> 12

(iv) Consolidated statements of changes in
shareholders' equity for the three years ended December 31, 1992, 1993 and
1994, and for the nine months ending September 30, 1995.

All such financial statements are in all material respects in accordance with
the books and records of BancGroup and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, all as more particularly set forth in the
notes to such statements. Each of the consolidated balance sheets presents
fairly as of its date the consolidated financial condition of BancGroup and its
Subsidiaries. Except as and to the extent reflected or reserved against in
such balance sheets (including the notes thereto), BancGroup did not have, as
of the dates of such balance sheets, any material Liabilities or obligations
(absolute or contingent) of a nature customarily reflected in a balance sheet
or the notes thereto, other than Liabilities (including reserves) in the amount
set forth in such balance sheets and the notes thereto. The statements of
consolidated income, shareholders' equity and changes in consolidated financial
position present fairly the results of operations and changes in financial
position of BancGroup and its Subsidiaries for the periods indicated. The
foregoing representations, insofar as they relate to the unaudited interim
financial statements of BancGroup for the nine months ended September 30, 1995,
are subject in all cases to normal recurring year-end adjustments and the
omission of footnote disclosure.

(b) All Tax returns required to be filed by or on behalf
of BancGroup have been timely filed (or requests for extensions therefor have
been timely filed and granted and have not expired), and all returns filed are
complete and accurate in all material respects. All Taxes shown on said
returns to be due and all additional assessments received have been paid. The
amounts recorded for Taxes on the balance sheets provided under section 4.3(a)
are, to the Knowledge of BancGroup, sufficient in all material respects for the
payment of all unpaid federal, state, county, local, foreign or other Taxes
(including any interest or penalties) of BancGroup accrued for or applicable to
the period ended on the dates thereof, and all years and periods prior thereto
and for which BancGroup may at said dates have been liable in its own right or
as transferee of the Assets of, or as successor to, any other corporation or
other party. No audit, examination or investigation is presently being
conducted or, to the Knowledge of BancGroup, threatened by any taxing authority
which is likely to result in a material Tax Liability, no material unpaid Tax
deficiencies or additional liabilities of any sort have been proposed by any
governmental representative and no agreements for extension of time for the
assessment of any material amount of Tax have been entered into by or on behalf
of BancGroup. BancGroup has withheld from its employees (and timely paid to
the appropriate governmental entity) proper and accurate amounts for all
periods in material compliance with all Tax withholding provisions of
applicable federal, state, foreign and local Laws (including without
limitation, income, social security and employment Tax withholding for all
types of compensation).

4.4 NO CONFLICT WITH OTHER INSTRUMENT. The consummation of the
transactions contemplated by this Agreement will not result in a breach of or
constitute a Default (without regard to the giving of notice or the passage of
time) under any material indenture, mortgage, deed of trust or other material
agreement or instrument to which BancGroup or
<PAGE> 13

any of its Subsidiaries is a party or by which they or their Assets may be
bound; will not conflict with any provision of the restated certificate of
incorporation or bylaws of BancGroup or the articles of incorporation or bylaws
of any of its Subsidiaries; and will not violate any provision of any Law,
regulation, judgment or decree binding on them or any of their Assets.

4.5 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the date of the
most recent balance sheet provided under section 4.3(a)(i) above, there have
been no events, changes or occurrences which have had or are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
BancGroup.

4.6 APPROVAL OF AGREEMENTS. The board of directors of BancGroup
has, or will have prior to the Effective Date, approved this Agreement and the
transactions contemplated by it and have, or will have prior to the Effective
Date, authorized the execution and delivery by BancGroup of this Agreement.
This Agreement constitutes the legal, valid and binding obligation of
BancGroup, enforceable against it in accordance with its terms. Approval of
this Agreement by the stockholders of BancGroup is not required by applicable
law. Subject to the matters referred to in section 8.2, BancGroup has full
power, authority and legal right to enter into this Agreement and to consummate
the transactions contemplated by this Agreement. BancGroup has no Knowledge of
any fact or circumstance under which the appropriate regulatory approvals
required by section 8.2 will not be granted without the imposition of material
conditions or material delays.

4.7 TAX TREATMENT. BancGroup has no present plan to sell or
otherwise dispose of any of the Assets of Southern, or to liquidate any
Subsidiaries, subsequent to the Merger, and BancGroup intends to continue the
historic business of Southern.

4.8 TITLE AND RELATED MATTERS. BancGroup has good and marketable
title to all the properties, interests in properties and Assets, real and
personal, reflected in the most recent balance sheet referred to in section
4.3(a), or acquired after the date of such balance sheet (except properties,
interests and Assets sold or otherwise disposed of since such date, in the
ordinary course of business), free and clear of all mortgages, Liens, pledges,
charges or encumbrances except (i) mortgages and other encumbrances referred to
in the notes of such balance sheet, (ii) liens for current Taxes not yet due
and payable and (iii) such imperfections of title and easements as do not
materially detract from or interfere with the present use of the properties
subject thereto or affected thereby, or otherwise materially impair present
business operations at such properties. To the Knowledge of BancGroup, the
material structures and equipment of BancGroup comply in all material respects
with the requirements of all applicable Laws.

4.9 SUBSIDIARIES. Each Subsidiary of BancGroup has been duly
incorporated and is validly existing as a corporation in good standing under
the Laws of the jurisdiction of its incorporation and each Subsidiary has been
duly qualified as a foreign corporation to transact business and is in good
standing under the Laws of each other jurisdiction in which it owns or leases
properties, or conducts any business so as to require such qualification and in
which the failure to be duly qualified could have a Material Adverse Effect
upon
<PAGE> 14

BancGroup and its Subsidiaries considered as one enterprise; each of the
banking Subsidiaries of BancGroup has its deposits fully insured by the Federal
Deposit Insurance Corporation to the extent provided by the Federal Deposit
Insurance Act; and the businesses of the non-bank Subsidiaries of BancGroup are
permitted to subsidiaries of registered bank holding companies.

4.10 CONTRACTS. Neither BancGroup nor any of its Subsidiaries is
in violation of its respective certificate of incorporation or by-laws or in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any Contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or by which
it or its property may be bound.

4.11 LITIGATION. Except as disclosed in or reserved for in
BancGroup's financial statements, there is no Litigation before or by any court
or Agency, domestic or foreign, now pending, or, to the Knowledge of BancGroup,
threatened against or affecting BancGroup or any of its Subsidiaries (nor is
BancGroup aware of any facts which could give rise to any such Litigation)
which is required to be disclosed in the Registration Statement (other than as
disclosed therein), or which is likely to have any Material Adverse Effect or
prospective Material Adverse Effect in the condition, financial or otherwise,
or in the general affairs, management, stockholders' equity or results of
operations of BancGroup and its Subsidiaries considered as one enterprise, or
which is likely to materially and adversely affect the properties or Assets
thereof or which is likely to materially affect or delay the consummation of
the transactions contemplated by this Agreement; all pending legal or
governmental proceedings to which BancGroup or any Subsidiary is a party or of
which any of their properties is the subject which are not described in the
Registration Statement, including ordinary routine litigation incidental to the
business, are, considered in the aggregate, not material; and neither BancGroup
nor any of its Subsidiaries have any contingent obligations which could be
considered material to BancGroup and its Subsidiaries considered as one
enterprise which are not disclosed in the Registration Statement as it may be
amended or supplemented.

4.12 COMPLIANCE. BancGroup and its Subsidiaries, in the conduct of
their businesses, are to the Knowledge of BancGroup, in material compliance
with all material federal, state or local Laws applicable to their or the
conduct of their businesses.

4.13 REGISTRATION STATEMENT. At the time the Registration
Statement becomes effective and at the time of the Stockholders' Meeting, the
Registration Statement, including the Proxy Statement which shall constitute a
part thereof, will comply in all material respects with the requirements of the
1933 Act and the rules and regulations thereunder, will not contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall not apply to statements
in or omissions from the Proxy Statement made in reliance upon and in
conformity with information furnished in writing to BancGroup by Southern or
any of its representatives expressly for use in the Proxy
<PAGE> 15

Statement or information included in the Proxy Statement regarding the business
of Southern, its operations, Assets and capital.

4.14 SEC FILINGS. (a) BancGroup has heretofore delivered to
Southern copies of BancGroup's: (i) Annual Report on Form 10-K for the fiscal
year ended December 31, 1994; (ii) 1994 Annual Report to Shareholders; (iii)
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1995,
June 30, 1995 and September 30, 1995; and (iv) all other reports, registration
statements and other documents filed by BancGroup with the SEC since December
31, 1994. Since December 31, 1994, BancGroup has timely filed all reports and
registration statements and the documents required to be filed with the SEC
under the rules and regulations of the SEC and all such reports and
registration statements or other documents have complied in all material
respects, as of their respective filing dates and effective dates, as the case
may be, with all the applicable requirements of the 1933 Act and the 1934 Act.
As of the respective filing and effective dates, none of such reports or
registration statements or other documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

(b) The documents incorporated by reference into the Registration
Statement, at the time they were filed with the SEC, complied in all material
respects with the requirements of the 1934 Act and Regulations thereunder and
when read together and with the other information in the Registration Statement
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading at the time the Registration Statement becomes effective
or at the time of the Stockholders Meeting.

4.15 FORM S-4. The conditions for use of a registration statement
on SEC Form S-4 set forth in the General Instructions on Form S-4 have been or
will be satisfied with respect to BancGroup and the Registration Statement.

4.16 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by BancGroup
directly with Southern and without the intervention of any other person, either
as a result of any act of BancGroup or otherwise in such manner as to give
rights to any valid claim against BancGroup for finders fee, brokerage
commissions or other like payment.

4.17 GOVERNMENT AUTHORIZATION. BancGroup and its Subsidiaries have
all Permits that, to the Knowledge of BancGroup and its Subsidiaries, are or
will be legally required to enable BancGroup or any of its Subsidiaries to
conduct their businesses in all material respects as now conducted by each of
them.

4.18 ABSENCE OF REGULATORY COMMUNICATIONS. Neither BancGroup nor
any of its Subsidiaries is subject to, or has received during the past three
(3) years, any written communication directed specifically to it from any
Agency to which it is subject or pursuant to which such Agency has imposed or
has indicated it may impose any material restrictions
<PAGE> 16

on the operations of it or the business conducted by it or in which such Agency
has raised a material question concerning the condition, financial or
otherwise, of such company.

4.19 DISCLOSURE. No representation or warranty, or any statement
or certificate furnished or to be furnished to Southern by BancGroup, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained in this
Agreement or in any such statement or certificate not misleading.

ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SOUTHERN

Southern represents, warrants and covenants to and with BancGroup, as
follows:

5.1 ORGANIZATION. Southern is a Florida corporation, and the Bank
is a Florida banking corporation and not a member of the Federal Reserve
System. Each Southern Company is duly organized, validly existing and in good
standing under the respective Laws of its jurisdiction of incorporation and has
all requisite power and authority to carry on its business as it is now being
conducted and is qualified to do business in every jurisdiction in which the
character and location of the Assets owned by it or the nature of the business
transacted by it requires qualification or in which the failure to qualify
could, individually, or in the aggregate, have a Material Adverse Effect on the
condition (financial or other) earnings, business, affairs, Assets, properties,
prospects or results of operations of Southern or of Southern and its
Subsidiaries taken as a whole.

5.2 CAPITAL STOCK. (i) As of September 30, 1995, the authorized
capital stock of Southern consists of 10,000,000 shares of common stock, $1.00
par value per share, 3,362,000 shares of which are issued and outstanding. All
of such shares which are outstanding are validly issued, fully paid and
nonassessable and not subject to preemptive rights. Southern has 1,112,000
shares of its common stock subject to exercise pursuant to stock options under
its stock option plans. Except for the foregoing, Southern does not have any
other arrangements or commitments obligating it to issue shares of its capital
stock or any securities convertible into or having the right to purchase shares
of its capital stock.

5.3 SUBSIDIARIES. Southern has no direct Subsidiaries other than
the Bank, and there are no operating subsidiaries of the Bank. Southern owns
all of the issued and outstanding capital stock of the Bank free and clear of
any liens, claims or encumbrances of any kind. All of the issued and
outstanding shares of capital stock of the Subsidiaries have been validly
issued and are fully paid and non-assessable. As of September 30, 1995, there
were 1,000,000 shares of the common stock, par value $4.00 per share,
authorized of the Bank, 527,778 of which are issued and outstanding and wholly
owned by Southern.

5.4 FINANCIAL STATEMENTS; TAXES (a) Southern has delivered to
BancGroup copies of the following financial statements of Southern:
<PAGE> 17

(i) Consolidated statements of financial
condition as of December 31, 1993 and 1994, and for the nine months ending
September 30, 1995;

(ii) Consolidated statements of income for each of
the three years ended December 31, 1992, 1993 and 1994, and for the nine months
ending September 30, 1995;

(iii) Consolidated statements of stockholders'
equity for each of the three years ended December 31, 1992, 1993, and 1994,
and for the nine months ending September 30, 1995; and

(iv) Consolidated statements of cash flows for the
three years ended December 31, 1992, 1993 and 1994, and for the nine months
ending September 30, 1995.

All of the foregoing financial statements are in all material respects
in accordance with the books and records of Southern and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated, except for changes required
by GAAP, all as more particularly set forth in the notes to such statements.
Each of such balance sheets presents fairly as of its date the financial
condition of Southern. Except as and to the extent reflected or reserved
against in such balance sheets (including the notes thereto), Southern did not
have, as of the date of such balance sheets, any material Liabilities or
obligations (absolute or contingent) of a nature customarily reflected in a
balance sheet or the notes thereto, other than Liabilities (including reserves)
in the amount set forth in such balance sheets and the notes thereto. The
statements of income, stockholders' equity and cash flows present fairly the
results of operation, changes in shareholders equity and cash flows of Southern
for the periods indicated. The foregoing representations, insofar as they
relate to the unaudited interim financial statements of Southern for the nine
months ended September 30, 1995, are subject in all cases to normal recurring
year-end adjustments and the omission of footnote disclosure.

(b) Except as set forth on Schedule 5.4(b), all Tax
returns required to be filed by or on behalf of Southern have been timely filed
(or requests for extensions therefor have been timely filed and granted and
have not expired), and all returns filed are complete and accurate in all
material respects. All Taxes shown on said returns to be due and all
additional assessments received have been paid. The amounts recorded for Taxes
on the balance sheets provided under section 5.4(a) are, to the Knowledge of
Southern, sufficient in all material respects for the payment of all unpaid
federal, state, county, local, foreign and other Taxes (including any interest
or penalties) of Southern accrued for or applicable to the period ended on the
dates thereof, and all years and periods prior thereto and for which Southern
may at said dates have been liable in its own right or as a transferee of the
Assets of, or as successor to, any other corporation or other party. No audit,
examination or investigation is presently being conducted or, to the Knowledge
of Southern, threatened by any taxing authority which is likely to result in a
material Tax Liability, no material unpaid Tax deficiencies or additional
liability of any sort have been proposed by any governmental representative and
no agreements for extension of time for the assessment of any material amount
of Tax have been entered into by or on behalf of Southern.
<PAGE> 18

Southern has not executed an extension or waiver of any statute of limitations
on the assessment or collection of any Tax due that is currently in effect.

(c) Each Southern Company has withheld from its employees
(and timely paid to the appropriate governmental entity) proper and accurate
amounts for all periods in material compliance with all Tax withholding
provisions of applicable federal, state, foreign and local Laws (including
without limitation, income, social security and employment Tax withholding for
all types of compensation). Each Southern Company is in compliance with, and
its records contain all information and documents (including properly completed
IRS Forms W-9) necessary to comply with, all applicable information reporting
and Tax withholding requirements under federal, state and local Tax Laws, and
such records identify with specificity all accounts subject to backup
withholding under section 3406 of the Code.

5.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 5.5, since the date of the most recent balance sheet provided under
section 5.4(a)(i) above, no Southern Company has

(a) issued, delivered or agreed to issue or deliver any
stock, bonds or other corporate securities (whether authorized and unissued or
held in the treasury) except shares of common stock issued upon the exercise of
Southern Options and shares issued as director's qualifying shares;

(b) borrowed or agreed to borrow any funds or incurred,
or become subject to, any Liability (absolute or contingent) except borrowings,
obligations and Liabilities incurred in the ordinary course of business and
consistent with past practice;

(c) paid any material obligation or Liability (absolute
or contingent) other than current Liabilities reflected in or shown on the most
recent balance sheet referred to in section 5.4(a)(i) and current Liabilities
incurred since that date in the ordinary course of business and consistent with
past practice;

(d) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any Assets of any kind whatsoever to
shareholders, or purchased or redeemed, or agreed to purchase or redeem, any of
its outstanding securities;

(e) except in the ordinary course of business, sold or
transferred, or agreed to sell or transfer, any of its Assets, or canceled, or
agreed to cancel, any debts or claims;

(f) except in the ordinary course of business, entered or
agreed to enter into any agreement or arrangement granting any preferential
rights to purchase any of its Assets, or requiring the consent of any party to
the transfer and assignment of any of its Assets;

(g) suffered any Losses or waived any rights of value
which in either event in the aggregate are material considering its business as
a whole;
<PAGE> 19

(h) except in the ordinary course of business, made or
permitted any amendment or termination of any Contract, agreement or license to
which it is a party if such amendment or termination is material considering
its business as a whole;

(i) except in accordance with normal and usual practice,
made any accrual or arrangement for or payment of bonuses or special
compensation of any kind or any severance or termination pay to any present or
former officer or employee;

(j) except in accordance with normal and usual practice,
increased the rate of compensation payable to or to become payable to any of
its officers or employees or made any material increase in any profit sharing,
bonus, deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan, payment or arrangement made to, for or with any of its
officers or employees;

(k) received notice or had Knowledge or reason to believe
that any of its substantial customers has terminated or intends to terminate
its relationship, which termination would have a Material Adverse Effect on its
financial condition, results of operations, business, Assets or properties;

(l) failed to operate its business in the ordinary course
so as to preserve its business intact and to preserve the goodwill of its
customers and others with whom it has business relations;

(m) entered into any other material transaction other
than in the ordinary course of business; or

(n) agreed in writing, or otherwise, to take any action
described in clauses (a) through (m) above.

Between the date hereof and the Effective Date, no Southern Company,
without the express written approval of BancGroup, will do any of the things
listed in clauses (a) through (n) of this section 5.5 except as permitted
therein or as contemplated in this Agreement, and no Southern Company will
enter into or amend any material Contract without the express written consent
of BancGroup. Southern may request the consent of BancGroup to any of the
foregoing actions by furnishing BancGroup with a written request which
describes the action proposed to be taken by Southern. Such consent shall not
be unreasonably withheld. BancGroup shall have a period of 10 days from the
date on which it receives such request within which to notify Southern of
either its consent or refusal to consent, to the proposed action. BancGroup's
failure to respond to any such request within such 10 days period shall be
deemed to constitute a consent to the action proposed in Southern's request.

5.6 TITLE AND RELATED MATTERS.

(a) Title. Southern has good and marketable title to all
the properties, interest in properties and Assets, real and personal, reflected
in the most recent balance
<PAGE> 20

sheet referred to in section 5.4(a)(i), or acquired after the date of such
balance sheet (except properties, interests and Assets sold or otherwise
disposed of since such date, in the ordinary course of business), free and
clear of all mortgages, Liens, pledges, charges or encumbrances except (i)
mortgages and other encumbrances referred to in the notes to such balance
sheet, (ii) Liens for current Taxes not yet due and payable and (iii) such
imperfections of title and easements as do not materially detract from or
interfere with the present use of the properties subject thereto or affected
thereby, or otherwise materially impair present business operations at such
properties. To the Knowledge of Southern, the material structures and
equipment of each Southern Company comply in all material respects with the
requirements of all applicable Laws.

(b) Leases. Schedule 5.6(b) sets forth a list and
description of all real and personal property owned or leased by any Southern
Company, either as lessor or lessee.

(c) Personal Property. Schedule 5.6(c) sets forth a
depreciation schedule of each Southern Company's fixed Assets as of December
31, 1994.

(d) Computer Hardware and Software. Schedule 5.6(d)
contains a description of all agreements relating to data processing computer
software and hardware now being used in the business operations of any Southern
Company. Southern is not aware of any defects, irregularities or problems with
any of its computer hardware or software which renders such hardware or
software unable to satisfactorily perform the tasks and functions to be
performed by them in the business of any Southern Company.

5.7 COMMITMENTS. Except as set forth in Schedule 5.7, no Southern
Company is a party to any oral or written (i) Contracts for the employment of
any officer or employee which is not terminable on 30 days' (or less) notice,
(ii) profit sharing, bonus, deferred compensation, savings, stock option,
severance pay, pension or retirement plan, agreement or arrangement, (iii) loan
agreement, indenture or similar agreement relating to the borrowing of money by
such party, (iv) guaranty of any obligation for the borrowing of money or
otherwise, excluding endorsements made for collection, and guaranties made in
the ordinary course of business, (v) consulting or other similar material
Contracts, (vi) collective bargaining agreement, (vii) agreement with any
present or former officer, director or shareholder of such party, or (viii)
other Contract, agreement or other commitment which is material to the
business, operations, property, prospects or Assets or to the condition,
financial or otherwise, of any Southern Company. Complete and accurate copies
of all Contracts, plans and other items so listed have been made or will be
made available to BancGroup for inspection.

5.8 CHARTER AND BYLAWS. Schedule 5.8 contains true and correct
copies of the articles of incorporation and bylaws of each Southern Company,
including all amendments thereto, as currently in effect. There will be no
changes in such articles of incorporation or bylaws prior to the Effective
Date, without the prior written consent of BancGroup.

5.9 LITIGATION. There is no Litigation (whether or not
purportedly on behalf of Southern) pending or, to the Knowledge of Southern,
threatened against or affecting any
<PAGE> 21

Southern Company (nor is Southern aware of any facts which are likely to give
rise to any such Litigation) at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind, which involves the
possibility of any judgment or Liability not fully covered by insurance in
excess of a reasonable deductible amount or which may have a Material Adverse
Effect on the business operations, properties or Assets or in the condition,
financial or otherwise, of any Southern Company, and no Southern Company is in
Default with respect to any judgment, order, writ, injunction, decree, award,
rule or regulation of any court, arbitrator or governmental department,
commission, board, bureau, agency or instrumentality, which Default would have
a Material Adverse Effect on the business operations, properties or Assets or
in the condition, financial or otherwise, of such party. To the Knowledge of
Southern, each Southern Company has complied in all material respects with all
material applicable Laws and Regulations including those imposing Taxes, or any
applicable jurisdiction and of all states, municipalities, other political
subdivisions and Agencies, in respect of the ownership of its properties and
the conduct of its business, which, if not complied with, would have a Material
Adverse Effect in the business operations, properties or Assets or in the
condition, financial or otherwise, of any such Southern Company.

5.10 MATERIAL CONTRACT DEFAULTS. Except as disclosed on Schedule
5.10, no Southern Company is in Default in any material respect under the terms
of any material Contract, agreement, lease or other commitment which is or may
be, material to the business, operations, properties or Assets, or the
condition, financial or otherwise, of such company and, to the Knowledge of
Southern, there is no event which, with notice or lapse of time, or both, may
be or become an event of Default under any such material Contract, agreement,
lease or other commitment in respect of which adequate steps have not been
taken to prevent such a Default from occurring.

5.11 NO CONFLICT WITH OTHER INSTRUMENT. The consummation of the
transactions contemplated by this Agreement will not result in the breach of
any term or provision of or constitute a Default under any Contract, indenture,
mortgage, deed of trust or other material agreement or instrument to which any
Southern Company is a party and will not conflict with any provision of the
charter or bylaws of any Southern Company.

5.12 GOVERNMENTAL AUTHORIZATION. Each Southern Company has all
Permits that, to the Knowledge of Southern, are or will be legally required to
enable any Southern Company to conduct its business in all material respects as
now conducted by each Southern Company.

5.13 ABSENCE OF REGULATORY COMMUNICATIONS. Except as provided in
Schedule 5.13, no Southern Company is subject to, nor has any Southern Company
received during the past three years, any written communication directed
specifically to it from any Agency to which it is subject or pursuant to which
such Agency has imposed or has indicated it may impose any material
restrictions on the operations of it or the business conducted by it or in
which such Agency has raised any material question concerning the condition,
financial or otherwise, of such company.
<PAGE> 22

5.14 ABSENCE OF MATERIAL ADVERSE CHANGE. To the Knowledge of
Southern, since the date of the most recent balance sheet provided under
section 5.4(a)(i), there have been no events, changes or occurrences which
have had, or are reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on any Southern Company.

5.15 INSURANCE. Each Southern Company has in effect insurance
coverage and bonds with reputable insurers which, in respect to amounts, types
and risks insured, management of Southern reasonably believes to be adequate
for the type of business conducted by such company. No Southern Company is
liable for any material retroactive premium adjustment. All insurance policies
and bonds are valid, enforceable and in full force and effect, and no Southern
Company has received any notice of any material premium increase or
cancellation with respect to any of its insurance policies or bonds. Within
the last three years, no Southern Company has been refused any insurance
coverage which it has sought or applied for, and it has no reason to believe
that existing insurance coverage cannot be renewed as and when the same shall
expire, upon terms and conditions as favorable as those presently in effect,
other than possible increases in premiums that do not result from any
extraordinary loss experience. All policies of insurance presently held or
policies containing substantially equivalent coverage will be outstanding and
in full force with respect to each Southern Company at all times from the date
hereof to the Effective Date.

5.16 PENSION AND EMPLOYEE BENEFIT PLANS.

(a) To the Knowledge of Southern, all employee benefit
plans of each Southern Company have been established in compliance with, and
such plans have been operated in material compliance with, all applicable Laws.
Except as set forth in Section 5.16, no Southern Company sponsors or otherwise
maintains a "pension plan" within the meaning of section 3(2) of ERISA or any
other retirement plan other than the Southern 401(k) plan that is intended to
qualify under section 401 of the Code, nor do any unfunded Liabilities exist
with respect to any employee benefit plan, past or present. To the Knowledge
of Southern, no employee benefit plan, any trust created thereunder or any
trustee or administrator thereof has engaged in a "prohibited transaction," as
defined in section 4975 of the Code, which may have a Material Adverse Effect
on the condition, financial or otherwise, of any Southern Company.

(b) To the Knowledge of Southern, no amounts payable to
any employee of any Southern Company will fail to be deductible for federal
income tax purposes by virtue of Section 280G of the Code and regulations
thereunder.

5.17 BUY-SELL AGREEMENT. To the Knowledge of Southern, there are
no agreements among any of its shareholders granting to any person or persons a
right of first refusal in respect of the sale, transfer, or other disposition
of shares of outstanding securities by any shareholder of Southern, any similar
agreement or any voting agreement or voting trust in respect of any such
shares.
<PAGE> 23

5.18 BROKERS. Except for services provided for Southern by The
Carson Medlin Company, all negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by Southern
directly with BancGroup and without the intervention of any other person,
either as a result of any act of Southern, or otherwise, in such manner as to
give rise to any valid claim against Southern for a finder's fee, brokerage
commission or other like payment.

5.19 APPROVAL OF AGREEMENTS. The board of directors of Southern
has approved this Agreement and the transactions contemplated by this Agreement
and has authorized the execution and delivery by Southern of this Agreement.
Subject to the matters referred to in section 8.2, Southern has full power,
authority and legal right to enter into this Agreement, and, upon appropriate
vote of the shareholders of Southern in accordance with this Agreement,
Southern shall have full power, authority and legal right to consummate the
transactions contemplated by this Agreement.

5.20 DISCLOSURE. No representation or warranty, nor any statement
or certificate furnished or to be furnished to BancGroup by Southern, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained in this
Agreement or in any such statement or certificate not misleading.

5.21 REGISTRATION STATEMENT. At the time the Registration
Statement becomes effective and at the time of the Stockholders Meeting, the
Registration Statement, including the Proxy Statement which shall constitute
part thereof, will not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this section
shall only apply to statements in or omissions from the Proxy Statement
relating to descriptions of the business of Southern, its Assets, properties,
operations, and capital stock or to information furnished in writing by
Southern or its representatives expressly for inclusion in the Proxy Statement.

5.22 LOANS; ADEQUACY OF ALLOWANCE FOR LOAN LOSSES. All reserves
for loan losses shown on the most recent financial statements furnished by
Southern have been calculated in accordance with prudent and customary banking
practices and are adequate to reflect the risk inherent in the loans of
Southern. Southern has no Knowledge of any fact which is likely to require a
future material increase in the provision for loan losses or a material
decrease in the loan loss reserve reflected in such financial statements. Each
loan reflected as an Asset on the financial statements of Southern is the
legal, valid and binding obligation of the obligor of each loan, enforceable in
accordance with its terms subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, or other similar laws relating to creditors' rights
generally and to general equitable principles. Southern does not have in its
portfolio any loan exceeding its legal lending limit, and except as disclosed
on Schedule 5.22, Southern has no known significant delinquent, substandard,
doubtful, loss, nonperforming or problem loans.
<PAGE> 24

5.23 ENVIRONMENTAL MATTERS. Except as provided in Schedule 5.23,
to the Knowledge of Southern, each Southern Company is in material compliance
with all Laws and other governmental requirements relating to the generation,
management, handling, transportation, treatment, disposal, storage, delivery,
discharge, release or emission of any waste, pollution, or toxic, hazardous or
other substance (the "Environmental Laws"), and Southern has no Knowledge that
any Southern Company has not complied with all regulations and requirements
promulgated by the Occupational Safety and Health Administration that are
applicable to any Southern Company. To the Knowledge of Southern, there is no
Litigation pending or threatened with respect to any violation or alleged
violation of the Environmental Laws. To the Knowledge of Southern, with
respect to Assets of or owned by any Southern Company, including any Loan
Property, (i) there has been no spillage, leakage, contamination or release of
any substances for which the appropriate remedial action has not been
completed; (ii) no owned or leased property is contaminated with or contains
any hazardous substance or waste; and (iii) there are no underground storage
tanks on any premises owned or leased by any Southern Company. Southern has no
Knowledge of any facts which might suggest that any Southern Company has
engaged in any management practice with respect to any of its past or existing
borrowers which could reasonably be expected to subject any Southern Company to
any Liability, either directly or indirectly, under the principles of law as
set forth in United States v. Fleet Factors Corp., 901 F.2d 1550 (11th Cir.
1990) or any similar principles. Moreover, to the Knowledge of Southern, no
Southern Company has extended credit, either on a secured or unsecured basis,
to any person or other entity engaged in any activities which would require or
requires such person or entity to obtain any Permits which are required under
any Environmental Law which has not been obtained.

5.24 TRANSFER OF SHARES. Southern has no Knowledge of any plan or
intention on the part of Southern's shareholders to sell or otherwise dispose
of any of the BancGroup Common Stock to be received by them in the Merger that
would reduce such shareholders' ownership to a number of shares having, in the
aggregate, a fair market value of less than fifty (50%) percent of the total
fair market value of Southern common stock outstanding immediately before the
Merger.

5.25 COLLECTIVE BARGAINING. There are no labor contracts,
collective bargaining agreements, letters of undertakings or other
arrangements, formal or informal, between any Southern Company and any union or
labor organization covering any of any Southern Company's employees and none of
said employees are represented by any union or labor organization.

5.26 LABOR DISPUTES. To the Knowledge of Southern, each Southern
Company is in material compliance with all federal and state laws respecting
employment and employment practices, terms and conditions of employment, wages
and hours. No Southern Company is or has been engaged in any unfair labor
practice, and, to the Knowledge of Southern, no unfair labor practice complaint
against any Southern Company is pending before the National Labor Relations
Board. Relations between management of each Southern Company and the employees
are amicable and there have not been, nor to the
<PAGE> 25

Knowledge of Southern, are there presently, any attempts to organize employees,
nor to the Knowledge of Southern, are there plans for any such attempts.

5.27 DERIVATIVE CONTRACTS. No Southern Company is a party to or
has agreed to enter into a swap, forward, future, option, cap, floor or collar
financial contract, or any other interest rate or foreign currency protection
contract or derivative security not included in Southern's financial statements
delivered under section 5.4 hereof which is a financial derivative contract
(including various combinations thereof).

ARTICLE 6
ADDITIONAL COVENANTS

6.1 ADDITIONAL COVENANTS OF BANCGROUP. BancGroup covenants to and
with Southern as follows:

(a) Registration Statement and Other Filings. BancGroup
shall prepare and file with the SEC the Registration Statement on Form S-4 (or
such other form as may be appropriate) and all amendments and supplements
thereto, in form reasonably satisfactory to Southern and its counsel, with
respect to the Common Stock to be issued pursuant to this Agreement. BancGroup
shall use reasonable good faith efforts to prepare all necessary filings with
any Agencies which may be necessary for approval to consummate the transactions
contemplated by this Agreement.

(b) Blue Sky Permits. BancGroup shall use its best
efforts to obtain, prior to the effective date of the Registration Statement,
all necessary state securities Law or "blue sky" Permits and approvals required
to carry out the transactions contemplated by this Agreement.

(i) As soon as practicable and in any event
within forty-five (45) days after the end of each quarterly period (other than
the last quarterly period) in each fiscal year, consolidated statements of
operations of BancGroup for such period and for the period beginning at the
commencement of the fiscal year and ending at the end of such quarterly period,
and a consolidated statement of financial condition of BancGroup as of the end
of such quarterly period, setting forth in each case in comparative form
figures for the corresponding periods ending in the preceding fiscal year,
subject to changes resulting from year-end adjustments;

(ii) Promptly upon receipt thereof, copies of all
audit reports submitted to BancGroup by independent auditors in connection with
each annual, interim or special audit of the books of BancGroup made by such
accountants;

(iii) As soon as practicable, copies of all such
financial statements and reports as it shall send to its stockholders and of
such regular and periodic reports as BancGroup may file with the SEC or any
other Agency; and
<PAGE> 26

(iv) With reasonable promptness, such additional
financial data as Southern may reasonably request.

(d) No Control of Southern by BancGroup. Notwithstanding
any other provision hereof, until the Effective Date, the authority to
establish and implement the business policies of Southern shall continue to
reside solely in Southern's officers and board of directors.

(e) Listing. Prior to the Effective Date, BancGroup
shall use its reasonable efforts to list the shares of BancGroup Common Stock
to be issued in the Merger on the NYSE or other quotations system on which such
shares are primarily traded.

(f) Employee Benefit Matters. On the Effective Date, all
employees of any Southern Company shall, at BancGroup's option, either became
employees of the Resulting Corporation or its Subsidiaries or be entitled to
severance benefits in accordance with Colonial Bank's severance policy as of
the date of this Agreement. All employees of any Southern Company who become
employees of the Resulting Corporation or its Subsidiaries on the Effective
Date shall be entitled, to the extent permitted by applicable Law, to
participate in all benefit plans of Colonial Bank to the same extent as
Colonial Bank employees. Employees of any Southern Company who become
employees of the Resulting Corporation or its Subsidiaries shall be allowed to
participate as of the Effective Date in the medical and dental benefits plan of
Colonial Bank as new employees of Colonial Bank, and the time of employment of
such employees who are employed at least 30 hours per week with any Southern
Company shall be counted as employment under such dental and medical plans of
Colonial Bank for purposes of calculating any 30 day waiting period and
pre-existing condition limitations. To the extent permitted by applicable Law,
the period of service with the appropriate Southern Company of all employees
who become employees of the Resulting Corporation or its Subsidiaries on the
Effective Date shall be recognized only for vesting and eligibility purposes
under Colonial Bank's benefit plans. In addition, if the Effective Date falls
within an annual period of coverage under any group health plan or group dental
plan of the Resulting Corporation and its Subsidiaries, each such Southern
Company employee shall be given credit for covered expenses paid by that
employee under comparable employee benefit plans of the Southern Company during
the applicable coverage period through the Effective Date towards satisfaction
of any annual deductible limitation and out-of-pocket maximum that may apply
under that group health plan or group dental plan of the Resulting Corporation
and its Subsidiaries.

(g) Indemnification; Directors and Officers Insurance

(i) From and after the Effective Date, BancGroup shall
indemnify and advance costs and expenses (including reasonable attorneys fees,
disbursements and expenses) and hold harmless each present and former director
and/or officer of Southern or its Subsidiaries determined as of the Effective
Date (the "Indemnified Parties"), against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages,
settlements or liabilities (collectively, "Costs") incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative (each a "Claim"), arising out of or pertaining
to matters existing or occurring at or prior to the Effective Date, whether
asserted or claimed prior to, at or after the
<PAGE> 27

Effective Date to the fullest extent that Southern would have been required
under Florida law and its Articles of Incorporation or Bylaws in effect on the
date hereof, to indemnify such person (and also advance expenses as incurred to
the fullest extent permitted under applicable law).

(ii) Any Indemnified Party wishing to claim indemnification
under Section 6.1 (i) shall notify BancGroup within forty-five (45) days of the
Indemnified Party's receipt of a notice of any Claim, but the failure to so
notify shall not relieve BancGroup of any liability it may have to such
Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any claim (whether arising before or after
the Effective Date), (i) BancGroup shall have the right to assume the defense
thereof, and BancGroup shall not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other expenses subsequently incurred by
such Indemnified Parties in connection with the defense thereof, except that if
BancGroup elects not to assume such defense, or counsel for the indemnified
Parties advises that there are issues which raise conflicts of interest between
BancGroup and the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to them, and BancGroup shall pay the reasonable fees and
expenses of such counsel for the Indemnified Parties promptly after statements
therefore are received; provided, however, that BancGroup shall be obligated
pursuant to this paragraph (ii) to pay for only one firm of counsel for all
Indemnified Parties in any jurisdiction unless the use of one counsel for such
Indemnified Parties will present such counsel with a conflict of interest, (ii)
the Indemnified Parties will cooperate in the defense of any such matter, and
(iii) and BancGroup shall not be liable for any settlement effected without its
prior written consent which shall not be unreasonably withheld. If such
indemnity with any respect to any Indemnified Party is unenforceable against
BancGroup, then BancGroup and the Indemnified Party shall contribute to the
amount payable in such proportion as is appropriate to reflect relative faults
and benefits.

(iii) For a period of four (4) years after the Effective
Date, BancGroup shall cause to be maintained in effect the current policies
with directors and officers liability insurance maintained by Southern
(provided that BancGroup may substitute therefore policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous to such directors and officers and provided that the deductible
amount on BancGroup's policies may be higher than that for existing Southern
policies) with respect to claims arising from facts or events which occurred
before the Effective Date, provided that such policies may be maintained at a
cost that is comparable to the cost of such policies as of the date of this
Agreement.

(iv) If BancGroup or any of its successors and assigns, (i)
shall consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such consolidation
or merger, or (ii) shall transfer all or substantially all of its property and
assets to any individual, corporation or other entity, then, in each such case,
proper provision shall be made so that the successors and assigns of BancGroup
and its Subsidiaries shall assume the obligations set forth in this section.

(v) The provisions of this Section 6.1(g) are intended to be
for the benefit of, and shall be enforceable by each Indemnified Party, and
each Indemnified Party's heirs and representatives.
<PAGE> 28

6.2 ADDITIONAL COVENANTS OF SOUTHERN. Southern covenants to and
with BancGroup as follows:

(a) Operations. Southern will conduct its business
and the business of each Southern Company in a proper and prudent manner and
will use its best efforts to maintain its relationships with its depositors,
customers and employees. No Southern Company will engage in any material
transaction outside the ordinary course of business or make any material change
in its accounting policies or methods of operation, nor will Southern permit
the occurrence of any change or event which would render any of the
representations and warranties in Article 5 hereof untrue in any material
respect at and as of the Effective Date with the same effect as though such
representations and warranties had been made at and as of such Effective Date.
Southern may request the consent of BancGroup to any of the foregoing actions
by furnishing BancGroup with a written request which describes the action
proposed to be taken by Southern. Such consent shall not be unreasonably
withheld. BancGroup shall have a period of 10 days from the date on which it
receives such request within which to notify Southern of either its consent or
refusal to consent, to the proposed action. BancGroup's failure to respond to
any such request within such 10 day period shall be deemed to constitute a
consent to the action proposed in Southern's request.

(b) Stockholders Meeting; Best Efforts. Southern will
cause the Stockholders Meeting to be held for the purpose of approving the
Merger as soon as practicable after the effective date of the Registration
Statement, and will use its best efforts to bring about the transactions
contemplated by this Agreement, including stockholder approval of this
Agreement, as soon as practicable unless this Agreement is terminated as
provided herein.

(c) Prohibited Negotiations. Until the termination of
this Agreement, neither Southern nor any of Southern's directors or officers
(or any person representing any of the foregoing) shall solicit or encourage
inquiries or proposals with respect to, furnish any information relating to or
participate in any negotiations or discussions concerning, any acquisition or
purchase of all or of a substantial portion of the Assets of, or of a
substantial equity interest in, Southern or any business combination involving
Southern or any Southern Company other than as contemplated by this Agreement.
Southern will notify BancGroup immediately if any such inquiries or proposals
are received by Southern, if any such information is requested from Southern,
or if any such negotiations or discussions are sought to be initiated with
Southern, and Southern shall instruct Southern's officers, directors, agents or
affiliates or their subsidiaries to refrain from doing any of the above;
provided, however, that nothing contained herein shall be deemed to prohibit
any officer or director of Southern from fulfilling his fiduciary duty or from
taking any action that is required by Law.

(d) Director Recommendation. The members of the Board of
Directors of Southern agree to support publicly the Merger, provided, however,
that nothing contained herein shall be deemed to prohibit any officer or
director of Southern from fulfilling his fiduciary duty or from taking any
action that is required by Law.
<PAGE> 29

(e) Shareholder Voting. Southern shall on the date of
execution of this Agreement obtain an agreement from certain of its
shareholders substantially in the form set forth in Exhibit A.

(f) Financial Statements. Southern shall furnish to
BancGroup:

(i) As soon as practicable and in any event within 30 days
after the end of each quarterly period (other than the last quarterly period)
in each fiscal year, consolidated statements of operations of Southern for such
period and for the period beginning at the commencement of the fiscal year and
ending at the end of such quarterly period, and a consolidated statement of
financial condition of Southern as of the end of such quarterly period, setting
forth in each case in comparative form figures for the corresponding periods
ending in the preceding fiscal year, subject to changes resulting from year-end
adjustments;

(ii) Promptly upon receipt thereof, copies of all audit
reports submitted to Southern by independent auditors in connection with each
annual, interim or special audit of the books of Southern made by such
accountants;

(iii) As soon a practicable, copies of all such financial
statements and reports as it shall send to its stockholders and of such regular
and periodic reports as Southern may file with the SEC or any other Agency; and

(iv) With reasonable promptness, such additional financial
data as the BancGroup may reasonably request.

ARTICLE 7
MUTUAL COVENANTS AND AGREEMENTS

7.1 BEST EFFORTS; COOPERATION. Subject to the terms and
conditions herein provided, BancGroup and Southern each agrees to use its best
efforts promptly to take, or cause to be taken, all actions and do, or cause to
be done, all things necessary, proper or advisable under applicable Laws or
otherwise, including, without limitation, promptly making required deliveries
of stockholder lists and stock transfer reports and attempting to obtain all
necessary Consents and waivers and regulatory approvals, to consummate and make
effective, as soon as practicable, the transactions contemplated by this
Agreement. The officers of each Party to this Agreement shall fully cooperate
with officers and employees, accountants, counsel and other representatives of
the other Parties not only in fulfilling the duties hereunder of the Party of
which they are officers but also in assisting, directly or through direction of
employees and other persons under their supervision or control, such as stock
transfer agents for the Party, the other Parties requiring information which is
reasonably available from such Party.

7.2 PRESS RELEASE. Each Party hereto agrees that, unless approved
by the other Parties in advance, such Party will not make any public
announcement, issue any press release or other publicity or confirm any
statements by any person not a party to this Agreement concerning the
transactions contemplated hereby. Notwithstanding the foregoing, each Party
hereto reserves the right to make any disclosure if such Party, in its
reasonable discretion, deems such disclosure required by Law. In that event,
such Party
<PAGE> 30

shall provide to the other Party the text of such disclosure sufficiently in
advance to enable the other Party to have a reasonable opportunity to comment
thereon.

7.3 MUTUAL DISCLOSURE. Each Party hereto agrees to promptly
furnish to each other Party hereto its public disclosures and filings not
precluded from disclosure by Law including but not limited to call reports,
Form 8-K, Form 10-Q and Form 10-K filings, Y-2 applications, reports on Form
Y-6, quarterly or special reports to shareholders, Tax returns, Form S-8
registration statements and similar documents.

7.4 ACCESS TO PROPERTIES AND RECORDS. Each Party hereto shall
afford the officers and authorized representatives of each of the other Parties
full access to the Assets, books and records of such Party in order that such
other Parties may have full opportunity to make such investigation as they
shall desire of the affairs of such Party and shall furnish to such Parties
such additional financial and operating data and other information as to its
businesses and Assets as shall be from time to time reasonably requested.

ARTICLE 8
CONDITIONS TO OBLIGATIONS OF ALL PARTIES

The obligations of BancGroup and Southern to cause the transactions
contemplated by this Agreement to be consummated shall be subject to the
satisfaction, in the sole discretion of the Party relying upon such conditions,
on or before the Effective Date of all the following conditions, except as such
Parties may waive such conditions in writing:

8.1 APPROVAL BY SHAREHOLDERS. At the Stockholders Meeting, this
Agreement and the matters contemplated by this Agreement shall have been duly
approved by the vote of the holders of not less than the requisite number of
the issued and outstanding voting securities of Southern as is required by
applicable Law and Southern's articles of incorporation and by-laws.

8.2 REGULATORY AUTHORITY APPROVAL. Orders, Consents and
approvals, in form and substance reasonably satisfactory to BancGroup and
Southern shall have been entered by the Board of Governors of the Federal
Reserve System and other appropriate bank regulatory Agencies (i) granting the
authority necessary for the consummation of the transactions contemplated by
this Agreement and (ii) satisfying all other requirements prescribed by Law.

8.3 LITIGATION. There shall be no pending or threatened
Litigation in any court or any pending or threatened proceeding by any
governmental commission, board or Agency, with a view to seeking or in which it
is sought to restrain or prohibit consummation of the transactions contemplated
by this Agreement or in which it is sought to obtain divestiture, rescission or
damages in connection with the transactions contemplated by this Agreement and
no investigation by any Agency shall be pending or threatened which might
result in any such suit, action or other proceeding.

8.4 REGISTRATION STATEMENT. The Registration Statement shall be
effective under the 1933 Act and no stop order suspending the effectiveness of
the Registration Statement
<PAGE> 31

shall be in effect; no proceedings for such purpose, or under the proxy rules
of the SEC or any bank regulatory authority pursuant to the 1934 Act, as
amended, and with respect to the transactions contemplated hereby, shall be
pending before or threatened by the SEC or any bank regulatory authority; and
all approvals or authorizations for the offer of BancGroup Common Stock shall
have been received or obtained pursuant to any applicable state securities
Laws, and no stop order or proceeding with respect to the transactions
contemplated hereby shall be pending or threatened under any such state Law.

8.5 TAX OPINION. An opinion of Miller, Hamilton, Snider & Odom,
L.L.C., counsel to BancGroup, shall have been received by Southern and
BancGroup in form and substance reasonably satisfactory to Southern and
BancGroup to the effect that (i) the Merger will constitute a "reorganization"
within the meaning of section 368 of the Code; (ii) no gain or loss will be
recognized by Southern or BancGroup; (iii) no gain or loss will be recognized
to the stockholders of Southern who receive shares of BancGroup Common Stock;
(iv) the basis of the BancGroup Common Stock received in the Merger will be
equal to the basis of the shares of Southern common stock exchanged in the
Merger; (v) the holding period of the BancGroup Common Stock will include the
holding period of the shares of Southern common stock exchanged therefor if
such shares of Southern common stock were capital assets in the hands of the
exchanging Southern stockholder; and (vi) cash received by a Southern
stockholder in lieu of a fractional share interest of BancGroup Common Stock
will be treated as having been received as a distribution in full payment in
exchange for the fractional share interest of BancGroup Common Stock which he
would otherwise be entitled to receive and will qualify as capital gain or loss
(assuming Southern common stock was a capital asset in his hands as of the
Effective Date).

8.6 MARKET VALUE. The average of the closing prices as reported
by the NYSE of BancGroup Common Stock for the period of 20 consecutive trading
days ending on the trading day immediately preceding the Effective Date shall
not be less than $24.625 or greater than $36.625.

ARTICLE 9
CONDITIONS TO OBLIGATIONS OF SOUTHERN

The obligations of Southern to cause the transactions contemplated by
this Agreement to be consummated shall be subject to the satisfaction on or
before the Effective Date of all the following conditions except as Southern
may waive such conditions in writing:

9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. Notwithstanding
any investigation made by or on behalf of Southern, all representations and
warranties of BancGroup contained in this Agreement shall be true in all
material respects on and as of the Effective Date as if such representations
and warranties were made on and as of such Effective Date, and BancGroup shall
have performed in all material respects all agreements and covenants required
by this Agreement to be performed by it on or prior to the Effective Date.

9.2 ADVERSE CHANGES. There shall have been no changes after the
date of the most recent balance sheet provided under section 4.3(a)(i) hereof
in the results of
<PAGE> 32

operations (as compared with the corresponding period of the prior fiscal
year), Assets, Liabilities, financial condition or affairs of BancGroup which
in their total effect constitute a Material Adverse Effect, nor shall there
have been any material changes in the Laws governing the business of BancGroup
or which would impair the rights of Southern or its stockholders pursuant to
this Agreement.

9.3 CLOSING CERTIFICATE. In addition to any other deliveries
required to be delivered hereunder, Southern shall have received a certificate
from the President or a Vice President and from the Secretary or Assistant
Secretary of BancGroup dated as of the Closing certifying that:

(a) the Board of Directors of BancGroup has duly adopted
resolutions (copies of which shall be attached to such certificate) approving
the substantive terms of this Agreement and authorizing the consummation of the
transactions contemplated by this Agreement and such resolutions have not been
amended or modified and remain in full force and effect;

(b) each person executing this Agreement on behalf of
BancGroup is an officer of BancGroup holding the office or offices specified
therein and the signature of each person set forth on such certificate is his
or her genuine signature;

(c) the certificate of incorporation and bylaws of
BancGroup referenced in section 4.4 hereof remain in full force and effect;

(d) such persons have no knowledge of a basis for any
material claim, in any court or before any Agency or arbitration and or
otherwise against, by or affecting BancGroup or the business, prospects,
condition (financial or otherwise), or Assets of BancGroup or which would
prevent the performance of this Agreement or the transactions contemplated by
this Agreement or declare the same unlawful or cause the recision thereof;

(e) to such persons' knowledge, the Proxy Statement
delivered to Southern's stockholders, or any amendments or revisions thereto so
delivered, as of the date thereof, did not contain or incorporate by reference,
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, not
misleading in light of the circumstances under which they were made (it being
understood that such persons need not express a statement as to information
concerning or provided by Southern for inclusion in such Proxy Statement); and

(f) the conditions set forth in this Article 9 insofar as
they relate to BancGroup have been satisfied.

9.4 OPINION OF COUNSEL. Southern shall have received an opinion
of Miller, Hamilton, Snider & Odom, L.L.C., counsel to BancGroup, dated as of
the Closing, in form reasonably satisfactory to Southern, as to matters set
forth in Exhibit B hereto.

9.5 COMFORT LETTER. Southern shall have received from Coopers &
Lybrand, L.L.P., comfort letters dated the date of the mailing of the Proxy
Statement and the
<PAGE> 33

Effective Date, covering matters customary in transactions such as the Merger,
and in form and substance reasonably satisfactory to Southern.

9.6 FAIRNESS OPINION. Southern shall have received prior to the
mailing of the Proxy Statement from The Carson Medlin Company a letter setting
forth its opinion that the consideration to be received by the shareholders of
Southern under the terms of this Agreement is fair to them from a financial
point of view.

9.7 NYSE LISTING. The shares of BancGroup Common Stock to be
issued under this Agreement shall have been approved for listing on the NYSE.

9.8 OTHER MATTERS. There shall have been furnished to such
counsel for Southern certified copies of such corporate records of BancGroup
and copies of such other documents as such counsel may reasonably have
requested for such purpose.

ARTICLE 10
CONDITIONS TO OBLIGATIONS OF BANCGROUP

The obligations of BancGroup to cause the transactions contemplated by
this Agreement to be consummated shall be subject to the satisfaction by
Southern on or before the Effective Date of the following conditions except as
BancGroup may waive such conditions in writing:

10.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. Notwithstanding
any investigation made by or on behalf of BancGroup, all representations and
warranties of Southern contained in this Agreement shall be true in all
material respects on and as of the Effective Date as if such representations
and warranties were made on and as of the Effective Date, and Southern shall
have performed in all material respects all agreements and covenants required
by this Agreement to be performed by it on or prior to the Effective Date.

10.2 ADVERSE CHANGES. There shall have been no changes after the
date of the most recent balance sheet provided under section 5.4(a)(i) hereof
in the results of operations (as compared with the corresponding period of the
prior fiscal year), Assets, Liabilities, financial condition, or affairs of
Southern which constitute a Material Adverse Effect, nor shall there have been
any material changes in the Laws governing the business of Southern which would
impair BancGroup's rights pursuant to this Agreement.

10.3 CLOSING CERTIFICATE. In addition to any other deliveries
required to be delivered hereunder, BancGroup shall have received a certificate
from the President or Vice President and from the Secretary or Assistant
Secretary of Southern dated as of the Closing certifying that:

(a) the Board of Directors of Southern has duly adopted
resolutions (copies of which shall be attached to such certificate) approving
the substantive terms of this
<PAGE> 34

Agreement and authorizing the consummation of the transactions contemplated by
this Agreement and such resolutions have not been amended or modified and
remain in full force and effect;

(b) the shareholders of Southern have duly adopted
resolutions (copies of which shall be attached to such certificate) approving
the substantive terms of the Merger and the transactions contemplated thereby
and such resolutions have not been amended or modified and remain in full force
and effect;

(c) each person executing this Agreement on behalf of
Southern is an officer of Southern holding the office or offices specified
therein and the signature of each person set forth on such certificate is his
or her genuine signature;

(d) the charter documents of Southern and the Bank
referenced in section 5.8 hereof were in full force and effect and have not
been amended or modified since the date hereof;

(e) to such persons' knowledge, the Proxy Statement
delivered to Southern's stockholders, or any amendments or revisions thereto so
delivered, as of the date thereof, did not contain or incorporate by reference
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, not
misleading in light of the circumstances under which they were made (it being
understood that such persons need only express a statement as to information
concerning or provided by Southern for inclusion in such Proxy Statement); and

(f) the conditions set forth in this Article 10 insofar
as they relate to Southern have been satisfied.

10.4 OPINION OF COUNSEL. BancGroup shall have received an opinion
of Shutts & Bowen, counsel to Southern, dated as of the Closing, in form
reasonably satisfactory to BancGroup, as to matters set forth in Exhibit C
hereto.

10.5 CONTROLLING SHAREHOLDERS. Each shareholder of Southern
who may be an "affiliate" of Southern, within the meaning of Rule 145 of the
general rules and regulations under the 1933 Act shall have executed and
delivered an agreement satisfactory to BancGroup to the effect that such person
shall not make a "distribution" (within the meaning of Rule 145) of the Common
Stock which he receives upon the Effective Date and that such Common Stock will
be held subject to all applicable provisions of the 1933 Act and the rules and
regulations of the SEC thereunder. The agreement will also provide that no
affiliate of Southern will sell or otherwise reduce such affiliate's risk
relative to any shares of BancGroup Common Stock received in the Merger until
financial results concerning at least 30 days of post-Merger combined
operations have been published. Southern recognizes and acknowledges that
Common Stock issued to such persons may bear a legend evidencing the agreement
described above.

10.6 OTHER MATTERS. There shall have been furnished to counsel for
BancGroup certified copies of such corporate records of Southern and copies of
such other documents as such counsel may reasonably have requested for such
purpose.
<PAGE> 35

10.7 DISSENTERS. The number of shares as to which shareholders of
Southern have exercised dissenters rights of appraisal under section 3.6 does
not exceed 10% of the outstanding shares of common stock of Southern.

10.8 POOLING OF INTERESTS. BancGroup shall have received the
written opinion of Coopers & Lybrand, L.L.P., that the Merger will qualify for
the pooling of interests method of accounting under generally accepted
accounting principles.

10.9 MATERIAL EVENTS. There shall have been no determination by
the board of directors of BancGroup that the transactions contemplated by this
Agreement have become impractical because of any state of war or declaration of
a banking moratorium in the United States.

ARTICLE 11
TERMINATION OF REPRESENTATIONS AND WARRANTIES

All representations and warranties provided in Articles 4 and 5 of
this Agreement or in any closing certificate pursuant to Articles 9 and 10
shall terminate and be extinguished at and shall not survive the Effective
Date. All covenants, agreements and undertakings required by this Agreement to
be performed by any Party hereto following the Effective Date shall survive
such Effective Date and be binding upon such Party. If the Merger is not
consummated, all representations, warranties, obligations, covenants, or
agreements hereunder or in any certificate delivered hereunder relating to the
transaction which is not consummated shall be deemed to be terminated or
extinguished except that Section 7.2, Article 11, Article 15 and any applicable
definitions of Article 14, shall survive. Items disclosed in the Exhibits and
Schedules attached hereto are incorporated into this Agreement and form a part
of the representations, warranties, covenants or agreements to which they
relate. Information provided in such Exhibits and Schedules is provided only
in response to the specific section of this Agreement which calls for such
information.

ARTICLE 12
NOTICES

All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given at
the time given or mailed, first class postage prepaid:

(a) If to Southern to Charles W. Brinkley, Jr. President
and CEO, Southern Banking Corporation, 201 East Pine Street, Orlando, Florida
32801, facsimile (407) 481-9879, with copies to Rod Jones, Esq., Shutts &
Bowen, Suite 1000, 20 North Orange Avenue, Orlando, Florida 32801, facsimile
(407) 425-8316, or as may otherwise be specified by Southern in writing to
BancGroup.

(b) If to BancGroup, to W. Flake Oakley, IV, One Commerce
Street, Suite 800, Montgomery, Alabama, 36104, facsimile (334) 240-6040, with a
copy to Michael D. Waters, Miller, Hamilton, Snider & Odom, One Commerce
Street, Suite 802, Montgomery, Alabama 36104, facsimile (334) 265-4533, or as
may otherwise be specified in writing by BancGroup to Southern.
<PAGE> 36

ARTICLE 13
AMENDMENT OR TERMINATION

13.1 AMENDMENT. This Agreement may be amended by the mutual
consent of BancGroup and Southern before or after approval of the transactions
contemplated herein by the shareholders of Southern.

13.2 TERMINATION. This Agreement may be terminated at any time
prior to or on the Effective Date whether before or after action thereon by the
shareholders of Southern, as follows:

(a) by the mutual consent of the respective boards of
directors of Southern and BancGroup;

(b) by the board of directors of either Party (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a breach by the other Party of any representation or
warranty contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the breaching
Party of such breach and which breach would provide the non-breaching Party the
ability to refuse to consummate the Merger under the standard set forth in
section 10.1 of this Agreement in the case of BancGroup and section 9.1 of this
Agreement in the case of Southern;

(c) by the board of directors of either Party (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a material breach by the other Party of any covenant
or agreement contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the breaching
Party of such breach, or if any of the conditions to the obligations of such
Party contained in this Agreement shall not have been satisfied in full;

(d) by the board of directors of either BancGroup or
Southern if all transactions contemplated by this Agreement shall not have been
consummated on or prior to September 30, 1996, if the failure to consummate the
transactions provided for in this Agreement on or before such date is not
caused by any breach of this Agreement by the Party electing to terminate
pursuant to this section 13.2(d); or

(e) by the board of directors of either BancGroup or
Southern if the average of the closing prices of the BancGroup Common Stock
reported by the NYSE for the 20 consecutive trading days ending on the trading
day immediately proceeding the Effective Date shall be less than $24.625 or
greater than $36.625.

13.3 DAMAGES. In the event of termination pursuant to section
13.2, Southern and BancGroup shall not be liable for damages for any breach of
warranty or representation contained in this Agreement made in good faith, and,
in that case, the expenses incurred shall be borne as set forth in section 15.1
hereof.

ARTICLE 14
<PAGE> 37

DEFINITIONS

(a) The following terms, which are capitalized in this
Agreement, shall have the meanings set forth below for the purpose of this
Agreement:

<TABLE>
<S> <C>
Agencies Shall mean, collectively, the Federal Trade
Commission, the United States Department of
Justice, the Board of the Governors of the
Federal Reserve System, the Federal Deposit
Insurance Corporation, the Office of Thrift
Supervision, all state regulatory agencies
having jurisdiction over the Parties and their
respective Subsidiaries, HUD, the VA, the FHA,
the GNMA, the FNMA, the FHLMC, the NYSE, and
the SEC.

Agreement Shall mean this Amended and Restated Agreement and
Plan of Merger and the Exhibits and Schedules
delivered pursuant hereto and incorporated herein
by reference.

Assets Of a Person shall mean all of the assets,
properties, businesses and rights of such
Person of every kind, nature, character and
description, whether real, personal or mixed,
tangible or intangible, accrued or contingent,
or otherwise relating to or utilized in such
Person's business, directly or indirectly, in
whole or in part, whether or not carried on the
books and records of such Person, and whether
or not owned in the name of such Person or any
Affiliate of such Person and wherever located.

BancGroup The Colonial BancGroup, Inc., a Delaware
corporation with its principal offices in
Montgomery, Alabama.

Bank Southern Bank of Central Florida, a Florida banking corporation.

Closing The closing of the transactions contemplated hereby as described in section
2.7 of this Agreement.

Code The Internal Revenue Code of 1986, as amended.

Common Stock BancGroup's Common Stock authorized and defined in the restated certificate of
incorporation of BancGroup, as amended.

Consent Any consent, approval, authorization, clearance, exemption, waiver, or similar
affirmation by any Person pursuant to any Contract, Law, Order, or Permit.

</TABLE>
<PAGE> 38

<TABLE>
<S> <C>
Contract Any written or oral agreement, arrangement, authorization, commitment,
contract, indenture, instrument, lease, obligation, plan, practice,
restriction, understanding or undertaking of any kind or character, or other
document to which any Person is a party or that is binding on any Person or
its capital stock, Assets or business.

Default Shall mean (i) any breach or violation of or default under any Contract, Order
or Permit, (ii) any occurrence of any event that with the passage of time or
the giving of notice or both would constitute a breach or violation of or
default under any Contract, Order or Permit, or (iii) any occurrence of any
event that with or without the passage of time or the giving of notice would
give rise to a right to terminate or revoke, change the current terms of, or
renegotiate, or to accelerate, increase, or impose any Liability under, any
Contract, Order or Permit.

DGCL The Delaware General Corporation Law.

Effective Date Means the date and time at which the Merger becomes effective as defined in
section 2.7 hereof.

Environmental Laws Means the laws, regulations and governmental requirements referred to in
section 5.23 hereof.

ERISA The Employee Retirement Income Security Act of 1974, as amended.

Exchange Ratio The ratio of the number of shares of BancGroup Common Stock to be issued for
one share of Southern Stock, as defined in section 3.1(a).

Exhibits A through C, inclusive, shall mean the Exhibits so marked, copies of which are
attached to this Agreement. Such Exhibits are hereby incorporated by
reference herein and made a part hereof, and may be referred to in this
Agreement and any other related instrument or document without being attached
hereto.

FBCA The Florida Business Corporation Act

Knowledge Means the actual knowledge of the Chairman, President, Chief Financial
Officer, Chief Accounting Officer, Chief Credit Officer, General Counsel or
any Senior or Executive Vice President of BancGroup, in the case of

</TABLE>
<PAGE> 39

<TABLE>
<S> <C>
knowledge of BancGroup, or of Southern and the Bank, in the case of knowledge
of Southern.

Law Any code, law, ordinance, regulation, reporting or licensing requirement,
rule, or statute applicable to a Person or its Assets, Liabilities or
business, including those promulgated, interpreted or enforced by any Agency.

Liability Any direct or indirect, primary or secondary, liability, indebtedness,
obligation, penalty, cost or expense (including costs of investigation,
collection and defense), deficiency, guaranty or endorsement of or by any
Person (other than endorsements of notes, bills, checks, and drafts presented
for collection or deposit in the ordinary course of business) of any type,
whether accrued, absolute or contingent, liquidated or unliquidated, matured
or unmatured, or otherwise.

Lien Any conditional sale agreement, default of title, easement, encroachment,
encumbrance, hypothecation, infringement, lien, mortgage, pledge, reservation,
restriction, security interest, title retention or other security arrangement,
or any adverse right or interest, charge, or claim of any nature whatsoever
of, on, or with respect to any property or property interest, other than
(i) Liens for current property Taxes not yet due and payable, (ii) for
depository institution Subsidiaries of a Party, pledges to secure deposits and
other Liens incurred in the ordinary course of the banking business, and
(iii) Liens in the form of easements and restrictive covenants on real
property which do not materially adversely affect the use of such property by
the current owner thereof.

Litigation Any action, arbitration, complaint, criminal prosecution, governmental or
other examination or investigation, hearing, inquiry, administrative or other
proceeding relating to or affecting a Party, its business, its Assets
(including Contracts related to it), or the transactions contemplated by this
Agreement.

Loan Property Any property owned by the Party in question or by any of its Subsidiaries or
in which such Party or Subsidiary holds a security interest, and, where
required by the

</TABLE>
<PAGE> 40

<TABLE>
<S> <C>
context, includes the owner or operator of such property, but only with
respect to such property.

Loss Any and all direct or indirect payments, obligations, recoveries,
deficiencies, fines, penalties, interest, assessments, losses, diminution in
the value of Assets, damages, punitive, exemplary or consequential damages
(including, but not limited to, lost income and profits and interruptions of
business), liabilities, costs, expenses (including without limitation,
reasonable attorneys' fees and expenses, and consultant's fees and other costs
of defense or investigation), and interest on any amount payable to a third
party as a result of the foregoing.

material For purposes of this Agreement shall be determined in light of the facts and
circumstances of the matter in question; provided that any specific monetary
amount stated in this Agreement shall determine materiality in that instance.

Material Adverse Effect On a Party shall mean an event, change or occurrence which has a material
adverse impact on (i) the financial position, business, or results of
operations of such Party and its Subsidiaries, taken as a whole, or (ii) the
ability of such Party to perform its obligations under this Agreement or to
consummate the Merger or the other transactions contemplated by this Agreement
provided that "material adverse impact" shall not be deemed to include the
impact of (x) changes in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, (y) changes in
generally accepted accounting principles or regulatory accounting principles
generally applicable to banks and their holding companies, and (z) the Merger
and compliance with the provisions of this Agreement on the operating
performance of the Parties.

Merger The merger of Southern with BancGroup as contemplated in this Agreement.

NYSE The New York Stock Exchange.

Order Any administrative decision or award, decree, injunction, judgment, order,
quasi-judicial decision or award, ruling, or writ of any federal, state, local
or foreign or other

</TABLE>
<PAGE> 41

<TABLE>
<S> <C>
court, arbitrator, mediator, tribunal, administrative agency or Agency.

Party Shall mean Southern or BancGroup, and "Parties" shall mean both Southern and
BancGroup.

Permit Any federal, state, local, and foreign governmental approval, authorization,
certificate, easement, filing, franchise, license, notice, permit, or right to
which any Person is a party or that is or may be binding upon or inure to the
benefit of any Person or its securities, Assets or business.

Person A natural person or any legal, commercial or governmental entity, such as, but
not limited to, a corporation, general partnership, joint venture, limited
partnership, limited liability company, trust, business association, group
acting in concert, or any person acting in a representative capacity.

Proxy Statement The proxy statement used by Southern to solicit the approval of its
stockholders of the transactions contemplated by this Agreement, which shall
include the prospectus of BancGroup relating to the issuance of the BancGroup
Common Stock to the shareholders of Southern.

Registration Statement The registration statement on Form S-4, or such other appropriate form, to be
filed with the SEC by BancGroup, and which has been agreed to by Southern, to
register the shares of BancGroup Common Stock offered to stockholders of the
Bank pursuant to this Agreement, including the Proxy Statement.

Resulting Corporation BancGroup, as the surviving corporation resulting from the Merger.

SEC United States Securities and Exchange Commission.

Southern Southern Banking Corporation, a Florida corporation.

Southern Company Shall mean Southern the Bank, any Subsidiary of Southern or the Bank, or any
person or entity acquired as a Subsidiary of Southern or the Bank in the
future and owned by Southern at the Effective Date.

</TABLE>
<PAGE> 42

<TABLE>
<S> <C>
Southern Options Options respecting the issuance of Southern common stock pursuant to
Southern's stock option plans.

Southern Stock Shares of Common stock, par value $1.00 per share, of Southern.

Stockholders Meeting The special meeting of stockholders of Southern called to approve the
transactions contemplated by this Agreement.

Subsidiaries Shall mean all those corporations, banks, associations, or other entities of
which the entity in question owns or controls 5% or more of the outstanding
equity securities either directly or through an unbroken chain of entities as
to each of which 5% or more of the outstanding equity securities is owned
directly or indirectly by its parent; provided, however, there shall not be
included any such entity acquired through foreclosure or any such entity the
equity securities of which are owned or controlled in a fiduciary capacity.

Tax or Taxes Means any federal, state, county, local, foreign, and other taxes,
assessments, charges, fares, and impositions, including interest and penalties
thereon or with respect thereto.

1933 Act The Securities Act of 1933, as amended.

1934 Act The Securities Exchange Act of 1934, as amended.
</TABLE>

ARTICLE 15
MISCELLANEOUS

15.1 EXPENSES. Each Party hereto shall bear its own legal,
auditing, trustee, investment banking, regulatory and other expenses in
connection with this Agreement and the transactions contemplated hereby.

15.2 BENEFIT. This Agreement shall inure to the benefit of and be
binding upon Southern and BancGroup, and their respective successors. This
Agreement shall not be assignable by any Party without the prior written
consent of the other Party.

15.3 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with the Laws of the State of Alabama without regard to
any conflict of Laws.

<PAGE> 43

15.4 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to constitute an original. Each such counterpart
shall become effective when one counterpart has been signed by each Party
thereto.

15.5 HEADINGS. The headings of the various articles and sections
of this Agreement are for convenience of reference only and shall not be deemed
a part of this Agreement or considered in construing the provisions thereof.

15.6 SEVERABILITY. Any term or provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining terms and provisions thereof or affecting the
validity or enforceability of such provision in any other jurisdiction, and if
any term or provision of this Agreement is held by any court of competent
jurisdiction to be void, voidable, invalid or unenforceable in any given
circumstance or situation, then all other terms and provisions, being
severable, shall remain in full force and effect in such circumstance or
situation and the said term or provision shall remain valid and in effect in
any other circumstances or situation.

15.7 CONSTRUCTION. Use of the masculine pronoun herein shall be
deemed to refer to the feminine and neuter genders and the use of singular
references shall be deemed to include the plural and vice versa, as
appropriate. No inference in favor of or against any Party shall be drawn from
the fact that such Party or such Party's counsel has drafted any portion of
this Agreement.

15.8 RETURN OF INFORMATION. In the event of termination of this
Agreement prior to the Effective Date, each Party shall return to the other,
without retaining copies thereof, all confidential or non-public documents,
work papers and other materials obtained from the other Party in connection
with the transactions contemplated in this Agreement and shall keep such
information confidential, not disclose such information to any other person or
entity, and not use such information in connection with its business.

15.9 EQUITABLE REMEDIES. The parties hereto agree that, in the
event of a breach of this Agreement by either Party, the other Party may be
without an adequate remedy at law owing to the unique nature of the contemplated
transactions. In recognition thereof, in addition to (and not in lieu of) any
remedies at law that may be available to the non-breaching Party, the
non-breaching Party shall be entitled to obtain equitable relief, including the
remedies of specific performance and injunction, in the event of a breach of
this Agreement by the other Party, and no attempt on the part of the
non-breaching Party to obtain such equitable relief shall be deemed to
constitute an election of remedies by the non-breaching Party that would
preclude the non-breaching Party from obtaining any remedies at law to which it
would otherwise be entitled.

15.10 ATTORNEYS' FEES. If any Party hereto shall bring an action at
law or in equity to enforce its rights under this Agreement (including an
action based upon a misrepresentation or the breach of any warranty, covenant,
agreement or obligation contained herein), the prevailing Party in such action
shall be entitled to recover from the
<PAGE> 44

other Party its costs and expenses incurred in connection with such action
(including fees, disbursements and expenses of attorneys and costs of
investigation).

15.11 NO WAIVER. No failure, delay or omission of or by any Party
in exercising any right, power or remedy upon any breach or Default of any
other Party shall impair any such rights, powers or remedies of the Party not
in breach or Default, nor shall it be construed to be a wavier of any such
right, power or remedy, or an acquiescence in any similar breach or Default;
nor shall any waiver of any single breach or Default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of any Party
of any provisions of this Agreement must be in writing and be executed by the
Parties to this Agreement and shall be effective only to the extent
specifically set forth in such writing.

15.12 REMEDIES CUMULATIVE. All remedies provided in this Agreement,
by law or otherwise, shall be cumulative and not alternative.

15.13 ENTIRE CONTRACT. This Agreement and the documents and
instruments referred to herein constitute the entire contract between the
parties to this Agreement and supersede all other understandings with respect
to the subject matter of this Agreement.

IN WITNESS WHEREOF, Financial and BancGroup have caused this Agreement
to be signed by their respective duly authorized officers as of the date first
above written.

ATTEST: SOUTHERN BANKING CORPORATION

BY: Charles W. Brinkley BY: J. Donald Prewitt
--------------------------- --------------------------

ITS: President & CEO ITS: Chairman
--------------------------- --------------------------

(CORPORATE SEAL)

ATTEST: THE COLONIAL BANCGROUP, INC.

BY: Teresa Skipper BY: W. Flake Oakley
--------------------------- --------------------------

ITS: Assistant Secretary ITS: Chief Financial Officer
--------------------------- --------------------------

(CORPORATE SEAL)

<PAGE> 1

EXHIBIT 21

SUBSIDIARIES OF THE COLONIAL BANCGROUP, INC.

COLONIAL BANK, AN ALABAMA BANKING CORPORATION.

COLONIAL BANK OF TENNESSEE, A TENNESSEE BANK.

COLONIAL BANK, ATLANTA, GEORGIA, A FEDERAL SAVINGS BANK

THE COLONIAL BANCGROUP BUILDING CORPORATION, AN ALABAMA CORPORATION.

<PAGE> 1

EXHIBIT 23(A)

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this registration statement on
Form S-4 of our report dated February 24, 1995, on our audits of the restated
consolidated financial statements of The Colonial BancGroup, Inc. and
Subsidiaries as of December 31, 1994 and 1993 and for each of the three years
ended December 31, 1994. We also consent to the reference to our firm as
"experts" under the caption "Independent Accountants."

/s/ Coopers & Lybrand L.L.P.

Montgomery, Alabama
February 20, 1996

<PAGE> 1

EXHIBIT 23(B)

CONSENT OF COUNSEL

The Colonial BancGroup, Inc.

We hereby consent to use in this Form S-4 Registration Statement of
The Colonial BancGroup, Inc., of our name in the Prospectus, which is a part of
such Registration Statement, under the headings "APPROVAL OF THE MERGER -
Certain Federal Income Tax Consequences" and "LEGAL MATTERS," and to the
summarization of our opinions referenced therein.

/s/ MILLER, HAMILTON, SNIDER & ODOM, L.L.C.

February 19, 1996

<PAGE> 1

EXHIBIT 23(C)

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
Registration Statement.

/s/ Arthur Andersen, L.L.P.

Birmingham, Alabama
February 19, 1996

<PAGE> 1

EXHIBIT 23(D)

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use of our report dated January 19,
1995, our report dated January 19, 1995, except for information
presented in Note L, for which the date is March 2, 1995, and our
reported dated January 25, 1994, relating to the consolidated
financial statements of Commercial Bancorp of Gwinnett, Inc. and
Subsidiary, and our report dated March 10, 1995, relating to the
consolidated financial statements of the former Commercial Bancorp of
Georgia, Inc. and Subsidiary, included in the Registration Statement
on Form S-4 and Proxy Statement.

/s/ Bricker & Melton, P.A.

Duluth, Georgia
February 22, 1996

<PAGE> 1

EXHIBIT 23(E)

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on
Form S-4 of our report dated January 13, 1995, on our audits of the
financial statements of Southern Banking Corporation and Subsidiary.
We also consent to the reference to our firm under the caption
Experts.

/s/ Coopers & Lybrand

February 20, 1996

<PAGE> 1

EXHIBIT 23(F)

CONSENT AND REPORT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Joint Proxy Statement and Prospectus
constituting part of this Registration Statement on Form S-4 of Colonial
BancGroup of our report dated March 2, 1994 relating to the consolidated
financial statements of the former Commercial Bancorp of Georgia, Inc. as of
and for each of the two years in the period ended December 31, 1993, which
appears in such Prospectus.

/s/ PRICE WATERHOUSE LLP

Atlanta, Georgia
February 22, 1996
<PAGE> 2

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Commercial Bancorp of Georgia, Inc.

In our opinion, the consolidated statement of condition and the related
consolidated statements of income, of changes in shareholders' equity and of
cash flows as of and for each of the two years in the period ended December 31,
1993 of the former Commercial Bancorp of Georgia, Inc. and its subsidiary (not
presented separately herein) present fairly, in all material respects, the
financial position, the results of their operations and their cash flows for
each of the two years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

March 2, 1994
Atlanta, Georgia

<PAGE> 1

EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert E. Lowder, Young J. Boozer, III,
and W. Flake Oakley, and each of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and re-substitution, for him and in his
name, place and stead, to sign any reports or other filings which may be
required to be filed with the Securities and Exchange Commission on behalf of
The Colonial BancGroup, Inc. (the "Registrant"), during the year ending
December 31, 1996; to sign any registration statement and any amendments
thereto of the Registrant for the purpose of registering under the Securities
Act of 1933, as amended, shares to be offered and sold by the Registrant; to
file such other reports or other filings, such registration statements and
amendments thereto, with all exhibits thereto, and any documents in connection
therewith with the Securities and Exchange Commission; and to file such
notices, reports or registration statements (and amendments thereto) with any
such securities authority of any state which may be necessary to register or
qualify for an exemption from registration any securities offered or sold by
BancGroup in such states, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing requisite to
be done in and about the premises as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitutes, may lawfully do or cause
to be done by virtue hereof.

This Power of Attorney supersedes and revokes any previous power of attorney
of the Registrant relating to the foregoing matters and shall terminate at
the conclusion of the regular board meeting of the Registrant in January 1997.

Done this 17th day of January, 1996, in the City of Montgomery,
Alabama.

/s/ Robert E. Lowder Chairman of the Board,
- -------------------------------- President and Chief
Robert E. Lowder Executive Officer

/s/ Young J. Boozer Director
- --------------------------------
Young J. Boozer

/s/ William Britton Director
- --------------------------------
William Britton

/s/ Jerry J. Chesser Director
- --------------------------------
Jerry J. Chesser

<PAGE> 2

/s/ Augustus K. Clements, III Director
- -----------------------------
Augustus K. Clements, III

/s/ Robert Craft Director
- -----------------------------
Robert Craft

- ----------------------------- Director
Patrick F. Dye

/s/ Clinton Holdbrooks Director
- -----------------------------
Clinton Holdbrooks

/s/ D. B. Jones Director
- -----------------------------
D. B. Jones

/s/ Harold D. King Director
- -----------------------------
Harold D. King

/s/ John Ed Mathison Director
- -----------------------------
John Ed Mathison

/s/ Milton McGregor Director
- -----------------------------
Milton McGregor

/s/ John C. H. Miller, Jr. Director
- -----------------------------
John C. H. Miller, Jr.

/s/ Joe D. Mussafer Director
- -----------------------------
Joe D. Mussafer

/s/ William E. Powell, III Director
- -----------------------------
William E. Powell, III

/s/ Jack H. Rainer Director
- -----------------------------
Jack H. Rainer

/s/ Frances E. Roper Director
- -----------------------------
Frances E. Roper

/s/ Ed V. Welch Director
- -----------------------------
Ed V. Welch

<PAGE> 1
Exhibit 99 (A)

SOLICITED BY
THE BOARD OF
DIRECTORS
PROXY

DOTHAN FEDERAL SAVINGS BANK
SPECIAL MEETING OF STOCKHOLDERS
_________________, 1996

The undersigned hereby appoints _________________________ and
_________________________, and either of them, or such other persons as the
board of directors of Dothan Federal Savings Bank (the "Bank"), may designate,
proxies for the undersigned, with full power of substitution, to represent the
undersigned and to vote all of the shares of common stock of the Bank at the
special meeting of stockholders to be held on __________________, 1996, and at
any and all adjournments thereof.

<TABLE>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN

1. To ratify and approve the Agreement and Plan [ ] [ ] [ ]
of Merger dated as of ______, 1996, pursuant
to which the Bank will be merged with and into
Colonial Bank, a subsidiary of The Colonial
BancGroup, Inc.
</TABLE>

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE
VOTED AS DIRECTED HEREIN. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1 AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS
RESPECTING SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING
BUT WHICH ARE NOT NOW ANTICIPATED, AND TO VOTE UPON MATTERS INCIDENT TO THE
CONDUCT OF THE SPECIAL MEETING.

DATED: ____________________________________________, 1996

PHONE NO: _______________________________________________

_________________________________________________________
(Signature of Stockholder)

_________________________________________________________
(Signature of Stockholder, if more than one)

Please sign exactly as your name appears on the envelope
in which this material was mailed. If shares are held
jointly, each stockholder must sign. Agents, executors,
administrators, guardians and trustees must give full
title as such. Corporations should sign by their
president or authorized officer.

<PAGE> 1
Exhibit 99 (B)

ELECTION FORM

Complete this Election Form ONLY if you wish to receive an amount of cash
and common stock of The Colonial BancGroup, Inc. ("BancGroup") that is other
than 50% for each in exchange for all of your shares of Common Stock, par value
$.01 per share, of Dothan Federal Savings Bank (the "Bank"). In order to make
such election, this Election Form, properly completed, dated, signed and
submitted in accordance with the accompanying instructions, must be received by
the Bank no later than 5:30 p.m., on _____________, 1996, which is the time of
commencement of the special meeting of stockholders of the Bank called to vote
upon the merger of the Bank with and into Colonial Bank, a subsidiary of
BancGroup (the "Merger").
<PAGE> 2

PLEASE FOLLOW CAREFULLY THE ACCOMPANYING INSTRUCTIONS

DELIVER TO:

Dothan Federal Savings Bank
1962 West Main Street
Dothan, Alabama 36302

Facsimile: (334)794-1988

Attention: Charles Williams

Gentlemen:

In connection with the Merger I wish to receive a combination of cash and
Common Stock of BancGroup that is other than 50% for each. The percentage of
cash and Common Stock that I wish to receive is designated immediately below.
I understand that my election applies to all of the shares of Common Stock of
the Bank that I own of record.

Please indicate the number of shares
of Bank Common Stock you own: -----------------------------

Please indicate the percentage
of cash you wish to receive,
if other than 50%: ----------%

Please indicate the percentage of
BancGroup Common Stock you
wish to receive, if other
than 50%: ----------%

I understand that my election made above is subject to the terms,
conditions and limitations set forth in the Joint Proxy Statement and
Prospectus dated ___________, 1996, relating to the Merger, the Agreement and
Plan of Merger dated as of January 22, 1996 (the "Agreement"), and the
accompanying instructions.
<PAGE> 3

PLEASE FILL IN THE INFORMATION REQUESTED AND SIGN BELOW.

- ------------------------------ ------------------------------
Signature Name

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

------------------------------
Address

------------------------------
Telephone number

------------------------------
Taxpayer ID or
Social Security Number

<PAGE> 4

INSTRUCTIONS

1. Time in Which to Elect

To be effective, an election on this form must be received by the Bank no
later than 1:30 p.m. on _______________, 1996, or, if there is a postponement
or adjournment of the stockholders' meeting called to vote upon the Merger, no
later than 1:30 p.m., on the day on which the Merger is actually approved by
stockholders of the Bank (the "Election Deadline"). Election Forms not so
received by the Bank by the Election Deadline will be void.

2. Revocation

Any Election Form may be revoked by the person submitting the Election
Form only by written notice received by the Bank prior to the Election
Deadline.

3. Termination of Right to Elect

All Election Forms will be void and of no effect if the Merger is not
consummated.

4. Over and Undersubscriptions

Regardless of the Election Forms submitted, the aggregate number of shares
of BancGroup Common Stock to be distributed in the Merger shall equal 50% of
the total Merger Consideration (as defined in the Agreement) and the aggregate
amount of cash to be paid in the Merger shall equal 50% of the total Merger
Consideration. If the aggregate amount of cash to be paid in the Merger is
less than 50% of the Merger Consideration based upon the Election Forms which
have been properly filed, then a sufficient amount of additional cash shall be
distributed pro rata to all stockholders of the Bank who have not elected to
receive 100% of the Merger Consideration in cash, regardless of whether such
<PAGE> 5

stockholders have filed an Election Form, so that the aggregate amount of
Merger Consideration to paid in cash in the Merger will equal 50%, and the
number of shares of BancGroup Common Stock otherwise required to be distributed
shall be reduced pro rata as to all stockholders who have not elected to
receive 100% of the Merger Consideration in cash. If the aggregate amount of
cash to be paid in the Merger is greater than 50% of the Merger Consideration
based upon the Election Forms which have been properly filed, then the
aggregate amount of cash will be reduced and a sufficient amount of cash shall
be distributed pro rata to all stockholders of the Bank who have not elected to
receive 100% of the Merger Consideration in BancGroup Common Stock, regardless
of whether such stockholders have filed an Election Form, so that the aggregate
amount of Merger Consideration to be paid in cash in the Merger will equal 50%,
and the number of shares of BancGroup Common Stock otherwise required to be
distributed shall be increased pro rata as to all stockholders who have not
elected to received 100% of the Merger Consideration in BancGroup Common Stock.
Cash to be paid to any Bank stockholder exercising dissenters' rights of
appraisal shall be included as part of the Merger Consideration for determining
the amount of cash to be paid. Interest will not be paid on any cash to be
paid as part of the Merger Consideration.

5. Signatures

If this Election form is signed by a trustee, executor, administrator,
guardian, officer of a corporation, attorney-in-fact, or in any other
representative, nominee or fiduciary capacity, the person signing must give
such person's full title in such capacity and appropriate evidence of authority
to act in such capacity must be forwarded with the Election Form.
<PAGE> 6

6. Checks and New Certificates in Same Name

Checks for cash and any stock certificates representing shares of
BancGroup Common Stock shall be payable to the order of and registered in
exactly the same name that appears on the old certificates representing shares
of Bank Common Stock.

7. Miscellaneous

Cash payments will be mailed by check to the former Bank stockholder
entitled to such payments as promptly as practicable after the effective date
of the Merger.

The Bank and BancGroup shall determine whether Election Forms have been
properly submitted. No person is under any obligation to notify any person of
any defect in an Election Form or any other documents submitted therewith.

8. Questions and Requests for Information

Questions and requests for information or assistance relating to this
Election Form should be directed to the Bank at the address or telephone number
set forth above. Additional copies of this Notice of Cash Election may be
obtained from the Bank.