COLONIAL BANCGROUP INC, 424B5, 1998-01-05

COLONIAL BANCGROUP INC
424B5, 1998-01-05
STATE COMMERCIAL BANKS

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<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration Statement No. 333-39271

[LOGO] [ASB BANCSHARES LETTERHEAD]

December 29, 1997

To the stockholders of
ASB Bancshares, Inc.:

You are cordially invited to attend a special meeting of the stockholders
(the "Special Meeting") of ASB Bancshares, Inc. ("ASB") to be held at the
corporate offices of ASB, located at 255 5th Street, Ashville, Alabama 35953, at
6:00 p.m., local time, on February 3, 1998, notice of which is enclosed.

At the Special Meeting, you will be asked to consider and vote upon the
proposed merger (the "Merger") of ASB with and into The Colonial BancGroup, Inc.
("BancGroup") a Delaware corporation, in accordance with an Agreement and Plan
of Merger, dated as of August 28, 1997 between ASB and BancGroup (the
"Agreement"). BancGroup will be the surviving corporation in the Merger. Each
share of common stock of ASB outstanding at the time of the Merger, (except for
shares held by Joe W. Adkins, Chairman, Chief Executive Officer and President of
ASB, his wife, Dorothy G. Adkins, his sister, Carolyn Spann, and stockholders
who perfect their dissenters' rights of appraisal), will be converted into the
right to receive such number of shares of common stock of BancGroup, par value
$2.50 per share, ("BancGroup Common Stock") equal to $245.18 divided by the
Market Value of the BancGroup Common Stock as determined in accordance with the
Agreement, subject to a maximum and minimum number of shares to be issued, with
cash paid in lieu of fractional shares at the Market Value of such fractional
shares. Shares held by Mr. and Mrs. Adkins and Mrs. Spann will be converted into
subordinated debentures of BancGroup as described more fully in the accompanying
Proxy Statement and Prospectus. The Agreement is attached to the Proxy Statement
and Prospectus as Appendix A.

Enclosed are (i) the Notice of Special Meeting, (ii) the Proxy Statement
and Prospectus, (iii) the proxy card for the Special Meeting and (iv) a
pre-addressed return envelope for the proxy card. The Proxy Statement and
Prospectus describes in more detail the Agreement and the proposed Merger,
including a description of the conditions to consummation of the Merger and the
effects of the Merger on the rights of ASB stockholders. Please read these
materials carefully and consider thoughtfully the information set forth in them.

The Carson Medlin Company, ASB's financial advisor, has issued its opinion
to your Board of Directors regarding the fairness, from a financial point of
view, of the consideration to be paid pursuant to the Agreement to the
stockholders of ASB who are receiving BancGroup Common Stock in the Merger by
BancGroup. A copy of the opinion is attached as Appendix B to the Proxy
Statement and Prospectus.

THE BOARD OF DIRECTORS OF ASB HAS UNANIMOUSLY APPROVED AND ADOPTED THE
AGREEMENT AND CONSUMMATION OF THE MERGER CONTEMPLATED THEREBY, AND RECOMMENDS
THAT YOU VOTE FOR ADOPTION OF THE AGREEMENT.

Adoption of the Agreement will require the affirmative vote of the holders
of the shares representing a majority of the voting power present at the Special
Meeting. Accordingly, whether or not you plan to attend the Special Meeting, you
are urged to complete, sign, and return promptly the enclosed proxy card. If you
attend the Special Meeting, you may vote in person even if you previously
returned your proxy card. The proposed Merger with BancGroup is a significant
step for ASB and your vote on this matter is of great importance.

ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR ADOPTION OF THE
AGREEMENT BY MARKING THE ENCLOSED PROXY CARD "FOR" ITEM ONE.

We look forward to seeing you at the Special Meeting.

Sincerely,

Joe W. Adkins
-------------
JOE W. ADKINS
Chairman of the Board, President, and
Chief Executive Officer
<PAGE> 2

ASB BANCSHARES, INC.
255 5TH STREET
ASHVILLE, ALABAMA 35953
205-594-4141

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

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON FEBRUARY 3, 1998, AT 6:00 P.M.

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

NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the "Special
Meeting") of ASB Bancshares, Inc. ("ASB") will be held at the corporate offices
of ASB, located at 255 5th Street, Ashville, Alabama 35953, on February 3, 1998,
at 6:00 p.m., local time, for the following purposes:

1. Merger. To consider and vote upon the proposed merger (the "Merger")
of ASB with and into The Colonial BancGroup, Inc. ("BancGroup"), a Delaware
corporation, in accordance with an Agreement and Plan of Merger, dated as of
August 28, 1997, by and between ASB and BancGroup (the "Agreement").
BancGroup will be the surviving corporation in the Merger. Each share of
common stock, par value $0.01 per share, of ASB ("ASB Common Stock")
outstanding at the time of the Merger (except for shares held by Joe W.
Adkins, Chairman, Chief Executive Officer and President of ASB, his wife,
Dorothy G. Adkins, his sister, Carolyn Spann, and stockholders who perfect
their dissenters' rights of appraisal) will be converted into the right to
receive such number of shares of BancGroup common stock par value $2.50 per
share ("BancGroup Common Stock"), equal to $245.18 divided by the Market
Value of the BancGroup Common Stock as determined in accordance with the
Agreement, subject to a maximum and minimum number of shares to be issued,
with cash paid in lieu of fractional shares at the Market Value of such
fractional shares. Shares held by Mr. and Mrs. Adkins and Mrs. Spann will be
converted into subordinated debentures of BancGroup as described more fully
in the accompanying Proxy Statement and Prospectus. The Agreement is
attached to the 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 or postponements thereof.

3. Notice of Appraisal Rights. If Proposal 1 above is approved and the
Merger contemplated thereby is consummated, each holder of shares of ASB
Common Stock would have the right to demand appraisal of such holder's
shares of ASB Common Stock and would be entitled to the rights and remedies
of Section 262 of the Delaware General Corporation Law (the "DGCL"). The
right of any such stockholder to any such rights and remedies is contingent
upon consummation of the Merger. In addition, the rights of any such
stockholder to such rights and remedies is contingent upon strict compliance
with the requirements set forth in Section 262 of the DGCL, the full text of
which is attached as Appendix C to the accompanying Proxy Statement and
Prospectus. For a summary of the requirements of Section 262 of the DGCL,
see "The Merger -- Rights of Dissenting Stockholders" in the accompanying
Proxy Statement and Prospectus.

The Board of Directors of ASB has fixed the close of business on December
22, 1997, 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 ASB
Common Stock at the close of business on that date will be entitled to notice of
and to vote at the Special Meeting or any adjournments or postponements thereof.
Adoption of the Agreement requires the affirmative vote of the holders of the
shares representing a majority of the voting power present at the Special
Meeting.

You are cordially invited to attend the Special Meeting in order to ensure
that your shares are represented at the Special Meeting, but WHETHER OR NOT YOU
PLAN TO ATTEND, PLEASE COMPLETE AND SIGN THE ENCLOSED FORM OF PROXY AND MAIL IT
PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ENSURE THAT YOUR SHARES ARE
REPRESENTED AT THE SPECIAL MEETING. The proxy may be revoked at any time by
giving notice of such revocation in writing to the Secretary of ASB at or prior
to the Special Meeting, by executing and delivering a proxy bearing a later date
to the Secretary of ASB at or prior to the Special Meeting, or by attending the
Special Meeting and voting in person.

BY ORDER OF THE BOARD OF DIRECTORS

Joe W. Adkins
--------------------------------------
Joe W. Adkins
Chairman of the Board of Directors of
ASB

December 29, 1997

<PAGE> 3

PROSPECTUS
COMMON STOCK, $2.50 PAR VALUE
THE COLONIAL BANCGROUP, INC.

PROXY STATEMENT

FOR SPECIAL MEETING OF STOCKHOLDERS OF
ASB BANCSHARES, INC.

This Proxy Statement and Prospectus (the "Prospectus") relates to the
proposed Merger (the "Merger") of ASB Bancshares, Inc., a Delaware corporation
("ASB"), with and into The Colonial BancGroup, Inc., a Delaware corporation
("BancGroup"). This Prospectus is being furnished to the stockholders of ASB in
connection with the solicitation of proxies by the Board of Directors of ASB for
use at a special meeting of the stockholders of ASB (the "Special Meeting"),
including any adjournments or postponements thereof, to be held on February 3,
1998, at 6:00 p.m., local time, in the corporate office of ASB located at 255
5th Street, Ashville, Alabama 35953. At the Special Meeting, stockholders of ASB
will consider and vote upon the matters set forth in the preceding Notice of
Special Meeting of the stockholders, as more fully described in this Prospectus.

The Merger will be consummated pursuant to the terms of a certain Agreement
and Plan of Merger, dated as of August 28, 1997, by and between BancGroup and
ASB (the "Agreement"). The Agreement provides that, subject to the adoption of
the Agreement by the stockholders of ASB at the Special Meeting and the
satisfaction (or waiver, to the extent that such waiver is permitted by law) of
other conditions contained in the Agreement, ASB will be merged with and into
BancGroup and BancGroup will be the surviving corporation. Except for shares as
to which dissenters' rights of appraisal are perfected pursuant to Section 262
of the Delaware General Corporation Law (the "DGCL") and shares held by Joe W.
Adkins, Chairman, Chief Executive Officer and President of ASB, his wife,
Dorothy G. Adkins, and his sister, Carolyn Spann, each issued and outstanding
share of common stock, par value $.01 per share, of ASB (the "ASB Common
Stock"), shall be converted into a number of shares of the common stock, par
value $2.50 per share, of BancGroup (the "BancGroup Common Stock") equal to
$245.18 divided by the Market Value. The "Market Value" shall be the average of
the market price of BancGroup Common Stock for the ten trading days ending on
the trading day that is five calendar days immediately preceding the Effective
Date of the Merger. However, the Market Value shall not be less than $20.40 per
share, nor more than $27.60 per share. Assuming 52,614 shares of ASB Common
Stock outstanding as of the Effective Date, the maximum number of shares of
BancGroup Common Stock to be issued in the Merger shall be 632,362 (assuming a
minimum Market Value of $20.40 and a resulting exchange ratio of 12.019 shares
of BancGroup Common Stock per share of ASB Common Stock), and the minimum number
of shares of BancGroup Common Stock to be issued in the Merger shall be 467,398
(based upon a maximum Market Value of $27.60 and a resulting exchange ratio of
8.883 shares of BancGroup Common Stock per share of ASB Common Stock). Shares of
ASB Common Stock held by Mr. and Mrs. Adkins and by Mrs. Spann will be
converted, in accordance with the Agreement into BancGroup's 1997 Subordinated
Acquisition Debentures Series A (the "Debentures") paying a rate of interest
equal to the New York Prime Rate minus 1%, but in no event less than 7% per
annum, and due ten years from the date of issuance. The Debentures will be
issued at the rate of $245.18 for each share of ASB Common Stock held of record
by Mr. and Mrs. Adkins and Mrs. Spann. See "The Merger -- General," and
"-- Description of Debentures." The shares of BancGroup Common Stock are listed
on the New York Stock Exchange ("NYSE"). The closing price per share of the
BancGroup Common Stock on the NYSE on December 26, 1997, was $34.5625.

Consummation of the Merger requires, among other things, the affirmative
vote of the holders of the shares representing a majority of the voting power
present at the Special Meeting.

BancGroup has filed a Registration Statement pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), to register the shares of the
BancGroup Common Stock to be issued in connection with the Merger. This document
constitutes a Proxy Statement of ASB in connection with the solicitation of
proxies by ASB for the Special Meeting and a Prospectus of BancGroup with
respect to the BancGroup Common Stock to be issued in the Merger. This
Prospectus and accompanying form of proxy and related materials are first being
mailed to stockholders of ASB on or about December 31, 1997.

THE BOARD OF DIRECTORS OF ASB UNANIMOUSLY RECOMMENDS
ADOPTION OF THE AGREEMENT.

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

THE SECURITIES TO WHICH THIS PROSPECTUS RELATES 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 OF BANCGROUP COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

The street address of the principal executive offices of ASB is 255 5th
Street, Ashville, Alabama 35953 (telephone 205-594-4141), and its mailing
address is P.O. Box 1500, Ashville, Alabama 35953. The street and mailing
addresses of the principal executive offices of BancGroup are Colonial Financial
Center, One Commerce Street, Post Office Box 1108, Montgomery, Alabama 36101
(telephone 334-240-5000).

THE DATE OF THIS PROSPECTUS IS DECEMBER 29, 1997.

<PAGE> 4

AVAILABLE INFORMATION

BancGroup is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by BancGroup 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; and 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 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.

The Commission also maintains a Web site (http://www.sec.gov) that contains
reports, proxy statements and other information regarding registrants, such as
BancGroup, that file electronically with the Commission.

The BancGroup Common Stock is listed for trading on the NYSE under the
symbol CNB. Reports, proxy and information statements 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 pursuant
to the Securities Act to register the shares of BancGroup Common Stock being
issued 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 or incorporated herein by reference
concerning BancGroup and its subsidiaries has been furnished by BancGroup, and
the information concerning ASB and its subsidiary has been furnished by ASB.

This Prospectus contains certain forward-looking statements with respect to
the financial condition, results of operations, and business of BancGroup
following the consummation of the Merger and the proposed acquisition of other
banking institutions (the "Other Probable Business Combinations), including
statements relating to the expected impact of the Merger and the Other Probable
Business Combinations on BancGroup's financial performance. These
forward-looking statements involve certain risks and uncertainties. Factors that
may cause actual results to differ materially from those contemplated by such
forward-looking statements include, among other things, the following
possibilities: (i) expected cost savings from the Merger and the Other Pending
Acquisitions, if any or all of such transactions are consummated, cannot be
fully realized; (ii) deposit attrition, customer loss, or revenue loss following
the Merger and the Other Probable Business Combinations is greater than
expected; (iii) competitive pressure in the banking industry increases
significantly; (iv) costs or difficulties related to the integration of the
businesses of BancGroup and the institutions to be acquired are greater than
expected; (v) changes in the interest rate environment reduce margins; (vi)
general economic conditions, either nationally or regionally, are less favorable
than expected, resulting in, among other things, a deterioration in credit
quality; (vii) changes occur in the regulatory environment; (viii) changes occur
in business conditions and the rate of inflation; and (ix) changes occur in the
securities markets. The forward-looking earnings estimates, if any, included in
this Prospectus have not been examined or compiled by the independent public
accountants of BancGroup and ASB, nor have such accountants applied any
procedures thereto. Accordingly, such accountants do not express an opinion or
any other form of assurance on them. Further information on other factors that
could affect the financial results of BancGroup after the Merger and the Other
Probable Business Combinations is included in the filings with the Commission
incorporated by reference herein. When used in this Prospectus, the words
"believes," "estimates," "plans," "expects," "should," "may," "might,"
"outlook," and "anticipates," and similar expressions as they relate to
BancGroup (including its subsidiaries), or its management are intended to
identify forward-looking statements.

i
<PAGE> 5

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF
SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY BANCGROUP OR ASB. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION, TO
OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF BANCGROUP
OR ASB SINCE THE DATE OF THIS PROSPECTUS OR THAT INFORMATION IN THIS PROSPECTUS
OR IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THE DATES THEREOF.

DOCUMENTS INCORPORATED BY REFERENCE

THIS PROSPECTUS INCORPORATES DOCUMENTS OF BANCGROUP BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE,
WITHOUT CHARGE, UPON REQUEST FROM THE PERSONS 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 previously 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, 1996 (provided that any information included or incorporated
by reference in response to Items 402(a)(8), (i), (k) or (1) of Regulation
S-K of the SEC shall not be deemed to be incorporated herein and is not
part of the Registration Statement);

(2) BancGroup's Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997;

(3) BancGroup's Report on Form 8-K dated January 3, 1997;

(4) BancGroup's Report on Form 8-K dated January 20, 1997;

(5) BancGroup's Report on Form 8-K dated March 10, 1997;

(6) BancGroup's Report on Form 8-K dated April 15, 1997 disclosing the
amended and restated Management Discussion and Analysis and financial
statements for December 31, 1996 to reflect the January 1997
pooling-of-interests method combinations with Jefferson Bancorp, Inc., and
D/W Bancshares, Inc.;

(7) BancGroup's Report on Form 8-K dated June 11, 1997;

(8) BancGroup's Report on Form 8-K dated June 24, 1997 disclosing the
amended and restated Management Discussion and Analysis and financial
statements for December 31, 1996 to reflect the April 22, 1997
pooling-of-interests method combination with Ft. Brooke Bancorporation;

(9) BancGroup's Report on Form 8-K/A dated August 13, 1997 (correcting
and amending Form 8-K filed August 12, 1997);

(10) BancGroup's Report on Form 8-K dated October 30, 1997;

(11) BancGroup's Report on Form 8-K dated November 17, 1997;

(12) The description of the current management and Board of Directors
contained in the Proxy Statement pursuant to Section 14(a) of the Exchange
Act for BancGroup's Annual Meeting of stockholders held on April 16, 1997;
and,

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

ii
<PAGE> 6

All documents filed by BancGroup pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act 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 another subsequently filed
document which also is, or is deemed to be, incorporated 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 the Agreement with ASB 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 as 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 unless specifically incorporated herein). 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).

iii
<PAGE> 7

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY..................................................... 1
THE SPECIAL MEETING......................................... 11
General................................................... 11
Record Date; Shares Entitled to Vote; Vote Required for
the Merger............................................. 11
Solicitation, Voting and Revocation of Proxies............ 11
Effect of Merger on Outstanding BancGroup Common Stock.... 12
THE MERGER.................................................. 13
General................................................... 13
Background of the Merger and ASB's Reasons for the
Merger................................................. 14
Opinion of Financial Advisor.............................. 16
BancGroup's Reasons for the Merger........................ 20
Certain Relationships and Related Transactions -- Stock
Option................................................. 21
Interests of Certain Persons in the Merger................ 22
Description of Debentures................................. 23
Surrender of ASB Common Stock Certificates................ 24
Certain Federal Income Tax Consequences................... 24
Conditions to Consummation of the Merger.................. 26
Amendment or Termination of Agreement..................... 27
Regulatory Approvals...................................... 27
Conduct of Business Pending the Merger.................... 29
Commitments with Respect to Other Offers.................. 30
Rights of Dissenting Stockholders......................... 30
Resale of BancGroup Common Stock Issued in the Merger..... 32
Accounting Treatment...................................... 33
COMPARATIVE MARKET PRICES AND DIVIDENDS..................... 34
BancGroup................................................. 34
ASB....................................................... 35
BANCGROUP CAPITAL STOCK AND DEBENTURES...................... 35
BancGroup Common Stock.................................... 36
Preference Stock.......................................... 36
1986 Debentures........................................... 36
Changes in Control........................................ 37
COMPARATIVE RIGHTS OF STOCKHOLDERS.......................... 39
Director Elections........................................ 39
Removal of Directors...................................... 39
Voting.................................................... 39
Preemptive Rights......................................... 39
Directors' Liability...................................... 40
Indemnification........................................... 40
Special Meetings of Stockholders; Action Without a
Meeting................................................ 41
Mergers, Share Exchanges and Sales of Assets.............. 41
Amendment of Certificate of Incorporation and Bylaws...... 41
Rights of Dissenting Stockholders......................... 42
Preferred Stock........................................... 42
Effect of the Merger on ASB Stockholders.................. 42
</TABLE>

iv
<PAGE> 8

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENT OF CONDITION (UNAUDITED)...... 44
COMPLETED BUSINESS COMBINATIONS............................. 46
PENDING BUSINESS COMBINATIONS............................... 46
CONDENSED PRO FORMA STATEMENT OF INCOME (UNAUDITED)......... 49
SELECTED FINANCIAL AND OPERATING INFORMATION................ 52
ASB BANCSHARES, INC. AND SUBSIDIARY......................... 55
Selected Financial Data................................... 55
Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Years Ended
December 31, 1995 and 1996............................. 56
Management's Discussion and Analysis of Results of
Operations and Financial Condition for the Nine Months
Ended September 30, 1997 and 1996...................... 73
BUSINESS OF BANCGROUP....................................... 75
General................................................... 75
Recently Completed and Other Proposed Business
Combinations........................................... 75
Year 2000 Compliance...................................... 76
Voting Securities and Principal Stockholders.............. 76
Security Ownership of Management.......................... 77
Management Information.................................... 78
BUSINESS OF ASB............................................. 79
General................................................... 79
Business and Properties................................... 79
Competition............................................... 79
Legal Proceedings......................................... 79
Management................................................ 80
Employee Benefit Plans.................................... 80
Transactions with Management.............................. 80
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF ASB......... 81
ADJOURNMENT OF SPECIAL MEETING.............................. 81
OTHER MATTERS............................................... 81
DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS...... 81
LEGAL MATTERS............................................... 81
EXPERTS..................................................... 82
INDEX TO FINANCIAL STATEMENTS............................... F-1
APPENDIX A -- Agreement and Plan of Merger.................. A-1
APPENDIX B -- Opinion of Financial Adviser.................. B-1
APPENDIX C -- Section 262 of the Delaware General
Corporation Law relating to appraisal rights.............. C-1
APPENDIX D -- Stock Option Agreement........................ D-1
</TABLE>

v
<PAGE> 9

SUMMARY

The following provides a summary of certain information included in this
Prospectus and the documents incorporated herein by reference. This summary is
not intended to be a complete description of the matters covered in this
Prospectus. This 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 ASB are urged to read this
Prospectus in full, including the Appendices.

GENERAL

This Prospectus relates to the issuance of shares of BancGroup Common Stock
in connection with the proposed Merger of ASB with and into BancGroup. In
addition, this Prospectus describes the Debentures to be issued to Mr. and Mrs.
Adkins and Mrs. Spann in connection with the Merger.

THE SPECIAL MEETING

This Prospectus is being furnished to the holders of ASB Common Stock in
connection with the solicitation by the ASB Board of Directors of proxies for
use at the Special Meeting and at any and all adjournments and postponements
thereof, at which ASB stockholders will be asked to vote upon (i) a proposal to
adopt the Agreement and (ii) such other business as may properly come before the
meeting. The Special Meeting will be held at the corporate office of ASB located
at 255 5th Street, Ashville, Alabama 35953, at 6:00 p.m., local time, on
February 3, 1998. See "The Special Meeting -- General."

ASB's Board of Directors has fixed the close of business on December 22,
1997, as the Record Date (the "Record Date") for determination of the
stockholders entitled to notice of and to vote at the Special Meeting. Only
holders of record of shares of ASB Common Stock on the Record Date will be
entitled to notice of and to vote at the Special Meeting. Stockholders who
execute proxies retain the right to revoke them at any time prior to the proxies
being voted at the Special Meeting. As of the Record Date, there were 180 record
holders of ASB Common Stock and 84,120 shares of ASB Common Stock issued and
outstanding each entitled to one vote per share. See "The Special
Meeting -- Record Date; -- Shares Entitled to Vote; -- Vote Required for the
Merger."

Adoption of the Agreement and the transactions contemplated thereby
requires the affirmative vote of the holders of the shares representing a
majority of the voting power present at the Special Meeting. As of the Record
Date, directors and executive officers of ASB and their affiliates owned 24,014
shares of ASB Common Stock representing approximately 28.55% of the outstanding
shares. These individuals have agreed with BancGroup to vote their shares in
favor of the Merger. The directors and executive officers of BancGroup owned, as
of the Record Date, no shares of ASB Common Stock. As of the Record Date,
BancGroup and ASB each held no shares of ASB Common Stock in a fiduciary
capacity for others, or as a result of debts previously contracted. See "The
Special Meeting -- Record Date; -- Shares Entitled to Vote; -- Vote Required for
the Merger."

Proxies should be returned to ASB in the envelope enclosed herewith.
Stockholders of ASB submitting proxies may revoke their proxies (i) by giving
notice of such revocation in writing to the Secretary of ASB at or prior to the
Special Meeting, (ii) by executing and delivering a proxy bearing a later date
to the Secretary of ASB at or prior to the Special Meeting, or (iii) by
attending the Special Meeting and voting in person. See "The Special
Meeting -- Solicitation, Voting and Revocation of Proxies."

THE COMPANIES

BancGroup. BancGroup is a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended (the "BHCA"). It was organized in
Delaware in 1974 and has operated under its current name and management since
1981. BancGroup operates a wholly owned commercial banking subsidiary, Colonial
Bank, in the states of Alabama, Georgia, Florida and Tennessee. At September 30,
1997 Colonial Bank conducted a full service commercial banking business through
118 branches in Alabama, 5 branches in Tennessee, 14 branches in Georgia and 51
branches in Florida. BancGroup has also entered into
<PAGE> 10

agreements to acquire additional banks. Colonial Mortgage Company, a subsidiary
of Colonial Bank, is a mortgage banking company which as of September 30, 1997
serviced approximately $12.5 billion in residential loans and which originates
residential mortgages in 37 states through four divisional offices. At September
30, 1997, BancGroup had consolidated total assets of $6.6 billion and
consolidated stockholders' equity of $472.4 million. Since September 30, 1997,
BancGroup has acquired one banking institution with assets of $65.0 million and
stockholders' equity of $6.3 million. This acquisition is included in the pro
forma statements included herein. See "Business of BancGroup."

ASB. ASB, a Delaware corporation, is a bank holding company within the
meaning of the BHCA. As of September 30, 1997, ASB had consolidated total assets
of $144.5 million and consolidated stockholders' equity of $12.1 million. ASB
conducts its business activities through its wholly-owned bank subsidiary,
Ashville Savings Bank, which is organized in Alabama as a commercial bank
chartered under the laws of the State of Alabama. Ashville Savings Bank (the
"Bank") operates from its main office in Ashville, Alabama and at eight branch
offices located in Blount, Etowah and St. Clair, Alabama counties. ASB's
principal executive office is located at 255 5th Street, Ashville, Alabama
35953, and its telephone number at such address is 205-594-4141.

THE MERGER

The Agreement provides for the Merger of ASB with and into BancGroup, with
BancGroup to be the surviving corporation. Upon the date of consummation of the
Merger (the "Effective Date"), each outstanding share of ASB Common Stock
(except shares as to which dissenters' rights of appraisal are perfected
pursuant to Section 262 of the DGCL and shares of ASB Common Stock held of
record by Mr. and Mrs. Adkins and by Mrs. Spann) will be converted by operation
of law and without any action by any holder thereof into shares of BancGroup
Common Stock, subject to the treatment of fractional shares as described below.
The number of shares of BancGroup Common Stock into which each outstanding share
of ASB Common Stock on the Effective Date will be converted will be equal to
$245.18 divided by the Market Value (the "Merger Consideration"). The "Market
Value" shall be the average of the closing prices of the BancGroup Common Stock
as reported by the NYSE on each of the ten consecutive trading days ending on
the trading day five calendar days immediately preceding the Effective Date.
Regardless of the Market Value, however, assuming 52,614 shares of ASB Common
Stock outstanding as of the Record Date the maximum number of shares of
BancGroup Common Stock to be issued in the Merger shall be 632,362 (based upon a
minimum Market Value of $20.40) and the minimum number of shares of BancGroup
Common Stock to be issued in the Merger shall be 467,398 (based upon a maximum
Market Value of $27.60).

No fractional shares of BancGroup Common Stock will be issued in connection
with the Merger. To the extent that a fractional interest arises as a result of
the BancGroup Common Stock issuable in the Merger, cash will be paid in lieu
thereof based upon the Market Value of such fractional interest.

As of December 26, 1997, the Market Value as defined above exceeded the
maximum Market Value as defined above. If on the Effective Date, the Market
Value exceeds the maximum, then each share of ASB Common Stock will be converted
into 8.883 shares of BancGroup Common Stock (i.e. $245.18 divided by $27.60, the
maximum Market Value). As a result, a stockholder of ASB who owns 500 shares of
ASB Common Stock would receive 4,441.6 shares of BancGroup Common Stock ($245.18
divided by $27.60 and multiplied by 500), with the .6 of a share paid in cash
equal to $16.56 (.6 multiplied by $27.60).

Stockholders are advised to obtain current market quotations for BancGroup
Common Stock. The market price of BancGroup Common Stock at the Effective Date,
or on the date on which certificates representing such shares are received by
ASB stockholders, may be higher or lower than the market price of BancGroup
Common Stock as of the Record Date or at the time of the Special Meeting.

The Agreement provides that if, prior to the Effective Date, ASB or
BancGroup changes the number of shares of ASB Common Stock or BancGroup Common
Stock, respectively issued and outstanding as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock, an appropriate
and proportionate adjustment shall be made in the number of shares of BancGroup
Common Stock into which the ASB Common Stock shall be converted in the Merger.
2
<PAGE> 11

On the Effective Date, each share of ASB Common Stock held of record by Mr.
and Mrs. Adkins and by Mrs. Spann shall be converted by operation of law and
without any action by such holders into Debentures. The Debentures will be
issued in the principal amount of $245.18 for each share of ASB Common Stock
held of record by Mr. and Mrs. Adkins and Mrs. Spann. Assuming an aggregate of
31,506 shares of ASB Common Stock held by such persons, the aggregate principal
amount of Debentures to be issued shall be $7,724,813 and, accordingly, Mr. and
Mrs. Adkins jointly shall receive $5,125,847 aggregate principal amount of such
Debentures and Mrs. Spann shall receive $2,598,966 aggregate principal amount of
such Debentures. The Debentures shall be due and payable ten years from the
Effective Date. The Debentures shall bear interest at the New York Prime Rate
minus 1%, but in no event shall such interest rate be less than 7% per annum.

The terms of the Debentures were negotiated by Mr. Adkins on behalf of Mrs.
Adkins, Mrs. Spann and himself with representatives of BancGroup. Mr. and Mrs.
Adkins and Mrs. Spann have signed agreements with BancGroup to accept the
Debentures subject to ASB stockholders' adoption of the Agreement and approval
of the consummation of the Merger. See "The Merger -- Description of
Debentures."

ASB stockholders will be given notice of the consummation of the Merger
promptly after the Effective Date of the Merger. Certificates for the shares of
BancGroup Common Stock issued will not be distributed or dividends paid on such
shares until stockholders surrender their certificates representing their shares
of ASB Common Stock. See "The Merger -- General," and "-- Surrender of ASB
Common Stock Certificates."

For certain information concerning voting at the Special Meeting,
dissenters' rights, and management of BancGroup and ASB, see "The Special
Meeting -- Solicitation, Voting and Revocation of Proxies," "-- Record Date;
Shares Entitled to Vote; Vote Required," "The Merger -- General," "-- Rights of
Dissenting Stockholders," "Business of Bancgroup -- Voting Securities and
Principal Stockholders," "-- Security Ownership of Management," and "Business of
ASB -- Principal Holders of Common Stock."

REASONS FOR THE MERGER, RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF ASB

The ASB Board of Directors believes that the Agreement and the Merger are
in the best interests of ASB and its stockholders. THE ASB BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT ASB STOCKHOLDERS VOTE FOR ADOPTION OF THE AGREEMENT.
The ASB Board of Directors believes that the Merger will result in a company
with expanded opportunities for profitable growth and that the combined
resources and capital of ASB and BancGroup will provide an enhanced ability to
compete in the changing and competitive financial services industry. See "The
Merger -- Background of the Merger and ASB's Reasons for the Merger."

In unanimously approving the Agreement, ASB's directors considered, among
other things, the financial condition of each of ASB and BancGroup, the terms
and conditions of the Agreement, the financial terms and income tax consequences
of the Merger, the likelihood of the Merger being approved by regulatory
authorities without undue conditions or delay and the opinion of The Carson
Medlin Company ("Carson Medlin") as to the fairness of the Merger, from a
financial point of view, to the stockholders of ASB. See "The Merger --
Background of the Merger and ASB's Reasons for the Merger."

OPINION OF FINANCIAL ADVISOR

Carson Medlin has rendered an opinion to the ASB Board of Directors that,
based on and subject to the procedures, matters, and limitations described in
its opinion and such other matters as it considered relevant, as of the date of
its opinion, the Merger Consideration is fair, from a financial point of view,
to the stockholders of ASB who are receiving BancGroup Common Stock in the
Merger. The opinion of Carson Medlin dated as of the date of this Prospectus is
attached as Appendix C to this Prospectus. ASB stockholders are urged to read
the opinion in its entirety for a description of the procedures followed,
matters considered, and limitations on the reviews undertaken in connection
therewith. See "The Merger -- Opinion of Financial Advisor."
3
<PAGE> 12

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -- STOCK OPTION

In connection with the Agreement, BancGroup and ASB have entered into a
stock option agreement dated August 28, 1997 (the "Option Agreement"), pursuant
to which, under certain circumstances, BancGroup will have an option to purchase
up to 19.9% of the outstanding shares of ASB Common Stock at a purchase price of
$245.18 per share. The option will become exercisable upon the occurrence of
certain events which are generally related to the potential acquisition of ASB
by another party. The option was granted by ASB as a condition of, and in
consideration for, BancGroup's entering into the Agreement; and, the option is
intended to increase the likelihood that the Merger will be consummated by
making it more difficult and expensive for any third party to acquire control of
ASB while BancGroup is seeking to consummate the Merger. See "The
Merger -- Certain Relationships and Related Transactions -- Stock Option."

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Certain members of ASB's management and its Board of Directors have
interests in the Merger in addition to their interests as stockholders of ASB
generally. Those interests relate to the following, among other things: (i) a
consulting agreement between Colonial Bank and Mr. Adkins, pursuant to which Mr.
Adkins will receive consulting fees of $140,000, payable in three installments
over two years; (ii) an agreement not to compete between Colonial Bank and Mr.
Adkins for a term of three years pursuant to which Mr. Adkins will receive the
sum of $350,000, payable over three years; (iii) $60,000 payable to Mr. Adkins
for service as Chairman of ASB; (iv) a deferred compensation agreement pursuant
to which, in the event of a change in control of ASB, Mr. Adkins will receive
monthly payments of $8,333.33, commencing on January 1 of the fourth calendar
year following the calendar year in which Mr. Adkins' employment with the
Company or any of its affiliates terminates and continuing for a period of seven
years; (v) $125,000 payable, on the Effective Date, to the directors of ASB
(except Mr. Adkins) in the amount of $25,000 each for service as directors of
ASB; and (vi) the continued indemnification by BancGroup of the former and
present officers and directors of ASB and its subsidiaries following
consummation of the Merger. See "The Merger -- Interests of Certain Persons in
the Merger" "-- Description of Debentures," and "-- Deferred Compensation
Agreement."

In addition, Mr. and Mrs. Adkins and Mrs. Spann will receive Debentures in
the Merger rather than BancGroup Common Stock. The value attributed to the ASB
Common Stock held by Mr. and Mrs. Adkins and Mrs. Spann for purposes of receipt
of the Debentures is $245.18 per share, the same value attributed to ASB Common
Stock held by other stockholders of ASB. The Debentures, which pay a rate of
interest equal to the New York Prime Rate minus 1%, but in no event less than 7%
per annum, are due and payable in ten years, and are senior to the BancGroup
Common Stock upon liquidation of BancGroup. Therefore, they may have less risk
than BancGroup Common Stock. However, the Debentures are not transferable and,
therefore, no trading market for the Debentures will develop. As of the Record
Date, Mr. and Mrs. Adkins and Mrs. Spann together owned 31,506 shares of ASB
Common Stock representing 37.45% of the outstanding shares. See "The
Merger -- Description of Debentures."

On the Effective Date, and subject to the agreements referenced above, all
employees of ASB shall, at BancGroup's option, either become employees of
BancGroup or its subsidiaries or be entitled to severance benefits in accordance
with Colonial Bank's severance policy as of the date of the Agreement. All
employees of ASB who become employees of BancGroup or its subsidiaries on the
Effective Date shall be entitled, to the extent permitted by applicable law, to
participate in all benefit plans of BancGroup to the same extent as BancGroup's
employees, except as stated otherwise in the Agreement. See "The
Merger -- Interests of Certain Persons in the Merger -- Employee Benefit
Matters."

RIGHTS OF DISSENTING STOCKHOLDERS

Pursuant to Section 262 of the Delaware General Corporation Law (the
"DGCL"), the holders of ASB Common Stock have dissenters' rights with respect to
the Merger. Any ASB stockholder who does not vote in favor of the proposal to
adopt the Agreement and approve the Merger contemplated thereby and who complies
4
<PAGE> 13

with certain requirements of the applicable provisions of the DGCL may have the
right to an appraisal and payment for such person's shares of ASB Common Stock.

TO PERFECT DISSENTERS' RIGHTS OF APPRAISAL, A HOLDER OF ASB COMMON STOCK
MUST STRICTLY COMPLY WITH THE APPLICABLE STATUTORY PROVISIONS, A COPY OF WHICH
IS ATTACHED AS APPENDIX C TO THIS PROSPECTUS. ANY HOLDER OF ASB COMMON STOCK WHO
RETURNS A SIGNED PROXY BUT WHO FAILS TO PROVIDE VOTING INSTRUCTIONS WITH RESPECT
TO THE PROPOSAL TO ADOPT THE AGREEMENT AND THE MERGER CONTEMPLATED THEREBY WILL
BE DEEMED TO HAVE VOTED IN FAVOR OF SUCH PROPOSAL AND WILL NOT BE ENTITLED TO
ASSERT DISSENTERS' RIGHTS OF APPRAISAL. See "The Merger -- Rights of Dissenting
Stockholders."

CONDITIONS TO THE MERGER

The obligations of ASB and BancGroup, respectively, to consummate the
Merger are subject to the satisfaction (or waiver, to the extent permitted
pursuant to the Agreement and by law) of various conditions set forth in the
Agreement including, but not limited to: (i) the adoption of the Agreement by
the holders of the shares representing a majority of the voting power present at
the Special Meeting; (ii) the notification to, or approval of the Merger by, the
Board of Governors of the Federal Reserve System (the "Federal Reserve") and the
approval of the Merger of the Bank with Colonial Bank (the "Bank Merger") by the
Alabama Banking Department (the "Alabama Department") and the Federal Reserve;
(iii) the absence of any pending or threatened litigation which seeks to
restrain or prohibit the Merger; (iv) receipt of opinions of counsel as to
certain matters; and (v) receipt of an opinion from Coopers & Lybrand L.L.P. as
to certain tax matters.

The obligation of ASB to consummate the Merger is further subject to
several conditions, including, but not limited to: (i) the absence of any
material adverse changes in the financial condition or affairs of BancGroup; and
(ii) the shares of BancGroup Common Stock to be issued under the Agreement being
approved for listing on the NYSE.

The obligation of BancGroup to consummate the Merger is further subject to
various conditions, including, but not limited to: (i) the absence of any
material adverse change in the financial condition or affairs of ASB; (ii) the
number of shares as to which holders of ASB Common Stock have exercised
dissenter's rights of appraisal not exceeding 15% of the outstanding shares of
ASB Common Stock; and (iii) the execution by Mr. Adkins of certain ancillary
agreements. See "The Merger -- Interests of Certain Persons in the Merger."

Applications for appropriate regulatory approvals by the Federal Reserve
and the Alabama Department have been filed with such agencies. NO ASSURANCE CAN
BE PROVIDED THAT THE NECESSARY STOCKHOLDER AND REGULATORY APPROVALS CAN BE
OBTAINED OR THAT THE OTHER CONDITIONS PRECEDENT TO THE MERGER CAN OR WILL BE
SATISFIED. ASB AND BANCGROUP ANTICIPATE THAT ALL CONDITIONS TO THE CONSUMMATION
OF THE MERGER WILL BE SATISFIED SO THAT THE MERGER CAN BE CONSUMMATED DURING THE
FIRST QUARTER OF 1998. HOWEVER, DELAYS IN THE CONSUMMATION OF THE MERGER COULD
OCCUR.

See "The Merger -- Conditions to Consummation of the Merger" and
"-- Regulatory Approvals."

AMENDMENT OR TERMINATION OF AGREEMENT

To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the Boards
of Directors of each of the parties. However, after adoption of the Agreement
and the merger by the holders of ASB Common Stock, no amendment decreasing the
consideration to be received by ASB stockholders may be made without the further
approval of such stockholders. Such amendments may require the filing with the
Commission of an amendment of the Registration Statement, of which this
Prospectus forms a part. The Agreement may be terminated at any time prior to or
on the Effective Date, whether before or after adoption of the Agreement by the
stockholders of ASB, by the mutual consent of the respective Boards of Directors
of ASB and BancGroup, or by the Board of Directors of either BancGroup or ASB
under certain circumstances including, but not limited to, the failure of the
transactions contemplated by the Agreement to be consummated on or prior to
March 1, 1998, if such
5
<PAGE> 14

failure to consummate is not caused by any breach of the Agreement by the party
electing to terminate. See "The Merger -- Amendment or Termination of
Agreement."

COMPARATIVE RIGHTS OF STOCKHOLDERS

At the Effective Date, ASB stockholders, whose rights are governed by ASB's
Certificate of Incorporation, as amended (the "ASB Certificate"), and Bylaws
(the "ASB Bylaws") and by the DGCL, will automatically become BancGroup
stockholders, and their rights as BancGroup stockholders will be governed by
BancGroup's Restated Certificate of Incorporation (the "BancGroup Certificate")
and Bylaws (the "BancGroup Bylaws") and the DGCL. The rights of BancGroup
stockholders differ from the rights of ASB stockholders in certain important
respects, including with respect to certain anti-takeover provisions provided
for in the BancGroup Certificate and the BancGroup Bylaws. A discussion of these
rights and a comparison thereof is set forth at "BancGroup Capital Stock and
Debentures -- Changes in Control," and "Comparative Rights of Stockholders."

FEDERAL INCOME TAX CONSEQUENCES

No ruling with respect to the federal income tax consequences of the Merger
to ASB's stockholders will be requested from the Internal Revenue Service (the
"IRS"). ASB has received an opinion from Coopers & Lybrand L.L.P., that, among
other things: (i) the Merger will constitute a "reorganization" within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"); (ii) no gain or loss will be recognized by BancGroup or ASB; (iii) no
gain or loss will be recognized by the stockholders of ASB who receive shares of
BancGroup Common Stock except to the extent of any cash paid for fractional
shares, and except to the extent of any dividends received from ASB 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 ASB Common Stock
exchanged in the Merger less any basis allocated to any fractional share of
BancGroup Common Stock settled by cash payment; (v) the holding period of the
BancGroup Common Stock will include the holding period of the shares of ASB
Common Stock exchanged therefore if such share of ASB Common Stock were capital
assets in the hands of the exchanging ASB stockholder; (vi) cash received by an
ASB 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 or
she would otherwise be entitled to receive and will qualify as capital gain or
loss (assuming the ASB Common Stock was a capital asset in his or her hands as
of the Effective Date); (vii) stockholders of ASB who receive Debentures
pursuant to the Agreement will be treated as having received such Debentures in
full payment in exchange for their ASB Common Stock and such exchange shall
qualify as a capital gain which qualifies for installment treatment for purposes
of Section 453 and 453A of the Code; and (viii) receipt of the Debentures shall
not be considered payment for purposes of Section 453(f)(3) of the Code.
Stockholders who receive cash for their shares of ASB Common Stock upon
perfection of dissenters' rights also will realize gain or loss for federal
income tax purposes with respect to such shares. See "The Merger -- Certain
Federal Income Tax Consequences." TAX CONSEQUENCES OF THE MERGER FOR INDIVIDUAL
TAXPAYERS CAN VARY, HOWEVER, AND ASB STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM.

ACCOUNTING TREATMENT

The Merger of ASB into BancGroup will be treated as a "purchase"
transaction by BancGroup for accounting purposes. See "The Merger -- Accounting
Treatment."

RECENT PER SHARE MARKET PRICES

BancGroup. BancGroup Common Stock is listed for trading on the NYSE under
the symbol "CNB." Prior to February 21, 1995, BancGroup had two classes of
common stock outstanding, Class A and Class B. Class B Common Stock was not
publicly traded. Class A Common Stock was traded on the Nasdaq National Market
System ("Nasdaq NMS") under the symbol "CLBGA" until February 24, 1995. On
February 21, 1995, the BancGroup Class A Common Stock and Class B Common Stock
were reclassified into BancGroup
6
<PAGE> 15

Common Stock. Trading of BancGroup Common Stock on the NYSE commenced on
February 24, 1995. The following table shows the dividends per share and
indicates the high and low closing prices of the BancGroup Class A Common Stock
and the BancGroup Common Stock as reported on the Nasdaq NMS and the NYSE,
respectively, for the last two full fiscal years.

<TABLE>
<CAPTION>
PRICE PER SHARE
OF BANCGROUP COMMON
STOCK
--------------------------
HIGH LOW
---------- ----------
<S> <C> <C> <C> <C>
1995
First Quarter............................................... $11 13/16 $ 9 3/4
Second Quarter.............................................. 13 5/8 11 9/16
Third Quarter............................................... 14 15/16 13 3/4
Fourth Quarter.............................................. 16 7/16 14 1/4
1996
First Quarter............................................... 18 1/4 15
Second Quarter.............................................. 18 1/16 15 5/8
Third Quarter............................................... 17 15/16 15 5/8
Fourth Quarter.............................................. 20 1/8 17 3/8
1997
First Quarter............................................... 24 18 2/3
Second Quarter.............................................. 24 7/8 22
Third Quarter............................................... 29 3/16 24 1/4
Fourth Quarter (through December 26, 1997).................. 35 1/16 28 15/16
</TABLE>

ASB. There is no established public trading market for the ASB Common
Stock. The shares of ASB Common Stock are not actively traded, and such trading
activity, as it occurs, takes place in privately negotiated transactions.
Management of ASB is aware of certain transactions in shares of ASB that have
occurred in the over-the-counter market, although the trading prices of all
stock transactions are not known. The following table sets forth the trading
prices for the shares of ASB Common Stock that have occurred since January 1,
1995 for transactions in which the trading prices are known to management of
ASB:

<TABLE>
<CAPTION>
PRICE PER SHARE
OF ASB COMMON STOCK(1)
----------------------
HIGH LOW
-------- --------
<S> <C> <C>
1995
First Quarter............................................... $ 85.00 $ 85.00
Second Quarter.............................................. N/A N/A
Third Quarter............................................... N/A N/A
Fourth Quarter.............................................. 100.00 100.00
1996
First Quarter............................................... N/A N/A
Second Quarter.............................................. N/A N/A
Third Quarter............................................... 100.00 100.00
Fourth Quarter.............................................. 100.00 100.00
1997
First Quarter............................................... 106.00 106.00
Second Quarter.............................................. N/A N/A
Third Quarter............................................... N/A N/A
Fourth Quarter (through December 26, 1997).................. N/A N/A
</TABLE>

7
<PAGE> 16

On July 8, 1997, the date immediately preceding the public announcement of
the Merger, the closing price of the BancGroup Common Stock on the NYSE was
$26.25 per share. The following table presents the Market Value of BancGroup
Common Stock on that date, and the Market Value and equivalent per share value
of ASB Common Stock on that date:

<TABLE>
<CAPTION>
EQUIVALENT
BANCGROUP ASB PRICE PER ASB
COMMON STOCK(1) COMMON STOCK(2) SHARE(3)
--------------- --------------- -------------
<S> <C> <C> <C>
Comparative Market Value................ $26.25 $106.00 $245.18
</TABLE>

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

(1) Closing price as reported by the NYSE on July 8, 1997.
(2) There is no established public trading market for the shares of ASB Common
Stock. The value shown is the price at which shares of ASB Common Stock were
sold on March 15, 1997, which was the last sale price prior to the public
announcement of the Merger on July 9, 1997, of which management of ASB is
aware.

(3) If the Merger had closed on July 8, 1997 and assuming that the Market Value
had also been $26.25 on July 8, 1997, 9.3402 ($245.18 divided by $26.25)
shares of BancGroup Common Stock would have been exchanged for each share of
ASB Common Stock.

See "Comparative Market Prices and Dividends."

The Debentures to be issued to Mr. and Mrs. Adkins and Mrs. Spann pursuant
to the Agreement will be non-transferable, except under very limited
circumstances, and, therefore, are expected to have no readily determinable
market value. No trading market for the Debentures is expected to develop. There
can be no assurance as to what the market price of the BancGroup Common Stock
will be if and when the Merger is consummated.

CERTAIN LEGAL RESTRICTIONS ON ACQUISITIONS OF CONTROL

Certain restrictions under Delaware law prevent a person who beneficially
owns 15% or more of the BancGroup 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 have been
satisfied.

The BancGroup Certificate and the BancGroup 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: (i) a classified Board
of Directors; (ii) supermajority voting requirements for certain "business
combinations" that exceed the provisions of Delaware law described above; (iii)
flexibility for the Board of Directors to consider non-economic and other
factors in evaluating a "business combination;" (iv) inability of stockholders
to call special meetings and act by written consent; and (v) certain advance
notice provisions for the conduct of business at stockholder meetings.

See "BancGroup Capital Stock and Debentures" and "Comparative Rights of
Stockholders."
8
<PAGE> 17

PER SHARE DATA

The table below presents on a per share basis the book value, cash
dividends and income from continuing operations of BancGroup and ASB on a
historical basis and on a pro forma equivalent basis assuming consummation of
the Merger. Certain information from the table has been taken from the 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
ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
PER SHARE DATA
BancGroup -- Historical (as restated):
Net income
Primary*............................................... $ 1.32 $ 1.26
Fully diluted*......................................... $ 1.31 1.25
Book value at end of period*.............................. 11.26 10.29
Dividends per share:
Common Stock*............................................. 0.45 0.54
ASB
Net income
Historical:
Primary................................................ 14.29 16.45
Fully diluted.......................................... 14.29 16.45
Pro forma equivalent assuming combination with ASB and
completed business combination(a):
Primary................................................ 11.64 11.10
Fully diluted.......................................... 11.55 10.93
Pro forma equivalent assuming combination with completed
business combination, ASB and other probable business
combinations(a):
Primary................................................ 11.37 11.19
Fully diluted.......................................... 11.28 11.10
Book value at end of period
Historical................................................ 144.02 128.86
Pro forma equivalent assuming combination with completed
business combination and ASB(a)........................ 102.51 N/A
Pro forma equivalent assuming combination with completed
business combination, ASB and other probable business
combinations(a)........................................ 100.71 N/A
Dividends per share
Historical(c)............................................. -- 1.10
Pro forma equivalent assuming combination with completed
business combination and ASB(b)........................ 4.00 4.80
Pro forma equivalent assuming combination with completed
business combination, ASB and other probable business
combinations(b)........................................ 4.00 4.80
BANCGROUP
Pro forma combined (ASB and completed business
combination)..............................................
Net income
Primary................................................ $ 1.31 1.25
Fully diluted.......................................... $ 1.30 1.23
Book value at end of period............................ 11.45 N/A
</TABLE>

9
<PAGE> 18

<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
BANCGROUP
Pro forma combined (completed business combination, ASB and other probable
business combination):
Net income
Primary............................................................... $ 1.28 1.26
Fully diluted......................................................... $ 1.27 1.25
Book value at end of period........................................... 11.34 N/A
</TABLE>

* Restated to reflect the impact of a two-for-one stock split effected in the
form of a 100% stock dividend paid February 11, 1997.
N/A Not applicable due to pro forma balance sheet being presented only at June
30, 1997, which assumes the transaction was consummated on the latest
balance sheet date in accordance with Rule 11-02(b) of Regulation S-X.

(a) 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 ASB.
For the purposes of these pro forma equivalent per share amounts, an 8.883
BancGroup Common Stock share conversion ratio is utilized. The ratio is
based on the maximum Market Value of $27.60 ($245.18/$27.60). As of
December 26, 1997, the Market Value exceeded the maximum Market Value
allowed.

(b) Pro forma equivalent dividends per share are shown at BancGroup Common
Stock dividend per share rate multiplied by the 8.883 conversion ratio per
share of ASB Common Stock (see note (a) above). 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.
10
<PAGE> 19

THE SPECIAL MEETING

GENERAL

This Prospectus is being furnished to the holders of ASB Common Stock in
connection with the solicitation by the ASB Board of Directors of proxies for
use at the Special Meeting and at any and all adjournments and postponements
thereof, at which ASB stockholders will be asked to vote upon (i) a proposal to
adopt the Agreement; and (ii) such other business as may properly come before
the meeting. The Special Meeting will be held at the corporate office of ASB
located at 255 5th Street, Ashville, Alabama 35953, at 6:00 p.m., local time, on
February 3, 1998.

THE BOARD OF DIRECTORS OF ASB BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF ASB AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE ADOPTION OF THE AGREEMENT (ITEM 1 ON THE PROXY
CARD).

This Prospectus is also furnished by BancGroup in connection with the offer
of shares of BancGroup Common Stock to be issued in the Merger. In addition,
this Prospectus describes the Debentures to be issued to Mr. and Mrs. Adkins and
Mrs. Spann in connection with the Merger. No vote of BancGroup stockholders is
required to approve the Merger.

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

The Board of Directors of ASB has fixed the close of business on December
22, 1997, as the Record Date for determination of stockholders entitled to
notice of and to vote at the Special Meeting as of the Record Date. As of the
Record Date, there were 180 record holders of ASB Common Stock and 84,120 shares
of ASB Common Stock outstanding, each entitled to one vote per share.

The presence at the Special Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of ASB Common Stock on the Record Date
is necessary to constitute a quorum for the transaction of business at the
Special Meeting. In the absence of a quorum, the Special Meeting may be
postponed from time to time until ASB stockholders holding the requisite number
of shares of ASB Common Stock are represented in person or by proxy. In
determining whether a quorum exists at the Special Meeting for purposes of all
matters to be voted on, all votes "for" or "against," as well as all
abstentions, with respect to the proposal receiving the most such votes, will be
counted. If a quorum is present, the affirmative vote of the holders of the
shares representing a majority of the voting power present at the Special
Meeting is required to adopt the Agreement. Each holder of record of shares of
ASB Common Stock is entitled to cast, for each share registered in his or her
name, one vote on the proposal to adopt the Agreement as well as on each other
matter presented to a vote of stockholders at the Special Meeting.

As of the Record Date, directors and executive officers and their
affiliates owned 24,014 shares of ASB Common Stock representing approximately
28.55% of the outstanding shares. These individuals have agreed with BancGroup
to vote their shares in favor of the Merger.

If the Agreement is adopted at the Special Meeting, ASB is expected to
merge with and into BancGroup promptly after the other conditions to the
Agreement are satisfied. See "The Merger -- Conditions to Consummation of the
Merger."

THE BOARD OF DIRECTORS OF ASB URGES THE STOCKHOLDERS OF ASB 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 ADOPTION OF THE
AGREEMENT.

SOLICITATION, VOTING AND REVOCATION OF PROXIES

In addition to soliciting proxies by mail, directors, officers and other
employees of ASB, without receiving special compensation therefor, may solicit
proxies from ASB's stockholders by telephone, by telegram or in

11
<PAGE> 20

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 ASB Common Stock.

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

Shares of ASB Common Stock represented by a proxy properly signed and
received at or prior to the Special Meeting, unless properly revoked, will be
voted in accordance with the instructions on the proxy. IF A PROXY IS SIGNED AND
RETURNED WITHOUT ANY VOTING INSTRUCTIONS, SHARES OF ASB COMMON STOCK REPRESENTED
BY THE PROXY WILL BE VOTED "FOR" THE PROPOSAL TO ADOPT THE AGREEMENT AND IN
ACCORDANCE WITH THE DETERMINATION OF THE MAJORITY OF THE BOARD OF DIRECTORS OF
ASB AS TO ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE SPECIAL MEETING,
INCLUDING ANY ADJOURNMENT OR POSTPONEMENT THEREOF. IF NECESSARY, THE PROXYHOLDER
MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE SPECIAL MEETING IN ORDER TO
PERMIT FURTHER SOLICITATION OF PROXIES IN THE EVENT THERE ARE NOT SUFFICIENT
VOTES TO APPROVE THE FOREGOING PROPOSAL AT THE TIME OF THE SPECIAL MEETING.
HOWEVER, NO PROXYHOLDER WILL VOTE ANY PROXIES VOTED "AGAINST" ADOPTION OF THE
AGREEMENT "FOR" A PROPOSAL TO ADJOURN THE SPECIAL MEETING.

A stockholder may revoke any proxy given pursuant to this solicitation by:
(i) delivering to the Secretary of ASB, prior to or at the Special Meeting, a
written notice revoking the proxy; (ii) delivering to the Secretary of ASB, at
or prior to the Special Meeting, a duly executed proxy relating to the same
shares and bearing a later date; or (iii) voting in person at the Special
Meeting. All written notices of revocation and other communications with respect
to the revocation of ASB's proxies should be addressed to:

ASB BANCSHARES, INC.
P.O. Box 1500
Ashville, Alabama 35953
205-594-4141
Attention: Frances Wise

Attendance at the Special Meeting will not, in and of itself, constitute a
revocation of a proxy.

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, however, be counted for purposes of determining
whether a quorum is present at the Special Meeting.

The Board of Directors of ASB is not aware of any business to be acted upon
at the Special Meeting other than consideration of the Merger described herein.
If, however, other matters are properly brought before the Special Meeting, or
any adjournments or postponements thereof, the persons appointed as proxies will
have the discretion to vote or act on such matters according to their best
judgment. Proxies voted in favor of the Merger, or proxies as to which no voting
instructions are given, will be voted to adjourn the Special Meeting, if
necessary, in order to solicit additional proxies in favor of the Merger.
Proxies voted against the Merger and abstentions will not be voted for an
adjournment. See "Adjournment of the Special Meeting."

EFFECT OF MERGER ON OUTSTANDING BANCGROUP COMMON STOCK

Assuming that no dissenters' rights of appraisal are exercised in the
Merger and a Market Value of $27.60 (the maximum Market Value) on the Effective
Date (as of December 26, 1997, the Market Value exceeded the maximum), BancGroup
would issue 467,398 shares of BancGroup Common Stock to the stockholders of ASB,
other than Mr. and Mrs. Adkins and Mrs. Spann, pursuant to the Merger. Based on
those assumptions, the 467,398 shares of BancGroup Common Stock would represent
approximately 1.10% of the total number of shares of BancGroup Common Stock
outstanding following the Merger, not counting any additional shares BancGroup
may issue, including shares to be issued pursuant to other pending acquisitions.

12
<PAGE> 21

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 attached hereto as Appendix A and certain provisions of Delaware law
relating to the rights of dissenting stockholders, a copy of which provisions is
attached hereto as Appendix C. All ASB stockholders are urged to read the
Agreement and the Appendices in their entirety.

GENERAL

The Agreement provides for the Merger of ASB with and into BancGroup, with
BancGroup to be the surviving corporation. Upon the Effective Date, each
outstanding share of ASB Common Stock (except shares of ASB Common Stock as to
which dissenters' rights of appraisal are perfected under Section 262 of the
DGCL and shares of ASB Common Stock held of record by Mr. and Mrs. Adkins and
Mrs. Spann) shall be converted by operation of law and without any action by any
holder thereof into shares of BancGroup Common Stock. The number of shares of
BancGroup Common Stock into which each outstanding share of ASB Common Stock on
the Effective Date shall be converted shall be equal to $245.18 divided by the
Market Value of BancGroup Common Stock. The Market Value shall be the average of
the closing prices of the BancGroup Common Stock as reported by the NYSE on each
of the ten consecutive trading days ending on the trading day five calendar days
immediately preceding the Effective Date. Regardless of the Market Value,
however, and, assuming 52,614 shares of ASB Common Stock outstanding as of the
Effective Date, the maximum number of shares of BancGroup Common Stock to be
issued in the Merger shall be 632,362 (based upon a minimum Market Value of
$20.40) and the minimum number of shares of BancGroup Common Stock to be issued
in the Merger shall be 467,398 (based upon a maximum Market Value of $27.60).

As of December 26, 1997, the Market Value above exceeded the maximum Market
Value. If on the Effective Date, the Market Value exceeds the maximum, then each
share of ASB Common Stock will be converted into 8.883 shares of BancGroup
Common Stock (i.e. $245.18 divided by $27.60, the maximum Market Value). As a
result, a stockholder of ASB who owns 500 shares of ASB Common Stock would
receive 4,441.6 shares of BancGroup Common Stock ($245.18 divided by $27.60 and
multiplied by 500) with the .6 of a share paid in cash equal to $16.56 (.6
multiplied by $27.60).

The Agreement provides that if, prior to the Effective Date, either of ASB
or BancGroup changes the number of shares of ASB Common Stock or BancGroup
Common Stock, issued and outstanding as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock, an appropriate
and proportionate adjustment shall be made in the number of shares of BancGroup
Common Stock into which the ASB Common Stock shall be converted in the Merger.

On the Effective Date, each share of ASB Common Stock held of record by Mr.
and Mrs. Adkins and Mrs. Spann shall be converted by operation of law and
without any action by such holders into the Debentures. The Debentures will be
issued at the rate of $245.18 principal amount of Debentures for each share of
ASB Common Stock held of record by Mr. and Mrs. Adkins and Mrs. Spann. Assuming
an aggregate of 31,506 shares of ASB Common Stock held by such persons, the
aggregate principal amount of Debentures to be issued shall be $7,724,813 and,
accordingly, Mr. and Mrs. Adkins shall jointly receive $5,125,847 aggregate
principal amount of such Debentures, and Mrs. Spann shall receive $2,598,966
aggregate principal amount of such Debentures. The Debentures shall be due and
payable ten years from the Effective Date. The

13
<PAGE> 22

Debentures shall bear interest at the New York Prime Rate minus 1%, but in no
event shall such interest rate be less than 7% per annum.

The terms of the Debentures were negotiated by Mr. Adkins on behalf of Mrs.
Adkins, Mrs. Spann, and himself with representatives of BancGroup. Mr. and Mrs.
Adkins and Mrs. Spann have signed agreements with BancGroup to accept the
Debentures subject to ASB stockholders' approval of the consummation of the
Merger. See "-- Description of Debentures."

BACKGROUND OF THE MERGER AND ASB'S REASONS FOR THE MERGER

Background of the Merger. In April 1993, Joe W. Adkins, Chairman of the
Board of Directors, Chief Executive Officer and President of ASB, was approached
by Mr. Harold King, Vice Chairman of BancGroup, about the possibility of
BancGroup acquiring ASB. Mr. Adkins informed Mr. King that ASB's goal was to
remain independent and to grow slowly through the establishment of new branches.

Mr. King had several subsequent meetings with Mr. Adkins about a possible
merger, and, thereafter, Mr. King and Mr. Adkins exchanged information about
their respective institutions. At a meeting held on May 25, 1993, attended by
Mr. Adkins, Mrs. Frances Wise, Executive Vice President of Ashville Savings Bank
and Secretary of ASB, Mr. King, Mr. Alan Romanchuck, who was then Chief Credit
Officer of BancGroup and Mr. Flake Oakley, Secretary of BancGroup, BancGroup
offered to acquire all of the issued and outstanding shares of ASB Common Stock
for $11 million. The offer represented approximately 1.45 times the book value
of outstanding ASB Common Stock. After careful consideration, the Board of
Directors of ASB determined not to accept the offer and that remaining
independent was in the best interest of the stockholders of ASB.

During 1994, several institutions approached ASB about the possibility of a
merger, including a small, multi-bank holding company headquartered in Alabama,
which made an offer in September to acquire all of the issued and outstanding
shares of ASB Common Stock for approximately $12.8 million. The offer
represented approximately 1.5 times the book value of the outstanding shares of
ASB Common Stock. At a regular meeting of the ASB Board of Directors held on
October 15, 1994, the offer from such holding company was discussed, and the ASB
Board of Directors determined that it was in the best interest of the
stockholders of ASB for ASB to remain an independent institution.

In March 1995, Mr. King again approached ASB about the possibility of a
merger with BancGroup. On March 6, 1995, Mr. King met with Mr. Adkins and
informed him that BancGroup wished to increase its previous offer. Mr. Adkins
once again informed Mr. King that ASB had determined to remain independent, but
indicated that he would be willing to discuss the matter further. Mr. King
offered to arrange a meeting between Mr. Adkins and Mr. Robert Lowder, Chairman
of the Board of Directors, Chief Executive Officer and President of BancGroup.

On March 13, 1995, Mr. Adkins met at Colonial Bank in Montgomery with Mr.
Lowder, Mr. King, Mr. Romanchuck and Mr. Oakley. At the meeting, BancGroup
presented Mr. Adkins with another offer to acquire ASB. Pursuant to the terms of
the offer, all of the issued and outstanding shares of ASB Common Stock, except
those shares held by Mr. and Mrs. Adkins and Mr. Adkins's sister, Mrs. Spann,
would be exchanged for shares of BancGroup Common Stock. Mr. and Mrs. Adkins and
Mrs. Spann, instead of receiving BancGroup Common Stock, would receive
debentures issued by BancGroup and maturing in ten years. The proposal that Mr.
and Mrs. Adkins and Mrs. Spann receive a different form of consideration than
that received by other holders of ASB Common Stock was intended to assist Mr.
and Mrs. Adkins and Mrs. Spann (ages 70, 55 and 65, respectively) with
retirement planning. The total consideration offered represented approximately
1.5 times the book value of the outstanding ASB Common Stock. In a meeting of

14
<PAGE> 23

the ASB Board of Directors held on March 15, 1995, the Board of Directors
discussed the offer and again determined that it was in the best interest of the
stockholders of ASB for ASB to remain independent.

During an ASB Board of Directors' meeting on April 16, 1997, Lyman Lovejoy,
a director of ASB, informed the Board that he had been contacted by Steve
Whatley, President and CEO of Colonial Bank, East Central Region, about the
possibility of a merger with BancGroup. On April 24, 1997, Mr. Adkins met with
Mr. Whatley at Colonial Bank's office in Oxford, Alabama. Mr. Adkins indicated
that ASB would be willing to entertain another offer from BancGroup.

On June 2, 1997, Mr. Adkins received a formal proposal from BancGroup
pursuant to which BancGroup offered to pay the stockholders of ASB total
consideration of $18.05 million for the outstanding shares of ASB Common Stock.
On June 3, 1997, after reviewing the terms of recent bank acquisitions in
Alabama and other Southern states in light of ASB's size, location, capital and
income and after conferring with the directors of ASB individually, Mr. Adkins
presented BancGroup with a letter outlining a counter-proposal whereby a
majority of the Board of Directors of ASB would agree to recommend to the ASB
stockholders a sale of ASB to BancGroup for consideration equaling two times the
book value of ASB Common Stock.

On June 20, 1997, Mr. Adkins, Mr. Oakley and Mr. Whatley met in Oxford and
reached substantial agreement regarding the terms of ASB's counterproposal. Mr.
Oakley and Mr. Whatley presented Mr. Adkins with a formal offer to acquire ASB
for consideration equaling $239.25 per share of ASB Common Stock. On June 25,
1997, during a regular meeting of the ASB Board of Directors, the Board
considered BancGroup's latest proposal. The ASB Board of Directors determined
that, although BancGroup's offer of $239.25 per share was less than two times
the $134.50 per share book value of ASB as of April 30, 1997, the terms of the
offer were acceptable and in the best interest of the stockholders. The ASB
Board of Directors considered, among other factors, the amount of consideration
being offered, the tax-free nature of the proposed transaction, the rapid
changes occurring in the regulatory environment and the banking industry
generally, the increased cost of new services and the means to offer those
services and the potential market for ASB. The Board of Directors also discussed
the different forms of consideration that were being offered to stockholders of
ASB Common Stock. Mr. Adkins, speaking on behalf of himself, his wife and his
sister, informed the Board of Directors that their desire to receive debentures
was the result of their need to provide steady income in retirement. The Board
of Directors determined that, in light of Mr. Adkins' expressed desire on behalf
of himself and his wife and sister to provide steady income in their retirement
years, a different form of consideration was acceptable. The Board of Directors
gave Mr. Adkins authority to accept the offer as presented, or to negotiate
further for additional consideration.

On July 1, 1997, Mr. Adkins met with Mr. Oakley and Mr. Whatley and
indicated that ASB would accept the offer if the consideration were increased by
$1.25 million. BancGroup agreed to increase the total consideration to be paid
by BancGroup by only $625,000, $125,000 was to be paid to the directors of ASB
as compensation for their service on the Board of Directors and $500,000 was to
be paid to ASB stockholders. In addition, BancGroup agreed to pay $60,000 to Mr.
Adkins as compensation for his service as Chairman of the Board of Directors.

ASB and BancGroup executed a letter of intent reflecting the revised terms
on July 8, 1997. On August 28, 1997, following several weeks of negotiations and
due diligence, the Board of Directors of ASB determined that the transaction was
in the best interests of the stockholders of ASB and approved the Agreement.

ASB's Reasons for the Merger. The terms of the Agreement, including the
consideration to be paid to ASB stockholders, were the result of arm's length
negotiations between the representatives of BancGroup and ASB. Among the factors
considered by the Board of Directors of ASB in deciding to approve, adopt and
recommend the Agreement and the transactions contemplated thereby were:

(a) the consideration to be paid to ASB stockholders in relation to
the respective market values, book values, earnings per share and dividend
rates of ASB Common Stock and BancGroup Common Stock;

15
<PAGE> 24

(b) information concerning the respective financial conditions,
results of operations, capital levels, asset quality and prospects of ASB
and BancGroup;

(c) the short-term and long-term impact the Merger will have on the
BancGroup consolidated results of operations, including anticipated cost
savings resulting from consolidations in certain areas;

(d) the general structure of the transaction;

(e) the compatibility of management and business philosophy;

(f) the likelihood of receiving the requisite regulatory approvals in
a timely manner;

(g) the generally tax-free nature of the Merger to stockholders of
ASB;

(h) the ability of the combined enterprise to compete in relevant
banking and non-banking markets;

(i) industry and economic conditions, including trends in the
consolidation of the financial services industry;

(j) the impact of the Merger on the depositors, employees, customers
of and communities served by ASB through expanded consumer lending and
retail banking products and services; and,

(k) the opinion of ASB's financial advisor as to the fairness, from a
financial point of view, of the Merger Consideration to be paid to ASB
stockholders.

In adopting the Agreement and approving the transactions contemplated
thereby, ASB's Board of Directors was aware that (i) the Agreement contains
certain provisions prohibiting ASB from soliciting other offers to acquire ASB
(see "-- Conduct of Business Pending the Merger") and (ii) BancGroup would be
able to exercise its rights under the Option Agreement in certain circumstances
generally relating to the failure of ASB to consummate the Merger because of
another offer for ASB or a material change or a potential material change in the
ownership of ASB (see "-- Certain Relationships and Related
Transactions -- Stock Option"). However, the ASB Board of Directors was also
aware that such terms were specifically bargained for and insisted upon by
BancGroup as inducements to enter into the Agreement and that the obligations of
the ASB Board of Directors under the Agreement to recommend that ASB
stockholders adopt the Agreement and to use its reasonable efforts to obtain
such adoption were explicitly made subject to the fiduciary duties of the ASB
Board of Directors as advised by counsel to ASB. Accordingly, the Agreement
expressly permits the ASB Board of Directors, in the exercise of its fiduciary
duties, to withdraw or change its recommendation of the Agreement and to suspend
or terminate its efforts to obtain stockholder adoption of the Agreement at the
Special Meeting (in such circumstances, however, BancGroup may still be able to
exercise its rights under the Option Agreement).

The foregoing discussion of the information and factors considered by ASB's
Board of Directors is not intended to be exhaustive but includes all material
factors considered by ASB's Board of Directors. In reaching its determination to
approve the Merger, ASB's Board of Directors did not assign any relative or
specific weights to different factors. After deliberating with respect to the
Merger and the other transactions contemplated thereby, and considering, among
other things, the matters discussed above and the opinion of Carson Medlin
referred to above, ASB's Board of Directors unanimously approved the Agreement
and the transactions contemplated thereby, including the Option Agreement, as
being in the best interests of ASB and its stockholders.

ASB'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT ASB STOCKHOLDERS VOTE
FOR ADOPTION OF THE AGREEMENT.

OPINION OF FINANCIAL ADVISOR

Pursuant to an engagement letter dated August 19, 1997, ASB engaged Carson
Medlin to provide the Board of Directors of ASB with a written opinion regarding
the fairness from a financial point of view of the stock consideration to be
received by the unaffiliated stockholders of ASB. ASB selected Carson Medlin as
its financial adviser on the basis of Carson Medlin's experience and expertise
in representing community banks in

16
<PAGE> 25

acquisition transactions. Carson Medlin is an investment banking firm which
specializes in the advising of financial institutions located in the
southeastern United States. As part of its investment banking activities, Carson
Medlin is regularly engaged in the valuation of financial institutions and
transactions relating to their securities.

On August 28, 1997, Carson Medlin delivered its opinion to the Board of
Directors of ASB that the consideration provided for in the Agreement is fair,
from a financial point of view, to the unaffiliated stockholders who are the
holders of 52,614 of the outstanding shares of ASB. Carson Medlin subsequently
confirmed such opinion in writing as of that date. The full text of Carson
Medlin's written opinion dated August 28, 1997 is attached as Appendix B to this
Prospectus. It sets forth the procedures followed, assumptions made, matters
considered and qualifications and limitations on the review undertaken by Carson
Medlin in connection with its opinion. The following summary of the opinion is
qualified in its entirety by reference to the full text of such opinion.

Carson Medlin has relied upon, without independent verification, the
accuracy and completeness of the information reviewed by it for purposes of its
opinion. Carson Medlin did not undertake any independent evaluation or appraisal
of the assets and liabilities of ASB, nor was it furnished with any such
appraisals.

Carson Medlin is not expert in the evaluation of loan portfolios, including
under-performing or non-performing assets, charge-offs or the allowance for loan
losses. It has not reviewed any individual credit files of ASB or BancGroup.
Instead, it has assumed that the allowances for each of ASB and BancGroup are
adequate to cover their potential loan losses. Carson Medlin assumed that the
Merger will be recorded as a purchase under generally accepted accounting
principles. Carson Medlin's opinion is necessarily based on economic, market and
other conditions existing on the date of its opinion, and on information as of
various earlier dates made available to it.

Carson Medlin reviewed certain financial projections prepared by ASB and
BancGroup. Carson Medlin assumed that these projections were prepared on a
reasonable basis using the best and most current information available to the
managements of ASB and BancGroup, and that such projections will be realized in
the amounts and at the times contemplated thereby. Neither ASB nor BancGroup
publicly discloses internal management projections of the type provided to
Carson Medlin. Such projections were not prepared for, or with a view toward,
public disclosure.

In connection with rendering its opinion, Carson Medlin performed a variety
of financial analyses. The preparation of a fairness opinion involves various
determinations as to the most appropriate methods of financial analysis and the
application of those methods to the particular circumstances. Carson Medlin
believes that its analyses must be considered together as a whole and that
selecting portions of such analyses and the facts considered therein, without
considering all other factors and analyses, could create an incomplete or
inaccurate view of the analyses and the process underlying Carson Medlin's
opinion. In its analyses, Carson Medlin made numerous assumptions with respect
to industry performance, business and economic conditions, and other matters,
many of which are beyond the control of ASB and BancGroup and which may not be
realized. Any estimates contained in Carson Medlin's analyses are not
necessarily predictive of future result or values, which may be significantly
more or less favorable than such estimates. Estimates of values of companies do
not purport to be appraisals or necessarily reflect the prices at which such
companies or their securities may actually be sold. Except as described below,
none of the analyses performed by Carson Medlin were assigned a greater
significance by Carson Medlin than any other.

In connection with its opinion dated August 28, 1997, Carson Medlin
reviewed: (i) the Agreement; (ii) the annual reports to stockholders of
BancGroup, including the audited financial statements for the three years ended
December 31, 1996; (iii) audited financial statements of ASB for the three years
ended December 31, 1996; (iv) bank call reports for ASB for the two years ending
December 31, 1996 and for the six months ending June 30, 1997; (v) the unaudited
interim financial statements of BancGroup for the six months ended June 30,
1997; (vi) the unaudited interim financial statements of ASB for the six months
ended June 30, 1997; and, (vii) certain other financial and operating
information with respect to the business, operations and prospects of ASB and
BancGroup. In addition, Carson Medlin: (a) held discussions with members of the
senior management of ASB and BancGroup regarding the historical and current
business

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operations, financial condition and future prospects of their respective
companies; (b) reviewed the historical market prices and trading activity for
the common stock of ASB and BancGroup and compared them with those of certain
publicly traded companies which it deemed to be relevant; (c) compared the
results of operations of ASB and BancGroup with those of certain banking
companies which it deemed to be relevant; (d) compared the proposed financial
terms of the Merger with the financial terms, to the extent publicly available,
of certain other recent business combinations of commercial banking
organizations; and, (e) conducted certain other studies, analyses, inquiries and
examinations as Carson Medlin deemed appropriate.

The following is a summary of the principal analyses performed by Carson
Medlin in connection with its opinion.

Summary of Proposal. Carson Medlin reviewed the terms of the proposed
transaction, including the per share consideration and the aggregate transaction
value. The Agreement provides for a per-share consideration of $245.18 for each
of the 84,120 shares of ASB outstanding for an aggregate consideration of
approximately $20.625 million. The form of consideration will be BancGroup
Common Stock for all stockholders except for Mr. and Mrs. Adkins and Mrs. Spann
and stockholders who perfect dissenters' rights of appraisal. Shares of ASB held
by Mr. and Mrs. Adkins and Mrs. Spann will receive the same per share
consideration ($245.18) in the form, however, of BancGroup's 1997 Subordinated
Acquisition Debentures, Series A. See "-- Conversion of ASB Common Stock," and
"-- Description of Debentures."

Carson Medlin calculated that the aggregate transaction value represented
approximately 177 percent of stated book value at June 30, 1997, 14.2 times 1996
earnings, 13.2 times the annualized earnings as of June 30, 1997, an 8.3 percent
core deposit premium (defined as the aggregate transaction value minus stated
book value divided by core deposits) and 14.5% of total assets of ASB at June
30, 1997. Carson Medlin did not participate in the negotiation of the Agreement
and was not involved in the determination of the amount or form of consideration
to be paid.

Industry Comparative Analysis. In connection with rendering its opinion,
Carson Medlin compared selected operating results of ASB to those of 51
publicly-traded community commercial banks in Alabama, Florida, Georgia, North
Carolina, South Carolina, Virginia and West Virginia (the "SIBR Banks") as
contained in the Southeastern Independent Bank Review, a proprietary research
publication prepared by Carson Medlin quarterly since 1991. The SIBR Banks range
in asset size from approximately $98 million to $2.3 billion and in
stockholders' equity from approximately $8.8 million to $232.6 million. Carson
Medlin considers this group of financial institutions more comparable to ASB
than larger, more widely traded regional financial institutions. Carson Medlin
compared, among other factors, profitability, capitalization, and asset quality
of ASB to these financial institutions. Carson Medlin noted that based on
results through the first three months of 1997: (i) ASB had a return on average
assets ("ROA") for the three months ended March 31, 1997 of 1.00%, compared to
mean ROA of 1.22% for the SIBR Banks; (ii) ASB had a return on average equity
("ROE") for the three months ended March 31, 1997 of 12.6%, compared to mean ROE
of 12.6% for the SIBR Banks; (iii) ASB had common equity to total assets at
March 31, 1997 of 7.9%, compared to mean common equity to total assets of 9.5%
for the SIBR Banks; and (iv) ASB had non-performing assets (defined as loans 90
days past due, nonaccrual loans and other real estate) to total loans net of
unearned income and other real estate at March 31, 1997 of 0.00%, compared to
mean non-performing assets to total loans net of unearned income and other real
estate of 1.03% for the SIBR Banks. This comparison indicated that ASB's
financial performance was near the average for the SIBR Banks for most of the
factors considered.

Carson Medlin also compared selected operating results of BancGroup to
those of eight other publicly traded, mid-size regional bank holding companies
defined as those with assets between $4 and $29 billion (the "Peer Banks")
located in the Southeast. The Peer Banks include: AmSouth Bancorporation,
Compass Bancshares, Inc., First American Corporation, First Tennessee National
Corporation, National Commerce Bancorporation, Regions Financial Corporation,
SouthTrust Corporation, and Union Planters Corporation). Carson Medlin considers
this group of financial institutions comparable to BancGroup as to financial
characteristics, stock price performance and trading volume. Carson Medlin
compared selected balance sheet data, asset quality, capitalization,
profitability ratios and market statistics using financial data at or for the
six

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<PAGE> 27

months ended June 30, 1997 and market data as of August 19, 1997. This
comparison showed, among other things, that (i) for the six months ended June
30, 1997, BancGroup's net interest margin was 4.30% compared to a mean of 4.19%
and a median of 4.10% for the Peer Banks; (ii) for the six months ended June 30,
1997, its efficiency ratio (defined as non-interest expense divided by the sum
of non-interest income and taxable equivalent net interest income before
provision for loan losses) was 58.1% compared to a mean of 57.0% and a median of
56.2% for the Peer Banks; (iii) for the six months ended June 30, 1997,
BancGroup's ROA was 1.23% compared to a mean of 1.34% and a median of 1.36% for
the Peer Banks; (iv) for the six months ended June 30, 1997, BancGroup's ROE was
17.24% compared to a mean of 17.60% and a median of 17.13% for the Peer Banks;
(v) at June 30, 1997, BancGroup's stockholders' equity to total assets was 7.07%
compared to a mean of 7.76% and a median of 7.53% for the Peer Banks; (vi) at
June 30, 1997, BancGroup's non-performing assets to total assets were 0.60%
compared to a mean of 0.33% and a median of 0.35% for the Peer Banks; (vii) at
June 30, 1997, the ratio of BancGroup's loan loss reserves to non-performing
assets was 161% compared to a mean of 319% and a median of 233% for the Peer
Banks; and, (viii) at August 19, 1997, BancGroup's market capitalization was
$1.1 billion compared to the Peer Banks which ranged from a low of $1.2 billion
to a high of $4.8 billion. This comparison indicated that BancGroup's financial
performance is average in comparison to the Peer Banks.

No company or transaction used in the preceding Industry Comparative or the
following Comparable Transaction Analyses is identical to ASB or the
contemplated transaction. Accordingly, the results of these analyses necessarily
involve complex considerations and judgments concerning differences in financial
and operating characteristics of ASB and other factors that could affect the
value of the companies to which ASB is being compared. Mathematical analysis
(such as determining the average or median) is not, in itself, a meaningful
method of using comparable industry or transaction data.

Comparable Transaction Analysis. Carson Medlin reviewed certain
information relating to 15 selected Alabama bank mergers announced since January
1994 (the "Comparable Transactions"). The Comparable Transactions were
(acquiree/acquiror): Peoples State Bancshares/Citizens Corporation; First State
Corp./FirstFed Bancorp; Randolph Bancshares/Peoples Independent Bancshares;
Firstbanc Holding/Alabama National; Farmers & Merchants Bank/The Colonial
BancGroup, Inc.; Brundidge Banking Co./The Colonial BancGroup, Inc.; Shamrock
Holding/The Colonial BancGroup, Inc.; State Bancshares Inc./Synovus Financial;
First Fayette Bancshares/Regions Financial Corporation; First Monco
Bancshares/South Alabama Bancorporation; BancAlabama, Inc./Union Planters
Corporation; Southland Bancorp/ABC Bancorp; First American Bancorp/Alabama
National; Alabama National/National Commerce; and, Union B&T Co./Regions
Financial Corporation Carson Medlin considered, among other factors, the
earnings, capital level, asset size and quality of assets of the acquired
financial institutions. Carson Medlin compared the transaction prices to
earnings, stated book values, total assets and core deposit premiums.

On the basis of the Comparable Transactions, Carson Medlin calculated a
range of purchase prices as a percentage of stated book value for the Comparable
Transactions from a low of 119.3% to a high of 213.2%, with a mean of 160.9%.
These transactions indicated a range of values for ASB from $165.45 per share to
$295.67 per share, with a mean of $223.14 per share (based on ASB's stated book
value of $138.68 per share at June 30, 1997). The aggregate consideration
implied by the terms of the Agreement is approximately $245.18 per share and
implies a price to stated book value multiple of 176.8% which falls above the
average of the range for the Comparable Transactions.

Carson Medlin calculated a range of purchase prices as a multiple of
earnings for the Comparable Transactions, from a low of 8.0 times to a high of
20.6 times, with a means of 14.0 times. These transactions indicated a range of
values for ASB from $148.70 to $382.95 per share, with a mean of $260.26 per
share (based on ASB's six months annualized 1997 earnings of $18.59 per share).
The aggregate consideration implied by the terms of the Agreement is
approximately $245.18 per share and implies a price to earnings multiple of 13.2
times which falls slightly below the average of the range for the Comparable
Transactions.

Carson Medlin calculated the core deposit premiums for the Comparable
Transactions and found a range of values from a low of 4.0% to a high of 16.9%,
with a mean of 8.0%. The premium on ASB's core deposits

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<PAGE> 28

implied by the terms of the Agreement is 8.3%, above the average of the range
for the Comparable Transactions.

Finally, Carson Medlin calculated a range of purchase prices as a
percentage of total assets for the Comparable Transactions from a low of 11.0%
to a high of 22.3%, with a mean of 16.0%. The percentage of total assets implied
by the terms of the Agreement is approximately 14.5%, slightly below the average
of the range for the Comparable Transactions.

Present Value Analysis. Carson Medlin calculated the present value of ASB
assuming that ASB remained an independent bank. For purposes of this analysis,
Carson Medlin utilized certain projections of ASB's future earnings and
dividends. It assumed that the ASB Common Stock would be sold at the end of 5
years at 175% of book value. This value was then discounted to present value
utilizing discount rates of 15% through 17%. These rates were selected because,
in Carson Medlin's experience, they represent the rates that investors in
securities such as the ASB Common Stock would demand in light of the potential
appreciation and risks. On the basis of these assumptions, Carson Medlin
calculated that the present value of ASB as an independent bank ranged from
$192.68 per share to $209.87 per share. The aggregate consideration implied by
the terms of the Agreement is approximately $245.18 per share, which falls above
the high end of the range under present value analysis. Carson Medlin noted that
the present value analysis was included because it is a widely used valuation
methodology, but noted that the results of such methodology are highly dependent
upon the numerous assumptions, including earnings growth rates, dividend payout
rates, terminal values and discount rates.

Stock Trading History. Carson Medlin reviewed and analyzed the historical
trading prices and volumes for the BancGroup Common Stock on a monthly basis
from December 1992 to July 1997. Carson Medlin also compared price performance
of the BancGroup Common Stock during this period to the Peer Banks.

During the four quarters ending June 30, 1997, the ratio of stock price to
trailing 12 months earnings per share for the Peer Banks ranged from a low of
12.6 times to a high of 17.1 times. BancGroup's recent price to earnings ratio
ranged from a low of 10.6 times to a high of 14.4 times. BancGroup Common Stock
has traded on average at a lower price to earnings ratio than the Peer Banks.

During the four quarters ending June 30, 1997, the stock price as a
percentage of book value for Peer Banks ranged from a low of 200% to a high of
264%. BancGroup's recent price to book ratio ranged from a low of 171% to a high
of 230%. BancGroup Common Stock has traded on average at a lower price to book
value ratio than the Peer Banks.

Carson Medlin also examined the trading prices and volumes of ASB Common
Stock. ASB Common Stock has not traded in volumes sufficient to be meaningful;
therefore, Carson Medlin did not place any weight on the market price of the ASB
Common Stock.

Other Analysis. Carson Medlin also reviewed selected investment research
reports on and earnings estimates for BancGroup. In addition, Carson Medlin
prepared an overview of historical financial performance of ASB.

The opinion expressed by Carson Medlin was based upon market, economic and
other relevant considerations as they existed and have been evaluated as of the
date of the opinion. Events occurring after the date of issuance of the opinion,
including but not limited to, changes affecting the securities markets, the
results of operations or material changes in the assets or liabilities of ASB
could materially affect the assumptions used in preparing the opinion.

BANCGROUP'S REASONS FOR THE MERGER

The Board of Directors of BancGroup has unanimously approved the Merger and
the Agreement. BancGroup currently operates Colonial Bank as a network of
"community banks" across Alabama, in major market areas in Georgia and Florida
and limited market areas in Tennessee. The market area served by ASB represents
a natural extension of BancGroup's East Central Alabama Region. In addition,
ASB's community bank operating philosophy is an appropriate match with
BancGroup's emphasis on community banking.

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<PAGE> 29

In approving the Merger and the Agreement, the Board of Directors of
BancGroup took into account: (i) the financial performance and condition of ASB,
including its strong capital and good asset quality; (ii) similarities in the
philosophies of BancGroup and ASB, including ASB's commitment to delivering high
quality personalized financial services to its customers; and (iii) ASB's
management's knowledge of and experience in the market areas of Blount, Etowah,
and St. Clair Counties.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -- STOCK OPTION

This section describes certain provisions of the Option Agreement. This
description is qualified in its entirety by reference to the Option Agreement, a
copy of which is included as Appendix D to this Proxy Statement and incorporated
herein by reference. ALL STOCKHOLDERS ARE URGED TO READ THE OPTION AGREEMENT IN
ITS ENTIRETY.

Pursuant to the Option Agreement, ASB has granted to BancGroup an option to
purchase up to 16,740 shares of ASB Common Stock at a purchase price of $245.18
per share. Both the number of shares subject to the option and the purchase
price per option share are subject to adjustment under certain circumstances.
The Option Agreement was entered into as an inducement for and as a condition to
BancGroup's execution of the Agreement. The Option Agreement is intended to
increase the likelihood that the Merger will be consummated by making it more
difficult and expensive for a third party to acquire control of ASB while
BancGroup is seeking to consummate the Merger.

The option granted under the Option Agreement may be exercised by
BancGroup, in whole or in part, in the event a "Purchase Event" (as defined in
the Option Agreement) precedes the termination of the Agreement. If the option
becomes exercisable, ASB may be required to repurchase the option or any shares
issued thereunder at a price calculated in accordance with the Option Agreement.
In addition, under certain circumstances, the option may be converted into a
similar option to acquire shares of a person engaging in certain transactions
with ASB.

The term "Purchase Event" is defined to include: (i) ASB's agreement,
without BancGroup's prior written consent, to effect an "Acquisition
Transaction" with any person other than BancGroup, or ASB's authorization,
recommendation, or public proposal (or public announcement of its intention to
authorize, recommend, or propose) such an agreement; or (ii) the acquisition by
any person of beneficial ownership of 25% or more of the outstanding shares of
ASB Common Stock. The term "Acquisition Transaction" is defined to include: (i)
a Merger, consolidation, or other business combination involving ASB; (ii) the
disposition, by sale, exchange, lease, or otherwise, of substantially all of the
consolidated assets of ASB; or (iii) the issuance of securities representing 25%
or more of the voting power of ASB.

The Option Agreement and the option granted thereunder terminate upon the
earliest to occur of: (i) the Effective Date; (ii) termination of the Agreement
in accordance with its terms prior to the occurrence of a Purchase Event or a
"Preliminary Purchase Event" (generally, a tender offer or exchange offer by a
third party to acquire more than 25% of the outstanding shares of ASB Common
Stock or the failure of ASB's stockholders to approve the Merger following the
public announcement of a proposed Acquisition Transaction or tender offer);
(iii) termination of the Agreement by BancGroup prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event for reasons other than a breach
of the Agreement by ASB or the failure to occur of certain conditions which are
precedents to the consummation of the Merger; or (iv) 18 months after
termination of the Agreement by BancGroup because of a material breach of the
Agreement by ASB, or the failure to occur of certain conditions precedent to the
consummation of the Merger.

To the knowledge of ASB, no event that would permit the exercise of the
option has occurred as of the date hereof. The rights and obligations of ASB and
BancGroup under the Option Agreement are subject to receipt of any required
regulatory approval, including approval by the Federal Reserve under the BHCA.

The Option Agreement, together with ASB's agreement not to negotiate or
entertain any proposals for the sale of ASB or its subsidiaries to another party
(see "-- Commitments with Respect to Other Offers"), have the effect of
discouraging persons who might, prior to the Effective Date, be interested in
acquiring all or

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<PAGE> 30

a significant interest in ASB from considering or proposing such an acquisition,
even if such persons were prepared to pay a higher price per share for ASB
Common Stock than the price per share to be paid by BancGroup in the Merger. The
option granted to BancGroup under the Option Agreement will become exercisable
in the event of the occurrence of certain proposals to acquire ASB or the Bank.
The possibility that BancGroup might exercise the option, and thus acquire a
substantial block of ASB Common Stock, might deter offers of other bidders
interested in such an acquisition.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

General. Certain members of ASB's management and ASB's Board of Directors
have interests in the Merger that are in addition to any interests they may have
as stockholders of ASB generally. As described in greater detail below, these
interests relate to, among other things, provisions in the Agreement regarding
indemnification, eligibility for certain employee benefits and certain other
benefits.

Management and Directors. As of the Effective Date, Joe W. Adkins,
Chairman of the Board, Chief Executive Officer and President of ASB and the
Bank, will enter into a consulting agreement with Colonial Bank which will
commence on the Effective Date and expire on December 31, 1999. Mr. Adkins will
receive a consulting fee of $140,000 payable as follows in three installments:
$90,000 will be paid on the Effective Date; $25,000 will be paid on the first
anniversary of the Effective Date; and $25,000 will be paid on the second
anniversary of the Effective Date.

In addition, Mr. Adkins will enter into an Agreement Not to Compete with
Colonial Bank which will begin on the Effective Date and end on the third
anniversary of the Effective Date. As consideration for entering into the
Agreement Not to Compete, Mr. Adkins will receive $350,000, payable as follows:
$125,000 on the anniversary of the Effective Date, $125,000 on the second
anniversary of the Effective Date and $100,000 on the third anniversary of the
Effective Date.

Mr. and Mrs. Adkins, and Mrs. Spann, will receive Debentures in the Merger
rather than BancGroup Common Stock. The value per share attributed to the ASB
Common Stock held by Mr. and Mrs. Adkins and Mrs. Spann for purposes of receipt
of the Debentures is $245.18, the same value per share attributed to ASB Common
Stock held by other stockholders of ASB. The Debentures may have less risk than
BancGroup Common Stock because they pay a set rate of interest, are due and
payable in ten years, and are senior to the BancGroup Common Stock upon
liquidation of BancGroup. However, the Debentures are not transferable and,
therefore, no trading market for them will develop. Mr. and Mrs. Adkins and Mrs.
Spann own, in the aggregate, 31,506 shares of ASB Common Stock representing
37.45% of the outstanding shares. See "-- Description of Debentures."

Mr. Adkins has entered into a deferred compensation agreement with the Bank
that will become effective at the Effective Date. The deferred compensation
agreement provides, among other things, that in the event of a change in control
of ASB, ASB will pay to Mr. Adkins a monthly payment of $8,333.33 commencing on
January 1 of the fourth calendar year following the calendar year in which Mr.
Adkins terminates employment with ASB and all of its affiliates and continuing
for a period of seven years (for a total of 84 monthly payments). Pursuant to
the Agreement, a change in control is deemed to occur if (i) a tender offer is
made and consummated for the ownership of 50% or more of the outstanding voting
securities of ASB, (ii) ASB sells substantially all of its assets to another
corporation that is not a wholly-owned subsidiary, (iii) a person, within the
meaning of Section 3(a)(9) of Section 13(a)(3) (as in effect on the date of the
Agreement) of the Exchange Act, requires 50% or more of the outstanding voting
securities of ASB (whether directly, indirectly, beneficially or of record), or
(iv) ASB is merged or consolidated with another company, unless the holders of
the outstanding voting securities of ASB immediately prior to such transaction
continue to own more than 50% of the outstanding voting securities of their
surviving company.

Mr. Adkins will receive a payment of $60,000 for his service as Chairman of
the Board of Directors of ASB. Each of the other five members of the Board of
Directors of ASB will receive a payment of $25,000 for his or her service as a
director of ASB. See "The Merger -- Background of the Merger."

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<PAGE> 31

Employee Benefit Matters. The Agreement also provides that, on the
Effective Date, all employees of ASB, the Bank, or any subsidiary of either of
them (individually, an "ASB Company") will, at BancGroup's option, either become
employees of BancGroup or one of its subsidiaries or be entitled to severance
benefits in accordance with Colonial Bank's severance policy as of the date of
the Agreement. All employees of any ASB Company who become employees of
BancGroup or one of its subsidiaries on the Effective Date will 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, except as described
below. Employees of any ASB Company who become employees of the BancGroup or one
of its subsidiaries on the Effective Date will be allowed to participate as of
the Effective Date in the medical and dental benefits plans 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 ASB Company as of the Effective
Date will be counted as employment under the medical and dental 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 ASB Company of all employees who become
employees of BancGroup or one of its subsidiaries on the Effective Date will 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 of BancGroup and one of its
subsidiaries, each such ASB Company employee shall be given credit for covered
expenses paid by that employee under comparable employee benefit plans of the
ASB 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 of BancGroup and its
subsidiaries.

In addition, on the Effective Date, Colonial Bank will assume the Ashville
Savings Bank Money Purchase Plan sponsored by the Bank. All benefits under such
plan will be determined as of the Effective Date, and thereafter, no further
contributions will be made to such plan. The plan will be terminated immediately
following the Effective Date, and the benefits under the plan will be
distributed in accordance with the provisions of such plan and requirements of
applicable law.

Indemnification. BancGroup has agreed to indemnify and advance costs and
expenses (including reasonable attorneys' fees, disbursements and expenses) and
hold harmless from and after the Effective Date, present and former officers and
directors against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages, settlements, or liabilities incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative, or investigative, 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 Effective Date to the full extent
that ASB or the Bank would have been permitted under applicable law and its
Certificate, Charter or Bylaws in effect on the date of the Agreement, to
indemnify such person (and also advance expenses as incurred to the fullest
extent permitted under applicable law).

DESCRIPTION OF DEBENTURES

Mr. and Mrs. Adkins and Mrs. Spann, will surrender their ASB Common Stock
certificates and receive Debentures on the Effective Date rather than BancGroup
Common Stock. The value per share attributed to the ASB Common Stock held by Mr.
and Mrs. Adkins and Mrs. Spann for purposes of receipt of the Debentures is
$245.18, the same value per share attributed to ASB Common Stock held by other
stockholders of ASB. The Debentures, which pay a rate of interest equal to the
New York Prime Rate minus 1% (but in no event less than 7% per annum), are due
and payable in ten years. They are senior to the BancGroup Common Stock upon
liquidation, but are subordinate to BancGroup's Senior Indebtedness. See
"BancGroup Capital Stock and Debentures." Commencing as of the Effective Date
and ending at their maturity, the Debentures are redeemable by BancGroup with
the consent of the holders thereof. Commencing as of the Effective Date, a
holder of a Debenture may, subject to BancGroup's right to decline, request
redemption of any or all of the Debentures held by him or her.

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SURRENDER OF ASB COMMON STOCK CERTIFICATES

Upon the Effective Date and subject to the conditions described at
"Conditions to Consummation of the Merger," ASB's stockholders (except Mr. and
Mrs. Adkins and Mrs. Spann and ASB stockholders who perfect their dissenters'
rights of appraisal under Section 262 of the DGCL) will automatically, and
without further action by such stockholders or by BancGroup, become owners of
BancGroup Common Stock as described herein. Outstanding certificates
representing shares of the ASB Common Stock shall represent shares of BancGroup
Common Stock. Thereafter, upon surrender of the certificates formerly
representing shares of ASB Common Stock, the holders will be entitled to receive
certificates for the BancGroup Common Stock. Dividends on the shares of
BancGroup Common Stock will accumulate without interest and will not be
distributed to any former stockholder of ASB unless and until such stockholder
surrenders for cancellation his certificate for ASB Common Stock. SunTrust Bank,
Atlanta, Atlanta, Georgia, transfer agent for BancGroup Common Stock, will act
as the Exchange Agent with respect to the shares of ASB Common Stock surrendered
in connection with the Merger.

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

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The Merger is intended to qualify as a "reorganization" for federal income
tax purposes under Section 368(a)(1)(A) of the Code. The obligation of ASB to
consummate the Merger is conditioned on the receipt by ASB of an opinion from
Coopers & Lybrand L.L.P., which serves as BancGroup's independent public
accountant, to the effect that the Merger will constitute such a reorganization.
The opinion has been delivered to ASB. In delivering its opinion, Coopers &
Lybrand L.L.P., has received and relied upon certain representations contained
in certificates of officers of BancGroup and ASB and certain other information,
data, documentation and other materials as it deemed necessary. The tax opinion
is based upon customary assumptions contained therein, including the assumption
that ASB has no knowledge of any plan or intention on the part of the ASB
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 ASB Common Stock
outstanding immediately upon the Merger.

Neither ASB nor BancGroup intends to seek a ruling from the IRS as to the
federal income tax consequences of the Merger. ASB's stockholders should be
aware that the opinion will not be binding on the IRS or the courts. ASB's
stockholders also should be aware that some of the tax consequences of the
Merger are governed by provisions of the Code as to which there are no final
regulations and little or no judicial or administrative guidance. There can be
no assurance that future legislation, administrative rulings, or court decisions
will not adversely affect the accuracy of the statements contained herein.

The tax opinion states that, provided the assumptions stated therein are
satisfied, the Merger will constitute a reorganization as defined in Section
368(a) of the Code and the following federal income tax consequences will result
to ASB's stockholders who exchange their shares of ASB Common Stock for shares
of BancGroup Common Stock:

(i) No gain or loss will be recognized by ASB's stockholders on the
exchange of shares of ASB Common Stock for shares of BancGroup Common
Stock;

(ii) The aggregate basis of BancGroup Common Stock received by each
ASB stockholder (including any fractional shares of BancGroup Common Stock
deemed received, but not actually received), will be the same as the
aggregate tax basis of the shares of ASB Common Stock surrendered in
exchange therefor;

(iii) The holding period of the shares of BancGroup Common Stock
received by each ASB stockholder will include the period during which the
shares of ASB Common Stock exchanged therefor were held, provided that the
shares of ASB Common Stock were a capital asset in the holder's hands as of
the Effective Date;

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<PAGE> 33

(iv) Cash payments received by each ASB stockholder in lieu of a
fractional share of BancGroup Common Stock will be treated for federal
income tax purposes as if the fractional share had been issued in the
exchange and then redeemed by BancGroup. Gain or loss will be recognized on
the redemption of the fractional share and generally will be capital gain
or loss if the ASB Common Stock is a capital asset in the hands of the
holder;

(v) No gain or loss will be recognized by ASB upon the transfer of its
assets and liabilities to BancGroup. No gain or loss will be recognized by
BancGroup upon the receipt of the assets and liabilities of ASB;

(vi) The basis of the assets of ASB acquired by BancGroup will be the
same as the basis of the assets in the hands of ASB immediately prior to
the Merger;

(vii) The holding period of the assets of ASB in the hands of
BancGroup will include the period during which such assets were held by
ASB;

(viii) An ASB stockholder who dissents and receives only cash pursuant
to dissenters rights 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 ASB
Common Stock converted, if the shares of ASB Common Stock were held as
capital assets. However, an ASB stockholder who receives only cash may need
to consider the effects of Section 302 and 318 of the Code in determining
the federal income tax consequences of the transaction;

(ix) ASB stockholders who receive Debentures pursuant to the Agreement
will be treated as having received such Debentures in full payment in
exchange for their ASB Common Stock and such exchange shall qualify as a
capital gain which is eligible for installment treatment for purposes of
Section 453 and 453A of the Codes; and

(ix) Receipt of the Debentures shall not be considered payment for
purposes of Section 453(f)(3) of the Code.

Each ASB stockholder will be required to report on such stockholder's
federal income tax return for the fiscal year of such stockholder in which the
Merger occurs that such stockholder has received BancGroup Common Stock in a
reorganization.

THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO THE STOCKHOLDERS OF ASB, TO ASB AND TO
BANCGROUP AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF ALL POTENTIAL TAX
EFFECTS OF THE MERGER. THE DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES THAT
MAY BE RELEVANT TO A PARTICULAR STOCKHOLDER SUBJECT TO SPECIAL TREATMENT UNDER
CERTAIN FEDERAL INCOME TAX LAWS, SUCH AS DEALERS IN SECURITIES, BANKS, INSURANCE
COMPANIES, TAX-EXEMPT ORGANIZATIONS, NON-UNITED STATES PERSONS, STOCKHOLDERS WHO
DO NOT HOLD THEIR SHARES OF ASB COMMON STOCK AS "CAPITAL ASSETS" WITHIN THE
MEANING OF SECTION 1221 OF THE CODE, AND STOCKHOLDERS WHO ACQUIRED THEIR SHARES
OF ASB COMMON STOCK PURSUANT TO THE EXERCISE OF OPTIONS OR OTHERWISE AS
COMPENSATION, NOR ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCALITY
OR FOREIGN JURISDICTION; MOREOVER, THE TAX CONSEQUENCES TO HOLDERS OF ASB
OPTIONS ARE NOT DISCUSSED. THE DISCUSSION IS BASED UPON THE CODE, TREASURY
REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND COURT DECISIONS AS OF THE
DATE HEREOF. ALL OF THE FOREGOING IS SUBJECT TO CHANGE, AND ANY SUCH CHANGE
COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION. ASB STOCKHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE PARTICULAR FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO THEM.

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CONDITIONS TO CONSUMMATION OF THE MERGER

The obligations of ASB and BancGroup, respectively, to consummate the
Merger are subject to the satisfaction (or waiver, to the extent permitted under
the Agreement and by law) of various conditions set forth in the Agreement,
including, but not limited to, the following:

The mutual obligations of ASB and BancGroup to consummate the Merger are
conditioned upon, among other things: (i) the adoption of the Agreement by the
holders the shares representing a majority of the voting power present at the
Special Meeting; (ii) the notification to or approval of the Merger by the
Federal Reserve and the approval of the Bank Merger by the Alabama Department
and the Federal Reserve being obtained or being in full force and effect and all
waiting periods required by law having expired (provided that such approval may
not be conditioned or restricted in a manner which in the reasonable good faith
judgment of the Board of Directors of BancGroup would so materially adversely
impact the economic benefits of the transaction as contemplated by the Agreement
so as to render inadvisable the consummation of the Merger); (iii) each party
having obtained any and all other consents required for consummation of the
Merger for the preventing of any default under any contract or permit of such
party which, if not obtained or made, would reasonably likely have, individually
or in the aggregate, a material adverse effect on such party (provided that no
consent obtained which is necessary to consummate the transactions contemplated
may be conditioned or restricted in a manner which in the reasonable judgment of
the Board of Directors of BancGroup would so materially adversely impact the
economic or business benefits of the transactions contemplated by the Agreement
so as to render inadvisable the consummation of the Merger); (iv) the absence of
pending or threatened litigation with a view to restraining or prohibiting
consummation of the Merger or obtaining divestiture, rescission or damages in
connection with the Merger and no investigation by any government agency may be
pending or threatened which might result in any such suit, action or other
proceeding; (v) the absence of any investigation by any governmental agency
which might result in any such proceeding; (vi) receipt of opinions of counsel
regarding certain matters; (vii) the Registration Statement being effective
under the Securities Act and no stop order suspending the effectiveness of the
Registration Statement being in effect, no proceedings for such purpose, or
under the proxy rules of the Commission or any bank regulatory authority
pursuant to the Exchange Act, with respect to the transactions contemplated
hereby, being pending before or threatened by the Commission or any bank
regulatory authority, and all approvals or authorizations for the offer of
BancGroup Common Stock having been received or obtained pursuant to any
applicable state securities laws, and no stop order or proceeding with respect
to the transactions contemplated under the Agreement being pending or threatened
under any such state law; and (viii) receipt of an opinion from Coopers &
Lybrand L.L.P. as to certain tax matters.

The obligation of ASB to consummate the Merger is further subject to
several other conditions, including, among others: (i) the absence of any
material adverse change in the financial condition or affairs of BancGroup; (ii)
the shares of BancGroup Common Stock to be issued under the Agreement shall have
been approved for listing on the NYSE; (iii) the accuracy in all material
respects of the representations and warranties of BancGroup contained in the
Agreement and the performance by BancGroup of all of its covenants and
agreements under the Agreement; (iv) receipt by ASB of a certificate from the
President or a Vice President and from the Secretary or Assistant Secretary of
BancGroup dated as of the Closing certifying to certain facts as outlined in the
Agreement; and (v) receipt prior to the mailing of this Prospectus of a letter
from Carson Medlin setting forth its opinion that the Merger consideration to be
received by the stockholders of ASB under the terms of the Agreement is fair to
the stockholders, from a financial point of view, and such opinion must not have
been withdrawn as of the Effective Date.

The obligation of BancGroup to consummate the Merger is subject to several
other conditions, including, among others: (i) the absence of any material
adverse change in the financial condition or affairs of ASB; (ii) the number of
shares as to which holders of ASB Common Stock have exercised dissenters' rights
of appraisal not exceeding 15% of the outstanding shares of ASB Common Stock;
(iii) the accuracy in all material respects of the representations and
warranties of ASB contained in the Agreement and the performance by ASB of all
of its covenants and agreements under the Agreement; (iv) the receipt by
BancGroup of certain undertakings from holders of ASB Common Stock who may be
deemed to be "affiliates" of ASB pursuant to the rules of the Commission; (v)
the execution by Joe W. Adkins of certain

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<PAGE> 35

ancillary agreements; (vi) the Class B Common Stock of the Bank having been
surrendered to the Bank and canceled; and (vii) receipt by BancGroup of a
certificate from ASB executed by the President or Vice President and from the
Secretary or Assistant Secretary of ASB dated as of the Closing certifying to
certain facts as outlined in the Agreement. See "-- Interests of Certain Persons
in the Merger".

It is anticipated that the foregoing conditions, as well as certain other
conditions contained in the Agreement will be satisfied. The Agreement provides
that each of ASB and BancGroup may waive conditions to its respective
obligations to consummate the Merger, other than the receipt of the requisite
approvals of regulatory authorities and adoption of the Agreement by ASB
stockholders. In making any decision regarding a waiver of one or more
conditions to consummation of the Merger or an amendment of the Agreement, the
Boards of Directors of ASB and BancGroup would be subject to the fiduciary duty
standards imposed upon such boards by relevant law that would require such
boards to act in the best interests of their respective stockholders.

AMENDMENT OR TERMINATION OF AGREEMENT

To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the Boards
of Directors of each of the parties. However, after adoption of the Agreement
and the approval of Merger by the holders of ASB Common Stock, no amendment
decreasing the consideration to be received by ASB stockholders may be made
without the further approval of such stockholders. The Agreement may be
terminated at any time prior to or on the Effective Date whether before or after
adoption of the Agreement by the stockholders of ASB by the mutual consent of
the respective Boards of Directors of ASB and BancGroup or by the Board of
Directors of either BancGroup or ASB under certain circumstances including, but
not limited to: (i) a material breach which cannot or has not been cured within
30 days of notice of such breach being given by the non-breaching party; (ii)
failure to consummate the transactions contemplated under the Agreement by March
1, 1998, provided that such failure to consummate is not caused by any breach of
the Agreement by the party electing to terminate; and (iii) the inability to
satisfy or fulfill by March 1, 1998 a condition precedent to the obligations of
a party not then in breach to consummate the Merger.

REGULATORY APPROVALS

Notification of the Merger has been provided to the Federal Reserve
pursuant to Section 3 of the BHCA and the regulations promulgated pursuant
thereto. It is contemplated that the Merger will occur simultaneously with the
Bank Merger. The approval of the Federal Reserve and the Alabama Department must
be obtained prior to consummation of the Bank Merger. Applications were filed
with the Federal Reserve and the Alabama Department on or about October 16,
1997. The Federal Reserve approved the Bank Merger on or about November 19,
1997. The Alabama Department is expected to make a final determination regarding
the Bank Merger before the Special Meeting.

Federal Reserve Notification. Under limited circumstances, approval of the
Merger by the Federal Reserve under Section 3 of the BHCA is not required. More
specifically, the Merger would not require Federal Reserve approval if: (i) the
Bank is merged into a BancGroup bank subsidiary simultaneously with the Merger;
(ii) the Bank's Merger into a BancGroup bank subsidiary requires the prior
approval of a federal supervisory agency under the Bank Merger Act; (iii) the
transaction does not involve an acquisition subject to Section 4 of the BHCA;
(iv) both before and after the transaction, BancGroup meets the Federal
Reserve's capital adequacy guidelines; and (v) BancGroup provides written notice
of the transaction to the Federal Reserve at least ten days prior to the
transaction, and during that period, the Federal Reserve does not require an
application under Section 3 of the BHCA. It is anticipated that BancGroup will
satisfy the foregoing requirements, and, absent Federal Reserve action pursuant
to item (vi) above, an application with the Federal Reserve pursuant to Section
3 of the BHCA will not be required.

In the event the Federal Reserve requires an application pursuant to
Section 3 of the BHCA, approval of the Federal Reserve would be required prior
to the Merger. Pursuant to Section 3 of the BHCA, and the regulations
promulgated pursuant thereto, the Federal Reserve must withhold approval of the
Merger if it

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<PAGE> 36

finds that the transaction will result in a monopoly or be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any part of the United States. In addition, the Federal Reserve may
not approve the Merger if it finds that the effect thereof may be substantially
to lessen competition in any section of the country, or tend to create a
monopoly, or would in any other manner be in restraint of trade, unless it finds
that the anti-competitive effects of the Merger are clearly outweighed by the
probable effect of the Merger in meeting the convenience and needs of the
communities to be served. The Federal Reserve will also take into consideration
the financial condition and managerial resources of BancGroup, its subsidiaries,
any banks related to BancGroup through common ownership or management, and the
Bank. Finally, the Federal Reserve will consider the compliance records of
BancGroup's subsidiaries under the Community Reinvestment Act.

The BHCA provides for the publication of notice and public comment on the
application and authorizes the Federal Reserve to permit interested parties to
intervene in the proceedings. If an interested party is permitted to intervene,
such intervention could delay the regulatory approvals required for consummation
of the Merger. Section 11 of the BHCA imposes a waiting period which prohibits
the consummation of the Merger, in ordinary circumstances, for a period ranging
from 15-30 days following the Federal Reserve'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.

Alabama State Banking Department Approval. The Bank Merger must be
approved by the Alabama Department pursuant to applicable provisions of the
Alabama Banking Code. If the Superintendent of the Alabama Department finds that
(i) the proposed transaction will not be detrimental to the safety and soundness
of the bank resulting from the Bank Merger, (ii) any new officers and directors
of the resulting bank are qualified by character, experience, and financial
responsibility to direct and manage the resulting bank, and (iii) the proposed
Bank Merger is consistent with the convenience and needs of the communities to
be served by the resulting bank in the State of Alabama and is otherwise in the
public interest, the Bank Merger will be approved by the Superintendent.

Federal Reserve Approval. The Federal Reserve must approve the Bank Merger
pursuant to Section 18(c) of the Federal Deposit Insurance Act (the "Bank Merger
Act"). The Federal Reserve is prohibited from approving the Bank Merger if it
would result in a monopoly or would be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of banking in
any part of the United States. In addition, the Federal Reserve is prohibited
from approving the Bank Merger if its effect, in any section of the country,
would be substantially to lessen competition, or to tend to create a monopoly,
or which in any other manner would be in restraint of trade, unless it finds
that the anti-competitive effects of the Bank Merger are clearly outweighed in
the public interest by the probable effect of the Bank Merger in meeting the
convenience and needs of the community to be served. The Federal Reserve is
required to take into consideration the financial and managerial resources and
future prospects of the existing and proposed institutions, and the convenience
and needs of the community to be served.

The Bank Merger Act imposes a waiting period which prohibits consummation
of the Bank Merger, in ordinary circumstances, for a period ranging from 15-30
days following the Federal Reserve's approval of the Bank 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 Agreement provides that the obligation of each of BancGroup and ASB to
consummate the Merger is conditioned upon the receipt of all necessary
regulatory approvals, and the absence in such approvals of any condition or
restriction which in the reasonable good faith judgment of the Board of
Directors of BancGroup or ASB would so materially adversely impact the economic
benefits of the transaction as contemplated by the Agreement so as to render
inadvisable the Merger. There can be no assurance that the applications
necessary for BancGroup to consummate the Merger with ASB will be approved, and,
if such approvals are received, that such approvals will not be conditioned upon
terms and conditions that would cause the parties to abandon the Merger.

Any approval received from the banking agencies reflects only their view
that the Merger does not contravene applicable competitive standards imposed by
law, and that the Merger is consistent with regulatory

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<PAGE> 37

policies relating to safety and soundness. THE APPROVAL OF THE BANKING AGENCIES
IS NOT AN ENDORSEMENT OR RECOMMENDATION OF THE MERGER.

BancGroup is not aware of any other governmental approvals or actions that
may be required for consummation of the Merger except for the Federal Reserve
and the Alabama Department approvals, described above. Should any such approval
or action be required, it is presently contemplated that such approval or action
would be sought.

CONDUCT OF BUSINESS PENDING THE MERGER

The Agreement contains certain restrictions on the conduct of the business
of ASB pending consummation of the Merger. The Agreement prohibits ASB from,
among other things, taking any of the following actions, prior to the Effective
Date, 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), except shares of Common Stock to be issued pursuant
to the Option Agreement;

(ii) Borrowing or agreeing to borrow any funds or incurring or
becoming subject to, any liability (absolute or contingent) in excess of an
aggregate of $50,000 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, except that ASB may pay a cash dividend
to its stockholders equal to the net income of ASB from May 1, 1997 through
the end of the month immediately preceding the month in which the Effective
Date occurs;

(v) Except in the ordinary course of business, selling or transferring
or agreeing to sell or transfer, any of its assets, property or rights
having in the aggregate a book value in excess of $50,000 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) 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 in accordance with normal and usual practice (and except
for the Deferred Compensation Agreement), 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 (and except for the Deferred
Compensation Agreement) 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) 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

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<PAGE> 38

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

The Agreement also provides that (i) ASB will consult with BancGroup
respecting loan requests in excess of $100,000 that are not single-family
residential loan requests or, any of other loan requests outside the normal
course of business, and (ii) ASB will consult with BancGroup respecting business
issues that ASB believes should be brought to the attention of BancGroup.

COMMITMENTS WITH RESPECT TO OTHER OFFERS

Until the termination of the Agreement, and except for the Merger, neither
ASB 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, ASB or any
business combination involving ASB (collectively, an "Acquisition Proposal")
other than as contemplated by the Agreement. ASB will notify BancGroup
immediately if any such inquiries or proposals are received by ASB, if any such
information is requested from ASB, or if any such negotiations or discussions
are sought to be initiated with ASB. ASB shall instruct its officers, directors,
agents or affiliates or their subsidiaries to refrain from doing any of the
above. ASB may communicate information about an Acquisition Proposal to its
stockholders if and to the extent that legal counsel provides a written opinion
to ASB (a copy of which shall be provided in advance to BancGroup) that it is
required to do so in order to comply with its legal obligations.

In connection with the Agreement, ASB has granted to BancGroup the option
to purchase up to 19.9% of the ASB Common Stock at a purchase price of $245.18
per share. The option will become exercisable upon the occurrence of certain
events which are generally related to the potential acquisition of ASB by
another party. The option is intended to increase the likelihood that the Merger
will be consummated by making it more difficult and expensive for any third
party to acquire control of ASB while BancGroup is seeking to consummate the
Merger. See "-- Certain Relationships and Related Transactions -- Stock Option."

RIGHTS OF DISSENTING STOCKHOLDERS

If the Merger is consummated, holders of ASB Common Stock will be entitled
to have the "fair value" of their shares of ASB Common Stock at the Effective
Date (exclusive of any element of value arising from the accomplishment or
expectation of the Merger) judicially determined and paid to them in cash,
together with interest, if any, by complying with the provisions of Section 262
of the DGCL ("Section 262").

Stockholders of record who desire to exercise their appraisal rights must
satisfy all of the following conditions. A written demand for appraisal of their
ASB Common Stock must be delivered to ASB before the taking of the vote of the
ASB stockholders at the Special Meeting on approval of the Agreement. Such
demand will be sufficient if it reasonably informs ASB of the stockholder's
identity and that the stockholder intends thereby to demand appraisal of such
holder's shares. This written demand for appraisal of shares must be in addition
to and separate from voting against, abstaining from voting, or failing to vote
on adoption of the Agreement. Voting against, abstaining from voting, or failing
to vote on adoption of the Agreement will not constitute a demand for appraisal
within the meaning of Section 262.

Stockholders electing to exercise their appraisal rights under Section 262
must not vote for adoption of the Agreement. Voting for adoption of the
Agreement, or delivering a proxy in connection with the Special Meeting (unless
the proxy specifies a vote against, or abstaining from voting on, adoption of
the Agreement), will constitute a waiver of a stockholder's right of appraisal
and will nullify any written demand for appraisal submitted by the stockholder.

A demand for appraisal must be executed by or for the stockholder of
record, fully and correctly, as such stockholder's name appears on such
stockholder's ASB Common Stock certificates. If the ASB Common Stock is owned of
record in a fiduciary capacity, such as by a trustee, guardian, or custodian,
such demand must be executed by the fiduciary. If the ASB Common Stock is owned
of record by more than one person, as in a joint tenancy or tenancy in common,
such demand must be executed by all joint owners. An authorized

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<PAGE> 39

agent, including an agent for two or more joint owners, may execute the demand
for appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising the demand,
such holder is acting as agent for the record owner.

A record owner, such as a broker who holds ASB Common Stock as a nominee
for others may exercise appraisal rights with respect to the shares held for all
or less than all beneficial owners of shares as to which the holder is the
record owner. In such case, the written demand must set forth the number of
shares covered by such demand. Where the number of shares is not expressly
stated, the demand will be presumed to cover all shares of ASB Common Stock
outstanding in the name of such record owner.

Stockholders who elect to exercise appraisal rights should mail or deliver
their written demands to: ASB Bancshares, Inc., 255 5th Street, Ashville,
Alabama 35953; Attention: Francis Wise, Secretary. The written demand for
appraisal should specify the stockholder's name and mailing address, the number
of shares of ASB Common Stock owned, and state that the stockholder is thereby
demanding appraisal. Within ten days after the Effective Date, BancGroup must
provide notice of the Effective Date to all stockholders who have complied with
Section 262 and have not voted for adoption of the Agreement.

Within 120 days after the Effective Date, either BancGroup or any
stockholder who has complied with the foregoing requirements of Section 262 and
who is otherwise entitled to appraisal rights may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of shares
of the dissenting stockholders. If a petition for an appraisal is timely filed,
after a hearing on such petition, the Court of Chancery will determine which
stockholders are entitled to appraisal rights and will appraise the shares of
ASB Common Stock owned by such stockholders, determining the fair value of such
shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining fair value,
the court is to take into account all relevant factors. In Weinberger v. UOP,
Inc., et al., 457 A.2d 701, decided February 1, 1983, the Delaware Supreme Court
expanded the considerations that could be considered in determining fair value
in an appraisal proceeding, stating that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered, and that "[f]air price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court stated that in making this determination
of fair value the court must consider "market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts which were
known or which could be ascertained as of the date of Merger and which throw any
light on future prospects of the merged corporation." The court further stated
that "elements of future value, including the nature of the enterprise, which
are known or susceptible of proof as of the date of the Merger and not the
product of speculation, may be considered." However, the court noted that
Section 262 provides that fair value is to be determined "exclusive of any
element of value arising from the accomplishment or expectation of the
Merger . . .".

The fair value of shares determined under Section 262 could be more than,
the same as, or less than the consideration ASB stockholders are entitled to
receive pursuant to the Agreement if they do not seek appraisal of their shares.
Investment banking opinions as to fairness from a financial point of view are
not necessarily opinions as to fair value under Section 262.

At the hearing on such petition filed in the Court of Chancery, the court
will determine the stockholders who have complied with Section 262 and who have
become entitled to rights. The court may require dissenting stockholders who
have demanded an appraisal for their shares and who hold stock represented by
certificates to submit their stock certificates to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings. Failure of a
dissenting stockholder to submit such holder's certificates may result in the
dismissal of such stockholder's appraisal proceedings.

The cost of the appraisal proceeding may be determined by the Court of
Chancery and taxed against the parties as the court deems equitable in the
circumstances. Upon application of a dissenting stockholder, the court may order
that all or a portion of the expenses incurred by any dissenting stockholder in
connection with the appraisal proceeding, including, without limitation,
reasonable attorneys' fees and the fees and expenses of

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<PAGE> 40

experts, be charged pro rata against the value of all shares of ASB Common Stock
entitled to appraisal. In the absence of such a determination or assessment,
each party bears its own expenses.

Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, after the Effective Date, be entitled to vote for any purpose the
shares of ASB Common Stock subject to such demand or to receive payment of
dividends or other distributions, if any, on such shares, except for dividends
or distributions payable to stockholders of record as of a date prior to the
Effective Date.

At any time within 60 days after the Effective Date, any former holder of
ASB Common Stock will have the right to withdraw a demand for appraisal and to
accept the consideration offered in the Agreement. After this period, such
holder may withdraw such holder's demand for appraisal only with the consent of
BancGroup. If no petition for appraisal is filed with the Court of Chancery
within 120 days after the Effective Date, stockholders' rights to appraisal
shall cease and all stockholders will be entitled to receive the consideration
provided in the Agreement. Inasmuch as BancGroup has no obligation to file such
a petition, and has no present intention to do so, any stockholder who desires
such a petition to be filed is advised to file it on a timely basis. However, no
petition timely filed in the Court of Chancery demanding appraisal will be
dismissed as to any stockholder without the approval of the court, and such
approval may be conditioned upon such terms as the court deems just.

Within 120 days after the Effective Date, any stockholder who has complied
with the foregoing requirements of Section 262 is entitled, upon written
request, to receive from BancGroup a statement setting forth the aggregate
number of shares not voted in favor of the Merger and the aggregate number of
holders of shares who have demanded appraisal. Such written statement shall be
mailed to such stockholder within ten days of such holder's request.

The foregoing is only a summary of the rights of dissenting holders of ASB
Common Stock. Any holder of ASB Common Stock who intends to dissent should
carefully review the text of the Delaware statutory law set forth in Appendix C
to this Prospectus and should also consult with such holder's attorney. The
failure of a ASB stockholder to follow precisely the procedures summarized above
and set forth in Appendix C to this Prospectus, may result in loss of appraisal
rights. No further notice of the events giving rise to appraisal rights or any
steps associated therewith will be furnished to holders of ASB Common Stock,
except as indicated above or otherwise required by law.

In general, any dissenting stockholder who perfects such holder's right to
be paid the "fair value" of such holder's ASB Common Stock in cash will
recognize taxable gain or loss for federal income tax purposes upon receipt of
such cash. See "-- Certain Federal Income Tax Consequences."

The foregoing discussion is only a summary of the provisions of Delaware
law and does not purport to be complete and is qualified in its entirety by
reference to the provisions of Delaware law, which are attached hereto as
Appendix C. Successful assertion by ASB stockholders of their dissenters'
appraisal rights is dependent upon compliance with the requirements described
above. Non-compliance with any provision will result in a failure to perfect
those rights and the loss of any opportunity to receive payment for shares
pursuant to an appraisal.

BECAUSE OF THE COMPLEXITY OF THE PROVISIONS OF THE DELAWARE LAW RELATING TO
DISSENTERS' APPRAISAL RIGHTS, STOCKHOLDERS WHO ARE CONSIDERING DISSENTING FROM
THE MERGER ARE URGED TO CONSULT THEIR OWN LEGAL ADVISERS.

RESALE OF BANCGROUP COMMON STOCK ISSUED IN THE MERGER

The issuance of the shares of BancGroup Common Stock pursuant to the Merger
has been registered under the Securities Act. As a result, stockholders of ASB
who are not "affiliates" of ASB (as such term is defined under the Securities
Act) may resell, without restriction, all shares of BancGroup Common Stock which
they receive in connection with the Merger. Under the Securities Act, only
affiliates of ASB are subject to restrictions on the resale of the BancGroup
Common Stock which they receive in the Merger.

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<PAGE> 41

The BancGroup Common Stock received by affiliates of ASB who do not also
become affiliates of BancGroup after the consummation of the Merger may not be
sold except pursuant to an effective Registration Statement under the Securities
Act covering such shares or in compliance with Rule 145 promulgated under the
Securities Act or another applicable exemption from the registration
requirements of the Securities Act. Generally, Rule 145 permits BancGroup Common
Stock held by such stockholders to be sold in accordance with certain provisions
of Rule 144 under the Securities Act. In general, these provisions of Rule 144
permit a person to sell on the open market in brokers' or certain other
transactions within any three-month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares of BancGroup Common
Stock or the average weekly trading volume in BancGroup Common Stock reported on
the NYSE during the four calendar weeks preceding such sale. Sales under Rule
144 are also subject to the availability of current public information about
BancGroup. The restrictions on sales will cease to apply under most
circumstances once the former ASB affiliate has held the BancGroup Common Stock
for at least one year. BancGroup Common Stock held by affiliates of ASB who
become affiliates of BancGroup, if any, will be subject to additional
restrictions on the ability of such persons to resell such shares.

ASB 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 of ASB.
ASB 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 BancGroup Common Stock by
such person except pursuant to Rule 145 or pursuant to an effective registration
statement 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 undertakings 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 stock transfer orders will be given to BancGroup's stock transfer
agent.

ACCOUNTING TREATMENT

The acquisition of ASB will be treated as a "purchase" transaction by
BancGroup in accordance with generally accepted accounting principles.
Accordingly, the purchase price will be assigned to the ASB assets acquired and
liabilities assumed based on their fair values with any excess purchase price
being recorded as goodwill.

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<PAGE> 42

COMPARATIVE MARKET PRICES AND DIVIDENDS

BANCGROUP

BancGroup Common Stock is listed for trading on the NYSE under the symbol
"CNB." Prior to February 21, 1995, BancGroup had two classes of common stock
outstanding, Class A and Class B. Class B Common Stock was not publicly traded.
Class A Common Stock was traded on the Nasdaq National Market System ("Nasdaq
NMS") under the symbol "CLBGA" until February 24, 1995. On February 21, 1995,
the BancGroup Class A Common Stock and Class B Common Stock were reclassified
into BancGroup Common Stock. Trading of BancGroup Common Stock on the NYSE
commenced on February 24, 1995. The following table shows the dividends per
share and indicates the high and low closing prices of the BancGroup Class A
Common Stock and the BancGroup Common Stock as reported on the Nasdaq NMS and
the NYSE, respectively, for the last two full fiscal years.

<TABLE>
<CAPTION>
PRICE PER
SHARE(1)
----------------- DIVIDENDS(1)
HIGH LOW PER SHARE
------- ------- ------------
<S> <C> <C> <C> <C> <C>
1995
1st Quarter................................................. 11 3/16 9 3/4 $0.1125
2nd Quarter................................................. 13 5/8 11 9/16 0.1125
3rd Quarter................................................. 14 15/16 13 3/4 0.1125
4th Quarter................................................. 16 7/16 14 1/4 0.1125
1996
1st Quarter................................................. 18 1/4 15 0.135
2nd Quarter................................................. 18 1/6 15 5/8 0.135
3rd Quarter................................................. 17 15/16 15 5/8 0.135
4th Quarter................................................. 20 1/8 17 3/8 0.135
1997
1st Quarter................................................. 24 18 2/3 0.15
2nd Quarter................................................. 24 7/8 22 0.15
3rd Quarter................................................. 29 3/16 24 1/4 0.15
4th Quarter (through December 26, 1997)..................... 35 1/16 28 15/16 0.15
</TABLE>

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

(1) Restated to reflect the impact of a two-for-one stock split effected in the
form of a 100% stock dividend paid February 11, 1997.

On July 8, 1997, 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 $26.25 per share.

At December 31, 1996, BancGroup's subsidiaries accounted for approximately
98% of BancGroup's consolidated assets. BancGroup derives substantially all of
its income from dividends received from its subsidiaries. Various statutory
provisions and regulatory policies limit the amount of dividends that Colonial
Bank may pay without regulatory approval. In addition, federal statutes restrict
the ability of Colonial Bank to make loans to BancGroup, and regulatory policies
may additionally restrict payment of dividends.

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<PAGE> 43

ASB

There is no established public trading market for ASB Common Stock. The
shares of ASB Common Stock are not actively traded, and such trading activity,
as it occurs, takes place in privately negotiated transactions. Management of
ASB is aware of certain transactions in shares of ASB that have occurred January
1, 1995 although the trading prices of all stock transactions are not known. The
following sets forth the trading prices for the shares of ASB Common Stock that
have occurred since January 1, 1995 for transactions in which the trading prices
are known to management of ASB:

<TABLE>
<CAPTION>
PRICE PER SHARE
----------------- DIVIDENDS
HIGH LOW PER SHARE
------- ------- -------------------
<S> <C> <C> <C>
1995
First Quarter.................................... $ 85.00 $ 85.00 $1.05
Second Quarter................................... N/A N/A --
Third Quarter.................................... N/A N/A --
Fourth Quarter................................... 100.00 100.00 --
1996
First Quarter.................................... N/A N/A 1.05
Second Quarter................................... N/A N/A --
Third Quarter.................................... 100.00 100.00 --
Fourth Quarter................................... 100.00 100.00 --
1997
First Quarter.................................... 106.00 106.00 1.10
Second Quarter................................... N/A N/A --
Third Quarter.................................... N/A N/A --
Fourth Quarter (through December 26, 1997)....... N/A N/A --
</TABLE>

The Agreement limits ASB's ability to pay dividends prior to the Effective
Date to an amount equal to the net income of ASB from May 1, 1997 through the
end of the month immediately preceding the month in which the Effective Date
occurs. See "The Merger -- Conduct of Business Pending the Merger."

The Debentures to be issued to Mr. and Mrs. Adkins and Mrs. Spann pursuant
to the Agreement will be non-transferable except under limited circumstances
and, therefore, are expected to have no determinable market value. Accordingly,
no trading market for the Debentures is expected to develop.

BANCGROUP CAPITAL STOCK AND DEBENTURES

BancGroup's authorized capital stock consists of 100,000,000 shares of
BancGroup 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 September 30, 1997, there
were issued and outstanding a total of 41,964,197 shares of BancGroup 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 $5,012,686
were outstanding as of September 30, 1996 and convertible at any time into
358,049 shares of BancGroup Common Stock, subject to adjustment. There are
1,774,988 shares of BancGroup Common Stock subject to issue upon exercise of
options under BancGroup's stock option plans. In addition to BancGroup Common
Stock to be issued in the Merger, BancGroup will issue additional shares of
BancGroup Common Stock in pending acquisitions. On January 20, 1997, BancGroup
issued, through a special purpose trust, $70 million of Trust Preferred
Securities. See "Business of BancGroup -- Proposed Affiliate Banks."

The following statements with respect to BancGroup Common Stock and
Preference Stock are brief summaries of material provisions of Delaware law, the
BancGroup Certificate, and the BancGroup Bylaws, and do not purport to be
complete and are qualified in their entirety by reference to the foregoing.

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<PAGE> 44

BANCGROUP 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 BancGroup Common Stock are entitled to share ratably in such
dividends.

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

Preemptive Rights. The holders of BancGroup 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 BancGroup Common Stock without stockholder
approval. However, the BancGroup Common Stock are listed on the NYSE, which
requires stockholder approval of the issuance of additional shares of BancGroup
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 BancGroup 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 BancGroup 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.

1986 DEBENTURES

BancGroup issued the 1986 Debentures in the total principal amount of
$28,750,000. The 1986 Debentures were issued under a trust indenture (the "1986
Indenture") between BancGroup and SunTrust Bank, Atlanta, 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 $14 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 512,800 shares of such BancGroup 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

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<PAGE> 45

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 December 31, 1996, BancGroup's Senior Indebtedness as defined in the
1986 Indenture aggregated approximately $870 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.

On January 29, 1997, BancGroup issued, through a special purpose trust, $70
million of Trust Preferred Securities. These securities bear interest at 8.92%
and are subject to redemption by BancGroup in whole or in part at any time after
January 29, 2007 until maturing in January 2027; circumstances are remote that
redemption will occur prior to maturity. The securities are subordinated to
substantially all of BancGroup's indebtedness. In BancGroup's consolidated
statement of condition, these securities will be shown as long-term debt.

The Debentures to be issued to Mr. and Mrs. Adkins and Mrs. Spann pursuant
to the Agreement will rank pari passu with the 1986 Debentures. See ("The
Merger -- Description of Debentures").

CHANGES IN CONTROL

Certain provisions of the BancGroup Certificate and the BancGroup 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 "-- Preference Stock." In addition, the power of BancGroup's Board 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
"-- BancGroup 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 22 directors of BancGroup. This provision of the BancGroup 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
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 BancGroup 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,

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<PAGE> 46

1994. An effect of this provision may be to exclude Robert E. Lowder, the
current Chairman and Chief Executive Officer of BancGroup, and 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. As of April 30, 1997, the Board of
Directors and Executive Officers of BancGroup owned as a group approximately
10.64% of the outstanding shares of BancGroup Common Stock.

Board Evaluation of Mergers. The BancGroup 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 BancGroup 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. The BancGroup 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. The BancGroup 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 provisions of the BancGroup Certificate relating
to business combinations with a related person, described above at "Business
Combinations," but they are generally less restrictive than the BancGroup
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 has been given 60
days' prior written notice of such proposed acquisition and within that time
period the Federal Reserve 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 issues written notice of its
intent not to disapprove the action. Under a rebuttable presumption established
by the Federal Reserve, the acquisition of more than

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<PAGE> 47

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, shares of ASB Common Stock (except for shares
held by stockholders who perfect their dissenters' rights of appraisal pursuant
to the applicable provisions of the DGCL, Mr. and Mrs. Adkins and Mrs. Spann)
will be converted from shares of ASB, a Delaware corporation, governed by the
DGCL and the ASB Certificate and the ASB Bylaws, to shares of BancGroup, a
Delaware corporation, governed by the DGCL and the BancGroup Certificate and the
BancGroup Bylaws. Certain significant differences exist between the rights of
ASB stockholders and those of BancGroup stockholders. In particular, the
BancGroup Certificate and Bylaws contain certain provisions that could impede or
prevent an acquisition of BancGroup. For additional description of such
provisions, see "BancGroup Capital Stock and Debentures -- Change in Control."
The following discussion is not intended to be a complete statement of all
differences affecting the rights of ASB and BancGroup stockholders, and is
qualified in its entirety by reference to the DGCL as well as to the BancGroup
Certificate and Bylaws and the ASB Certificate and Bylaws. For additional
description of the rights of the holders of BancGroup Common Stock, see
"BancGroup Capital Stock and Debentures."

DIRECTOR ELECTIONS

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."

ASB. The ASB Board of Directors consists of a single class with five to 15
members, each of whom serves a one-year term. The ASB Bylaws provide for a
nominating committee, consisting of not less than three directors, to select
nominees to the ASB Board for election by the holders of at least a majority of
the voting power of ASB Common Stock at an annual meeting of the stockholders of
ASB.

REMOVAL OF DIRECTORS

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.

ASB. The ASB Certificate and the ASB Bylaws do not contain any provision
specifically providing for the removal of directors.

VOTING

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

ASB. The ASB Bylaws provide that each stockholder shall be entitled to one
vote, in person or by proxy, for each voting share of ASB Common Stock held. The
ASB Certificate and the ASB Bylaws do not provide for cumulative voting rights
in the election of directors.

PREEMPTIVE RIGHTS

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.

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<PAGE> 48

ASB. The ASB Certificate provides that holders of shares of ASB Common
Stock or shares of other ASB capital stock shall have no preemptive rights to
acquire any other shares of ASB capital stock.

DIRECTORS' LIABILITY

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.

ASB. The ASB Certificate provides that a director shall not be held
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except this provision shall not
eliminate liability of a director (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 which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payment of dividends or unlawful stock purchase or
redemption under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived an improper personal benefit.

INDEMNIFICATION

BancGroup. The BancGroup certificate provides that BancGroup shall
indemnify its officers, directors, agents and employees to the full extent
permitted under the DGCL. Section 145 of the DGCL 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 DGCL, 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), he or she must be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.

BancGroup maintains an officers' and directors' insurance policy and a
separate indemnification agreement pursuant to which officers and directors of
BancGroup would be entitled to indemnification against certain liabilities,
including reimbursement of certain expenses that extends beyond the minimum
indemnification provided by Section 145 of the DGCL.

ASB. The ASB Bylaws generally provide that without limitation, ASB shall
indemnify any person who was or is a party to or is threatened in a proceeding,
by reason of the fact that such person is or was a director, officer, employee,
or agent of the corporation, or is or was serving at the request of ASB in such
capacity for another corporation, partnership, joint venture, trust, or other
enterprise, against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in

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<PAGE> 49

connection with such proceeding, to the full extent permitted by the DGCL. The
Bylaws further provide that expenses incurred by a person entitled to
indemnification in defending a civil or criminal action suit or proceeding shall
be paid by ASB in advance of the final disposition of such action, suit, or
proceeding upon receipt of an undertaking by or on behalf of the indemnitee to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by ASB.

ASB maintains a directors' and officers' insurance policy pursuant to which
officers and directors of ASB would be entitled to indemnification against
certain liabilities, including reimbursement of certain expenses.

SPECIAL MEETINGS OF STOCKHOLDERS; ACTION WITHOUT A MEETING

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.

ASB. The ASB Bylaws provide that any action which is required to be taken
or may be taken at a meeting of the ASB stockholders may be taken without prior
notice and without a vote, if a consent in writing setting forth such action is
signed by the holders of outstanding shares of ASB Common Stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action.

MERGERS, SHARE EXCHANGES AND SALES OF ASSETS

BancGroup. The DGCL provides that Mergers and sales of substantially all
of the assets of Delaware corporations must be approved by a majority of the
outstanding stock of the corporation entitled to vote thereon. The DGCL 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.

ASB. ASB is subject to the provisions of the DGCL concerning mergers,
share exchanges, and sales of assets described above. The ASB Bylaws provide
that the vote of the holders of the shares representing a majority of the voting
power present at such meeting shall decide any question brought before such
meeting, unless the DGCL or the ASB Certificate contains a supermajority voting
requirement. The ASB Certificate does not contain a supermajority voting
requirement for corporate actions involving mergers, share exchanges, or sales
of assets.

AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS

BancGroup. Under the DGCL, a Delaware 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 Directors evaluation of business combination procedures. See "BancGroup
Capital Stock and Debentures -- Changes in Control."

41
<PAGE> 50

As is permitted by the DGCL, the BancGroup 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.

ASB. The ASB Certificate provides that the corporation reserves the right
to amend, alter, change, or repeal any provision contained in the ASB
Certificate in any manner now or hereafter prescribed by statute.

RIGHTS OF DISSENTING STOCKHOLDERS

BancGroup. Under the DGCL, a stockholder has the right, in certain
circumstances, to dissent from certain corporate transactions and receive the
fair value of his or her shares in cash in lieu of the consideration he or she
otherwise would have received in the transaction. For this purpose, "fair value"
may be determined by all generally accepted techniques of valuation used in the
financial community, excluding any element of value arising from the
accomplishment or expectation of the transaction, but including elements of
future value that are known or susceptible of proof. 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 NMS, or held of record by
more than 2,000 stockholders (as is BancGroup Common Stock), and (ii)
stockholders are permitted by the 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.

ASB. Pursuant to Section 262 of the DGCL, the holders of ASB Common Stock
have dissenters' rights with respect to the Merger. Any ASB stockholder who does
not vote in favor of the proposal to adopt the Agreement and approve the Merger
contemplated thereby and who complies with certain requirements of the
applicable provisions of the DGCL may have the right to an appraisal and payment
for such person's shares of ASB Common Stock.

TO PERFECT DISSENTERS' RIGHTS OF APPRAISAL, A HOLDER OF ASB COMMON STOCK
MUST STRICTLY COMPLY WITH THE APPLICABLE STATUTORY PROVISIONS, A COPY OF WHICH
PROVISIONS IS ATTACHED AS APPENDIX C TO THIS PROSPECTUS. ANY HOLDER OF ASB
COMMON STOCK WHO RETURNS A SIGNED PROXY BUT WHO FAILS TO PROVIDE VOTING
INSTRUCTIONS WITH RESPECT TO THE PROPOSAL TO ADOPT THE AGREEMENT AND THE MERGER
CONTEMPLATED THEREBY WILL BE DEEMED TO HAVE VOTED IN FAVOR OF SUCH PROPOSAL AND
WILL NOT BE ENTITLED TO ASSERT DISSENTERS' RIGHTS OF APPRAISAL. SEE "THE
MERGER -- RIGHTS OF DISSENTING STOCKHOLDERS."

PREFERRED STOCK

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,"
"-- Changes in Control."

ASB. The ASB Certificate does not authorize the issuance of shares of
capital stock other than common voting shares.

EFFECT OF THE MERGER ON ASB STOCKHOLDERS

As of September 30, 1997, ASB had 180 stockholders of record and 84,120
outstanding shares of common stock. As of September 30, 1997, BancGroup had
41,964,197 shares of BancGroup Common Stock outstanding with 8,007 stockholders
of record.

Assuming that no dissenters' rights of appraisal are exercised in the
Merger, a Market Value of BancGroup Common Stock of $27.60 (the maximum Market
Value) on the Effective Date (as of December 26, 1997, the Market Value as
defined exceeded the maximum Market Value allowed), an

42
<PAGE> 51

aggregate number of 467,398 shares of BancGroup Common Stock would be issued to
the stockholders of ASB pursuant to the Merger, other than Mr. and Mrs. Adkins
and Mrs. Spann. Based on those assumptions, the 467,398 shares of BancGroup
Common Stock would represent approximately 1.10% of the total number of shares
of BancGroup Common Stock outstanding following the Merger, not counting any
additional shares BancGroup may issue, including shares to be issued pursuant to
other pending acquisitions.

The issuance of the BancGroup Common Stock pursuant to the Merger will
reduce the percentage interest of the BancGroup Common Stock held by each
principal stockholder and each director and officer of BancGroup. Based upon the
foregoing assumptions and the additional shares issued pursuant to completed
business combinations since April 30, 1997, as a group, the directors and
executive officers of BancGroup who own approximately 10.33% of BancGroup's
outstanding shares would own approximately 10.23% after the Merger. See
"Business of BancGroup -- Voting Securities and Principal Stockholders."

BancGroup has entered into agreements pursuant to which additional shares
of BancGroup Common Stock will be issued. See "Business of BancGroup -- Proposed
Affiliate Banks."

43
<PAGE> 52

THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES

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

The following summary includes (i) the condensed consolidated statement of
condition of BancGroup and subsidiaries as of September 30, 1997, (ii) the
condensed consolidated statements of condition of the completed business
combination with First Independence Bank of Florida ("Completed Business
Combination") as of September 30, 1997, (iii) adjustments to give effect to the
completed pooling-of-interests method business combination with First
Independence, (iv) the condensed consolidated statement of condition of ASB
Bancshares, Inc., (v) adjustments to give effect to the proposed purchase method
business combination with ASB, (vi) combined presentation of condensed
consolidated statements of condition of the other probable business combinations
with BancGroup; First Central Bank, South Florida Banking Corp. and United
American Holding Corp. ("Other Probable Business Combinations") as of September
30, 1997, (vii) adjustments to give effect to the proposed pooling-of-interests
method business combinations with First Central, South Florida and United
American, (viii) the pro forma combined condensed statement of condition of
BancGroup and Subsidiaries as if such combinations had occurred on September 30,
1997.

These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of condition of
BancGroup and subsidiaries, incorporated by reference herein. The pro forma
information provided below may not be indicative of future results.

44
<PAGE> 53

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------------------------------------------------------------------------------------
CONSOLIDATED COMPLETED OTHER PROBABLE
COLONIAL BUSINESS ADJUSTMENTS/ ASB ADJUSTMENTS/ BUSINESS
BANCGROUP COMBINATION (DEDUCTIONS) BANCSHARES (DEDUCTIONS) SUBTOTAL COMBINATIONS
------------ ------------ ------------ ---------- ------------ ---------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks... $ 221,463 $ 3,432 $ 4,168 $ 229,063 $ 23,103
Interest-bearing deposits
in banks................. 14,013 20 14,033 270
Federal funds sold........ 2,470 949 1,800 5,219 12,682
Securities available for
sale..................... 524,740 7,318 9,317 541,375 99,742
Investment securities..... 311,796 18,861 330,657 6,292
Mortgage loans held for
sale..................... 182,878 182,878
Loans, net of unearned
income................... 4,970,765 50,699 106,178 5,127,642 397,257
Less: Allowance for
possible loan losses..... (61,913) (680) (524) (63,117) (5,304)
---------- -------- -------- -------- -------- ---------- --------
Loans, net................ 4,908,852 50,019 105,654 5,064,525 391,953
Premises and equipment,
net...................... 123,776 2,137 3,478 (115)(3) 129,276 16,043
Excess of cost over
tangible and identified
intangible assets
acquired, net............ 68,849 8,937(3) 77,786 2,089
Mortgage servicing
rights................... 134,118 134,118
Other real estate owned... 12,612 394 13,006 1,992
Accrued interest and other
assets................... 100,360 799 1,233 235(3) 102,627 9,297
---------- -------- -------- -------- -------- ---------- --------
Total assets....... $6,605,927 $ 65,048 $ $144,531 $ 9,057 $6,824,563 $563,463
========== ======== ======== ======== ======== ========== ========

LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits.................. $5,136,556 $ 58,283 $130,990 $5,325,829 $489,374
FHLB short-term
borrowings............... 610,000 610,000
Other short-term
borrowings............... 185,333 185,333 18,159
Subordinated debt......... 6,208 7,725(3) 13,933
Trust preferred
securities............... 70,000 70,000
Other long-term debt...... 24,891 85 24,976 3,846
Other liabilities......... 100,586 449 1,341 539(3) 102,915 3,679
---------- -------- -------- -------- -------- ---------- --------
Total
liabilities...... 6,133,574 58,732 132,416 8,264 6,332,986 515,058
Preferred stock...........
Common stock.............. 104,910 3,203 (3,203)(1) 2 (2)(3) 107,338 2,868
1,260(1) 1,168(3)
Additional paid in
capital.................. 187,260 3,130 (3,130)(1) 1,048 (1,048)(3) 204,073 28,819
5,073(1) 11,740(3)
Retained earnings......... 180,778 (15) 11,533 (11,533)(3) 180,763 16,498
Treasury stock............ (534) 534
Unearned compensation..... (1,796) (1,796) (69)
Unrealized gain (loss) on
securities available for
sale, net of taxes....... 1,201 (2) 66 (66)(3) 1,199 289
---------- -------- -------- -------- -------- ---------- --------
Total equity....... 472,353 6,316 12,115 793 491,577 48,405
---------- -------- -------- -------- -------- ---------- --------
Total liabilities
and equity....... $6,605,927 $ 65,048 $ $144,531 $ 9,057 $6,824,563 $563,463
========== ======== ======== ======== ======== ========== ========
Capital Ratios:
Capital ratio............ 8.11%
Tangible leverage
ratio.................. 7.28%
Tier one capital
ratio*................. 9.93%
Total capital ratio*..... 11.31%

<CAPTION>
SEPTEMBER 30, 1997
--------------------------
PRO FORMA
ADJUSTMENTS/ COMBINED
(DEDUCTIONS) TOTAL
------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks... $ 252,166
Interest-bearing deposits
in banks................. 14,303
Federal funds sold........ 17,901
Securities available for
sale..................... 641,117
Investment securities..... 336,949
Mortgage loans held for
sale..................... 182,878
Loans, net of unearned
income................... 5,524,899
Less: Allowance for
possible loan losses..... (68,421)
-------- ----------
Loans, net................ 5,456,478
Premises and equipment,
net...................... 145,319
Excess of cost over
tangible and identified
intangible assets
acquired, net............ 79,875
Mortgage servicing
rights................... 134,118
Other real estate owned... 14,998
Accrued interest and other
assets................... 111,924
-------- ----------
Total assets....... $ $7,388,026
======== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits.................. $5,815,203
FHLB short-term
borrowings............... 610,000
Other short-term
borrowings............... 203,492
Subordinated debt......... 13,933
Trust preferred
securities............... 70,000
Other long-term debt...... 28,822
Other liabilities......... 548 2,4,5 107,142
-------- ----------
Total
liabilities...... 548 6,848,592
Preferred stock...........
Common stock.............. 1,722(5) 118,880
(1,638)(5)
4,777(2)
(1,213)(2)
5,043(4)
(17)(4)
Additional paid in
capital.................. 1,054(5) 224,218
(1,138)(5)
5,152(2)
(8,716)(2)
13,939(4)
(18,965)(4)
Retained earnings......... (548)2,4,5 196,713
Treasury stock............
Unearned compensation..... (1,865)
Unrealized gain (loss) on
securities available for
sale, net of taxes....... 1,488
-------- ----------
Total equity....... (548) 539,434
-------- ----------
Total liabilities
and equity....... $ $7,388,026
======== ==========
Capital Ratios:
Capital ratio............ 8.34%
Tangible leverage
ratio.................. 7.30%
Tier one capital
ratio*................. 9.91%
Total capital ratio*..... 11.43%
</TABLE>

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

* Based on risk weighted assets.

45
<PAGE> 54

COMPLETED BUSINESS COMBINATION

FIRST INDEPENDENCE BANK OF FLORIDA
(pooling of interests)

(1) To record the issuance of 504,075 shares of BancGroup Common Stock in
exchange for all of the outstanding shares and warrants of First Independence:

<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
First Independence outstanding shares....................... 640,674
First Independence warrants (converted according to merger
agreement)................................................ 104,285
Conversion ratio -- shares.................................. 0.7257
Conversion ratio -- warrants................................ 0.3753
BancGroup shares to be issued............................... 504,075
Par value of 504,075 shares issued at $2.50 per share....... $ 1,260
Shares issued at par value.................................. $ 1,260
Total capital stock of First Independence................... 6,333
Excess recorded as an increase to contributed capital....... 5,073
--------
6,333
To eliminate First Independence Common stock, at par
value..................................................... $ (3,203)
Contributed capital....................................... (3,130)
--------
(6,333)
Net change in equity.............................. $ --
========
</TABLE>

PENDING BUSINESS COMBINATIONS

SOUTH FLORIDA BANKING CORP.
(pooling of interests)

(A) To record the issuance of 1,910,722 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of South Florida Banking Corp.

<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
South Florida outstanding shares............................ 1,213,465
Conversion ratio............................................ 1.5746
BancGroup shares to be issued............................... 1,910,722
Par value of 1,910,722 shares issued at $2.50 per share..... $ 4,777
Shares issued at par value.................................. $ 4,777
Total capital stock of South Florida........................ 9,929
Excess recorded as an increase to contributed capital....... 5,152
----------
9,929
To eliminate South Florida
Common stock, at par value................................ (1,213)
Contributed capital....................................... (8,716)
----------
(9,929)
Net change in equity................................... $ --
==========
(B) To record possible non-recurring charges associated with
severance payable to terminated employees, net of
taxes................................................... $ 120
==========
</TABLE>

46
<PAGE> 55

ASB BANCSHARES, INC.
(purchase)

(3) (A) To assign the amount by which the estimated value of BancGroup's
investment in ASB is in excess of the historical carrying value
amount of the net assets acquired, based on their estimated fair
value of such assets:

<TABLE>
<S> <C>
Equity in carrying value of net assets of ASB............... $12,115
Adjustments to state assets at fair value:
Write-off computer software and hardware.................. (115)
Acquisition accruals:
Present value of deferred compensation (calculated
assuming retirement in 1998, monthly payments of
$8,333.33 beginning January 1, 2002 for 84 months at
8%).................................................... (393)
Litigation accrual........................................ (15)
Legal, accounting and professional........................ (15)
Potential severance payable upon acquisition.............. (116)
Tax effect of purchase adjustments.......................... 235
Goodwill.................................................... 8,937
-------
8,518
Adjusted equity in carrying value of net assets............. $20,633
=======
Allocated as follows:
Subordinated Debentures for 31,506 shares of ASB.......... $ 7,725
Shares to be issued at par value 467,398 X 2.50........... 1,168
Additional Paid in Capital................................ 11,740
-------
Total purchase price to be paid in stock and
debt............................................. $20,633
=======
</TABLE>

UNITED AMERICAN HOLDING CORPORATION
(pooling of interests)

(4) (A) To record the issuance of 2,017,177 shares of BancGroup Common
Stock in exchange for all of the outstanding shares of United
American:

<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
United American outstanding shares.......................... 1,779,600
Conversion ratio............................................ 1.1335
BancGroup shares to be issued............................... 2,017,177
Par value of 2,017,177 shares issued at $2.50 per share..... $ 5,043
Shares issued at par value.................................. $ 5,043
Total capital stock of United American...................... 18,982
Excess recorded as an increase to contributed capital....... 13,939
----------
18,982
To eliminate United Common stock, at par value.............. $ (17)
Contributed capital....................................... (18,965)
----------
(18,982)
Net change in equity.............................. $ --
==========
(B) To record possible non-recurring charges associated with
severance payable to terminated employees and salary
continuation agreements, net of taxes................... $ 317
==========
</TABLE>

47
<PAGE> 56

FIRST CENTRAL BANK
(pooling of interests)

(5) (A) To record the issuance of 688,742 shares of BancGroup Common Stock
in exchange for all of the outstanding shares of First Central:

<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
First Central outstanding shares............................ 327,500
Conversion ratio............................................ 2.103
BancGroup shares to be issued............................... 688,742
Par value of 688,742 shares issued at $2.50 per share....... $ 1,722
Shares issued at par value.................................. $ 1,722
Total capital stock of First Central........................ 2,776
Excess recorded as an increase to contributed capital....... 1,054
--------
2,776
To eliminate First Central
Common stock, at par value................................ $ (1,638)
Contributed capital....................................... (1,138)
--------
(2,776)
--------
Net change in equity.............................. $ --
========
(B) To record possible non-recurring charges associated with
severance payable to terminated employees............... $ 111
========
</TABLE>

48
<PAGE> 57

THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES

CONDENSED PRO FORMA STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS)

The following summary includes (i) the condensed consolidated statements of
income of BancGroup and subsidiaries on a historical basis for the nine months
ended September 30, 1997 and the year ended December 31, 1996, (ii) the
condensed statements of income of the completed business combination with First
Independence Bank of Florida ("Completed Business Combination"), for the nine
months ended September 30, 1997 and the year ended December 31, 1996, (iii)
adjustments to give effect to the pooling-of-interests method business
combination with First Independence, (iv) the condensed consolidated statements
of income of ASB Bancshares, for the nine months ended September 30, 1997 and
the year ended December 31, 1996, (v) adjustments to give effect to the proposed
purchase method business combination with ASB Bancshares, (vi) the combined
presentation of condensed consolidated statements of income of the other
probable business combinations with BancGroup; United American Holding Corp.,
First Central Bank and South Florida Banking Corp., and ("Other Probable
Business Combinations"), for the nine months ended September 30, 1997 and the
year ended December 31, 1996, (vii) adjustments to give effect to the probable
pooling-of-interests method business combinations with United American, South
Florida Banking Corp., and First Central and (viii) the pro forma statements of
income of BancGroup and subsidiaries as if such business combinations had
occurred on January 1, 1996.

These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of income of
BancGroup and subsidiaries, incorporated by reference herein. The pro forma
information provided may not necessarily be indicative of future results.

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
----------------------------------------------------------------------------------

CONSOLIDATED COMPLETED
COLONIAL BUSINESS ADJUSTMENTS/ ASB ADJUSTMENTS/
BANCGROUP COMBINATION (DEDUCTIONS) BANCSHARES (DEDUCTIONS) SUBTOTAL
------------ ----------- ------------ ---------- ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income............ $ 362,830 $ 3,935 $ -- $ 8,426 $ -- $ 375,191
Interest expense........... 182,497 1,606 -- 4,163 435(1) 188,701
---------- --------- ---------- ------- ------- ----------
Net interest income........ 180,333 2,329 -- 4,263 (435) 186,490
Provision for loan
losses.................... 8,833 -- 45 8,878
---------- --------- ---------- ------- ------- ----------
Net interest income after
provision for loan
losses.................... 171,500 2,329 -- 4,218 (435) 177,612
---------- --------- ---------- ------- ------- ----------
Noninterest income......... 61,623 355 -- 621 -- 62,599
Noninterest expense........ 143,609 2,023 -- 3,007 (17)(1) 149,069
$ 447(1)
---------- --------- ---------- ------- ------- ----------
Income before income
taxes..................... 89,514 661 -- 1,832 (865) 91,142
Applicable income taxes.... 33,460 -- -- 630 (163)(1) 33,927
---------- --------- ---------- ------- ------- ----------
Net income................. $ 56,054 $ 661 $ -- $ 1,202 $ (702) $ 57,215
========== ========= ========== ======= ======= ==========
Average primary shares
outstanding**............. 42,370,000 640,674 (640,674) 84,120 (84,120) 43,612,142
494,904 747,238
Average fully-diluted
shares outstanding**...... 42,963,000 640,674 (640,674) 84,120 (84,120) 44,214,173
503,935 747,238
Earnings per share:
Primary**................. $ 1.32 $ 1.31
Fully diluted**........... $ 1.31 $ 1.30

<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
-----------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
------------ ------------ ----------

<S> <C> <C> <C>
Interest income............ $ 31,399 $ 406,590
Interest expense........... 12,808 -- 201,509
--------- ---------- ----------
Net interest income........ 18,591 -- 205,081
Provision for loan
losses.................... 755 9,633
--------- ---------- ----------
Net interest income after
provision for loan
losses.................... 17,836 -- 195,448
--------- ---------- ----------
Noninterest income......... 3,678 66,277
Noninterest expense........ 14,321 -- 163,390
--
--------- ---------- ----------
Income before income
taxes..................... 7,193 -- 98,335
Applicable income taxes.... 2,525 -- 36,452
--------- ---------- ----------
Net income................. $ 4,668 $ -- $ 61,883
========= ========== ==========
Average primary shares
outstanding**............. 3,221,200 (3,221,200) 48,333,694
4,721,552
Average fully-diluted
shares outstanding**...... 3,221,200 (3,221,200) 48,954,127
4,739,954
Earnings per share:
Primary**................. $ 1.28
Fully diluted**........... $ 1.27
</TABLE>

49
<PAGE> 58

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED
BANCGROUP BUSINESS ADJUSTMENTS/ ASB ADJUSTMENTS/
(RESTATED)* COMBINATION (DEDUCTIONS) BANCSHARES (DEDUCTIONS) SUBTOTAL
------------ ----------- ------------ ---------- ------------ ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Interest income............... $ 406,838 $ 3,916 $ -- $10,443 $ -- $ 421,197
Interest expense.............. 205,843 1,692 -- 5,141 579(3) 213,255
---------- --------- ---------- ------- ------- ----------
Net interest income........... 200,995 2,224 -- 5,302 (579) 207,942
Provision for loan losses..... 12,545 108 60 12,713
---------- --------- ---------- ------- ------- ----------
Net interest income after
provision for loan losses.... 188,450 2,116 -- 5,242 (579) 195,229
---------- --------- ---------- ------- ------- ----------
Noninterest income............ 72,382 602 -- 862 73,846
Noninterest expense........... 183,316 2,244 -- 3,912 (23)(3) 190,045
596(3)
---------- --------- ---------- ------- ------- ----------
Income before income taxes.... 77,516 474 -- 2,192 (1,152) 79,030
Applicable income taxes....... 27,303 (13) -- 743 (217)(3) 27,816
---------- --------- ---------- ------- ------- ----------
Net income.................... $ 50,213 $ 487 $ -- $ 1,449 $ (935) $ 51,214
========== ========= ========== ======= ======= ==========
Average primary shares
outstanding**................ 39,764,000 529,153 (529,153) 88,100 (88,100) 40,965,173
418,580 782,592
Average fully-diluted shares
outstanding**................ 40,623,000 529,153 (529,153) 88,100 (88,100) 41,843,195
437,602 782,592
Earnings per share:
Net income:
Primary**.................. $ 1.26 $ 1.25
Fully diluted**............ $ 1.25 $ 1.23

<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------
OTHER
PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
------------ ------------ ----------

<S> <C> <C> <C>
Interest income............... $ 35,549 $ 456,746
Interest expense.............. 13,651 -- 226,906
--------- ---------- ----------
Net interest income........... 21,898 -- 229,840
Provision for loan losses..... 1,019 13,732
--------- ---------- ----------
Net interest income after
provision for loan losses.... 20,879 -- 216,108
--------- ---------- ----------
Noninterest income............ 3,972 -- 77,818
Noninterest expense........... 15,457 -- 205,502

--------- ---------- ----------
Income before income taxes.... 9,394 -- 88,424
Applicable income taxes....... 3,327 -- 31,143
--------- ---------- ----------
Net income.................... $ 6,067 $ -- $ 57,281
========= ========== ==========
Average primary shares
outstanding**................ 3,046,607 (3,046,607) 45,357,294
4,392,121
Average fully-diluted shares
outstanding**................ 3,046,607 (3,046,607) 46,253,793
4,410,598
Earnings per share:
Net income:
Primary**.................. $ 1.26
Fully diluted**............ $ 1.25
</TABLE>

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

* Restated to give effect to the April 22, 1997 pooling-of-interests
combination with Fort Brooke Bancorporation.

** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid on February 11, 1997.

PRO FORMA ADJUSTMENTS:
(In thousands)

PENDING BUSINESS COMBINATIONS

Adjustments applicable to the purchase method business combination with ASB
Bancshares:

(1) To amortize the assignment of estimated fair value in excess of
the carrying amount of assets acquired. The amortization consists of the
following:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Increases in income:
Amortization of write-down on fixed assets
(5 year period).......................... $ 17 $ 23
------- -------
Total............................... 17 23
------- -------
Increase in expense:
Interest on subordinated debentures (assumed
at 7.5%)................................. (435) (579)
Amortization of goodwill (15 year period)... (447) (596)
------- -------
Total............................... (882) (1,175)
------- -------
Net decrease in income before tax............. (865) (1,152)
Tax effect of the pro forma adjustments (other
than goodwill amortization)................. 163 217
------- -------
Net decrease in income.............. $ (702) $ (935)
======= =======
</TABLE>

50
<PAGE> 59

NONRECURRING CHARGES
(In thousands)

Nonrecurring charges and related tax effects which result directly from the
business combinations and which will be included in BancGroup's results are set
forth below. These charges are not reflected in the condensed pro forma
statements of income.

(1) Possible adjustments applicable to the purchase method business
combination with ASB.

<TABLE>
<S> <C>
Increase in expense:
Potential severance payable to terminated employees....... $ (87)
-------
Net decrease in income before taxes....................... (87)
Tax effect of the pro forma adjustment.................... 32
-------
Net decrease in income............................ $ (55)
=======
</TABLE>

(2) Possible adjustments applicable to the pooling of interest method
business combination with South Florida:

<TABLE>
<S> <C>
Increase in expense:
Potential severance payable to terminated employees....... $(188)
-------
Net decrease in income before tax......................... (188)
Tax effect of the pro forma adjustments................... 68
-------
Net decrease in income............................ $(120)
=======
</TABLE>

(3) Possible adjustments applicable to the pooling of interest method
business combination with United American:

<TABLE>
<S> <C>
Increase in expense:
Adjustment for immediate vesting under salary continuation
agreement.............................................. $(424)
Potential severance payable to terminated employees....... (76)
-------
Net decrease in income before tax........................... (500)
Tax effect of the pro forma adjustments..................... 183
-------
Net decrease in income............................ $(317)
=======
</TABLE>

(4) Possible adjustments applicable to the pooling of interest method
business combination with First Central:

<TABLE>
<S> <C>
Increase in expense:
Adjustment for immediate vesting under salary continuation
agreement.............................................. $(169)
Potential severance payable to terminated employees....... (6)
-------
Net decrease in income before tax........................... (175)
Tax effect of the pro forma adjustments..................... 64
-------
Net decrease in income............................ $(111)
=======
</TABLE>

51
<PAGE> 60

THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES

SELECTED FINANCIAL AND OPERATING INFORMATION

The following tables present certain financial information for BancGroup on
a historical basis for the nine months ended September 30, 1997 and 1996, as of
September 30, 1997 and, years ended December 31, 1996, 1995, 1994, 1993 and 1992
and as of December 31, 1996, 1995, 1994, 1993 and 1992 and on a pro forma basis
for the nine months ended September 30, 1997 and 1996, as of September 30, 1997
and, years ended December 31, 1996, 1995 and 1994.

The pro forma information includes consolidated BancGroup and subsidiaries
and consolidated First Independence, South Florida, United American, ASB, and
First Central. The pro forma balance sheet data gives effect to the combinations
as if they had occurred on December 31, 1996 and the pro forma operating data
gives effect to the combinations as if they occurred at the beginning of the
earliest period presented. Note that for the purchase method combination Article
11 of Regulation S-X requires pro forma statements to be presented for only the
most recent fiscal year and interim period. Accordingly, ASB is only included in
the pro forma information as of and for the nine months ended September 30, 1997
and the year ended December 31, 1996.

The following selected financial information should be read in conjunction
with the discussion set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and all of the financial
statements included elsewhere in this Prospectus and incorporated by reference.
The pro forma information provided below may not be indicative of future
results.

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
1997 1997 1996 1996
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income.................................... $406,590 $362,830 $329,810 $300,943
Interest expense................................... 201,509 182,497 162,712 151,547
-------- -------- -------- --------
Net interest income................................ 205,081 180,333 167,098 149,396
Provision for loan losses.......................... 9,633 8,833 7,116 6,292
-------- -------- -------- --------
Net interest income after provision for loan
losses........................................... 195,448 171,500 159,982 143,104
Noninterest income................................. 66,277 61,623 57,137 53,900
Noninterest expense................................ 163,390 143,609 142,305 129,378
-------- -------- -------- --------
Income before income taxes......................... 98,335 89,514 74,814 67,626
Applicable income taxes............................ 36,452 33,460 26,280 23,794
-------- -------- -------- --------
Net income......................................... $ 61,883 $ 56,054 $ 48,534 $ 43,832
======== ======== ======== ========
EARNINGS PER SHARE
Net income:
Primary.......................................... $ 1.28 $ 1.32 $ 1.09 $ 1.11
Fully-diluted.................................... $ 1.27 $ 1.31 $ 1.08 $ 1.10
Average shares outstanding
Primary.......................................... 48,334 42,370 44,479 39,525
Fully-diluted.................................... 48,954 42,963 45,163 40,204
Cash dividends:
Common........................................... $ 0.45 $ 0.45 $ 0.405 $ 0.405
</TABLE>

52
<PAGE> 61

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------------------------------------- -----------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA HISTORICAL HISTORICAL
1996 1995 1994 1993 1992 1996* 1995*
--------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest Income............. $456,746 $375,260 $281,009 $236,084 $226,057 $406,838 $341,826
Interest Expense............ 226,906 183,798 114,679 92,813 100,932 205,843 170,483
-------- -------- -------- -------- -------- -------- --------
Net interest income......... 229,840 191,462 166,330 143,271 125,125 200,995 171,343
Provision for possible loan
losses.................... 13,732 10,198 9,076 15,234 18,207 12,545 8,986
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan
losses.................... 216,108 181,264 157,254 128,037 106,918 188,450 162,357
Noninterest income.......... 77,818 63,891 56,889 55,649 50,217 72,382 60,527
Noninterest expense......... 201,037 167,747 157,622 144,335 129,476 178,851 150,654
SAIF special
assessment(1)............. 4,465 -- -- 4,465
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes..................... 88,424 77,408 56,521 39,351 27,659 77,516 72,230
Applicable income taxes..... 31,143 27,462 18,610 12,265 7,793 27,303 25,765
-------- -------- -------- -------- -------- -------- --------
Income before extraordinary
items..................... 57,281 49,946 37,911 27,086 19,866 50,213 46,465
Extraordinary items......... -- -- -- (396)
Cumulative effect of change
in accounting............. -- -- -- 3,933
-------- -------- -------- -------- -------- -------- --------
Net income.................. $ 57,281 $ 49,946 37,911 $ 30,623 $ 19,866 $ 50,213 $ 46,465
======== ======== ======== ======== ======== ======== ========
EARNINGS PER SHARE
Income before extraordinary
items:
Primary**................. $ 1.26 $ 1.17 $ 0.95 $ 0.73 $ 0.61 $ 1.26 $ 1.23
Fully Diluted**........... $ 1.25 $ 1.14 $ 0.95 0.73 0.61 1.25 1.19
Net Income:
Primary**................. $ 1.26 $ 1.17 $ 0.95 0.82 0.61 1.26 1.23
Fully Diluted**........... $ 1.25 $ 1.14 $ 0.95 0.82 0.61 $ 1.25 $ 1.19
Average shares outstanding
Primary**................. 45,357 42,630 39,796 37,194 32,361 39,764 37,912
Fully Diluted**........... 46,254 44,564 41,272 39,380 35,025 40,623 39,796
Cash dividends:
Common**.................. $ 0.54 $ 0.338 $ -- $ 0.540 $ 0.338
Class A**................. -- $ 0.113 $ 0.400 $ 0.355 $ 0.335 0.113
Class B**................. -- $ 0.063 $ 0.200 0.155 0.135 0.063

<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
BANCGROUP BANCGROUP BANCGROUP
HISTORICAL HISTORICAL HISTORICAL
1994* 1993* 1992*
---------- ---------- ----------
<S> <C> <C> <C>
STATEMENT OF INCOME
Interest Income............. $255,758 $204,322 $192,526
Interest Expense............ 105,797 81,008 86,283
-------- -------- --------
Net interest income......... 149,961 123,314 106,243
Provision for possible loan
losses.................... 8,254 11,767 14,625
-------- -------- --------
Net interest income after
provision for loan
losses.................... 141,707 111,547 91,618
Noninterest income.......... 54,149 50,990 46,226
Noninterest expense......... 144,119 125,901 112,340
SAIF special
assessment(1).............
-------- -------- --------
Income before income
taxes..................... 51,737 36,636 25,504
Applicable income taxes..... 17,243 11,249 6,960
-------- -------- --------
Income before extraordinary
items..................... 34,494 25,387 18,544
Extraordinary items......... (396)
Cumulative effect of change
in accounting............. 3,890
-------- -------- --------
Net income.................. $ 34,494 $ 28,881 $ 18,544
======== ======== ========
EARNINGS PER SHARE
Income before extraordinary
items:
Primary**................. $ 0.96 $ 0.81 $ 0.67
Fully Diluted**........... 0.95 0.81 0.67
Net Income:
Primary**................. 0.96 0.92 0.67
Fully Diluted**........... $ 0.95 $ 0.91 $ 0.67
Average shares outstanding
Primary**................. 35,907 31,272 27,785
Fully Diluted**........... 37,383 33,458 30,407
Cash dividends:
Common**..................
Class A**................. $ 0.040 $ 0.355 $ 0.335
Class B**................. 0.020 0.155 0.135
</TABLE>

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

* Restated to give retroactive effect to the April 22, 1997
pooling-of-interests business combination with Fort Brooke Bancorporation.

** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid February 11, 1997.
(1) Legislation approving a one-time special assessment to recapitalize the
Savings Association Insurance Fund ("SAIF") resulted in $4,465,000 in
expense before income taxes and $2,874,000 net of applicable income taxes in
1996.

53
<PAGE> 62

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1997 1997 1996* 1995* 1994* 1993* 1992*
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION
DATA
At year end:
Total assets............. $7,388,026 $6,605,927 $5,672,537 $4,960,165 $3,865,936 $3,728,270 $2,658,833
Loans, net of unearned
inc.................. 5,524,899 4,970,765 4,215,802 3,645,727 2,736,041 2,289,233 1,657,604
Mortgage loans held for
sale................. 182,878 182,878 157,966 112,203 61,556 368,515 150,835
Deposits............... 5,815,203 5,136,556 4,299,821 3,869,012 3,067,500 2,990,190 2,251,299
Long-term debt......... 112,755 101,099 39,092 47,688 86,662 57,397 22,979
Shareholders' equity... 539,434 472,353 402,708 352,731 275,319 256,866 165,142
Average daily balances
Total assets........... 6,695,111 5,956,312 5,286,587 4,373,227 3,708,350 3,015,787 2,592,966
Interest-earning
assets............... 6,142,738 5,462,405 4,835,713 3,985,649 3,349,026 2,681,428 2,294,670
Loans, net of unearned
income............... 5,000,795 4,479,967 3,931,084 3,123,407 2,477,768 1,813,569 1,615,713
Mortgage loans held for
sale................. 127,862 127,862 135,135 98,785 135,046 248,502 121,820
Deposits............... 4,485,524 3,913,525 4,032,610 3,420,881 2,994,868 2,407,015 2,181,233
Shareholders' equity... 485,780 424,886 383,401 308,532 269,353 200,217 159,785
Book value per share**... $ 11.34 $ 11.26 $ 10.29 $ 9.43 $ 7.93 $ 7.69 $ 6.34
Tangible book value per
share**................ $ 9.71 $ 9.66 $ 9.51 $ 8.62 $ 7.35 $ 7.18 $ 6.06
SELECTED RATIOS
Income before
extraordinary items and
the cumulative effect
of a change in
accounting for income
taxes to:
Average assets....... 1.22% 1.21% 0.95% 1.06% 0.93% 0.84% 0.72%
Average stockholders'
equity............. 16.81 16.84 13.09 15.06 12.81 12.68 11.61
Net income to:
Average assets....... 1.22 1.21 0.95 1.06 0.93 0.96 0.72
Average stockholders'
equity............. 16.81 16.84 13.09 15.06 12.81 14.42 11.61
Efficiency ratio(1)...... 62.44 58.92 64.94 64.39 69.83 71.96 73.16
Dividend payout.......... 30.45 33.28 42.86 36.59 41.67 38.59 50.00
Average equity to average
assets................. 7.26 7.13 7.25 7.06 7.26 6.64 6.16
Allowance for possible
loan losses to total
loans (Net of unearned
income)................ 1.24% 1.25% 1.27% 1.29% 1.55% 1.61% 1.50%
</TABLE>

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

* Restated to give retroactive effect to the April 22, 1997
pooling-of-interests business combinations with Fort Brooke Bancorporation.

54
<PAGE> 63

ASB BANCSHARES, INC. AND SUBSIDIARY

SELECTED FINANCIAL DATA

The following tables present selected historical financial data for ASB
Bancshares, Inc. and subsidiary. These tables should be read in conjunction with
the historical financial statements and notes thereto included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
AT AND FOR
THE NINE
MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31
------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
For the Period:
Interest income............................. $ 8,426 $ 7,774 $ 10,443 $ 9,242 $ 8,115 $ 7,523 $ 7,278
Interest expense............................ 4,163 3,823 5,141 4,621 3,531 3,200 3,413
-------- -------- -------- -------- -------- -------- ----------
Net interest income......................... 4,263 3,951 5,302 4,621 4,584 4,323 3,865
Provision for credit losses................. 45 45 60 72 72 66 82
-------- -------- -------- -------- -------- -------- ----------
Net interest income after provision for
credit losses............................. 4,218 3,906 5,242 4,549 4,512 4,257 3,783
Noninterest income.......................... 621 646 862 609 532 535 523
Noninterest expenses........................ 3,007 2,884 3,912 3,704 3,548 3,292 2,980
-------- -------- -------- -------- -------- -------- ----------
Income before taxes on income............... 1,832 1,668 2,192 1,454 1,496 1,500 1,326
Taxes on income............................. 630 540 743 450 457 458 402
-------- -------- -------- -------- -------- -------- ----------
Net income.................................. $ 1,202 $ 1,128 $ 1,449 $ 1,004 $ 1,039 $ 1,042 $ 924
======== ======== ======== ======== ======== ======== ==========
Per share data:
Net income per share...................... 14.29 12.68 16.45 11.28 11.68 11.72 10.41
Cash dividends declared................... 0.00 0.00 1.10 1.05 1.05 1.05 1.00
Book value at end of period............... 144.02 124.43 128.86 112.53 101.44 91.25 80.75
Common shares outstanding at end of
period.................................... 84,120 88,930 84,120 88,950 88,950 88,950 88,770
Weighted average common shares outstanding
during period............................. 84,120 88,948 88,100 88,950 88,950 88,950 88,768
At Period End:
Total assets at end of period............... 144,531 134,033 134,496 122,543 109,855 97,478 87,198
Cash and cash equivalents................... 4,188 5,139 6,942 5,320 4,688 6,415 3,326
Investment securities....................... 29,978 29,520 28,192 26,641 26,640 23,295 19,889
Loans receivable, net....................... 105,654 95,219 95,281 86,461 74,602 64,383 59,169
Deposits.................................... 130,990 121,687 122,437 111,442 99,869 88,640 79,365
Stockholders' equity........................ 12,115 11,066 10,840 10,009 9,023 8,117 7,168,167
Selected Ratios:
Allowance for credit losses as a percentage
of period-end total loans................. 0.49% 0.51% 0.52% 0.51% 0.48% 0.50% 0.47%
Allowance for credit losses as a percentage
of non-performing loans................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
Total non-performing loans as a percentage
of total loans............................ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total non-performing loans as a percentage
of total assets........................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total non-performing loans and real estate
owned as a percentage of total assets..... 0.00% 0.00% 0.00% 0.04% 0.07% 0.00% 0.00%
</TABLE>

55
<PAGE> 64

ASB BANCSHARES, INC. AND SUBSIDIARY

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996

The following discussion is provided to afford the reader an understanding
of the major elements of ASB's financial condition, results of operations,
capital resources and liquidity. It should be read in conjunction with the
financial statements and notes thereto and other information appearing elsewhere
in this Prospectus.

GENERAL

ASB's results of operations are primarily dependent upon the results of
operations of the Bank. The Bank conducts commercial banking business consisting
of attracting deposits from the general public and applying those funds to the
origination of commercial, consumer, and real estate loans (including commercial
loans collateralized by real estate). The Bank's profitability depends primarily
on net interest income, which is the excess of interest income generated from
interest-earning assets (i.e., loans, investments, and federal funds sold) over
interest expense incurred on interest-bearing liabilities (i.e., customer
deposits and borrowed funds). Net interest income is affected by the relative
amounts of interest-earning assets and interest-bearing liabilities, and the
interest rate earned and paid on these balances. Net interest income is
dependent upon The Bank's interest-rate spread which is the excess of average
yield earned on its interest-earning assets over the average rate paid on its
interest-bearing liabilities. When interest-earning assets approximate or exceed
interest-bearing liabilities, any positive interest rate spread will generate
net interest income. The interest-rate spread is impacted by interest rates and
the amounts of deposits and loans. Additionally, the Bank's profitability is
affected by such factors as the level of noninterest income and expenses, the
provision for credit losses, and the effective tax rate. Noninterest income
consists primarily of service fees on deposit accounts, other fees and income
from the sale of fixed assets, and investment securities. Noninterest expense
consists primarily of compensation and employee benefits, occupancy and
equipment expenses, directors and advisors fees, data processing costs, deposit
insurance premiums paid to the FDIC, and other operating expenses.

Management's discussion and analysis of earnings and related financial data
are presented herein to assist investors in understanding the financial
condition of ASB at, and the results of operations of ASB, for the years ended
December 31, 1996 and 1995. The discussion should be read in conjunction with
the consolidated financial statements and related footnotes of ASB Bancshares
presented elsewhere herein.

LIQUIDITY

ASB

ASB is a legal business entity separate and distinct from the Bank. ASB's
principal source of cash flow during 1996 was dividends from the Bank. Possible
future sources of cash flow for ASB include dividends or management fees from
the Bank. However, there are various statutory limitations on the ability of the
Bank to pay dividends, extend credit, or otherwise supply funds to ASB. The FDIC
and the Alabama State Banking Department also have the general authority to
limit the dividends paid by insured banks and bank holding companies. ASB
Bancshares paid cash dividends of $92,532 and $93,398 to its shareholders during
the years ended December 31, 1996 and 1995, respectively.

During the year ended December 31, 1996, ASB's cash and cash equivalents
increased $1.6 million, to $6.9 million as of December 31, 1996, from $5.3
million as of December 31, 1995. During 1996, investing activities used $10.6
million of cash, and financing activities provided $10.4 million of cash. ASB
Bancshares, Inc.'s total assets increased $12.0 million to $134.5 million at
December 31, 1996 from $122.5 million at December 31, 1995.

56
<PAGE> 65

The Bank

Liquidity management involves the ability to meet the cash flow
requirements of customers who may be depositors wanting to withdraw their funds
or borrowers needing assurance that sufficient funds will be available to meet
their credit needs. 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 of investment securities held-to-maturity. In addition to cash and
due from banks, the Bank considers all securities available-for-sale and federal
funds sold as primary sources of asset liquidity. Many factors affect the
ability to accomplish these liquidity objectives successfully, including
economic environment, and the asset/liability mix within the balance sheet, as
well as the Bank's reputation in the community. At December 31, 1996, the Bank
had commitments to originate loans totaling $1.7 million. In addition, scheduled
maturities of certificates of deposit during 1997 totaled $52 million.
Management believes that the Bank has adequate resources to fund all of its
commitments, that substantially all of its existing commitments will be funded
within 12 months and, if so desired, that the Bank can adjust the rates and
terms on certificates of deposit and other deposit accounts to retain deposits
in a changing interest rate environment.

A state-chartered commercial bank is required to maintain at all times a
reserve fund in an amount fixed by resolution of the State of Alabama banking
board. Such reserve on demand deposits shall not exceed 14% and shall be not
less than 7% of the total of such demand deposits. Such reserve on time and
savings deposits shall not exceed 6% and shall not be less than 3% of the total
of such time and savings deposits. The reserve shall consist of cash on hand and
demand deposits due from other banks.

CAPITAL RESOURCES

ASB's total stockholders' equity was $10.8 million and $10.0 million as of
December 31, 1996 and 1995, respectively, which represents an increase of
$800,000. This increase was a result of 1996's net income of $1.4 million offset
by the $43,000 change in unrealized losses at December 31, 1996 from December
31, 1995, dividends paid of $93,000, and purchase of treasury stock of $483,000.
ASB Bancshares, Inc.'s total stockholders' equity was 8.06% and 8.17% of total
assets as of December 31, 1996 and 1995, respectively. The Bank's total
stockholders' equity was $10.8 million and $10.0 million as of December 31, 1996
and 1995, or an increase of $800,000. This increase was a result of 1996's net
income of $872,000 less the $43,000 change in the unrealized securities losses
at December 31, 1996 from December 31, 1995.

The federal banking regulatory authorities have adopted certain "prompt
corrective action" rules with respect to depository institutions. The rules
establish five capital tiers: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized". The various federal banking regulatory agencies have adopted
regulations to implement the capital rules by, among other things, defining the
relevant capital measures for the five capital categories. An institution is
deemed to be "well capitalized" if it has a total risk-based capital ratio of
10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, and a Tier 1
leverage ratio of 5% or greater and is not subject to a regulatory order,
agreement, or directive to meet and maintain a specific capital level. At
December 31, 1996, the Bank met the capital ratios of a "well capitalized"
financial institution with a total risk-based capital ratio of 15.45%, and Tier
1 leverage ratio of 14.77%. Depository institutions which fall below the
"adequately capitalized" category generally are prohibited from making any
capital distribution, are subject to growth limitations, and are required to
submit a capital restoration plan. There are a number of requirements and
restrictions that may be imposed on institutions treated as "significantly
undercapitalized" and, if the institution is "critically undercapitalized," the
banking regulatory agencies have the right to appoint a receiver or conservator.

In accordance with risk capital guidelines issued by the FDIC, the Bank is
required to maintain a minimum standard of total capital to risk-weighted assets
of 8%. Additionally, the FDIC requires banks to maintain a minimum
leverage-capital ratio of Tier 1 capital (as defined) to total assets. The
leverage-capital ratio ranges from 3% to 5% based on the bank's rating under the
regulatory rating system. The required

57
<PAGE> 66

leverage-capital ratio for the Bank at December 31, 1996, was 8%. The following
table summarized the regulatory capital levels and ratios for the Bank:

<TABLE>
<CAPTION>
ACTUAL REGULATORY
RATIOS REQUIREMENT
------ -----------
<S> <C> <C>
At December 31, 1996:
Total capital to risk-weighted assets..................... 15.45% 8.00%
Tier 1 capital to risk-weighted assets.................... 14.77 4.00
Tier 1 capital to total assets-leverage ratio............. 8.06 4.00
At December 31, 1995:
Total capital to risk-weighted assets..................... 14.91 8.00
Tier 1 capital to risk-weighted assets.................... 14.26 4.00
Tier 1 capital to total assets-leverage ratio............. 8.08% 4.00%
</TABLE>

RESULTS OF OPERATIONS

General

ASB's net income was $1.4 million, or $16.45 per share, for the year ended
December 31, 1996, as compared to $1 million, or $11.28 per share, for the year
ended December 31, 1995, or an increase of $445,000 or 44.5%. ASB's income
before taxes on income was $2.2 million for the year ended December 31, 1996, as
compared to $1.5 million for the year ended December 31, 1995, or an increase of
$738,000 or 49.2%.

For the years ended December 31, 1996 and 1995, selected ratios were as
follows:

<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Average equity as a percentage of average assets............ 8.12% 8.19%
Return on average assets.................................... 1.13 0.87
Return on average equity.................................... 13.90 10.55
Noninterest expense to average assets....................... 3.05% 3.19%
</TABLE>

For the years ended December 31, 1996 and 1995, the following table
presents information regarding (i) the total dollar amount of ASB's interest
income from interest-earning assets and the resultant average

58
<PAGE> 67

yield; (ii) the total dollar amount of interest expense on interest-bearing
liabilities and the resultant average cost; (iii) net interest income; (iv) net
interest spread; and (v) net interest margin.

<TABLE>
<CAPTION>
1996 1995
----------------------------- -----------------------------
AVERAGE AVERAGE
AVERAGE YIELD AVERAGE YIELD
BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest earning asset:
Loans receivable:
Commercial.............................................. $ 6,899 $ 562 8.15% $ 5,426 $ 546 10.06%
Real estate:(1)
Construction and Mortgage............................. 75,741 7,203 9.51 67,314 5,763 8.56
Consumer and other...................................... 8,706 767 8.81 8,200 1,080 13.17
-------- ------- ---- -------- ------ -----
Total loans, net of unearned interest............... 91,346 8,532 9.34 80,940 7,389 9.13
Investments -- taxable.................................... 23,442 1,520 6.48 22,198 1,469 6.62
Investment -- tax free(2)................................. 3,975 236 9.34 4,442 284 9.80
Federal funds sold........................................ 2,413 155 6.42 950 100 10.53
-------- ------- ---- -------- ------ -----
Total interest-earning assets....................... 121,176 10,443 8.61% 108,530 9,242 8.52%
------- ---- ------ -----
Cash and due from banks................................... 3,719 4,054
Allowance for credit losses............................... (475) (409)
Other non-earning assets.................................. 4,101 4,023
-------- --------
Total assets........................................ $128,521 $116,198
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
NOW accounts............................................ $ 11,854 $ 308 2.60% $ 11,528 $ 272 2.36%
Savings................................................. 18,012 542 3.01 18,495 572 3.09
Time deposits:
Under $100,000........................................ 54,539 3,130 5.74 47,864 2,991 6.25
$100,000 and over..................................... 18,256 1,121 6.14 14,919 740 4.96
Open.................................................. 575 29 5.04 575 32 5.57
Long-term debt............................................ 149 11 7.38 191 14 7.33
-------- ------- ---- -------- ------ -----
Total interest-bearing liabilities.................. 103,385 5,141 4.97% 93,572 4,621 4.94%
------- ---- ------ -----
Demand deposits........................................... 13,704 12,274
Other liabilities......................................... 1,007 836
Stockholders' equity...................................... 10,425 9,516
-------- --------
Total liabilities and stockholders' equity.......... $128,521 $116,198
======== ========
SPREAD AND INTEREST DIFFERENTIAL:
Net interest income......................................... $ 5,302 $4,621
======= ======
Interest rate spread(3)..................................... 3.64% 3.58%
==== =====
Net interest margin(4)...................................... 4.38% 4.26%
==== =====
Excess of total interest-earning assets over
interest-bearing liabilities.............................. $ 17,791 $ 14,958
======== ========
</TABLE>

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

(1) Interest income on mortgage loans included loan fees recognized as income of
$262,000 and $137,000 during the years ended December 31, 1996 and 1995,
respectively.
(2) Yields on tax-free investments are computed on a tax equivalent basis using
a 34% effective income tax rate.
(3) Interest-rate spread represents the excess of the average yield on
interest-earning assets over the average cost of interest-bearing
liabilities.
(4) Net interest margin represents net interest income divided by average
interest-earning assets.

Net interest income

Net interest income, which constitutes the principal source of income for
ASB, represents the excess of interest income on interest-earning assets over
interest expense on interest-bearing liabilities. The principal interest-earning
assets are federal funds sold, investment securities and loans receivable.
Interest-bearing liabilities primarily consist of time deposits,
interest-bearing checking accounts ("NOW accounts"), savings deposits, and money
market accounts. Funds attracted by these interest-bearing liabilities are
invested in interest-earning assets. Accordingly, net interest income depends
upon the volume of average interest-earning assets and average interest-bearing
liabilities and the interest rates earned or paid on them.

59
<PAGE> 68

The following table sets forth certain information regarding changes in ASB
Bancshares, Inc.'s interest income and interest expense during the year ended
December 31, 1996, as compared to the year ended December 31, 1995. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in interest rate
(change in rate multiplied by prior volume), (2) changes in the volume (change
in volume multiplied by prior rate) and (3) changes in rate-volume (change in
rate multiplied by change in volume).

<TABLE>
<CAPTION>
INCREASE (DECREASE) DUE TO
-----------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
----- ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable:
Commercial............................................ $(104) $ 149 $(29) $ 16
Real estate:
Construction and Mortgage.......................... 639 722 79 1,440
Consumer and other.................................... (358) 67 (22) (313)
----- ------ ---- ------
Total loans receivable........................ 177 938 28 1,143
Investments -- taxable.................................. (31) 84 (2) 51
Investments -- tax free(1).............................. (21) (30) 3 (48)
Federal funds sold...................................... (39) 154 (60) 55
----- ------ ---- ------
Total interest-earning assets................. 86 1,146 (31) 1,201
----- ------ ---- ------
INTEREST-BEARING LIABILITIES:
NOW accounts.......................................... 27 8 1 36
Savings............................................... (15) (15) -- (30)
Time deposits under $100,000.......................... (244) 417 (34) 139
Time deposits $100,000 and over....................... 176 166 39 381
Open.................................................. (3) -- -- (3)
Long-term debt........................................ -- (3) -- (3)
----- ------ ---- ------
Total interest-bearing liabilities............ (59) 573 6 520
----- ------ ---- ------
Net change in net interest income..................... $ 145 $ 573 $(37) $ 681
===== ====== ==== ======
</TABLE>

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

(1) Yields on tax-free investments are computed on a tax equivalent basis using
a 34% effective income tax rate.

ASB's net interest income was $5.3 million for the year ended December 31,
1996, compared with $4.6 million for the year ended December 31, 1995, or an
increase of $700,000 or 15.3%. This increase in net interest income resulted
from a growth in earning assets of $12 million. Throughout 1996, management
received high priced deposit accounts which they applied to the origination of
loans. The 12% volume increase in 1996 from 1995 in interest expense was
primarily attributable to the 11% increase in average interest-bearing
liabilities. The yield on total investments and Federal Funds sold decreased 471
basis points reflecting a general decrease in the rate paid on Federal Funds
sold and securities maturing paying a higher interest rate than the securities
purchased. The interest rate paid on interest bearing liabilities increased 3
basis points primarily due to an increased amount of deposits as a result of
management's policy to price the Bank's deposits at competitive rates. The
overall result was an increase in the net interest margin to 4.38% during 1996
from 4.26% during 1995.

Provision for Credit Losses

The provision for credit losses is charged to earnings to bring the
allowance for credit losses to a level deemed appropriate by management and is
based upon historical experience, the volume and type of lending conducted by
ASB, the amounts of non-performing loans, general economic conditions,
particularly as they relate to ASB's market area, and other factors related to
the collectibility of ASB Bancshares, Inc.'s loan

60
<PAGE> 69

portfolio. During the year ended December 31, 1996, the provision for credit
losses was $60,000, as compared to $72,000 during the year ended December 31,
1995, or a decrease of $12,000. While the provision for credit losses decreased,
the allowance for credit losses increased to $498,000 at December 31, 1996, from
$451,000 at December 31, 1995, or an increase of $47,000. As of December 31,
1996 and 1995, the allowance for credit losses was .52% and .52%, respectively,
of total loans receivable, and was 0% and 0%, respectively, of non-performing
loans.

Other Income

Other income is primarily composed of deposit service charges and fees and
gains on sales of certain assets. During the year ended December 31, 1996, other
income increased to $862,000 from $609,000 during the year ended December 31,
1995, or an increase of $253,000 or 41.6%.

During the year ended December 31, 1996, deposit services charges and fees
increased to $625,000 from $515,000 during the year ended December 31, 1995, or
an increase $110,000 or 21.4%. This increase was primarily attributable to the
increase in service chargeable accounts and an increase of higher priced deposit
accounts in 1996.

Other Expenses

During the year ended December 31, 1996, other expenses increased to $3.9
million from $3.7 million during the year ended December 31, 1995, or an
increase of $200,000 or 5.41%. The following narrative sets forth additional
information on certain other expense categories which had significant changes:

During the year ended December 31, 1996, compensation and benefits
increased to $2.5 million from $2.3 million during the year ended December 31,
1995, or an increase of $200,000 or 8.7%. This increase was primarily due to an
increase in the number of employees at the Bank and annual compensation and
benefit increases for existing employees.

Professional fees decreased to $39,000 during 1996, from $64,000, or a
decrease of $25,000 or 39%. This decrease resulted in a reduction in attorney
fees and legal expense.

Supplies increased to $106,000 during 1996, from $96,000, or an increase of
$10,000 or 10.42%. This increase resulted from an increase in customer base, a
new branch, and a change to monthly statements on a large percentage of savings
accounts.

Postage increased to $83,000 during 1996, from $67,200 during 1995, or an
increase of $16,000 or 23.88%. This increase resulted primarily from an increase
in deposit accounts being mailed each month.

ATM expense increased to $43,000 during 1996, from $18,000 during 1995, or
an increase of $25,000 or 139%. This increase resulted primarily from ATM
machines being placed in service at the end of 1995.

FDIC and statement assessments insurance expense decreased to $19,000
during 1996, from $131,000 during 1995, a decrease of $114,000 or 87%. This
decrease resulted primarily from two factors: (i) the FDIC and state's reduction
in insurance premiums; and (ii) a reduction of the 4th Quarter Assessment to
$500.

Taxes on Income

During the years ended December 31, 1996 and 1995, ASB, recorded taxes on
income of $743,000 and $450,000, respectively, reflecting effective income tax
rates of 33.90% in 1996 and 30.98% in 1995. The increase in the effective income
tax rate during 1996 was primarily due to a decrease in tax-exempt interest.

ASSET/LIABILITY MANAGEMENT

A principal objective of ASB's asset/liability management strategy is to
minimize its exposure to changes in interest rates by matching the maturity and
repricing horizons of interest-earning assets and interestbearing liabilities.
The strategy is overseen in part through the direction of Bank's Asset and
Liability Committee (the "ALCO Committee") which establishes policies and
monitors results to control interest rate sensitivity.

61
<PAGE> 70

Management evaluates interest rate risk and then formulates guidelines
regarding asset generation and repricing, funding sources and pricing, and
off-balance sheet commitments in order to maintain interest rate risk within
target levels for the appropriate level of risk which are determined by the ALCO
Committee.

As a part of ASB's interest-rate risk management policy, the ALCO Committee
examines the extent to which its assets and liabilities are "interest-rate
sensitive" and monitors the Bank's interest-rate sensitivity gap". An asset or
liability is considered to be interest-rate sensitive if it will reprice or
mature within the time period analyzed, usually one year or less. The
interest-rate sensitivity gap is the difference between interest-earning assets
and interest-bearing liabilities scheduled to mature or reprice within such time
period. A gap is considered positive when the amount of interest-rate sensitive
assets exceeds the amount of interest-rate sensitive liabilities. A gap is
considered negative when the amount of interest-rate sensitive liabilities
exceeds interest-rate sensitive assets. During a period of rising interest
rates, a negative gap would tend to adversely affect net interest income, while
a positive gap would tend to adversely affect net interest income. In addition,
any premiums on mortgage-backed securities are amortized to interest income
based on the estimated remaining life of the related securities. Management
periodically reviews the remaining estimated life of mortgage-backed securities,
and adjusts the amortization of the premiums accordingly, in light of changes in
market interest rates and other factors affecting prepayment rates on the
underlying mortgages. Acceleration of the amortization of premiums on
mortgage-backed securities reduces the effective yield on these investments and,
accordingly, adversely affects net interest income. As of December 31, 1996, the
remaining unamortized premiums on mortgage-backed securities totaled $0. See
"-- Financial Condition -- Investment Securities."

The ALCO Committee's policy is to maintain a cumulative one-year gap which
falls in the range of (20%) to 20% of total assets. As of December 31, 1996,
ASB's cumulative one-year gap was a positive 14.62% of total assets. Management
attempts to conform to this policy by managing the maturity distribution of its
investment portfolio, emphasizing originations and purchases of
adjustable-interest rate loans, and by managing the product mix and maturity of
its deposit accounts.

A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, the ALCO Committee also evaluates how the repayment of
particular assets and liabilities is impacted by changes in interest rates.
Income associated with interest-earning assets and costs associated with
interest-bearing liabilities may not be affected uniformly by changes in
interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on net interest income. For example,
although certain assets and liabilities may have similar maturities or period of
repricing, they may react in different degrees to changes in market interest
rates. Interest rates on certain types of assets and liabilities fluctuate in
advance of changes in general market interest rates, while interest rates on
other types may lag behind changes in general market rates. In addition, certain
assets, such as adjustable-interest rate mortgage loans, have features
(generally referred to as "interest rate caps") which limit changes in interest
rates on a short-term basis and over the life of the asset. In the event of a
change in interest rates, prepayments (on loans and mortgage-backed securities)
and early withdrawal (of deposit accounts) levels also could deviate
significantly from those assumed in calculating the interest rate gap. The
ability of many borrowers to service their debts also may decrease in the event
of an interest rate increase.

Management's strategy is to maintain a relatively balanced interest-rate
risk position to protect its net interest margin from market fluctuations. To
this end, the ALCO Committee reviews, on a quarterly basis, the maturity and
repricing of assets and liabilities.

Management believes that the type and amount of ASB's interest rate
sensitive liabilities may reduce the potential impact that a rise in interest
rates might have on ASB's net interest income. ASB, seeks to maintain a core
deposit base by providing quality services to its customers without
significantly increasing its cost of funds or operating expenses. ASB's
noninterest bearing demand deposits, NOW accounts, money market, and savings
accounts were 35.9% and 38.8% of total deposits at December 31, 1996 and 1995,
respectively. These accounts bore a weighted average interest rate of 1.96% and
2.00% during the years ended December 31, 1996 and 1995, respectively.
Management anticipates that these accounts will continue to comprise a
significant

62
<PAGE> 71

portion of ASB's total deposit base. ASB, also maintains a relatively large
portfolio of liquid assets in order to reduce its overall exposure to changes in
market interest rates. ASB, also maintains a "floor", or minimum rate, on
certain of its floating or prime based loans. These floors allow ASB, to
continue to earn a higher rate when the floating rate falls below the
established floor rate.

The following table sets forth certain information relating to ASB
Bancshares, Inc.'s interest-earning assets and interest-bearing liabilities at
December 31, 1996, that are estimated to mature or are scheduled to reprice
within the period shown.

<TABLE>
<CAPTION>
0 TO 30 31 TO 90 91 TO 180 181 TO 365 OVER ONE
DAYS DAYS DAYS DAYS YEAR TOTALS
-------- -------- --------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans receivable:(1)
Commercial.............. $ 240 $ 580 $ 828 $ 1,005 $ 5,272 $ 7,925
Real estate
construction......... 7 19 27 33 177 263
Real estate mortgage.... 2,282 5,539 7,913 9,604 50,341 75,679
Commercial real
estate............... 118 285 408 495 2,587 3,893
Consumer and other...... 268 655 936 1,136 5,954 8,949
-------- -------- -------- -------- ------- --------
Total loans..... 2,915 7,078 10,112 12,273 64,331 96,709
Federal funds sold........ 3,225 -- -- -- -- 3,225
Investment Securities:(2)
Available-for-sale........ -- -- 301 -- 7,112 7,413
Held-to-maturity........ -- 510 877 3,060 16,332 20,779
-------- -------- -------- -------- ------- --------
Total
rate-sensitive
assets........ 6,140 7,588 11,290 15,333 87,775 128,126
-------- -------- -------- -------- ------- --------
Deposits:
NOW accounts............ 12,004 -- -- -- -- 12,004
Savings accounts........ 17,944 -- -- -- -- 17,944
Time deposits:(3)
Under $100,000....... 5,653 11,003 8,107 13,493 19,675 57,931
$100,000 and over.... 1,956 3,806 2,804 4,667 6,778 20,011
Open................. 575 -- -- -- -- 575
-------- -------- -------- -------- ------- --------
Total
rate-sensitive
liabilities... 38,132 14,809 10,911 18,160 26,453 108,465
-------- -------- -------- -------- ------- --------
Gap (repricing
differences)............ (31,992) (7,221) 379 (2,827) 61,322 19,661
======== ======== ======== ======== ======= ========
Cumulative Gap............ $(31,992) $(39,213) $(38,834) $(41,661) $19,661
======== ======== ======== ======== =======
Cumulative GAP/total
assets.................. (23.79)% (29.15)% (28.87)% (30.97)% 14.62%
======== ======== ======== ======== =======
</TABLE>

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

(1) In preparing the table above, adjustable-interest rate loans were included
in the period in which the interest rates are next scheduled to adjust
rather than in the period in which the loans mature. Fixed-interest rate
loans were scheduled according to their contractual maturities.
(2) In preparing the table above, adjustable-interest rate investment securities
were included in the period in which the interest rates are next scheduled
to adjust rather than in the period in which the investment securities
mature. Fixed-interest rate investment securities were scheduled according
to their contractual maturities.
(3) Time deposits were scheduled according to their contractual maturities.

63
<PAGE> 72

FINANCIAL CONDITION

Lending Activities

A significant source of ASB's income was in interest earned on its loan
portfolio. At December 31, 1996, ASB Bancshares, Inc.'s total assets were $134.5
million and its loans receivable, net were $95.3 million or 70.85% of total
assets. At December 31, 1995, ASB's total assets were $122.5 million and its
loans receivable, net were $86.5 million or 70.56% of total assets. The increase
in total loans receivable to December 31, 1996 from December 31, 1995, was $8.8
million or 10.2%.

For the years ended December 31, 1996 and 1995, the net change in total
loans receivable was approximately as follows:

<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Balances at beginning of year....................... $ 87,981 $ 75,989
Loan originations................................... 54,469 23,169
Loan repayments..................................... (45,728) (11,190)
Loans charged-off................................... (13) 13
Transfers to other real estate owned................ -- --
-------- --------
Balance at end of year.............................. $ 96,709 $ 87,981
======== ========
</TABLE>

The increase in loan originations during 1996 from 1995 was primarily due
to the emphasis placed by Bank's management during 1996 on soliciting new loans
and the opening of a new branch.

The Bank's primary market area consists of St. Clair County, Blount County,
and Etowah County, Alabama. Market risks are minimized by the geographic
dispersion of the various branches. The diverse mixture of customers have
incomes derived from a wide variety of sources. It does not appear that any
single adverse economic event would have a serious negative effect on bank
earnings or capital.

Lending activities are conducted pursuant to a written policy which has
been adopted by the Bank. Each loan officer has defined lending authority beyond
which loans, depending upon their type and size, must be reviewed and approved
by a loan committee comprised of certain officers and directors of the Bank.

As of December 31, 1996 and 1995, the composition of ASB's loan portfolio
was as follows:

<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
% OF % OF
AMOUNT TOTAL AMOUNT TOTAL
------- ------ ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial.................................... $ 7,925 8.19% $ 5,917 6.73%
Real estate construction...................... 263 0.28% -- 0.00%
Real estate mortgage.......................... 75,679 78.25% 68,540 77.90%
Commercial real estate........................ 3,893 4.03% 3,837 4.36%
Consumer and other............................ 8,949 9.25% 9,687 11.01%
------- ------ ------- ------
Total loans receivable.............. 96,709 100.00% 87,981 100.00%
====== ======
Less:
Unearned income and fees.................... (930) (1,069)
Allowance for credit losses................. (498) (0.52)% (451) (0.51)%
------- ====== ------- ======
Loans, net.......................... $95,281 $86,461
======= =======
</TABLE>

64
<PAGE> 73

As of December 31, 1996, the maturities and interest rate sensitivities of
ASB's loan portfolio based on remaining scheduled principal repayments, were as
follows:

<TABLE>
<CAPTION>
DUE IN DUE AFTER ONE
ONE YEAR YEAR THROUGH DUE AFTER
OR LESS 5 YEARS 5 YEARS TOTAL
-------- ------------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial.................................... $ 2,653 $ 3,482 $ 1,790 $ 7,925
Real estate construction...................... 86 115 62 263
Real estate mortgage.......................... 25,338 33,264 17,077 75,679
Commercial real estate........................ 1,306 1,713 874 3,893
Consumer and other............................ 2,995 3,936 2,018 8,949
------- ------- ------- -------
Total loans receivable.............. $32,378 $42,510 $21,821 $96,709
======= ======= ======= =======
Loans with maturities over one year:
Fixed-interest rate......................... $42,510 $21,821 $64,331
======= ======= =======
</TABLE>

Asset Quality

Management seeks to maintain quality assets through sound underwriting and
sound lending practices. The largest category of loans in ASB's loan portfolio
is collateralized by real estate mortgages. As of December 31, 1996 and 1995,
82.28% and 82.26%, respectively, of the total loan portfolio were collateralized
by this type of property. The level of delinquent loans and other real estate
owned also is relevant to the credit quality of a loan portfolio. As of December
31, 1996, total non-performing assets were $0 or 0% of total assets, compared to
$50,000 or .04% of total assets as of December 31, 1995.

The real estate mortgage loans in ASB Bancshares, Inc.'s portfolio consist
of fixed-interest rate loans which were originated at prevailing market interest
rates. The Bank's policy has been to originate real estate mortgage loans
predominantly in its primary market area. Real estate mortgage loans are
generally made in amounts up to 80% of the appraised value of the property
securing the loan. Real estate mortgages are generally made on the basis of the
borrower's ability to make repayment from his employment and other income, and
are collateralized by real property whose value tends to be readily
ascertainable.

Loan concentrations are defined as amounts loaned to a number of borrowers
engaged in similar activities which would cause them to be similarly impacted by
economic or conditions. ASB, on a routine basis, monitors these concentrations
in order to consider adjustments in its lending practices to reflect economic
conditions, loan to deposit ratios, and industry trends. As of December 31, 1996
and 1995, no concentration of loans within any portfolio category to any group
of borrowers engaged in similar activities or in a similar business exceeded 10%
of total loans, except that as of such dates, loans collateralized with
mortgages on real estate represented 82.56% and 82.27%, respectively, of the
loan portfolio and were to borrowers in varying activities and businesses.

The Loan Committee of the Board of Directors of the Bank concentrates its
efforts and resources and that of its senior management and lending officers on
loan review and underwriting procedures. Internal controls include ongoing
reviews of loans made to monitor documentation and the existence and valuations
of collateral. In addition, management of the Bank has established a review
process with the objective of identifying, evaluating, and initiating necessary
corrective action for marginal loans. The goal of the loan review process is to
address classified and non-performing loans as early as possible.

Classification of Assets

Generally, interest on loans accrues and is credited to income based upon
the principal balance outstanding. It is management's policy to discontinue the
accrual of interest income and classify a loan on non-accrual status when in the
opinion of management, principal or interest is not likely to be paid in
accordance with the terms of the obligation or when principal or interest is
past due 90 days or more unless, in the determination of management, the
principal and interest on the loan are well collateralized and in the process of
collection. Consumer installment loans are generally charged-off after 90 days
of delinquency unless adequately collateralized and in the process of
collection. Loans are not returned to accrual status until

65
<PAGE> 74

principal and interest payments are brought current and future payments appear
reasonably certain. Interest accrued and unpaid at the time a loan is placed on
non-accrual status is charged against interest income.

Real estate acquired by ASB, as a result of foreclosure or by deed in lieu
of foreclosure is classified as other real estate owned ("OREO"). OREO
properties are recorded at the lower of cost or fair value less estimated
selling costs, and the estimated loss, if any, is charged to the allowance for
credit losses at the time it is transferred to OREO. Further write-downs in OREO
are recorded at the time management believes additional deterioration in value
has occurred and are charged to nonintrusion expense.

Interest income that would have been recorded under the original terms of
loans on non-accrual status and interest income actually recognized were $0 and
$0, respectively, for the year ended December 31, 1996 and $0 and $0,
respectively, for the year ended December 31, 1995.

On January 1, 1995, ASB adopted Statements of Financial Accounting
Standards No. 114 and 118. These Statements address the accounting by creditors
for impairment of certain loans and generally require ASB to identify loans, for
which full repayment of principal and interest will probably not be received, as
impaired loans. The Statements require that impaired loans be valued at the
present value of the value of expected future cash flows, discounted at the
loan's effective interest rate, or at the observable market price of the loan,
or the fair value of the underlying collateral if the loan is collateral
dependent. ASB has implemented the Statements by modifying its quarterly review
of the adequacy of the allowance for credit losses related to these loans
totaling $0 and $0 as of December 31, 1996 and 1995, respectively. The average
balance of impaired loans amounted to approximately $0 and $0 during the years
ended December 31, 1996 and 1995, respectively. The adoption of the Statements
did not have a material effect on the results of operations for the year ended
December 31, 1995.

As of December 31, 1996 and 1995, loans on non-accrual status and other
real estate owned, the ratio of such loans and real estate owned to total
assets, and certain other related information were as follows:

<TABLE>
<CAPTION>
1996 1995
-------------- --------------
% OF % OF
TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS
------ ----- ------ -----
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Loans on non-accrual status:
Commercial.......................................... $ -- --% $ -- --%
Real estate construction............................ -- -- -- --
Commercial real estate.............................. -- -- -- --
Residential mortgage................................ -- -- -- --
Consumer and other.................................. -- -- -- --
---- ---- ---- ----
Total loans on non-accrual status........... -- -- -- --
Accruing loans over 90 days delinquent:
Residential mortgage................................ -- -- -- --
Troubled debt restructuring........................... -- -- -- --
---- ---- ---- ----
Total non-performing loans.................. -- -- -- --
==== ==== ==== ====
Other real estate owned............................... -- 50
==== ====
Total non-performing assets................. -- 50
==== ====
Loans past-due:
30-59 days delinquent............................... 195 0.20 142 0.16
60-89 days delinquent............................... 2 0.00 -- 0.00
---- ---- ---- ----
Total loans past-due 30 to 89 days.......... $197 0.20% $142 0.16%
==== ==== ==== ====
As a percentage of total assets:
Total non-performing loans.......................... 0.00% 0.00%
==== ====
Total non-performing assets......................... 0.00% 0.04%
==== ====
</TABLE>

66
<PAGE> 75

<TABLE>
<CAPTION>
1996 1995
-------------- --------------
% OF % OF
TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS
------ ----- ------ -----
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
</TABLE>

Allowance for credit losses as a percentage of:
Total loans......................................... 0.52% 0.62%
==== ====
Non-performing loans................................ 0.00% 0.00%
==== ====

As of December 31, 1996, loans on non-accrual status total $0.

As of December 31, 1996, there were no accruing loans over 90 days
delinquent.

As of December 31, 1996, loans 30 to 89 days deliquent totaled $197,000 and
consisted of 15 customer relationships.

Allowance for Credit Losses

In originating loans, ASB recognizes that credit losses will be experienced
and that the risk of loss will vary with, among other things, the type of loan
being made, the credit worthiness of the borrower over the term of the loan and,
in the case of a collateralized loan, the quality of the collateral for the
loan, as well as general economic conditions. As a matter of policy, ASB
maintains an allowance for credit losses. The amount provided for credit losses
during any period is based on an evaluation by management of the amount needed
to maintain the allowance at a level sufficient to cover anticipated losses and
the inherent risk of losses in the loan portfolio. In determining the amount of
the allowance, management considers the dollar amount of loans outstanding, its
assessment of known or potential problem loans, current economic conditions, the
risk characteristics of the various classifications of loans, credit record of
its borrowers, the fair market value of underlying collateral, and other
factors. Specific allowances are provided for individual loans when ultimate
collection is considered questionable by management after reviewing the current
status of loans which are contractually past due and considering the fair value
of the underlying collateral for each loan. See Results of
Operations -- Provision for Credit Losses.

As of December 31, 1996 and 1995, the allocation of the allowance for
credit losses was as follows:

<TABLE>
<CAPTION>
1996 1995
-------------- --------------
% OF % OF
LOANS LOANS
TO TO
TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS
------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial............................................ $ 24 0.03% $ 23 0.03%
Real estate construction.............................. -- -- -- --
Residential mortgage.................................. 75 0.08% 68 0.08%
Consumer and other.................................... 399 0.41% 360 0.42%
---- ---- ---- ----
Total allowance for credit losses........... $498 0.52% $451 0.52%
==== ==== ==== ====
</TABLE>

During the year ended December 31, 1996, the provision for credit losses
was $60,000, compared to $72,000 during the year ended December 31, 1995, or an
decrease of $12,000.

The Bank continued to provide for loan losses throughout 1996. Total
charged-off loans, net of recoveries, were $13,000 for 1996 and $(13,000) for
1995.

During 1996, $24,000 of loans were charged-off, of which $13,000 consisted
of unsecured loans. The three largest charged-off loans totaled $12,000,
representing 50% of the total loans charged-off. The first charged-off loan was
a $5,500 unsecured consumer loan. The second charged-off loan was a $4,000
consumer loan secured by a truck. The third charged-off loan was a $2,500
consumer loan secured by a truck.

67
<PAGE> 76

During the years ended December 31, 1996 and 1995, the activity in the ASB
allowance for credit losses was as follows:

<TABLE>
<CAPTION>
1996 1995
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Allowance at beginning of period............................ $ 451 $ 366
Loans charged-off:
Commercial................................................ -- --
Real estate construction.................................. -- --
Residential mortgage...................................... -- (5)
Consumer and other........................................ (24) (22)
------- -------
Total loans charged-off........................... (24) (27)
------- -------
Recoveries:
Commercial................................................ -- --
Real estate construction.................................. -- --
Residential mortgage...................................... -- 26
Consumer and other........................................ 11 14
------- -------
Total recoveries.................................. 11 40
------- -------
Net loans charged-off..................................... (13) 13
------- -------
Provision for credit losses charged to expense.............. 60 72
------- -------
Allowance at end of period.................................. $ 498 $ 451
======= =======
Net charge-offs as a percentage of average loans
outstanding............................................... 0.01% 0.02%
======= =======
Allowance for credit losses as a percentage of period-end
total loans receivable.................................... 0.52% 0.52%
======= =======
Allowance for credit losses as a percentage of
non-performing loans...................................... 0.00% 0.00%
======= =======
Average loans outstanding................................... 91,346 80,940
======= =======
Period-end total loans receivable........................... 96,709 87,981
======= =======
</TABLE>

Investment Securities

The total investment portfolio increased to $28.2 million as of December
31, 1996, from $26.6 million as of December 31, 1995, or an increase of $1.6
million or 6.02%. This increase was primarily from the increase in deposits
during 1996.

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<PAGE> 77

The following table sets forth the carrying balances of ASB's investment
portfolio as of December 31, 1996 and 1995:

<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Securities available-for-sale:
U.S. Treasury securities.................................. $ 3,731 $ 1,940
U.S. Government agency obligations........................ 3,380 2,153
State, county, and municipal securities................... 302 --
------- -------
Total securities available-for-sale............... $ 7,413 $ 4,093
======= =======
Securities held-to-maturity:
U.S. Treasury securities.................................. $ 8,297 $ 9,645
U.S. Government agency obligations........................ 8,796 8,137
State, county, and municipal securities................... 3,646 4,685
FNMA and FHLMC mortgage-backed securities................. 40 80
------- -------
Total held-to-maturity............................ $20,779 $22,547
======= =======
Total investment securities....................... $28,192 $26,640
======= =======
Federal funds sold.......................................... $ 3,225 $ 1,600
======= =======
Total investment portfolio........................ $31,417 $28,240
======= =======
</TABLE>

ASB has adopted Statement of Financial Accounting Standards No. 115 ("SFAS
115"), which requires companies to classify investment securities, including
mortgage-backed securities as either held-to-maturity, available-for-sale, or
trading securities. Securities classified as held-to-maturity are carried at
amortized cost. Securities classified as available-for-sale are reported at fair
value, with unrealized gains and losses, net of tax effect, reported as a
separate component of stockholders' equity. Securities classified as trading
securities are recorded at fair value, with unrealized gains and losses included
in earnings.

As allowed by "A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities" issued by the Financial
Accounting Standards Board, ASB reevaluated the classification of its investment
securities and on December 11, 1995, the Bank transferred selected securities
from its held-to-maturity category to its availale-for-sale catergory, a change
affecting securities with a total amortized cost of $1.1 million and a fair
value at the time of the transfer of $1.1 million.

69
<PAGE> 78

As of December 31, 1996, the maturity distribution and certain other
information pertaining to investment securities were as follows:

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE YIELD
--------- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Securities available-for-sale:
U.S. Treasury securities:
Due within one year.................................... $ 300 $ 301 6.428%
Due one to five years.................................. 2,879 2,898 6.078%
Due five to ten years.................................. 528 532 6.275%
------- ------- -----
$ 3,707 $ 3,731 6.178%
======= ======= =====
U.S. Government agency obligations:
Due one to five years.................................. $ 1,898 $ 1,888 4.449%
Due five to ten years.................................. 1,495 1,492 7.126%
------- ------- -----
$ 3,393 $ 3,380 5.657%
======= ======= =====
State, county, and municipal securities
Due over ten years..................................... $ 325 $ 302 8.673%
======= ======= =====
Total securities available-for-sale............... $ 7,425 $ 7,413 6.060%
======= ======= =====
Securities held-to-maturity:
U.S. Treasury securities:
Due within one year.................................... $ 3,750 $ 3,788 7.020%
Due one to five years.................................. 3,898 3,966 6.906%
Due five to ten years.................................. 649 664 6.523%
------- ------- -----
$ 8,297 $ 8,418 6.955%
======= ======= =====
U.S. Government agency obligations:
Due within one year.................................... $ 400 $ 404 8.034%
Due one to five years.................................. 4,550 4,527 6.431%
Due five to ten years.................................. 3,846 3,797 6.737%
------- ------- -----
$ 8,796 $ 8,728 6.663%
======= ======= =====
State, county and municipal obligations:(2)
Due within one year.................................... $ 270 276 9.965%
Due one to five years.................................. 817 825 9.414%
Due five to ten years.................................. 1,670 1,702 8.977%
Due over ten years..................................... 889 907 8.055%
------- ------- -----
$ 3,646 $ 3,710 8.942%
======= ======= =====
FNMA and FHLMC mortgage-backed securities:
Due within one year.................................... $ 27 $ 27 7.708%
Due one to five years(1)............................... 13 13 8.887%
------- ------- -----
$ 40 $ 40 7.500%
======= ======= =====
Total securities held-to-maturity................. $20,779 $20,896 7.181%
======= ======= =====
</TABLE>

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

(1) The mortgage-backed securities and collateral mortgage obligations were
purchased with an expected average life of approximately three years.
(2) Yields on state, county and municipal obligations are not computed on a tax
equivalent basis.

ASB invests in mortgage-backed securities that are guaranteed as to
principal and interest by the Government National Mortgage Association ("GNMA"),
the Federal Home Loan Mortgage Corporation ("FHLMC"), or the Federal National
Mortgage Association ("FNMA"). Although mortgage-backed

70
<PAGE> 79

securities generally have a lower yield than loans, mortgage-backed securities
increase the quality of ASB's assets by virtue of the guarantees that back them,
are more liquid than individual mortgage loans and may be used to collateralize
borrowings or other obligations of ASB. Due to repayment and prepayments of the
underlying loans, the actual maturities of mortgage-backed securities are
substantially less than the scheduled maturities. ASB's portfolio of
mortgage-backed securities was purchased with an anticipated average life of
approximately three years. Changes in interest and prepayment rates may also
affect the average life, yield to maturity, and related market value of ASB
Bancshares, Inc.'s mortgage-backed securities. Changes in the market values of
ASB Bancshares, Inc.'s mortgage-backed securities may result in volitility in
capital based on how ASB classifies the securities. See "Asset/Liability
Management".

Deposit Activities

Deposits are the major source of ASB's funds for lending and other
investment purposes. Deposits are attracted principally from within ASB's
primary market area through the offering of a broad variety of deposit
instruments including checking accounts, money market accounts, regular savings
accounts, term certificate accounts (including "jumbo" certificates in
denominations of $100,000 or more), and retirement savings plans. As of December
31, 1996 and 1995, the distribution by type of ASB's deposit accounts was as
follows:

<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
% OF % OF
AMOUNT DEPOSITS AMOUNT DEPOSITS
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Demand deposits............................... $ 13,971 11.41% $ 13,435 12.03%
NOW deposits.................................. 12,004 9.80% 11,704 10.51%
Savings accounts.............................. 17,945 14.66% 18,080 16.23%
Time deposits under $100,000.................. 57,931 47.31% 51,147 45.90%
Time deposits $100,000 and over............... 20,011 16.34% 16,501 14.81%
Time deposits open............................ 575 0.48% 575 0.52%
-------- ------ -------- ------
Total deposits...................... $122,437 100.00% $111,442 100.00%
======== ====== ======== ======
</TABLE>

Time deposits included individual retirement accounts ("IRAs") totaling
$10.7 million and $10.2 million at December 31, 1996 and 1995, all of which are
in the form of certificates of deposit.

ASB's deposits increased to $122.4 million as of December 31, 1996, from
$111.4 million as of December 31, 1995, or an increase of $11.0 million or
9.88%. This increase was primarily attributable to the Bank's pricing of
deposits at competitive rates.

Maturity terms, service fees, and withdrawal penalties are established by
the Bank on a periodic basis. The determination of rates and terms is predicated
on funds acquisition and liquidity requirements, rates paid by competitors,
growth goals, and federal regulations.

FDIC regulations limit the ability of certain insured depository
institutions to accept, renew, or rollover deposits of offering rates of
interest which are significantly higher than the prevailing rates of interest on
deposits offered by other insured depository institutions having the same type
of charter in such depository institutions' normal market area. Under these
regulations, "well capitalized" depository institutions may accept, renew, or
roll over deposits at such rates without restriction, "adequately capitalized"
depository institutions may accept, renew or roll over deposits at such rates
with a waiver from the FDIC (subject to certain restrictions on payments of
rates), and "undercapitalized" depository institutions may not accept, renew or
roll over deposits at such rates. As of December 31, 1996, the Bank met the
definition of a "well capitalized" depository institution.

ASB does not have a concentration of deposits from any one source, the loss
of which would have a material adverse effect on ASB. Management believes that
substantially all of ASB's depositors are residents in its primary market area.
ASB Bancshares, Inc., currently does accept brokered deposits.

71
<PAGE> 80

Time deposits of $100,000 and over, public fund deposits, and other large
deposit accounts tend to be short-term in nature and more sensitive to changes
in interest rates than other types of deposits and, therefore, may be a less
stable source of funds. In the event that exiting short-term deposits are not
renewed, the resulting loss of the deposited funds could adversely affect ASB's
liquidity. In a rising interest rate market, such short-term deposits may prove
to be a costly source of funds because their short-term nature facilities
renewal at increasingly higher interest rates, which may adversely affect ASB's
earnings. However, the converse is true in a falling interest-rate market where
such short-term deposits are more favorable to ASB.

As of December 31, 1996 and 1995, time deposits of $100,000 and over mature
as follows:

<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Due in three months or less................................. $ 8,647 $ 5,125
Due from three to one year.................................. 5,634 3,793
Due over one year........................................... 5,730 7,583
------- -------
Total time deposits $100,000 and over............. $20,011 $16,501
======= =======
</TABLE>

IMPACT OF INFLATION AND CHANGING PRICES

The financial statements and related data concerning ASB have been prepared
in accordance with generally accepted accounting principles which require the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation. The principal element of ASB's earnings is interest
income which may be significantly affected by the level of inflation and by
government monetary and fiscal policies adopted in response to inflationary or
deflationary pressures.

Inflation affects the reported financial condition and results of
operations of all companies. However, the majority of assets and liabilities of
financial institutions are monetary in nature and, therefore, differ greatly
from most commercial and industrial companies that have significant investments
in fixed assets or inventories. Inflation does have an important impact on the
growth of total assets and the resulting need to increase equity capital at
higher than normal rates in order to maintain an appropriate equity to assets
ratio. Inflation also is a factor which may influence interest rates, yet the
frequency and magnitude of interest rate fluctuations do not necessarily
coincide with changes in the general inflation rate. In an effort to cope with
the effects of inflation, ASB Bancshares, Inc., attempts to monitor its
interest-rate sensitivity gap position, as discussed above. In addition, a
periodic review of banking services and products is conducted to adjust pricing
in view of current costs.

FUTURE ACCOUNTING REQUIREMENTS

Statement of Financial Accounting Standards No. 125 ("SFAS 125"),
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial components approach that focuses on
control. SFAS 125 provides standards for distinguishing transfers of financial
assets from transfers that are secured borrowings. The accounting and disclosure
requirements of SFAS 125 will become effective for ASB beginning January 1,
1997. Management is in the process of evaluating SFAS 125, but does not
anticipate that SFAS 125 will have a material impact on ASB's financial
statements.

72
<PAGE> 81

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

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

Results of Operations for the Nine Months Ended September 30, 1997, Compared
to the Nine Months Ended September 30, 1996

ASB and the Bank's net income for the nine months ended September 30, 1997,
was $1,202,000, an increase of 6.56% from net income of $1,128,000 reported in
the first nine months of 1996. Net income per share was also up 12.7% to $14.29
from $12.68 reported in 1996. The principal reasons for this improvement were
the growth of assets and liabilities (due to increased market penetration).
Also, part of the increase in net income per share is due to the purchase of
treasury stock in 1997.

NET INTEREST INCOME

Net interest income totalled $4,263,000 for the first nine months of 1997,
or 7.9% higher than $3,951,000 in the first nine months of 1996. The increase in
net interest income was due to an increase of $10.4 million or 10.96% in loans
and an increase of $8.1 million or 7.61% in interest-bearing deposits. Earning
assets as of the end of the third quarter of 1997 were $135.6 million, up 8.73%
or $10.9 million from the $124.7 million reported at September 30, 1996. The
increase in earning assets reflects a $1.8 million or 6.6% increase in
investments securities and a $1.3 million decrease in federal funds sold. Net
loans at the end of the second quarter were $105.7 million, reflecting a $10.4
million increase from September 30, 1996.

The increase in earning assets was largely attributable to increases in
loans and investment securities. Total deposits at September 30, 1997, were $131
million, up $9.3 million or 7.64% from the $121.7 million reported at September
30, 1996. The increase resulted from a $142,000 decrease in NOW deposits, a
$543,000 decrease in money market deposits, a $525,000 increase in savings
deposits, and a $1,189,000 increase in non-interest-bearing demand deposits, in
addition to an increase of $8,274,000 in time deposits. The increase was due to
attractive and competitively priced deposit products and an expanded market
base. The positive effect of the increase in deposits in funding the growth of
earning assets was augmented by a $1,049,000 increase in stockholders' equity.

The net interest margin for the first nine months of 1997 was 3.24%
compared to 3.29% in 1996. This decrease was due to the impact of more rapidly
rising rates on deposits as well as growth in earning assets.

PROVISIONS FOR LOAN LOSSES

The provision for loan losses was $45,000 during the first nine months of
1997, compared to $45,000 for the first nine months of 1996.

NONINTEREST INCOME

Noninterest income for the first nine months of 1997 totalled $621,000,
which was 3.87% less than the $646,000 reported in the same period of the prior
year. The change was primarily due to ASB and the Bank's sale of fixed assets
during 1996.

NONINTEREST EXPENSE

Noninterest expenses totalled $3,007,000 for the first nine months of 1997,
up 4.26% or $123,000 from the $2,884,000 reported for the first nine months of
1996. The major factor in the change was an increase in personnel expense.

73
<PAGE> 82

PROVISION FOR INCOME TAXES

The income tax provision for the first nine months of 1997 totalled
$630,000 compared with $540,000 for the same period in 1996. The $90,000
increase from the prior year was attributable to an increase in ASB and the
Bank's net income.

STATEMENT OF CONDITION

Total assets as of September 30, 1997, were $144.5 million, up 7.84% from
$134 million on September 30, 1996. The growth in total assets paralleled the
growth in deposits discussed above. Net loans totalled $105.7 million at
September 30, 1997, representing a 10.96% increase from $95.2 million reported
at September 30, 1996. The increase in loans was due to increased business
development and favorable economic conditions. Investment securities totalled
$30 million at September 30, 1997, up 1.55% from $29.5 million on September 30,
1996. The increase in investments was due to the growth of deposits discussed
above.

The continuing profitability of ASB and the Bank resulted in an increase of
stockholders' equity to $12.1 million, or 9.48% more than the $11.1 million at
September 30, 1996.

ASSET QUALITY

The total non-performing assets at September 30, 1997 and 1996, were $0 and
$63,000, respectively. There were no loans which the Bank had specifically
classified as impaired on which the accrual of interest had been discontinued or
reduced at September 30, 1997 and 1996.

On January 1, 1995, ASB and the Bank adopted Financial Accounting Standards
Board Statement of Financial Accounting Standards ("SFAS") No. 114, Accounting
by Creditors for Impairment of Loan, and SFAS No. 118, Accounting by Creditors
for Impairment of a Loan -- Recognition and Disclosures, an amendment of SFAS
No. 114. These standards address the accounting for impairment of certain loans
when it is probable that all amounts due pursuant to the contractual terms of
the loan will not be collected. Adoption of these standards entailed the
identification of commercial, industrial, real estate commercial, and real
estate construction loans which are considered impaired under the provisions of
SFAS No. 114. Adoption of these statements did not have a material impact on ASB
and the Bank's financial position or results of operations and does not affect
the comparability of the above amounts at September 30, 1997, to prior periods.

PROVISION FOR LOAN LOSSES

The provision for loan losses for the nine months ended September 30, 1997,
was $45,000, compared to $45,000 for the first nine months of 1996. The
allowance for loan losses was $524,000 on September 30, 1997, which equaled .49%
of outstanding loans. This compares with $489,000 or .51% of outstanding loans
at September 30, 1996, and $498,000 or .52% of outstanding loans at December 31,
1996. The low level of loan loss reserves (relative to outstanding loans) is
attributable to the quality of the loan portfolio.

The quality of the loan portfolio remains sound, and the reserve for loan
losses is considered to be adequate to cover current credit related
uncertainties. Established credit review procedures ensure that close attention
is given to commercial real estate loans as well as other credit exposures which
may be adversely affected by a significant increase in interest rates and/or
down-turns of segments of the local economy.

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<PAGE> 83

BUSINESS OF BANCGROUP

GENERAL

BancGroup is a bank holding company registered under the BHCA. It was
organized in 1974 under the laws of Delaware and has operated under its current
name and management since 1981. BancGroup operates Colonial Bank as its wholly
owned commercial banking subsidiary in the states of Alabama, Georgia, Florida
and Tennessee. Colonial Bank, an Alabama banking corporation, conducts a full
service commercial banking business through 119 branches in Alabama, five
branches in Tennessee, fourteen branches in Georgia and 56 branches in Florida.
Colonial Mortgage Company, a subsidiary of Colonial Bank is a mortgage banking
company which services approximately $12.5 billion in residential loans and
which originates mortgages in 37 states through 4 divisional offices.
BancGroup's commercial banking loan portfolio is comprised primarily of
commercial real estate loans (24%) and residential real estate loans (45%), 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 above numbers and amounts are compiled as
of September 30, 1997. At September 30, 1997, BancGroup had consolidated total
assets of $6.6 billion and consolidated stockholders' equity of $472.4 million.

RECENTLY COMPLETED AND OTHER PROPOSED BUSINESS COMBINATIONS

Since September 30, 1997, BancGroup has acquired one banking institution,
First Independence, with assets and stockholders' equity acquired of $65.0
million and $6.3 million, respectively. This acquisition is included in the pro
forma statements contained herein. See "The Colonial BancGroup, Inc. and
Subsidiaries -- Condensed Pro Forma Statements of Condition (Unaudited)."

BancGroup has entered into a definitive agreement dated as of September 8,
1997, to acquire United American Holding Corporation ("United American"). United
American is a Florida corporation and is a holding company for United American
Bank located in Orlando, Florida. United American will merge with and into
BancGroup and following such merger United American Bank of Central Florida,
located in Orlando, Florida, will merge with Colonial Bank. BancGroup will issue
a maximum of 2,729,218 shares of its Common Stock, depending upon the market at
the time of the Merger. The actual number of shares of BancGroup Common Stock to
be issued in this transaction will depend upon the market value of BancGroup
Common Stock at the time of the acquisition. This transaction is subject to,
among other things, approval by the stockholders of United American and approval
by appropriate regulatory authorities. At September 30, 1997, United American
had assets of $260.8 million, deposits of $227.5 million and stockholders'
equity of $21.5 million.

BancGroup has entered into a definitive agreement dated as of September 4,
1997, to acquire South Florida Banking Corp. ("South Florida"). South Florida is
a Florida corporation and is a holding company for First National Bank of
Florida at Bonita Springs located in Bonita Springs, Florida. South Florida will
merge with and into BancGroup and, following such merger, First National Bank of
Florida at Bonita Springs will merge with Colonial Bank. BancGroup will issue a
maximum of 1,929,744 shares of its Common Stock, depending upon certain
conditions as defined in the Merger. This transactions is subject to, among
other things, approval by the stockholders of South Florida and approval by
appropriate regulatory authorities. At September 30, 1997, South Florida had
assets of $246.0 million, deposits of $215.9 million and stockholders' equity of
$16.9 million.

BancGroup has entered into a definitive agreement dated as of September 9,
1997, to acquire First Central Bank ("First Central"). First Central is a
Florida bank located in St. Petersburg, Florida. First Central will merge with
Colonial Bank. BancGroup will issue a maximum of 841,796 shares of its Common
Stock, depending upon the market at the time of the Merger. The actual number of
shares of BancGroup Common Stock to be issued in this transaction will depend
upon the market value of BancGroup Common Stock at the time of the acquisition.
This transaction is subject to, among other things, approval by the stockholders
of First Central and approval by appropriate regulatory authorities. At
September 30, 1997, First Central had assets of $56.6 million, deposits of $46.0
million and stockholders' equity of $10.1 million.

75
<PAGE> 84

YEAR 2000 COMPLIANCE

Most computer software programs and processing systems, including those
used by BancGroup and its subsidiaries in their operations have not been
designed to accommodate entries beyond the year 1999 in date fields. Failure to
address the anticipated consequences of this design deficiency could have
material adverse effects on the business and operations of any business,
including BancGroup, that relies on computers and associated technologies. In
response to the challenges of addressing such consequences in the banking
industry, bank regulatory agencies, including the Federal Reserve, BancGroup's
primary regulator, have established a Year 2000 Supervision Program and
published guidelines for implementing procedures to bring the computer software
programs and processing systems into year 2000 compliance.

In compliance with the guidelines of the Federal Reserve, BancGroup has
assigned staff on a full time basis to assess the impact of year 2000 on all
areas of BancGroup, Colonial Bank and the bank's mortgage company subsidiary.
The staff is responsible for developing and implementing a strategy to ensure
that all critical systems are year 2000 compliant and testing has begun by
fourth quarter 1998. All critical Bank software and processing systems are
currently being upgraded to year 2000 compliant status. The anticipated cost of
upgrading those systems for Colonial Bank is presently estimated to be
approximately $800,000. The mortgage company servicing system is scheduled to be
rewritten into year 2000 compliant format by November 1998. The cost of the
mortgage company servicing system rewrite, in addition to other systems upgrades
is estimated to be $2.7 million spread over the next two to three years.
BancGroup anticipates that these modifications will bring added functionality
and capacity to BancGroup. Micro computer based systems are currently being
assessed and the cost of bringing those systems into year 2000 compliance is not
currently ascertainable. The costs to bring other miscellaneous systems into
year 2000 compliance is not expected to be material.

VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS

As of April 30, 1997, BancGroup had issued and outstanding 40,740,357
shares of BancGroup Common Stock with 7,729 stockholders of record. Each such
share is entitled to one vote. In addition, as of that date, 1,839,981 shares of
BancGroup Common Stock were subject to issue upon exercise of options pursuant
to BancGroup's stock option plans and up to 512,800 shares of BancGroup Common
Stock were issuable upon conversion of BancGroup's 1986 Debentures. There are
currently 100,000,000 shares of BancGroup Common Stock authorized.

The following table shows those persons who are known to BancGroup to be
beneficial owners as of April 30, 1997, of more than five percent of BancGroup's
outstanding Common Stock.

<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME AND ADDRESS STOCK OUTSTANDING(1)
- ---------------- --------- --------------
<S> <C> <C>
Robert E. Lowder(2)......................................... 2,888,820(3) 6.78%
Post Office Box 1108
Montgomery, AL 36101
James K. Lowder............................................. 2,199,298 5.17%
Post Office Box 250
Montgomery, AL 36142
Thomas H. Lowder............................................ 2,146,106 5.04%
Post Office Box 11687
Birmingham, AL 35202
</TABLE>

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

(1) Percentages are calculated assuming the issuance of 1,839,981 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.

76
<PAGE> 85

(3) Includes 181,020 shares of BancGroup Common Stock subject to options under
BancGroup's stock option plans.

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 April 30, 1997.

<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME STOCK OUTSTANDING(1)
- ---- --------- --------------
<S> <C> <C>
DIRECTORS
Lewis Beville............................................... 1,816 *
Young J. Boozer............................................. 15,256(2) *
William Britton............................................. 19,616 *
Jerry J. Chesser............................................ 147,428 *
Augustus K. Clements, III................................... 18,600 *
Robert S. Craft............................................. 11,994 *
Patrick F. Dye.............................................. 37,960(3) *
Clinton O. Holdbrooks....................................... 280,900(4) *
D. B. Jones................................................. 20,714(5) *
Harold D. King.............................................. 156,108 *
Robert E. Lowder**.......................................... 2,888,820(6) 6.78%
John Ed Mathison............................................ 28,454 *
Milton E. McGregor.......................................... -- *
John C. H. Miller, Jr....................................... 70,480(7) *
Joe D. Mussafer............................................. 20,264 *
William E. Powell, III...................................... 14,352 *
J. Donald Prewitt........................................... 222,940(8) *
Jack H. Rainer.............................................. 2,900 *
Jimmy Rane.................................................. -- *
Frances E. Roper............................................ 365,342 *
Simuel Sippial.............................................. 2,774 *
Ed V. Welch................................................. 30,454 *
EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Purser L. McLeod, Jr........................................ 74,951(9) *
Young J. Boozer, III........................................ 46,920(9) *
W. Flake Oakley, IV......................................... 39,458(9) *
Michelle Condon............................................. 18,586(9) *
All Executive Officers and Directors as a Group............. 4,529,087(10) 10.64%
</TABLE>

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

* Represents less than one percent.
** Executive Officer.
(1) Percentages are calculated assuming the issuance of shares of Common Stock
pursuant to BancGroup's stock option plans.
(2) Includes 1,000 shares of Common Stock out of 2,000 shares owned by Young J.
Boozer, and Young J. Boozer, III EX U/W Phyllis C. Boozer.
(3) Includes 35,960 shares of Common Stock subject to options exercisable under
BancGroup's stock option plans.
(4) Includes 24,524 shares of Common Stock subject to options under BancGroup's
stock option plans, and 78,998 shares over which Mr. Holdbrooks serves as
trustee.
(5) Mr. Jones holds power to vote these shares as trustee.

77
<PAGE> 86

(6) These shares include 181,020 shares of Common Stock subject to options
under BancGroup's stock option plans. See the table at "Voting Securities
and Principal Stockholders."
(7) Includes 20,000 shares subject to options.
(8) Includes 61,604 shares subject to stock options.
(9) Young J. Boozer, III, W. Flake Oakley, IV, P.L. "Mac" McLeod, Jr. and
Michelle Condon, hold options respecting 25,000, 18,000, 26,000 and 11,000
shares of Common Stock, respectively, pursuant to BancGroup's stock option
plan.
(10) P.L. "Mac" McLeod, Jr. was nominated as President of BancGroup on August
12, 1997, and such nomination was approved by BancGroup's Board of
Directors on October 15, 1997.
(11) Includes shares subject to options.

MANAGEMENT INFORMATION

Certain information regarding the biographies of the directors and
executive officers of BancGroup, executive compensation and related party
transactions is included in (i) BancGroup's Annual Report on Form 10-K for the
fiscal year ending December 31, 1996, at items 10; (ii) BancGroup's Proxy
Statement for its 1997 Annual Meeting, at items 10, 11 and 13; and (iii)
BancGroup's Report on Form 8-K dated October 30, 1997; and is incorporated
herein by reference.

78
<PAGE> 87

BUSINESS OF ASB

GENERAL

ASB, a Delaware corporation, is a bank holding company registered with the
Federal Reserve under the BHC Act. As of September 30, 1997, ASB had
consolidated total assets of approximately $144.5 million and consolidated
stockholders' equity of approximately $12.1 million.

ASB conducts its business activities through its wholly-owned bank
subsidiary, the Bank, which is organized in Alabama as a commercial bank
chartered under the laws of the State of Alabama. The Bank operates from its
main office in Ashville, Alabama and at 8 branch offices located in Blount,
Etowah and St. Clair, Alabama counties. ASB's principal executive office is
located at 255 5th Street, Ashville, Alabama, 35953 and its telephone number at
such address is (205) 594-4141.

BUSINESS AND PROPERTIES

The Bank offers a full range of traditional commercial banking services
including demand, savings, and time deposits, consumer, commercial and real
estate loans, safe deposit boxes, access to a retail credit plan, drive-in
banking facilities and access to 24-hour teller machines through various
networks. The Bank owns the facility in which it operates described above.

As of September 30, 1997, the Bank had approximately 72 employees. The
parent company, ASB, has no salaried employees, although certain executive
officers hold parallel positions with the Bank. No employees are represented by
unions or other bargaining units, and management considers its relations with
employees to be satisfactory.

COMPETITION

ASB encounters vigorous competition in its market areas from a number of
sources, including bank holding companies and commercial banks, thrift
institutions, credit unions, other financial institutions and financial
intermediaries. Regional interstate banking laws and other recent federal and
state laws have resulted in increased competition from both conventional banking
institutions and other business offering financial services and products. The
Bank also competes for interest bearing funds with a number of other financial
intermediaries and investment alternatives, including brokerage firms "money
market" funds, government, and financial institutions, some of which have
greater financial resources than ASB. At September 30, 1997, there were
approximately 22 commercial bank branches, one savings bank branch, and three
credit union branches competing in Blount, Etowah and St. Clair, Alabama
counties.

LEGAL PROCEEDINGS

ASB and the Bank are not parties to any material legal proceedings other
than ordinary routine litigation incidental to their business.

79
<PAGE> 88

MANAGEMENT

The following table presents information about the directors and executive
officers of ASB and the Bank:

<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY
OWNED AT SEPTEMBER 30, 1997
PRESENT OCCUPATION AND POSITION AND OFFICE DIRECTOR OR --------------------------------
PRINCIPAL OCCUPATION FOR HELD WITH ASB EXECUTIVE PERCENT
NAME AGE LAST FIVE YEARS AND BANK OFFICER SINCE DIRECTLY INDIRECTLY OF CLASS
- ---- --- ------------------------ --------------------- ------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Joe Adkins............. 70 Banker (1) 1952 20,076 830 24.85
Wayne Harrison......... 57 Merchant Director 1976 320 0 .4
Lyman Lovejoy.......... 56 Realtor Director 1983 440 0 .5
Barry Rich............. 49 Pharmacist Director 1994 10 0 .01
Donnie Thomas.......... 43 Judge of Probate(2) Director 1991 10 0 .01
Donald Wilson.......... 60 Building Contractor Director 1986 764 1,564 2.8
Frances Wise........... 55 Banker (3) 1987 100 0 .12
Donald Sanders......... 44 Banker Senior Vice President 1988 130 0 .14
Barbara Moore.......... 54 Banker Vice President 1992 740 0 .88
Nancy Burton........... 44 Banker Senior Vice President 1993 30 0 .04
</TABLE>

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

(1) Chairman of the Board of ASB
President of ASB and
President and Chief Executive Officer of the Bank
(2) Judge of Probate for two years -- previously Blount County Administrator
(3) Executive Vice President of Ashville Savings Bank
Secretary and Treasurer of ASB Bancshares

Directors serve as directors of ASB and the Bank.

EMPLOYEE BENEFIT PLANS

ASB currently has a retirement plan which is termed as a money purchase
pension plan which is 100% funded by the Bank and involves both cash investments
and life insurance. ASB employees also have the option to have full health
coverage by Blue Cross Blue Shield of Alabama Insurance Company. The Bank pays
the premium for single coverage but further gives each employee the option of
paying an additional premium for full family coverage. In addition to this
regular medical coverage, each employee has the option to pay an additional
premium for a dental rider. Also each employee has a term life insurance policy.
Non-officers have $25,000 and officers have $50,000 in coverage. Each employee
receives 10 days sick leave per year cumulative to 30 days. Employees also are
given nine paid holidays per year. Each full time employee receives two weeks
paid vacation each year and those with ten years or more receive up to three
weeks vacation.

TRANSACTIONS WITH MANAGEMENT

In the ordinary course of business, the Bank has loans, deposits and other
transactions with its executive officers, directors, and organizations with
which such persons are associated. Such transactions are on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with others. The aggregate amount of loans to
the aforementioned persons and company(s) in which they have a 10% or more
ownership interest as of June 30, 1997 were approximately $761,000.

80
<PAGE> 89

VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF ASB

The following table sets forth certain information concerning the
beneficial owners of more than 5.0% of ASB Common Stock, as of the Record Date.
Unless otherwise indicated, the person listed is the record owner and has the
sole voting and investment power over the shares.

<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY
OWNED AT SEPTEMBER 30, 1997
----------------------------------------
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER DIRECTLY INDIRECTLY PERCENT OF CLASS
- -------------- ------------------------------------ -------- ---------- ----------------
<S> <C> <C> <C> <C>
Common...................... Joe W. Adkins 20,076 830 24.85%
31699 U.S. Highway 411
Ashville, Al 35953
Common...................... Carolyn Spann 10,600 -- 12.60%
31993 U.S. Highway 411
Ashville, Al 35953
</TABLE>

ADJOURNMENT OF SPECIAL MEETING

Adoption of the Agreement and the transaction contemplated by ASB's
stockholders requires the affirmative vote of the holders of the shares
representing a majority of the voting power present at the Special Meeting. In
the event there are an insufficient number of shares of ASB Common Stock present
in person or by proxy at the Special Meeting to approve the Agreement, ASB's
Board of Directors intends to adjourn the Special Meeting to a later date
provided a majority of the shares present and voting on the motion have voted in
favor of such adjournment. The place and date to which the Special Meeting would
be adjourned would be announced at the Special Meeting. Proxies voted against
the Agreement and abstentions will not be voted to adjourn the Special Meeting.
Abstentions and broker non-votes will not be voted on this matter but will not
count as "no votes." If it is necessary to adjourn the Special Meeting and the
adjournment is for a period of not more than 30 days from the original date of
the Special Meeting, no notice of the time and place of the adjourned meeting
need be given the stockholders, other than an announcement made at the Special
Meeting.

The effect of any such adjournment would be to permit ASB to solicit
additional proxies for approval of the Agreement. While such an adjournment
would not invalidate any proxies previously filed as long as the record date for
the adjourned meeting remained the same, including proxies filed by stockholders
voting against the Agreement, an adjournment would afford ASB the opportunity to
solicit additional proxies in favor of the Agreement.

OTHER MATTERS

The Board of Directors of ASB 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 ASB.

DATE FOR SUBMISSION OF BANCGROUP STOCKHOLDER PROPOSALS

In order to be eligible for inclusion in BancGroup's proxy solicitation
materials for its 1998 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 March 14, 1998.

LEGAL MATTERS

Certain legal matters regarding the shares of BancGroup Common Stock
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.

81
<PAGE> 90

Miller, Jr., a director of BancGroup, is a partner. Such firm received fees for
legal services performed in 1996 of $1,474,853. John C. H. Miller, Jr.
beneficially owns 38,352 shares of BancGroup Common Stock. Mr. Miller also
received employee-related compensation from BancGroup in 1996 of $41,000.
Certain legal matters relating to the Merger are being passed upon for ASB by
the law firm of Alston & Bird, LLP, Atlanta, Georgia.

EXPERTS

Coopers & Lybrand L.L.P. serves as the independent accountants for
BancGroup. The consolidated financial statements of BancGroup and the
supplemental consolidated financial statements of BancGroup as of December 31,
1996 and 1995 and for each of the three years ended December 31, 1996 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.

McGriff, Dowdy & Co. serves as the independent certified public accountants
for ASB. ASB's consolidated financial statements as of December 31, 1996 and for
the year ended December 31, 1996 are in this Prospectus in reliance upon the
report of such firm, are 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. ASB's consolidated financial statements
as of December 31, 1995 and for each of the two years ended December 31, 1995,
are in this Prospectus in reliance upon the report of Schauer, Taylor, Cox &
Edwards, P.C., independent certified public accountants and are given on the
authority of that firm as experts in accounting and auditing.

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 SECRETARY OF ASB PRIOR TO THE SPECIAL
MEETING, BY EXECUTING A LATER DATED PROXY AND DELIVERING IT TO THE SECRETARY OF
ASB PRIOR TO THE SPECIAL MEETING OR BY ATTENDING THE SPECIAL MEETING VOTING IN
PERSON.

82
<PAGE> 91

ASB BANCSHARES, INC. AND SUBSIDIARY

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
December 31, 1996 and 1995
Independent Auditors' Report.............................. F-2
Independent Auditors' Report.............................. F-3
Consolidated Balance Sheets............................... F-4
Consolidated Statements of Income......................... F-5
Consolidated Statements of Stockholders' Equity........... F-6
Consolidated Statements of Cash Flows..................... F-7
Notes to Consolidated Financial Statements................ F-8
September 30, 1997 and 1996
Unaudited Consolidated Balance Sheets..................... F-20
Unaudited Consolidated Statements of Income............... F-21
Unaudited Consolidated Statements of Cash Flows........... F-22
Note to Unaudited Consolidated Financial Statements....... F-23
</TABLE>

F-1
<PAGE> 92

Board of Directors

ASB Bancshares, Inc. and Subsidiary
Ashville, Alabama

INDEPENDENT AUDITORS' REPORT

We have audited the accompanying consolidated balance sheet of ASB
Bancshares, Inc. and Subsidiary as of December 31, 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Holding Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audit. The financial
statements of ASB Bancshares, Inc. and Subsidiary as of December 31, 1995, were
audited by other auditors whose report dated January 17, 1996, expressed an
unqualified opinion on those statements.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ASB
Bancshares, Inc. and Subsidiary as of December 31, 1996, and the results of its
operations and cash flows for the year then ended, in conformity with generally
accepted accounting principles.

/s/ McGriff, Dowdy & Associates, P.C.
McGriff, Dowdy & Associates, P.C.
Albertville, Alabama
January 23, 1997

F-2
<PAGE> 93

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
of ASB Bancshares, Inc. and Subsidiary
Ashville, Alabama

We have audited the consolidated balance sheets of ASB Bancshares, Inc. and
subsidiary as of December 31, 1995 and 1994, and the related consolidated
statements of income, shareholders' equity and cash flows for the years then
ended. 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 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 consolidated financial position of ASB Bancshares,
Inc. and subsidiary as of December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.

Schauer, Taylor, Cox & Edwards, P.C.

Birmingham, Alabama
January 17, 1996

F-3
<PAGE> 94

ASB BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
---------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT FOR
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 3,717 $ 3,720
Federal funds sold.......................................... 3,225 1,600
-------- --------
Total cash and cash equivalents................... 6,942 5,320
Investment securities:
Available for sale........................................ 7,413 4,093
Held to maturity.......................................... 20,779 22,548
Loans receivable, net of allowance for credit losses........ 95,281 86,461
Accrued interest receivable................................. 816 858
Property and equipment, less accumulated depreciation....... 3,080 3,069
Other assets................................................ 116 163
Deferred tax asset.......................................... 69 31
-------- --------
Total assets...................................... $134,496 $122,543
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits.................................................. $122,437 $111,442
Accrued interest payable.................................. 663 626
Long-term note payable.................................... 128 170
Other liabilities......................................... 373 273
Deferred tax liability.................................... 56 23
-------- --------
Total liabilities................................. 123,657 112,534
Stockholders' equity:
Common stock, par value $.01 per share, 150,000 shares
authorized, 90,000 shares issued....................... 1 1
Minority interest......................................... 1 1
Additional paid-in capital................................ 1,048 1,048
Retained earnings......................................... 10,331 8,975
Less: Treasury stock at cost (5,880 shares of common
stock, at cost)........................................ (534) (51)
Unrealized gain (loss) on securities available-for-sale,
Net of applicable deferred income taxes................ (8) 35
-------- --------
Total stockholders' equity........................ 10,839 10,009
-------- --------
Total liabilities and stockholders' equity........ $134,496 $122,543
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 95

ASB BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995
---------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT FOR SHARE AMOUNTS)
<S> <C> <C>
Interest Income:
Interest and fees on loans................................ $ 8,532 $ 7,390
Interest on investment securities
United States government obligations................... 1,491 1,469
Obligations of states and political subdivisions....... 265 284
Interest on federal funds sold............................ 155 99
------- -------
Total interest income............................. 10,443 9,242
------- -------
Interest Expense:
Interest on deposits...................................... 5,130 4,607
Interest on long-term debt................................ 11 14
------- -------
Total interest expense............................ 5,141 4,621
------- -------
Net interest income............................... 5,302 4,621
Provision for credit losses................................. 60 72
------- -------
Net interest income after provision for credit
losses........................................... 5,242 4,549
------- -------
Other Income:
Service charges and fees.................................. 730 515
Gain (loss) on sale of fixed assets and other real
estate................................................. 77 --
Gain on sale of investment securities..................... 25 9
Other..................................................... 30 85
------- -------
Total other income................................ 862 609
------- -------
Other Expenses:
Salaries and employee benefits............................ 2,546 2,319
Occupancy and equipment................................... 559 547
Directors and advisors fees............................... 140 127
Other..................................................... 667 711
------- -------
Total other expenses.............................. 3,912 3,704
------- -------
Income before income taxes........................ 2,192 1,454
Income tax provision........................................ 743 450
------- -------
Net income.................................................. $ 1,449 $ 1,004
======= =======
Net income per share of common stock........................ $ 16.45 $ 11.28
======= =======
Weighted average number of shares........................... 88,100 88,950
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 96

ASB BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
SECURITIES
AVAILABLE-
FOR-SALE,
NET OF
APPLICABLE
ADDITIONAL DEFERRED
CAPITAL PAID-IN RETAINED TREASURY INCOME
STOCK CAPITAL EARNINGS STOCK TAXES TOTAL
------- ---------- -------- -------- ------------- -------
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Balance --
December 31, 1994..................... $2 $1,048 $ 8,064 $ (51) $(41) $ 9,022
Dividends paid.......................... -- -- (93) -- -- (93)
Change in unrealized gains on securities
available-for-sale, net of applicable
deferred income taxes................. -- -- -- -- 76 76
Net income.............................. -- -- 1,004 -- -- 1,004
-- ------ ------- ----- ---- -------
Balance --
December 31, 1995..................... 2 1,048 8,975 (51) 35 10,009
Dividends paid.......................... -- -- (93) -- -- (93)
Purchase of 4,830 shares of treasury
stock................................. -- -- -- (483) -- (483)
Change in unrealized gains on securities
available-for-sale, net of applicable
deferred income taxes................. -- -- -- -- (43) (43)
Net income.............................. -- -- 1,449 -- -- 1,449
-- ------ ------- ----- ---- -------
Balance --
December 31, 1996..................... $2 $1,048 $10,331 $(534) $ (8) $10,839
== ====== ======= ===== ==== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 97

ASB BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1996 1995
--------- ---------
(DOLLARS IN
THOUSANDS, EXCEPT FOR
SHARE AMOUNTS)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income................................................ $ 1,449 $ 1,004
-------- --------
Adjustments to reconcile net income to net cash provided
by (used for) operating activities:
Provision for loan losses............................... 60 72
Provision for depreciation.............................. 276 286
Provision for amortization of intangible assets......... 16 --
Provision for deferred taxes............................ -- 20
Gain on sale of investment securities................... (25) (9)
Accretion of investment security discounts.............. (20) --
Amortization of investment security premiums............ 6 --
Gain on sale of fixed assets............................ (72) --
Gain (loss) on sale of other real estate................ (5) 5
Changes in assets and liabilities:
(Increase) decrease in accrued interest receivable...... 42 (64)
Increase in prepaid expenses............................ (18) --
Increase in deferred tax asset.......................... (33) --
Increase in accrued interest payable.................... 37 178
Increase (decrease) in other liabilities................ 59 (63)
Increase in corporate taxes payable..................... 43 --
Increase in deferred tax liability...................... 56 --
-------- --------
Total adjustments.................................. 422 425
-------- --------
Net cash provided by operating activities.......... 1,871 1,429
-------- --------
Cash Flows from Investing Activities:
Purchases of held-to-maturity securities.................. (3,852) (2,887)
Proceeds from maturities of held-to-maturity securities... 5,567 5,147
Principal paydowns on held-to-maturity securities......... 73 --
Purchases of available-for-sale securities................ (4,022) (2,331)
Proceeds from sale of available-for-sale securities....... 650 200
Net increase in loans..................................... (8,880) (11,930)
Proceeds from sale of fixed assets........................ 188 40
Purchase of premises, furniture, and equipment............ (403) (539)
Proceeds from sale of other real estate................... 54 20
-------- --------
Net cash used for investing activities............. (10,625) (12,280)
-------- --------
Cash Flows from Financing Activities:
Net increase in deposits.................................. $ 10,995 $ 9,729
Principal repayments on long-term debt.................... (43) (43)
Dividends paid............................................ (93) (93)
Net increase in demand deposits, NOW, and savings
accounts................................................ -- 1,844
Net increase in short-term borrowings..................... -- 46
Purchase of treasury stock................................ (483) --
-------- --------
Net cash provided by financing activities.......... 10,376 11,483
-------- --------
Net Increase in Cash and Cash Equivalents................... 1,622 632
Cash and Cash Equivalents, beginning of year................ 5,320 4,688
-------- --------
Cash and Cash Equivalents, end of year...................... $ 6,942 $ 5,320
======== ========
Supplemental Disclosures:
Interest paid in cash................................... $ 5,105 $ 4,443
Income taxes paid in cash............................... 677 451
Supplemental Schedule of Noncash Investing and Financing
Activities:
Investment securities of $1,101,570 were transferred
during December 1995 from held-to-maturity to securities
available-for-sale.
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE> 98

ASB BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

The Company provides financial services to individuals and corporate
customers and is subject to competition from other financial institutions. The
Company is also subject to the regulations of certain federal and state agencies
and undergoes periodic examinations by those regulatory authorities.

CONSOLIDATION

The consolidated financial statements include the accounts of ASB
Bancshares, Inc., (the "Company"), and its wholly owned subsidiary, Ashville
Savings Bank (the "Bank"). All significant intercompany balances and
transactions have been eliminated.

INVESTMENT SECURITIES

Effective January 1, 1994, the Company and its subsidiary bank adopted
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." This statement, among other things,
requires debt and equity securities to be divided into one of three categories:
held-to-maturity, available-for-sale, and trading.

The Bank's investments in securities are classified in two categories and
accounted for as follows:

Securities Held-to-Maturity Bonds, notes, and debentures for which
the Bank has the positive intent and ability to hold to maturity are
reported at cost, adjusted for amortization of premiums and accretion of
discounts which are recognized in interest income using methods which
approximate level yields over the period to maturity.

Securities Available-for-Sale Bonds, notes, debentures, and certain
equity securities not classified as securities held to maturity are
reported at fair value.

The Company and its subsidiary have no trading securities. During 1995, the
Financial Accounting Standards Board issued a report clarifying several
provisions of SFAS No. 115. The report authorized entities to "reassess the
appropriateness of the classifications of all securities" that were held when
the current rule took effect, without risking the classification of other
securities, for a limited period of time from November 15, 1995 to December 31,
1995. Effective December 11, 1995, the Bank transferred selected securities from
its held-to-maturity category to its available-for-sale category, a change
affecting securities with a total amortized cost of $1,101,570 and a fair value
at the time of the transfer of $1,135,279.

Unrealized holding gains and losses, net of tax, on securities
available-for-sale are reported as a net amount in a separate component of
stockholders' equity until realized.

Gains and losses on the sale of securities available-for-sale are
determined using the specific identification method.

CASH AND CASH EQUIVALENTS

The Company considers all cash and amounts due from depository
institutions, interest-bearing deposits in other banks, and federal funds sold
to be cash and cash equivalents for purposes of the statement of cash flows.

F-8
<PAGE> 99

ASB BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

Interest on loans is accrued and credited to operations based upon the
principal amount outstanding except for interest on certain consumer loans which
is recognized over the term of the loan using a method which approximates level
yields.

Accrual of interest is discontinued on a loan when management believes,
after considering economic and business conditions and collection efforts, that
the loan is impaired. Any unpaid interest previously accrued on those loans is
reversed from income. Interest income generally is not recognized on specific
impaired loans unless the likelihood of future loss is remote. Interest payments
received on such loans are applied as a reduction of the loan principal balance.
Interest income on other nonaccrual loans is recognized only to the extent of
interest payments received.

LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES

Loans are stated at the amount of unpaid principal, reduced by unearned
discount and an allowance for possible loan losses. Unearned discount on
installment loans is recognized as income over the terms of the loan by the
straight-line and simple interest methods. Interest on other loans is calculated
by using simple interest method on daily balances of the principal amount
outstanding. The allowance for possible loan losses is established through a
provision for loan losses charged to expense. The allowance is an amount that
management believes will be adequate to absorb possible losses on existing loans
that may become uncollectible based on evaluations of the collectibility of
loans and prior loan loss experience. The evaluations take into consideration
such factors as changes in nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current economic
conditions that may affect the borrower's ability to pay. Provisions for loan
losses and recoveries on loans previously charged off are added to the
allowance.

BANK PREMISES AND EQUIPMENT

Premises and equipment are stated at cost less accumulated depreciation.
Additions and improvements which extend the life of an asset are capitalized.
Expenditures for repairs and maintenance are charged against income when
incurred. The carrying values of assets traded in are used to adjust the
carrying values of the new assets acquired by trade. Assets which are disposed
of are removed from the accounts and the resulting gains or losses are recorded
in operations. Depreciation is computed by the straight-line and accelerated
methods based on the estimated useful lives of individual assets.

OTHER REAL ESTATE

Other real estate is comprised of properties acquired through a foreclosure
proceeding or acceptance of a deed in lieu of foreclosure. These properties are
carried at the lower of cost or fair market value based on appraised value at
the date acquired. Loan losses arising from the acquisition of such properties
are charged against the allowance for loan losses. An allowance for losses on
other real estate is maintained for subsequent valuation adjustments on a
specific property basis.

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.
Deferred taxes are recognized for differences between the basis of assets and
liabilities for financial statement and income tax purposes. The differences
relate to depreciable assets (use of different depreciation methods and lives
for financial statement and income tax purposes) and the loan loss provision
(use of different methods for financial statement and income tax

F-9
<PAGE> 100

ASB BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

purposes). The deferred tax assets and liabilities represent the future tax
return consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled.

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

USE OF ESTIMATES

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

Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans. While
management uses available information to recognize losses on loans, future
additions to the allowances may be necessary based on changes in local economic
conditions. In addition, regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for losses on
loans. Such agencies may require the Bank to recognize additions to the
allowances based on their judgements about information available to them at the
time of their examination.

OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS

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

The Bank has available as a source of short-term financing, the purchase of
federal funds from other commercial banks from available lines totaling
$3,000,000.

EARNINGS PER COMMON SHARE

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

EFFECT OF NEW FINANCIAL ACCOUNTING STANDARDS

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of
a Loan". SFAS No. 114, as amended by SFAS No. 118, became effective January 1,
1995, and requires that impaired loans that are within the scope of this
Statement be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical expedient,
at the loan's observable market price or the fair value of the collateral if the
loan is collateral dependent.

The adoption of SFAS No. 114 did not have a material effect on financial
position and results of operations.

F-10
<PAGE> 101

ASB BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- INVESTMENTS

The amortized cost and estimated market values of investment securities for
December 31, 1996, are as follows:

AVAILABLE-FOR-SALE SECURITIES

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. Government corporations and agencies.... $7,100 $34 $23 $7,111
Obligations of states and political
subdivisions................................. 325 3 26 302
------ --- --- ------
$7,425 $37 $49 $7,413
====== === === ======
</TABLE>

HELD-TO-MATURITY SECURITIES

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. Government corporations and agencies.... $17,134 $177 $125 $17,186
Obligations of states and political
subdivisions................................. 3,342 72 9 3,405
Obligations of private corporations............ 303 2 -- 305
------- ---- ---- -------
$20,779 $251 $134 $20,896
======= ==== ==== =======
</TABLE>

The following is a summary of maturities of securities held-to-maturity and
available-for-sale as of December 31, 1996 and 1995. 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>
1996
----------------------------------------
HELD-TO-MATURITY AVAILABLE-FOR-SALE
------------------- ------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- ------- --------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Amounts maturing in:
One year or less........................................ $ 4,446 $ 4,495 $ 300 $ 301
After one year through five years....................... 9,279 9,332 4,777 4,786
After five years through ten years...................... 6,165 6,162 2,024 2,024
After ten years......................................... 889 907 325 302
------- ------- ------ ------
$20,779 $20,896 $7,426 $7,413
======= ======= ====== ======
One year or less........................................ $ 2,472 $ 2,482 $ 500 $ 500
After one year through five years....................... 13,547 13,883 3,035 3,088
After five years through ten years...................... 5,673 5,775 499 505
After ten years......................................... 856 877 -- --
------- ------- ------ ------
$22,548 $23,017 $4,034 $4,093
======= ======= ====== ======
</TABLE>

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

F-11
<PAGE> 102

ASB BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Dispositions through calls, maturities, and paydowns of securities
held-to-maturity resulted in net gains of $12,563 and $9,332 for the years ended
December 31, 1996 and 1995, respectively.

During the year, the Company securities available-for-sale were called for
total proceeds of $650,000, resulting in gross realized gains of $12,637.

Securities with book values of approximately $15,635,000 and $14,596,000 at
December 31, 1996 and 1995, respectively, were pledged to secure various public
funds.

NOTE 3 -- RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS

The Bank is required by regulatory authorities to maintain average reserve
balances either in vault cash or on deposit with the Federal Reserve. The
average amount of those reserves required at December 31, 1996 and 1995, was
approximately $605,000 and $562,000, respectively.

NOTE 4 -- LOANS

The Bank grants loans primarily in Blount, Etowah, and St. Clair Counties
of North Central Alabama.

The major classifications of loans as of December 31, 1996 and 1995, were
as follows:

<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Commercial, Financial, and Agricultural..................... $ 7,925 $ 5,917
Real Estate -- Construction................................. 263 --
Real Estate -- Mortgage..................................... 79,572 72,377
Consumer.................................................... 8,908 9,010
Other (including overdrafts)................................ 41 677
------- -------
96,709 87,981
Less: Unearned Discount..................................... (930) (1,069)
Allowance for Possible Loan Losses.................... (498) (451)
------- -------
Net Loans................................................... $95,281 $86,461
======= =======
</TABLE>

A summary of transactions in the allowance for possible loan losses is as
follows:

<TABLE>
<S> <C> <C>
Balance -- Beginning of Year................................ $451 $366
Provision Charges to Operating Expenses..................... 60 72
Recoveries on Loans Previously Charged Off.................. 11 40
Loans Charged Off........................................... (24) (27)
---- ----
Balance -- End of Year...................................... $498 $451
==== ====
</TABLE>

Certain directors, executive officers, and principal shareholders,
including their immediate families and associates, were loan customers of the
Bank during the year. Such loans are made in the ordinary course of business at
normal credit terms, including interest rates and collateral and do not
represent more than a normal risk of collection. Total loans to these persons at
December 31, 1996 and 1995, amounted to approximately $823,000 and $984,000,
respectively.

There were no loans which the Bank had specifically classified as impaired
on which the accrual of interest had been discontinued or reduced at December
31, 1996 and 1995.

F-12
<PAGE> 103

ASB BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5 -- PREMISES AND EQUIPMENT

A summary of Bank premises and equipment at December 31, 1996 and 1995, is
as follows:

<TABLE>
<CAPTION>
1996 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 758 $ 871
Land Improvements........................................... 339 269
Buildings................................................... 2,414 2,386
Furniture and Equipment..................................... 1,809 1,756
Construction in Process..................................... 229 --
------ ------
5,549 5,282
Less Accumulated Depreciation............................... 2,469 2,213
------ ------
Bank Premises and Equipment -- Net.......................... $3,080 $3,069
====== ======
</TABLE>

Depreciation expense was $275,885 and $270,500 for the years ended December
31, 1996 and 1995, respectively.

NOTE 6 -- INCOME TAX PROVISION

The components of the provision for income taxes for the years ended
December 31, 1996 and 1995, are as follows:

<TABLE>
<CAPTION>
1996 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Current
Federal Income Tax Expense................................ $646 $396
State Excise Tax Expense.................................. 74 34
---- ----
720 430
Deferred Income Tax Expense....................... 23 20
---- ----
$743 $450
==== ====
</TABLE>

The components of the deferred income tax asset included in other assets
are as follows:

<TABLE>
<CAPTION>
1996 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Asset:
Federal................................................... $118 $ 99
State..................................................... 14 17
---- ----
Total Gross Deferred Tax Asset............................ 132 116
Less Valuation Allowance.................................. (63) (45)
---- ----
69 71
---- ----
Deferred Tax Liability:
Federal................................................... 50 53
State..................................................... 6 10
---- ----
56 63
---- ----
Net Deferred Tax Asset...................................... $ 13 $ 8
==== ====
</TABLE>

F-13
<PAGE> 104

ASB BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of each type of income and expense item that gave rise to
deferred taxes are:

<TABLE>
<CAPTION>
1996 1995
---- ----
(IN
THOUSANDS)
<S> <C> <C>
Net unrealized depreciation on securities
available-for-sale........................................ $ 4 $(23)
Depreciation................................................ (46) (29)
Allowance for Loan Losses................................... 127 115
Other....................................................... (9) (10)
---- ----
76 53
Less Valuation Allowance.................................... (63) (45)
---- ----
$ 13 $ 8
==== ====
</TABLE>

The net changes in total valuation allowance for the years ended December
31, 1996 and 1995, were $17,902 and $28,800, respectively.

NOTE 7 -- LONG-TERM DEBT

At December 31, 1996 and 1995, the Bank had a note payable in the amount of
$127,500 and $170,000, respectively, payable in annual installments of $42,500
plus interest at 7.25% through July 1999.

Maturities of long-term debt for the years ending December 31 are as
follows:

NOTE 8 -- DEPOSITS

The major classifications of deposits as of December 31, 1996 and 1995,
were as follows:

<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Non-interest-bearing demand................................. $ 13,971 $ 13,388
NOW accounts................................................ 12,004 11,704
Savings..................................................... 17,945 18,080
Time deposits of less than $100,000......................... 57,931 51,147
Time deposits of $100,000 or more........................... 20,011 16,501
Time deposits open.......................................... 575 575
-------- --------
$122,437 $111,395
======== ========
</TABLE>

The maturities of time certificates of deposit and other time deposits of
$100,000 or more issued by the Bank at December 31, 1996 and 1995, are as
follows:

<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Three months or less........................................ $ 8,647 $ 5,700
Over three through twelve months............................ 5,634 3,793
Over twelve months.......................................... 5,730 7,583
------- -------
$20,011 $17,076
======= =======
</TABLE>

F-14
<PAGE> 105

ASB BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9 -- FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers and
to reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and standby letters of credit.
Those instruments involve, to varying degrees, elements of credit and
interest-rate risk in excess of the amounts recognized in the statement of
financial position. The contract or notional amounts of those instruments
reflect the extent of involvement the subsidiary has in particular classes of
financial instruments.

The Bank's exposure to credit loss in the event of nonperformance by the
other parties to the financial instruments for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount of
those instruments. The Subsidiary uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.

<TABLE>
<CAPTION>
CONTRACT OR
NOTIONAL AMOUNT
---------------
1996 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Financial instruments whose contract amounts represent
credit risk:
Commitments to extend credit.............................. $1,463 $1,453
Standby letters of credit and financial guarantees
written................................................ 206 5
</TABLE>

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
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. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based upon
management's credit evaluation of the counterparty.

Standby 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 services to customers.

NOTE 10 -- RISK-BASED CAPITAL REQUIREMENTS

The Bank is required to maintain minimum amounts of capital to total "risk
weighted" assets, as defined by the banking regulators. The Bank met these ratio
requirements as of December 31, 1996 and 1995.

NOTE 11 -- CONCENTRATIONS OF CREDIT RISK

The majority of the Bank's loans and commitments and all commercial and
standby letters of credit have been granted to customers in the Bank's market
area (See Note 4). Investments in state and municipal securities also involve
governmental entities within the Bank's market area. The concentrations of
credit by type of loan are set forth in Note 4. The distribution of commitments
to extend credit related primarily to unused real estate draw lines. Commercial
and standby letters of credit are granted primarily to commercial borrowers.
Although the Subsidiary has diversified loan and investment portfolios, a
portion of the debtors' ability to honor their contracts is dependent upon
economic factors within the Bank's market area.

The Bank maintains its cash accounts at various commercial banks in
Alabama. The total cash balances in commercial banks are insured by the Federal
Deposit Insurance Corporation up to $100,000. Total uninsured balances held at
other commercial banks amounted to $163,376 and $94,081 at December 31, 1996 and
1995, respectively.

F-15
<PAGE> 106

ASB BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 12 -- RETIREMENT PLAN

The Bank has a money purchase pension plan covering all employees, subject
to eligibility requirements. The Bank makes annual contributions to the plan.
The plan benefits are fully vested at all times.

Contributions of the Bank for the years ended December 31, 1996 and 1995,
were $117,837 and $144,043, respectively.

NOTE 13 -- COMMITMENTS

As of December 31, 1996, the Company was in the process of constructing a
facility at its new Hokes Bluff location. The estimated cost of the project is
$450,000. As of December 31, 1996, construction in progress in the amount of
$229,222, had been recorded representing expenditures related to the project.
Management estimates that the project will be completed by April 1997.

NOTE 14 -- LITIGATION

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

NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to estimate
that value:

Cash and Short-Term Investments For those short-term investments, the
carrying amount is a reasonable estimate of fair value.

Investment Securities For securities and marketable equity securities
held for investment purposes, fair values are based on quoted market prices
or dealer quotes. For other securities held as investments, fair value
equals the quoted market price, if available. If a quoted market price is
not available, fair value is estimated using quoted market prices for
similar securities.

Loans Receivable For certain homogeneous categories of loans, such as
some residential mortgages and other consumer loans, fair value is
estimated using the quoted market prices for securities backed by similar
loans, adjusted for differences in loan characteristics. The fair value of
other types of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.

Deposit Liabilities The fair value of demand deposits, savings
accounts, and certain money market deposits is the amount payable on demand
at the reporting date. The fair value of fixed-maturity certificates of
deposit is estimated using the rates currently offered for deposit of
similar remaining maturities.

Long-term Debt For long-term debt, which bears interest at a current
rate, the carrying amount is a reasonable estimate of fair value.

Commitments to Extend Credit, Standby Letters of Credit, and Financial
Guarantees Written The fair value of commitments and letters of credit is
estimated to be approximately the same as the notional amount of the
related commitment.

F-16
<PAGE> 107

ASB BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The estimated fair values of the Company's financial instruments as of
December 31 are as follows:

<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial Assets:
Cash and Short-Term Investments............. $ 6,942 $ 6,942 $ 5,320 $ 5,320
Investment Securities....................... 28,192 28,309 26,641 27,109
Loans....................................... 95,779 95,736 86,912 --
Less Allowance for Loan Losses.............. 498 498 451 --
-------- -------- -------- --------
Net Loans................................... 95,281 95,238 86,461 86,715
-------- -------- -------- --------
Total Financial Assets........................ 130,415 130,489 118,422 119,144
======== ======== ======== ========
Financial Liabilities:
Deposits.................................... 122,437 123,419 111,442 111,934
Long-Term Debt.............................. 128 128 170 170
-------- -------- -------- --------
Total Financial Liabilities................... 122,565 123,547 111,612 $112,104
======== ======== ======== ========
Unrecognized Financial Instruments:
Commitments to Extend Credit................ $ 1,463 $ 1,463 $ 1,453 $ 1,453
Standby Letters of Credit................... 206 206 5 5
-------- -------- -------- --------
Total Unrecognized Financial Instruments...... $ 1,669 $ 1,669 $ 1,458 $ 1,458
======== ======== ======== ========
</TABLE>

F-17
<PAGE> 108

ASB BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 16 -- OTHER EXPENSES

The major components of other expense included in other expenses at
December 31, 1996 and 1995, are as follows:

<TABLE>
<CAPTION>
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Supplies.................................................... $106 $ 96
Postage..................................................... 83 67
Telephone................................................... 57 --
Computer Expense............................................ 51 54
Bank Charges................................................ 48 41
ATM Expense................................................. 43 18
Professional Fees........................................... 39 64
Miscellaneous............................................... 37 86
Advertising................................................. 36 37
Taxes and Licenses.......................................... 27 31
FDIC and State Assessments.................................. 19 131
Armed Guard................................................. 17 15
Goodwill Amortization....................................... 16 16
Dues and Subscriptions...................................... 16 --
Charge-Off Overdrafts....................................... 15 --
Club Expense................................................ 15 15
Senior Citizen Expenses..................................... 12 --
Contributions............................................... 11 --
Other Insurance............................................. 7 --
Teller Cash Over and Short.................................. 6 --
Education................................................... 4 8
Travel...................................................... 2 --
Bank Bond................................................... -- 32
---- ----
$667 $711
==== ====
</TABLE>

F-18
<PAGE> 109

ASB BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 17 -- CONDENSED PARENT COMPANY INFORMATION

BALANCE SHEETS

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 101 $ 103
Investment in and amounts due from subsidiary (equity
method) -- eliminated upon consolidation.................. 10,826 9,996
Other assets................................................ 4 2
------- -------
TOTAL ASSETS.............................................. $10,931 $10,101
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Dividends payable........................................... $ 93 $ 93
------- -------
TOTAL LIABILITIES......................................... 93 93
------- -------
STOCKHOLDERS' EQUITY...................................... 10,838 10,008
------- -------
$10,931 $10,101
======= =======
STATEMENTS OF INCOME
INCOME
From subsidiary -- eliminated upon consolidation
Dividends.............................................. $ 580 $ 93
EXPENSES
Other expenses............................................ 5 6
------- -------
Income before income taxes and equity in undistributed
earnings of subsidiary.................................... 575 87
INCOME TAX BENEFIT.......................................... 2 2
------- -------
Income before equity in undistributed earnings of
subsidiary................................................ 577 89
EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY.............. 872 915
------- -------
NET INCOME.................................................. $ 1,449 $ 1,004
======= =======
STATEMENTS OF CASH FLOWS
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net income................................................ $ 1,449 $ 1,004
Adjustments to reconcile net income to net cash:
Equity in undistributed income of subsidiary........... (872) (915)
Change in assets:
Other assets........................................... (3) (1)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 574 88
------- -------
CASH FLOWS USED BY FINANCING ACTIVITIES
Purchase of treasury stock................................ (483) --
Cash dividends paid to shareholders....................... (93) (93)
------- -------
NET CASH USED BY FINANCING ACTIVITIES....................... (576) (93)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (2) (5)
CASH AND CASH EQUIVALENTS -- Beginning of Year.............. 103 108
------- -------
CASH AND CASH EQUIVALENTS -- End of Year.................... $ 101 $ 103
======= =======
</TABLE>

F-19
<PAGE> 110

ASB BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C>
ASSETS
Cash and due from banks..................................... $ 4,187,624
Federal funds sold.......................................... 1,800,000
Investments available-for-sale.............................. 9,317,174
Investments held-to-maturity................................ 18,860,676
Loans, net.................................................. 105,654,169
Premises and equipment, net................................. 3,478,282
Accrued interest receivable................................. 1,054,497
Prepaid expenses............................................ 78,291
Other assets................................................ 36,484
Deferred tax asset.......................................... 63,386
------------
Total assets...................................... $144,530,583
============

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing...................................... $ 16,216,950
Interest-bearing.......................................... 114,773,093
------------
130,990,043
Accrued interest payable.................................... 753,529
Long-term note payable...................................... 85,000
Other liabilities........................................... 352,478
Corporate income taxes payable.............................. 130,842
Deferred tax liability...................................... 103,797
------------
Total Liabilities................................. $132,415,689
============
Stockholders' equity:
Common stock, par value $.01 per share, 150,000 shares
authorized, 90,000 shares issued....................... 900
Minority interest......................................... 1,400
Additional paid-in capital................................ 1,048,350
Retained earnings......................................... 11,532,547
Less: treasury stock at cost (5,880 shares of common
stock, at cost)........................................ (533,829)
Unrealized gain on securities available-for-sale, net of
applicable deferred income taxes....................... 65,526
------------
Total liabilities and stockholders' equity........ $144,530,583
============
</TABLE>

See accompanying note to unaudited financial statements.

F-20
<PAGE> 111

ASB BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
Interest income:
Loans..................................................... $6,877,113 $6,356,983
Investment securities..................................... 1,424,082 1,317,636
Federal funds sold........................................ 124,569 99,533
---------- ----------
Total interest income............................. 8,425,764 7,774,152
---------- ----------
Interest expense:
Deposits.................................................. 4,156,658 3,813,999
Long-term debt............................................ 6,419 8,730
---------- ----------
Total interest expense............................ 4,163,077 3,822,729
---------- ----------
Provision for loan losses................................... 45,000 45,000
Net interest income after provision for loan
losses....................................... 4,217,687 3,906,423
Noninterest income:
Service charges on deposits............................... 521,971 455,826
Other fees and commissions................................ 79,057 83,215
Gain on sale of fixed assets.............................. 8,649 74,646
Gain on sale of other real estate......................... -- 4,955
Gain on sale of investments............................... 995 12,563
Other operating income.................................... 9,980 14,283
---------- ----------
Total noninterest income.......................... 620,652 645,488
---------- ----------
Noninterest expense:
Salaries and employee benefits............................ 1,955,614 1,856,535
Occupancy and equipment................................... 418,398 425,087
Other expenses............................................ 632,949 601,906
---------- ----------
Total noninterest expense......................... 3,006,961 2,883,528
---------- ----------
Income before income taxes.................................. 1,831,378 1,668,383
Income tax provision........................................ 629,615 540,013
---------- ----------
Net Income........................................ $1,201,763 $1,128,370
========== ==========
Net Income Per Share of Common Stock.............. $ 14.29 $ 12.68
========== ==========
Weighted Average Number of Shares................. 84,120 88,948
========== ==========
</TABLE>

See accompanying note to unaudited financial statements.

F-21
<PAGE> 112

ASB BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 1,201,763 $ 1,128,370
----------- -----------
Adjustments to reconcile net income to net cash:
Provision for loan losses.............................. 45,000 45,000
Provision for depreciation............................. 212,373 207,110
Provision for amortization of intangible assets........ 12,150 12,150
Gain on sale of investment securities.................. (995) (12,563)
Accretion of investment security discounts............. (15,103) (14,722)
Amortization of investment security premiums........... 7,274 3.677
Gain on sale of fixed assets........................... (8,649) (74,646)
Gain on sale of other real estate...................... -- (4,955)
Changes in assets and liabilities:
(Increase) in accrued interest receivable.............. (239,096) (67,095)
Increase in prepaid expenses........................... (10,769) (23,245)
(Increase) decrease in deferred tax asset.............. 803 (32,937)
Increase in other assets............................... (34) (10,000)
Increase in accrued interest payable................... 90,899 8,420
Increase in other liabilities.......................... 62,483 158,856
Increase in corporate taxes payable.................... 47,605 34,275
Increase in deferred tax liability..................... 9,940 52,333
----------- -----------
Total adjustments................................. 213,881 281,658
----------- -----------
Net cash provided by operating activities......... 1,415,644 1,410,028
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of held-to-maturity securities.................. (1,134,900) (3,201,562)
Proceeds from maturities of held-to-maturity securities... 3,041,259 5,070,041
Principal paydowns on held-to-maturity securities......... 13,073 63,754
Purchases of available-for-sale securities................ (2,580,462 (1,802,219)
Proceeds from sale of available-for-sale securities....... 800,000 --
Net increase in loans..................................... (10,418,302) (8,866,687)
Proceeds from sale of fixed assets........................ 8,990 179,965
Purchase of premises and equipment........................ (610,788) (190,864)
Proceeds from sale of other real estate................... -- 54,955
----------- -----------
Net cash used for investing activities............ (10,881,130) (8,692,617)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in non-interest-bearing deposits............. 2,246,120 1,593,718
Net increase in interest-bearing deposits................. 6,307,195 8,652,075
Principal repayments on long-term debt.................... (42,500) (42,500)
Purchase of treasury stock................................ -- (2,000)
----------- -----------
Net cash provided by financing activities......... 8,510,815 10,201,293
----------- -----------
Net increase (decrease) in cash and due from banks.......... (954,671) 2,918,704
Cash and due from banks at beginning of period.............. 6,942,295 5,319,840
----------- -----------
Cash and due from banks at end of period.................... $ 5,987,624 $ 8,238,544
=========== ===========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest............................................... $ 4,072,178 $ 3,814,309
Income Taxes........................................... 567,737 486,342
Supplemental schedule of noncash investing activities:
Change in net unrealized holding losses/gains on
securities available-for-sale, net of taxes of $37,938
and $20,386, respectively.............................. $ 73,159 $ (70,185)
Loans transferred to other real estate owned.............. $ -- $ 63,138
</TABLE>

See accompanying note to unaudited financial statements.

F-22
<PAGE> 113

ASB BANCSHARES, INC. AND SUBSIDIARY

NOTE TO UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

NOTE 1 -- BASIS OF PRESENTATION:

The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the Bank, the financial
statements reflect all adjustments which are of a normal recurring nature and
which are necessary to present fairly the financial position of the Bank as of
September 30, 1997, and the results of operations for the nine months ended
September 30, 1997 and 1996, and cash flows for the nine months ended September
30, 1997 and 1996. The results of operations for the nine months ended September
30, 1997, are not necessarily indicative of the results which may be expected
for the entire fiscal year.

F-23
<PAGE> 114

APPENDIX A

AGREEMENT AND PLAN OF MERGER

BY AND BETWEEN

THE COLONIAL BANCGROUP, INC.,

AND

ASB BANCSHARES, INC.

DATED AS OF

AUGUST 28, 1997

A-1
<PAGE> 115

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 Certificate of Incorporation and Bylaws..................... A-5
2.4 Resulting Corporation's Officers and Board.................. A-6
2.5 Stockholder Approval........................................ A-6
2.6 Further Acts................................................ A-6
2.7 Effective Date and Closing.................................. A-6
2.8 Subsidiary Bank Merger...................................... A-6

ARTICLE 3 -- CONVERSION OF ACQUIRED CORPORATION STOCK
3.1 Conversion of Acquired Corporation Stock.................... A-6
3.2 Surrender of Acquired Corporation Stock..................... A-7
3.3 Fractional Shares........................................... A-7
3.4 Adjustments................................................. A-7
3.5 BancGroup 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 Agreement....................................... 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 SEC Filings................................................. A-10
4.15 Form S-4.................................................... A-11
4.16 Brokers..................................................... A-11
4.17 Government Authorization.................................... A-11
4.18 Absence of Regulatory Communications........................ A-11
4.19 Disclosure.................................................. A-11

ARTICLE 5 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIRED
CORPORATION
5.1 Organization................................................ A-11
5.2 Capital Stock............................................... A-11
5.3 Subsidiaries................................................ A-11
</TABLE>

A-2
<PAGE> 116
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
5.4 Financial Statements; Taxes................................. A-12
5.5 Absence of Certain Changes or Events........................ A-13
5.6 Title and Related Matters................................... A-14
5.7 Commitments................................................. A-14
5.8 Charter and Bylaws.......................................... A-14
5.9 Litigation.................................................. A-15
5.10 Material Contract Defaults.................................. A-15
5.11 No Conflict with Other Instrument........................... A-15
5.12 Governmental Authorization.................................. A-15
5.13 Absence of Regulatory Communications........................ A-15
5.14 Absence of Material Adverse Change.......................... A-15
5.15 Insurance................................................... A-15
5.16 Pension and Employee Benefit Plans.......................... A-16
5.17 Buy-Sell Agreement.......................................... A-16
5.18 Brokers..................................................... A-16
5.19 Approval of Agreements...................................... A-16
5.20 Disclosure.................................................. A-16
5.21 Registration Statement...................................... A-16
5.22 Loans; Adequacy of Allowance for Loan Losses................ A-17
5.23 Environmental Matters....................................... A-17
5.24 Transfer of Shares.......................................... A-17
5.25 Collective Bargaining....................................... A-17
5.26 Labor Disputes.............................................. A-17
5.27 Derivative Contracts........................................ A-18

ARTICLE 6 -- ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup........................... A-18
6.2 Additional Covenants of Acquired Corporation................ A-20

ARTICLE 7 -- MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation................................... A-22
7.2 Press Release............................................... A-22
7.3 Mutual Disclosure........................................... A-22
7.4 Access to Properties and Records............................ A-22
7.5 Notice of Adverse Changes................................... A-22
7.6 Indemnification............................................. A-23

ARTICLE 8 -- CONDITIONS TO OBLIGATIONS OF ALL PARTIES
8.1 Approval by Stockholders.................................... A-24
8.2 Consents and Approvals...................................... A-24
8.3 Litigation.................................................. A-24
8.4 Registration Statement...................................... A-24
8.5 Tax Opinion................................................. A-25

ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF ACQUIRED CORPORATION
9.1 Representations, Warranties and Covenants................... A-25
9.2 Adverse Changes............................................. A-25
9.3 Closing Certificate......................................... A-25
9.4 Opinion of Counsel.......................................... A-26
</TABLE>

A-3
<PAGE> 117
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
9.5 Fairness Opinion............................................ A-26
9.6 NYSE Listing................................................ A-26
9.7 Other Matters............................................... A-26
9.8 Material Events............................................. A-26

ARTICLE 10 -- CONDITIONS TO OBLIGATIONS OF BANCGROUP
10.1 Representations, Warranties and Covenants................... A-26
10.2 Adverse Changes............................................. A-26
10.3 Closing Certificate......................................... A-27
10.4 Opinion of Counsel.......................................... A-27
10.5 Controlling Shareholders.................................... A-27
10.6 Other Matters............................................... A-27
10.7 Dissenters.................................................. A-27
10.8 Material Events............................................. A-28
10.9 Ancillary Agreements........................................ A-28
10.10 Class B Shares.............................................. A-28

ARTICLE 11 -- TERMINATION OF REPRESENTATIONS AND WARRANTIES.......... A-28

ARTICLE 12 -- NOTICES............................................. A-28

ARTICLE 13 -- AMENDMENT OR TERMINATION
13.1 Amendment................................................... A-28
13.2 Termination................................................. A-29
13.3 Damages..................................................... A-29

ARTICLE 14 -- DEFINITIONS......................................... A-29

ARTICLE 15 -- MISCELLANEOUS
15.1 Expenses.................................................... A-34
15.2 Benefit and Assignment...................................... A-34
15.3 Governing Law............................................... A-34
15.4 Counterparts................................................ A-34
15.5 Headings.................................................... A-34
15.6 Severability................................................ A-34
15.7 Construction................................................ A-34
15.8 Return of Information....................................... A-34
15.9 Equitable Remedies.......................................... A-35
15.10 Attorneys' Fees............................................. A-35
15.11 No Waiver................................................... A-35
15.12 Remedies Cumulative......................................... A-35
15.13 Entire Contract............................................. A-35
</TABLE>

A-4
<PAGE> 118

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of this the
28th day of August 1997, by and between ASB BANCSHARES, INC. ("Acquired
Corporation"), a Delaware corporation, and THE COLONIAL BANCGROUP, INC.
("BancGroup"), a Delaware corporation.

WITNESSETH

WHEREAS, Acquired Corporation operates as a bank holding company for its
wholly owned subsidiary, Ashville Savings Bank (the "Bank"), with its principal
office in Ashville, Alabama; and

WHEREAS, BancGroup is a bank holding company with its Subsidiary bank,
Colonial Bank operating in Alabama, Florida, Georgia and Tennessee; and

WHEREAS, Acquired Corporation wishes to merge with BancGroup; and

WHEREAS, it is the intention of BancGroup and Acquired Corporation that
such Merger (i) shall qualify for federal income tax purposes as a
"reorganization" within the meaning of section 368(a) of the Code, as defined
herein and (ii) shall be accounted for as a purchase for financial accounting
purposes;

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, Acquired Corporation 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. The offices and facilities of Acquired
Corporation 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
Acquired Corporation and of BancGroup shall, as provided in the DGCL, be merged
into and continued in the Resulting Corporation, and the Resulting Corporation
shall be deemed to be the same corporation as Acquired Corporation and
BancGroup. All rights, franchises and interests of Acquired Corporation 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 Acquired Corporation
and BancGroup, respectively, on the Effective Date.

2.3 Certificate of Incorporation and Bylaws. On the Effective Date, the
certificate of incorporation and bylaws of the Resulting Corporation, until
otherwise amended or repealed, shall be the restated certificate of
incorporation and bylaws of BancGroup as they exist immediately before the
Effective Date.

A-5
<PAGE> 119

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 Stockholder Approval. This Agreement shall be submitted to the
stockholders of Acquired Corporation 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 stockholders
of Acquired Corporation as required by applicable Law, the Merger 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 Acquired Corporation or BancGroup,
acquired as a result of the Merger, or (ii) otherwise to carry out the purposes
of this Agreement, 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 Acquired Corporation
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"). Assuming all other conditions stated in this Agreement have
been or will be satisfied as of the Closing, the Closing shall take place at the
offices of BancGroup, in Montgomery, Alabama, at 5:00 p.m. on a date specified
by BancGroup that shall be as soon as reasonably practicable after the later to
occur of (i) the date of Stockholders Meeting or (ii) the date on which the last
of all required regulatory approvals described under Section 8.2 has been
obtained, or at such other place and time that the Parties may mutually agree.

2.8 Subsidiary Bank Merger. BancGroup and Acquired Corporation anticipate
that simultaneously with or immediately after the Effective Date the Bank will
merge with and into Colonial Bank, BancGroup's Subsidiary bank. The exact timing
and structure of such merger have not been finalized at this time, and BancGroup
in its discretion will finalize such timing and structure at a later date.
Acquired Corporation will cooperate with BancGroup, including the call of any
special meetings of the board of directors of the Bank and the filing of any
regulatory applications, in the execution of appropriate documentation relating
to such merger.

ARTICLE 3

CONVERSION OF ACQUIRED CORPORATION STOCK

3.1 Conversion of Acquired Corporation Stock. (a) On the Effective Date,
each share of common stock of Acquired Corporation outstanding and held of
record by Acquired Corporation's shareholders (the "Acquired Corporation
Stock"), except for shares of Acquired Corporation Stock held of record by Joe
W. Adkins, Sr., and Carolyn Spann, and shares held by persons that elect to
exercise their rights of appraisal under DGCL sec.262, shall be converted by
operation of law and without any action by any holder thereof into such number
of shares of BancGroup Common Stock (subject to section 3.3 hereof), equal to
$245.18 divided by the Market Value. Accordingly, the total Merger Consideration
for such shares of Acquired Corporation Stock is $12,900,187 assuming 52,614
shares of such Acquired Corporation Stock outstanding. 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 consecutive trading days ending on the trading day five days immediately
preceding the Effective Date. Regardless of the Market Value, however, the
maximum number of shares of BancGroup Common Stock to be issued in the Merger
shall be 632,362 (based upon a minimum

A-6
<PAGE> 120

Market Value of $20.40) and the minimum number of shares of BancGroup Common
Stock to be issued in the Merger shall be 467,398 (based upon a maximum Market
Value of $27.60).

(b) On the Effective Date, each share of Acquired Corporation Stock held of
record by Joe W. Adkins, Sr., and Carolyn Spann shall be converted by operation
of law and without any action by such holders into BancGroup's 1997 Subordinated
Acquisition Debentures, Series A (the "Debentures"). The Debentures will be
issued at the rate of $245.18 principal amount of Debentures for each share of
Acquired Corporation Stock held of record by Mr. Adkins and Ms. Spann. Assuming
an aggregate of 31,506 shares of Acquired Corporation Stock held by such
Persons, the aggregate principal amounts of Debentures to be issued shall be
$7,724,813 and, accordingly, Mr. Adkins shall receive $5,125,847 aggregate
principal amount of such Debentures and Mrs. Spann shall receive $2,598,966
aggregate principal amount of such Debentures. Such Debentures shall be due and
payable ten years from the Effective Date. The Debentures shall be substantially
in the form as the form of Debenture, contained at Exhibit D hereto. For
purposes of this Section 3.1, it is understood that shares of Acquired
Corporation Stock owned by Joe W. Adkins, Sr. are owned jointly by Mr. Adkins
and his wife, Dorothy G. Adkins.

3.2 Surrender of Acquired Corporation Stock. After the Effective Date,
each holder of an outstanding certificate or certificates which prior thereto
represented shares of Acquired Corporation Stock who is entitled to receive
BancGroup Common Stock or Debentures shall be entitled, upon surrender to
BancGroup of their certificate or certificates representing shares of Acquired
Corporation Stock (or an affidavit or affirmation by such holder of the loss,
theft, or destruction of such certificate or certificates in such form as
BancGroup may reasonably require and, if BancGroup reasonably requires, a bond
of indemnity in form and amount, and issued by such sureties, as BancGroup may
reasonably require), to receive in exchange therefor a certificate or
certificates representing the number of whole shares of BancGroup Common Stock
or the Debentures into and for which the shares of Acquired Corporation Stock so
surrendered shall have been converted, such certificates or Debentures 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 Acquired Corporation
Stock and which is to be converted into BancGroup Common Stock or Debentures
shall for all purposes evidence ownership of the BancGroup Common Stock or
Debentures 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 to the holder of such certificate until the certificates
previously representing shares of Acquired Corporation Stock shall have been
properly tendered by such person.

3.3 Fractional Shares. No fractional shares of BancGroup Common Stock
shall be issued, and each holder of shares of Acquired Corporation 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 Acquired Corporation Stock, be paid by BancGroup an
amount in cash equal to the Market Value of such fractional share.

3.4 Adjustments. In the event Acquired Corporation or BancGroup changes
the number of shares of Acquired Corporation Stock or BancGroup Common Stock,
respectively, issued and outstanding prior to the Effective Date as a result of
a stock split, stock dividend, or similar recapitalization with respect to such
stock, an appropriate and proportionate adjustment shall be made in the number
of shares of BancGroup Common Stock into which the Acquired Corporation Stock
shall be converted.

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 Acquired Corporation who shall
not have voted in favor of this Agreement and who has complied with the
applicable procedures set forth in Section 262 of the DGCL relating to rights of
dissenting shareholders, shall be entitled to receive payment for the fair value
of his Acquired Corporation Stock. If, after the Effective Date, a dissenting
shareholder of Acquired Corporation fails to perfect, or effectively withdraws
or loses, his right to appraisal and payment for his shares of Acquired
Corporation Stock, BancGroup shall issue and deliver the consideration to which
such holder of shares of

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Acquired Corporation Stock is entitled under Section 3.1 (without interest) upon
surrender by such holder of the certificate or certificates representing shares
of Acquired Corporation Stock held by such holders.

ARTICLE 4

REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP

BancGroup represents, warrants and covenants to and with Acquired
Corporation 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.

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 April 30, 1997, 40,740,357 shares were validly issued and outstanding, fully
paid and nonassessable and are not subject to preemptive rights (not counting
additional shares subject to issue pursuant to stock option and other plans and
convertible debentures), 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
BancGroup Common Stock to be issued in 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 based upon information
provided by Acquired Corporation with respect to addresses of the stockholders
of Acquired Corporation, will have been registered or qualified under the
securities laws of all jurisdictions in which such registration or qualification
is required.

(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 Acquired
Corporation copies of the following financial statements of BancGroup.

(i) Consolidated balance sheets as of December 31, 1995, December 31,
1996, and June 30, 1997;

(ii) Consolidated statements of operations for each of the three years
ended December 31, 1994, 1995 and 1996, and for the six months ended June
30, 1997;

(iii) Consolidated statements of cash flows for each of the three
years ended December 31, 1994, 1995 and 1996, and for the six months ended
June 30, 1997; and

(iv) Consolidated statements of changes in shareholders' equity for
the three years ended December 31, 1994, 1995 and 1996, and for the six
months ended June 30, 1997.

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 GAAP 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. 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 six months ended June 30, 1997, 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

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complete and accurate in all material respects. All Taxes shown on these 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 such 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 Contract, 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 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 Agreement. The board of directors of BancGroup has
approved this Agreement and the transactions contemplated by it and has
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 Acquired Corporation, subsequent to the Merger,
and BancGroup intends to continue the historic business of Acquired Corporation.

4.8 Title and Related Matters. BancGroup has good and marketable title to
all the properties, interests in properties and Assets, real and personal, that
are material to the business of BancGroup 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

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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 permitted 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 bylaws 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, 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 Acquired Corporation or any of its representatives
expressly for use in the Proxy Statement.

4.14 SEC Filings. (a) BancGroup has heretofore delivered to Acquired
Corporation copies of BancGroup's: (i) Annual Report on Form 10-K for the fiscal
year ended December 31, 1996; (ii) 1996 Annual Report to Shareholders; (iii)
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31 and June
30, 1997; and (iv) any reports on Form 8-K, filed by BancGroup with the SEC
since December 31, 1996. Since December 31, 1996, 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

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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 prior to and
upon mailing of the Proxy Materials to Acquired Corporation's stockholders.

4.16 Brokers. All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by BancGroup
directly with Acquired Corporation 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 fees,
brokerage commissions or other like payments.

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 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 Acquired Corporation 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 ACQUIRED CORPORATION

Acquired Corporation represents, warrants and covenants to and with
BancGroup, as follows:

5.1 Organization. Acquired Corporation is a Delaware corporation, and the
Bank is an Alabama state bank. Each Acquired Corporation 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 and in which the failure to qualify could, individually, or in the
aggregate, have a Material Adverse Effect.

5.2 Capital Stock. As of June 30, 1997, the authorized capital stock of
Acquired Corporation consisted of 150,000 shares of common stock, $.01 par value
per share, 90,000 shares of which are issued, 5,880 of which are held as
treasury shares. Accordingly 84,120 of such shares are outstanding. All of such
shares which are outstanding are validly issued, fully paid and nonassessable
and not subject to preemptive rights. Acquired Corporation does not have any
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, including the grant or issuance of options except for the Stock
Option Agreement. As of June 30, 1997 Joe W. Adkins, Sr. and Carolyn Spann owned
of record 20,906 and 10,600 shares, respectively, of Acquired Corporation Stock.

5.3 Subsidiaries. Acquired Corporation has no direct Subsidiaries other
than the Bank, and there are no Subsidiaries of the Bank. Acquired Corporation
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 Bank have been validly issued and are
fully paid and non-assessable. As of

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December 31, 1996, there were 1,000,000 shares of the class A common stock, par
value $1.00 per share, authorized of the Bank, 20,000 of which are issued and
outstanding and wholly owned by Acquired Corporation, and 20,000 of class B
common stock, par value $1.00 per share, 1,400 of which are issued and
outstanding and held pursuant to a Waiver of Dividends and Repurchase Agreement
as director qualifying shares. The Bank has no 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.

5.4 Financial Statements; Taxes (a) Acquired Corporation has delivered to
BancGroup copies of the following financial statements of Acquired Corporation:

(i) Parent only and Subsidiary only statements of financial condition
as of December 31, 1996 and 1995, and as of June 30, 1997;

(ii) Parent only and Subsidiary only statements of income for each of
the three years ended December 31, 1996, 1995 and 1994, and for the six
months ended June 30, 1997;

(iii) Parent only and Subsidiary only statements of stockholders'
equity for each of the three years ended December 31, 1996, 1995, and 1994;
and

(iv) Parent only and Subsidiary only statements of cash flows for the
three years ended December 31, 1996, 1995 and 1994.

All of the foregoing financial statements are in all material respects in
accordance with the books and records of Acquired Corporation and have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated, 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 Acquired Corporation. Except as and to the extent
reflected or reserved against in such balance sheets (including the notes
thereto), Acquired Corporation 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. The
statements of income, stockholders' equity and cash flows present fairly the
results of operation, changes in shareholders equity and cash flows of Acquired
Corporation for the periods indicated. The foregoing representations, insofar as
they relate to the unaudited interim financial statements of Acquired
Corporation for the six months ended June 30, 1997, 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 Acquired Corporation 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 these returns to be due and all additional
assessments received have been paid or proper reserves or accruals have been
established therefor. The amounts recorded for Taxes on the balance sheets
provided under section 5.4(a) are, to the Knowledge of Acquired Corporation,
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 Acquired Corporation accrued for or applicable to the period ended
on the dates thereof, and all years and periods prior thereto and for which
Acquired Corporation may at such 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 Acquired Corporation, 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 has 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 Acquired Corporation. Acquired Corporation 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 Acquired Corporation 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 Acquired

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Corporation 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 Acquired Corporation 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 to be issued pursuant to the
Stock Option Agreement 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) in excess of an
aggregate of $50,000 (for the Acquired Corporation Companies on a
consolidated basis) except borrowings, obligations (including purchase of
federal funds) and Liabilities incurred in the ordinary course of business
and consistent with past practice (which shall include, but not be limited
to, for Acquired Corporation, creation of deposit liabilities, purchases of
federal funds, advances from the Federal Home Loan Bank or the Federal
Reserve Bank, and entry into repurchase agreements fully secured by U.S.
government or agency securities);

(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) subject to the last paragraph of this section 5.5, 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, directly or
indirectly, or otherwise acquire, 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 having in the aggregate a
book value in excess of $50,000, 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;

(h) except in the ordinary course of business or in connection with
this Agreement, 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, and except
for the Deferred Compensation Agreement, 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, and except
for the Deferred Compensation Agreement, or as disclosed in Schedule 5.5
(j) or as required by Law, 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 with an Acquired Corporation Company, which termination would
have a Material Adverse Effect on any Acquired Corporation Company's
financial condition, results of operations, business, or properties;

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(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 Acquired Corporation
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 Acquired Corporation
Company will enter into or amend any material Contract, other than Loans or
renewals thereof entered into in the ordinary course of business, without the
express written consent of BancGroup; provided, however, that Acquired
Corporation may pay dividends to its shareholders in an amount equal to the net
income of Acquired Corporation from May 1, 1997 through the end of the month
immediately preceding the month in which the Effective Date occurs.

5.6 Title and Related Matters. (a) Title. Acquired Corporation has good
and marketable title to all the properties, interest in properties and Assets,
real and personal, that are material to the business of Acquired Corporation,
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 Acquired Corporation, the material
structures and equipment of each Acquired Corporation 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 Acquired Corporation Company,
either as lessor or lessee.

(c) Personal Property. Schedule 5.6(c) sets forth a depreciation schedule
of each Acquired Corporation Company's fixed Assets as of June 30, 1997.

(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 Acquired Corporation Company.
Acquired Corporation is not aware of any material defects, irregularities or
problems with any of its computer hardware or software which it currently uses
which renders such hardware or software unable to satisfactorily perform the
tasks and functions to be performed by them in the business of any Acquired
Corporation Company.

5.7 Commitments. Except as set forth in Schedule 5.7, and except for the
Deferred Compensation Agreement or otherwise as contemplated herein, no Acquired
Corporation 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 Acquired Corporation 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 certificate of incorporation and bylaws of each Acquired Corporation
Company, including all amendments thereto, as currently in

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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. Schedule 5.9 sets forth the Litigation (whether or not
purportedly on behalf of Acquired Corporation) pending or, to the Knowledge of
Acquired Corporation, threatened against or affecting any Acquired Corporation
Company (nor does Acquired Corporation have Knowledge 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 Acquired Corporation, and no Acquired Corporation
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 Acquired Corporation. To the Knowledge
of Acquired Corporation, each Acquired Corporation Company has complied in all
material respects with all material applicable Laws and Regulations including
those imposing Taxes, of 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 on Acquired Corporation.

5.10 Material Contract Defaults. Except as disclosed on Schedule 5.10, no
Acquired Corporation 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
Acquired Corporation, 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 material Contract,
indenture, mortgage, deed of trust or other material agreement or instrument to
which any Acquired Corporation Company is a party and will not conflict with any
provision of the charter or bylaws of any Acquired Corporation Company.

5.12 Governmental Authorization. Each Acquired Corporation Company has all
Permits that, to the Knowledge of Acquired Corporation, are or will be legally
required to enable any Acquired Corporation Company to conduct its business in
all material respects as now conducted by each Acquired Corporation Company.

5.13 Absence of Regulatory Communications. Except as provided in Schedule
5.13, no Acquired Corporation Company is subject to, nor has any Acquired
Corporation Company received during the past three years, any written
communication directed specifically to it from any Agency to which it is subject
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.

5.14 Absence of Material Adverse Change. To the Knowledge of Acquired
Corporation, 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 Acquired Corporation Company.

5.15 Insurance. Each Acquired Corporation Company has in effect insurance
coverage and bonds with reputable insurers which, in respect to amounts, types
and risks insured, management of Acquired Corporation reasonably believes to be
adequate for the type of business conducted by such company. No Acquired
Corporation 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 Acquired Corporation Company has received any notice of any
material premium increase or cancellation with respect to any of its insurance
policies or

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bonds. Within the last three years, no Acquired Corporation 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 Acquired Corporation Company at all times from
the date hereof to the Effective Date.

5.16 Pension and Employee Benefit Plans. (a) To the Knowledge of Acquired
Corporation, all employee benefit plans of each Acquired Corporation 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 Schedule
5.16, no Acquired Corporation 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 Ashville Savings Bank Money Purchase Plan that is intended to
qualify under section 401 of the Code. To the Knowledge of the Acquired
Corporation, all Liabilities arising out of employee benefit plans of the
Acquired Corporation, past or present, are reflected where appropriate on the
financial statements described in Section 4.3(a), in accordance with GAAP. To
the Knowledge of Acquired Corporation, 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
Acquired Corporation Company.

(b) To the Knowledge of Acquired Corporation, no amounts payable to any
employee of any Acquired Corporation 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 Acquired Corporation, 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 Acquired
Corporation, 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 Acquired
Corporation directly with BancGroup and without the intervention of any other
person, either as a result of any act of Acquired Corporation, or otherwise, in
such manner as to give rise to any valid claim against Acquired Corporation for
a finder's fee, brokerage commission or other like payment except for amounts
due to the Carson Medlin Company in connection with the fairness opinion
delivered pursuant to Section 9.5 hereof.

5.19 Approval of Agreements. The board of directors of Acquired
Corporation has approved this Agreement and the transactions contemplated by
this Agreement and has authorized the execution and delivery by Acquired
Corporation of this Agreement. Subject to the matters referred to in sections
8.1 and 8.2, Acquired Corporation has full power, authority and legal right to
enter into this Agreement, and, upon appropriate vote of the shareholders of
Acquired Corporation in accordance with this Agreement, Acquired Corporation
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 written statement
or certificate furnished or to be furnished to BancGroup by Acquired
Corporation, 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

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Acquired Corporation, its Assets, properties, operations, and capital stock
derived from information furnished in writing by Acquired Corporation 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 Acquired
Corporation have been calculated in accordance with prudent and customary
banking practices and are believed adequate in all material respects to reflect
the risk inherent in the loans of Acquired Corporation. Acquired Corporation 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. The loans reflected as Assets on the
financial statements of Acquired Corporation are legal, valid and binding
obligations 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, and comply with the requirements of all Laws to
which Acquired Corporation and its Subsidiaries are subject. Acquired
Corporation does not have in its portfolio any loan exceeding its legal lending
limit, and except as disclosed on Schedule 5.22, Acquired Corporation has no
known significant delinquent, substandard, doubtful, loss, nonperforming or
problem loans.

5.23 Environmental Matters. Except as provided in Schedule 5.23, to the
Knowledge of Acquired Corporation, each Acquired Corporation 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 Acquired
Corporation has no Knowledge that any Acquired Corporation Company has not
complied with all regulations and requirements promulgated by the Occupational
Safety and Health Administration that are applicable to any Acquired Corporation
Company. To the Knowledge of Acquired Corporation, there is no Litigation
pending or threatened with respect to any violation or alleged violation of the
Environmental Laws. To the Knowledge of Acquired Corporation, with respect to
Assets of any Acquired Corporation 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 Acquired Corporation Company. Acquired Corporation has no
Knowledge of any facts which might suggest that any Acquired Corporation 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 Acquired
Corporation 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
Acquired Corporation, no Acquired Corporation 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. Acquired Corporation has no Knowledge of any plan
or intention on the part of Acquired Corporation'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 Acquired Corporation 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 Acquired Corporation Company and any union or labor
organization covering any Acquired Corporation Company's employees and none of
said employees are represented by any union or labor organization.

5.26 Labor Disputes. To the Knowledge of Acquired Corporation, each
Acquired Corporation 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 Acquired Corporation Company is or has been
engaged in any unfair labor practice, and, to the Knowledge of Acquired
Corporation, no unfair labor practice complaint against any Acquired Corporation
Company is pending before the National Labor

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Relations Board. Relations between management of each Acquired Corporation
Company and the employees are amicable and there have not been, nor to the
Knowledge of Acquired Corporation, are there presently, any attempts to organize
employees, nor to the Knowledge of Acquired Corporation, are there plans for any
such attempts.

5.27 Derivative Contracts. No Acquired Corporation 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 Acquired
Corporation'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
Acquired Corporation as follows:

(a) Registration Statement and Other Filings. As soon as reasonably
practicable after the execution of this Agreement, 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 Acquired Corporation and its counsel, with
respect to the Common Stock and Debentures to be issued pursuant to this
Agreement and shall use its reasonable efforts to cause the Registration
Statement to become effective under the 1933 Act as soon as reasonably
practicable after the filing thereof and take any action required to be
taken under other applicable securities Laws in connection with the
issuance of the shares of BancGroup Common Stock upon consummation of the
Merger. As soon as reasonably practicable after the execution of 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. Copies of all
such filings shall be furnished in advance to Acquired Corporation and its
counsel.

(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
Acquired Corporation may reasonably request.

(d) No Control of Acquired Corporation by BancGroup. Notwithstanding
any other provision hereof, until the Effective Date, the authority to
establish and implement the business policies of

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Acquired Corporation shall continue to reside solely in Acquired
Corporation's officers and board of directors.

(e) Listing. Prior to the Effective Date, BancGroup shall file a
listing application 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. (i) On the Effective Date, all
employees of any Acquired Corporation Company shall, at BancGroup's option,
either become 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
Acquired Corporation 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, except as
stated otherwise in this section. Employees of any Acquired Corporation
Company who become employees of the Resulting Corporation or its
Subsidiaries on the Effective Date 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 Acquired
Corporation Company as of the Effective Date 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 Acquired Corporation 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
of the Resulting Corporation and its Subsidiaries, each such Acquired
Corporation Company employee shall be given credit for covered expenses
paid by that employee under comparable employee benefit plans of the
Acquired Corporation 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 of
the Resulting Corporation and its Subsidiaries.

(ii) On the Effective Date, the Ashville Savings Bank Money
Purchase Plan that is sponsored by the Bank shall be assumed by Colonial
Bank. All benefits under such plan shall be determined as of the
Effective Date and, thereafter, no further contributions shall be made
to such plan. Such plan shall be terminated immediately following the
Effective Date, and the benefits under such plan shall be distributed in
accordance with the provisions of such plan and all requirements of Law
applicable thereto.

(g) Ancillary Agreements. (i) BancGroup will enter into an agreement
not to compete and a consulting agreement with Joe W. Adkins, Sr. as of the
Effective Date. Such agreements will be in substantially the form as set
forth in Exhibits E and F hereto. BancGroup's obligation to enter into such
agreements is contingent upon Mr. Adkins' reasonable, good faith
cooperation with BancGroup to ensure that no adverse "golden parachute"
consequences under the Code arise for BancGroup, and Mr. Adkins will
cooperate with BancGroup to eliminate any adverse consequences that may
arise. BancGroup acknowledges that Acquired Corporation has entered into
the Deferred Compensation Agreement with Joe W. Adkins, a copy of which has
been provided to BancGroup, and to which BancGroup consents.

(ii) During the period commencing with the Effective Date and
ending on the date that benefits under the Deferred Compensation
Agreement commence, Joe W. Adkins shall have the right to purchase group
health coverage for himself and his spouse under the group health plan
of BancGroup and Colonial Bank as in effect from time to time. The cost
of such coverage, which shall be paid entirely by Mr. Adkins, shall be
equal to the amount charged participants from time to time for
continuation coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"). If elected by Mr. Adkins, the cost
of such coverage may be withheld from any payments made to Mr. Adkins
under the consulting agreement referred to in section 6.1(g)(i). By
electing to purchase coverage under this section 6.1(g)(ii), Mr. Adkins
shall have elected to receive

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such coverage in lieu of group health plan continuation coverage under
COBRA, and the period of continuation coverage under COBRA shall
commence with and run concurrently with the period of coverage provided
under this section. Upon the expiration of coverage provided under this
section, neither Mr. Adkins nor his spouse shall be entitled to
additional coverage under COBRA, except as provided in the Deferred
Compensation Agreement.

(h) Director Payments. At the Effective Date, BancGroup shall pay the
aggregate sum of $125,000 to those persons who are the directors of
Acquired Corporation as of the date of this Agreement, excluding Joe W.
Adkins, Sr., to be divided equally among such directors. BancGroup shall
also pay the sum of $60,000 to Joe W. Adkins, Sr. at the Effective Date as
compensation for services rendered.

6.2 Additional Covenants of Acquired Corporation. Acquired Corporation
covenants to and with BancGroup as follows:

(a) Operations. (i) Acquired Corporation will conduct its business
and the business of each Acquired Corporation Company in a proper and
prudent manner and will use its reasonable efforts to maintain its
relationships with its depositors, customers and employees. No Acquired
Corporation 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 Acquired Corporation 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. Acquired Corporation shall contact any person who may be required to
execute an undertaking under Section 10.5 hereof to request such
undertaking and shall take all such reasonable steps as are necessary to
obtain such undertaking. Acquired Corporation will take no action that
would prevent or impede the Merger from qualifying as a tax-free
reorganization within the meaning of Section 368 of the Code.

(ii) If requested by BancGroup, Acquired Corporation shall use its
reasonable efforts to cause all officers and directors that own any
stock of Acquired Corporation and all other shareholders of Acquired
Corporation who own more than five percent (5%) of Acquired Corporation
Stock, to execute an acknowledgment that such person has no present
plan, intention, or binding commitment to sell or otherwise dispose of
the BancGroup Common Stock to be received in the Merger within twelve
(12) months after the Effective Date.

(b) Stockholders Meeting; Best Efforts. Acquired Corporation will
cooperate with BancGroup in the preparation of the Registration Statement
and any regulatory filings and 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. Except with respect to this Agreement
and the transactions contemplated hereby, no Acquired Corporation Company
nor any affiliate thereof nor any investment banker, attorney, accountant,
or other representative (collectively, "Representatives") retained by an
Acquired Corporation Company shall directly or indirectly solicit any
Acquisition Proposal with respect to Acquired Corporation by any Person.
Except to the extent necessary to comply with the fiduciary duties of
Acquired Corporation's Board of Directors as advised in writing by counsel
to such Board of Directors, no Acquired Corporation Company or any
Representative thereof shall furnish any nonpublic information that it is
not legally obligated to furnish, negotiate with respect to, or enter into
any Contract with respect to, any Acquisition Proposal, and each Acquired
Corporation Company shall direct and use its reasonable efforts to cause
all of its Representatives not to engage in any of the foregoing, but
Acquired Corporation may communicate information about such an Acquisition
Proposal to its shareholders if and to the extent that it is required to do
so in order to comply with its legal obligations as advised in writing by
counsel to such Board of Directors. Acquired Corporation shall promptly
notify BancGroup orally and in writing in the event that any Acquired
Corporation Company receives any inquiry or proposal relating to any such

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Acquisition Proposal. Acquired Corporation shall immediately cease and
cause to be terminated any existing activities, discussions, or
negotiations with any Persons other than BancGroup conducted heretofore
with respect to any of the foregoing. Acquired Corporation shall enter into
the Stock Option Agreement with BancGroup dated as of the date of this
Agreement.

(d) Director Recommendation. Subject to their fiduciary duties, the
members of the Board of Directors of Acquired Corporation agree to support
publicly the Merger.

(e) Shareholder Voting. Acquired Corporation shall on the date of
execution of this Agreement obtain and submit to BancGroup an agreement
from certain of its directors substantially in the form set forth in
Exhibit A.

(f) Financial Statements and Monthly Status Reports. Acquired
Corporation shall furnish to BancGroup:

(i) As soon as practicable and in any event within 45 days after
the end of each quarterly period (other than the last quarterly period)
in each fiscal year, statements of operations of Acquired Corporation
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
statement of financial condition of Acquired Corporation 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 Acquired Corporation by independent auditors in connection
with each annual, interim or special audit of the books of Acquired
Corporation 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 Acquired Corporation may file with the
SEC or any other Agency;

(iv) With reasonable promptness, such additional financial data as
BancGroup may reasonably request; and

(v) Within 10 calendar days after the end of each month (or, if the
financial statements referred to in clause (d) are not then available,
as soon as possible thereafter) commencing with the next calendar month
following the date of this Agreement and ending at the Effective Date, a
written description of (a) any non-compliance with the terms of this
Agreement, together with its then current estimate of the out-of-pocket
costs and expenses incurred or reasonably accruable in connection with
the transactions contemplated by this Agreement; (b) the status, as of
the date of the report, of all existing or threatened litigation against
any Acquired Corporation Company; (c) copies of minutes of any meeting
of the board of directors of any Acquired Corporation Company and any
committee thereof occurring in the month for which such report is made,
including all documents presented to the directors at such meetings; and
(d) monthly financial statements, including a balance sheet and income
statement.

(g) Fiduciary Duties. Prior to the Effective Date, (i) no director or
officer (each an "Executive") of any Acquired Corporation Company shall,
directly or indirectly, own, manage, operate, join, control, be employed by
or participate in the ownership, proposed ownership, management, operation
or control of or be connected in any manner with, any business, corporation
or partnership which is competitive to the business of any Acquired
Corporation Company, (ii) all Executives, at all times, shall satisfy their
fiduciary duties to Acquired Corporation and its Subsidiaries, and (iii)
such Executives shall not (except as required in the course of his or her
employment with any Acquired Corporation Company) communicate or divulge
to, or use for the benefit of himself or herself or any other person, firm,
association or corporation, without the express written consent of Acquired
Corporation, any confidential information which is possessed, owned or used
by or licensed by or to any Acquired Corporation Company or confidential
information belonging to third parties which any Acquired Corporation

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Company shall be under obligation to keep secret or which may be
communicated to, acquired by or learned of by the Executive in the course
of or as a result of his or her employment with any Acquired Corporation
Company.

(h) Certain Practices. At the request of BancGroup, but subject to
Section 6.1(d) hereof, (i) Acquired Corporation shall consult with
BancGroup and advise BancGroup through its regional banking operation
located in Anniston, Alabama of all of the Bank's loan requests over
$100,000 that are not single-family residential loan requests or of any
other loan request outside the normal course of business, and (ii) Acquired
Corporation will consult with BancGroup to coordinate various business
issues on a basis mutually satisfactory to Acquired Corporation and
BancGroup. Acquired Corporation and the Bank shall not be required to
undertake any of such activities, however, except as such activities may be
in compliance with existing Law and Regulations.

ARTICLE 7

MUTUAL COVENANTS AND AGREEMENTS

7.1 Best Efforts; Cooperation. Subject to the terms and conditions herein
provided and the fiduciary duties of their respective directors and officers,
BancGroup and Acquired Corporation 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, including the holding
of any regular or special board meetings, 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 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-3 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 the other Party full access to the
Assets, books and records of such Party in order that such other Party may have
full opportunity to make such investigation as it 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. All such information that may be
obtained by any such Party will be held in confidence by such party, will not be
disclosed by such Party or any of its representatives except in accordance with
this Agreement, and will not be used by such Party for any purpose other than
the accomplishment of the Merger as provided herein.

7.5 Notice of Adverse Changes. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations,

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warranties, or covenants contained herein, and to use its reasonable efforts to
prevent or promptly to remedy the same.

7.6 Indemnification. (a) 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 person entitled to
indemnification from an Acquired Corporation Company (the "Indemnified
Parties"), against any costs or expenses (including reasonable attorney's 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 Effective Date to the fullest extent that any Acquired
Corporation Company would have been permitted under applicable Law and its
Certificate 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).

(b) Any Indemnified Party wishing to claim indemnification under this
Section 7.6 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 BancGroup. 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) BancGroup shall not
be liable for any settlement effected without its prior written consent which
shall not be unreasonably withheld. If such indemnity with 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.

(c) In consideration of and as a condition precedent to the effectiveness
of the indemnification obligations provided by BancGroup in this section to a
director or officer of the Acquired Corporation, such director or officer of the
Acquired Corporation shall have delivered to BancGroup on or prior to the
Effective Date a letter in form reasonably satisfactory to BancGroup concerning
claims such directors or officers may have against Acquired Corporation. In the
letter, the directors or officers shall: (i) acknowledge the assumption by
BancGroup as of the Effective Date of all Liability (to the extent Acquired
Corporation or any of its Subsidiaries is so liable) for claims for
indemnification arising under this section 7.6; (ii) affirm that they do not
have nor are they aware of any claims they might have (other than those referred
to in the following clause (iii)) against any Acquired Corporation Company;
(iii) identify any claims or any facts or circumstances of which they are aware
that could give rise to a claim for indemnification under this section 7.6; and
(iv) release as of the Effective Date any and all claims that they may have
against any Acquired Corporation Company other than (A) those referred to in the
foregoing clause (iii) and disclosed in the letter of the director or officer,
(B) claims by third parties which have not yet been asserted against such
director or officer (other than claims arising from facts and circumstances of
which such director or officer is aware and which such director or officer
reasonably believes might result in claims but which are not disclosed in such
director or executive officer's letter), (C) claims by third parties arising
from any transaction contemplated by this Agreement or disclosed in any schedule
to this Agreement, and (D) claims by third parties arising in the ordinary
course of business of any Acquired Corporation Company after the date of the
letter.

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(d) Acquired Corporation hereby represents and warrants to BancGroup that
it has no Knowledge of any claim, pending or threatened, or of any facts or
circumstances that Acquired Corporation reasonably believes could give rise to
any obligation by BancGroup to provide the indemnification required by this
section 7.6 other than as disclosed in the letters of the directors and
executive officers referred to in section 7.6(c) hereof or described in any
schedule to this Agreement and claims arising from any transaction contemplated
by this Agreement.

ARTICLE 8

CONDITIONS TO OBLIGATIONS OF ALL PARTIES

The obligations of BancGroup and Acquired Corporation 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 Stockholders. 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 Acquired Corporation as is required by
applicable Law and Acquired Corporation's articles of incorporation and bylaws.

8.2 Consents and Approvals. (a) All Consents of, filings and registrations
with, and notifications to, all Agencies required for consummation of the Merger
or the merger of the Bank with Colonial Bank shall have been obtained or made
and shall be in full force and effect and all waiting periods required by Law
shall have expired. No Order, Consent or approval so obtained which is necessary
to consummate the transactions as contemplated hereby shall be conditioned or
restricted in a manner which in the reasonable good faith judgment of the Board
of Directors of BancGroup would so materially adversely impact the economic
benefits of the transaction as contemplated by this Agreement so as to render
inadvisable the consummation of the Merger.

(b) Each Party shall have obtained any and all other Consents required for
consummation of the Merger (other than those referred to in Section 8.2(a) of
this Agreement) for the preventing of any Default under any Contract or Permit
of such Party which, if not obtained or made, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on such Party. No
Consent obtained which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner which in the reasonable
judgment of the Board of Directors of BancGroup would so materially adversely
impact the economic or business benefits of the transactions contemplated by
this Agreement so as to render inadvisable the consummation of the Merger.

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, 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 Coopers & Lybrand L.L.P., shall have been
received in form and substance reasonably satisfactory to the Acquired
Corporation 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 BancGroup or Acquired Corporation; (iii) no gain or
loss will be recognized by the shareholders of Acquired Corporation who receive
shares of BancGroup Common Stock except to the extent of any cash paid for
fractional shares, and except to the extent of any dividends received from
Acquired Corporation 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 Acquired Corporation common stock exchanged in the Merger
less any basis allocated to any fractional share of BancGroup Common Stock
settled by cash payment; (v) the holding period of the BancGroup Common Stock or
Debentures will include the holding period of the shares of Acquired Corporation
common stock exchanged therefor if such shares of Acquired Corporation common
stock were capital assets in the hands of the exchanging Acquired Corporation
shareholder; (vi) cash received by an Acquired Corporation shareholder 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 or she would
otherwise be entitled to receive and will qualify as capital gain or loss
(assuming the Acquired Corporation common stock was a capital asset in his or
her hands as of the Effective Date); (vii) shareholders of Acquired Corporation
who receive Debentures pursuant to Section 3.1 will be treated a having received
such Debentures in full payment in exchange for their Acquired Corporation Stock
and such exchange shall qualify as a capital gain which qualifies for
installment treatment for purposes of Section 453 and 453A of the Code, and
(viii) receipt of the Debentures shall not be considered payment for purposes of
Section 453(f)(3) of the Code.

ARTICLE 9

CONDITIONS TO OBLIGATIONS OF ACQUIRED CORPORATION

The obligations of Acquired Corporation 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 Acquired Corporation may waive such conditions in writing:

9.1 Representations, Warranties and Covenants. Notwithstanding any
investigation made by or on behalf of Acquired Corporation, 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 which would impair the rights of Acquired Corporation or its
shareholders pursuant to this Agreement.

9.3 Closing Certificate. In addition to any other deliveries required to
be delivered hereunder, Acquired Corporation 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
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;

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(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 or otherwise against, by
or affecting BancGroup or the business, prospects, condition (financial or
otherwise), or Assets of BancGroup which would prevent the performance of
this Agreement or the transactions contemplated by this Agreement or
declare the same unlawful or cause the rescission thereof;

(e) to such persons' knowledge, the Proxy Statement delivered to
Acquired Corporation'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 are not responsible
for and need not express a statement as to information with respect to or
provided by Acquired Corporation 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. Acquired Corporation shall have received an
opinion of Miller, Hamilton, Snider & Odom, L.L.C., counsel to BancGroup, dated
as of the Closing, substantially in the form set forth in Exhibit B hereto.

9.5 Fairness Opinion. Acquired Corporation shall have received prior to
the mailing of the Proxy Statement a letter from an investment banking firm
generally recognized as qualified for such purpose setting forth its opinion
that the Merger Consideration to be received by the shareholders of Acquired
Corporation under the terms of this Agreement is fair to them from a financial
point of view, and such opinion shall not have been withdrawn as of the
Effective Date.

9.6 NYSE Listing. The shares of BancGroup Common Stock to be issued under
this Agreement shall have been approved for listing on the NYSE.

9.7 Other Matters. There shall have been furnished to such counsel for
Acquired Corporation certified copies of such corporate records of BancGroup and
copies of such other documents as such counsel may reasonably have requested for
such purpose.

9.8 Material Events. There shall have been no determination by the board
of directors of Acquired Corporation that the transactions contemplated by this
Agreement have become impractical because of any state of war, declaration of a
banking moratorium in the United States or a general suspension of trading on
the NYSE or any other exchange on which BancGroup Common Stock may be traded.

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 on or before
the Effective Date of all 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 Acquired Corporation 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 Acquired
Corporation 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 correspond-

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ing period of the prior fiscal year), Assets, Liabilities, financial condition,
or affairs of Acquired Corporation which constitute a Material Adverse Effect,
nor shall there have been any material changes in the Laws governing the
business of Acquired Corporation 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
Acquired Corporation executed by the President or Vice President and from the
Secretary or Assistant Secretary of Acquired Corporation dated as of the Closing
certifying that:

(a) the Board of Directors of Acquired Corporation has duly adopted
resolutions 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 Acquired Corporation have duly adopted
resolutions 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 Acquired
Corporation is an officer of Acquired Corporation 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 certificate or articles of incorporation and bylaws of each
Acquired Corporation Company referenced in section 5.8 hereof remain 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
Acquired Corporation's shareholders, 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 are not responsible
for and need not express a statement as to information with respect to or
provided by BancGroup in such Proxy Statement); and

(f) the conditions set forth in this Article 10 insofar as they relate
to Acquired Corporation have been satisfied.

10.4 Opinion of Counsel. BancGroup shall have received an opinion of
Alston & Bird, LLP, counsel to Acquired Corporation, dated as of the Closing,
substantially as set forth in Exhibit C hereto.

10.5 Controlling Shareholders. Each shareholder of Acquired Corporation
who may be an "affiliate" of Acquired Corporation, 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, provided that any sale,
transfer or distribution of such Common Stock shall be made in compliance with
all applicable provisions of the 1933 Act and the rules and regulations of the
SEC thereunder. Acquired Corporation recognizes and acknowledges that BancGroup
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 Acquired Corporation and
copies of such other documents as such counsel may reasonably have requested for
such purpose.

10.7 Dissenters. The number of shares as to which shareholders of Acquired
Corporation have exercised dissenters rights of appraisal under section 3.6 does
not exceed 15 percent of the outstanding shares of common stock of Acquired
Corporation.

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10.8 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, declaration of a banking
moratorium in the United States or general suspension of trading on the NYSE or
any exchange on which BancGroup Common Stock may be traded.

10.9 Ancillary Agreements. Joe W. Adkins shall have executed the ancillary
agreements referenced in Section 6.1(g).

10.10 Class B Shares. The Class B Common Stock of the Bank shall be
surrendered by the holders thereof to the Bank and canceled in accordance with
the terms of the Waiver of Dividends and Repurchase Agreement between the
Acquired Corporation and its directors.

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
the last sentence of Section 7.4, and Sections 7.2, 13.3, 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.

ARTICLE 12

NOTICES

All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered by hand, by facsimile
transmission, by registered or certified mail, postage pre-paid, or by courier
or overnight carrier, to the persons at the addresses set forth below (or at
such other address as may be provided hereunder), and shall be deemed to have
been delivered as of the date so received:

(a) If to Acquired Corporation to Joe W. Adkins, President, ASB
Bancshares, Inc., P.O. Box 219, Ashville, Alabama 35953-0219, facsimile
(205) 594-4641, with copies to Ralph F. MacDonald, III, Alston & Bird LLP,
One Atlantic Center, 1201 West Peachtree Street, Atlanta, Georgia
30309-3424, facsimile (404) 881-4777, or as may otherwise be specified by
Acquired Corporation in writing to BancGroup.

(b) If to BancGroup, to W. Flake Oakley, IV, One Commerce Street,
Suite 803, Montgomery, Alabama, 36104, facsimile (334) 240-5069, with a
copy to Michael D. Waters, Miller, Hamilton, Snider & Odom, L.L.C., One
Commerce Street, Suite 802, Montgomery, Alabama 36104, facsimile (334)
265-4533, or as may otherwise be specified in writing by BancGroup to
Acquired Corporation.

ARTICLE 13

AMENDMENT OR TERMINATION

13.1 Amendment. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, however, that after
any such approval by the holders of Acquired Corporation Stock, there shall be
made no amendment decreasing the consideration to be received by Acquired
Corporation stockholders without the further approval of such stockholders.

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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 Acquired Corporation, as follows:

(a) by the mutual consent of the respective boards of directors of
Acquired Corporation 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 material 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 Acquired Corporation;

(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 in Article 9 as to Acquired Corporation
or Article 10 as to BancGroup shall not have been satisfied in full at
Closing; or

(d) by the board of directors of either Party in the event (i) any
Consent of any Agency required for consummation of the Merger and the other
transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
stockholders of Acquired Corporation fail to vote their approval of this
Agreement and the transactions contemplated hereby as required by the Laws
of the State of Delaware at the Acquired Corporation Stockholders' Meeting
where the transactions were presented to such stockholders for approval and
voted upon; or

(e) by the board of directors of either BancGroup or Acquired
Corporation if all transactions contemplated by this Agreement shall not
have been consummated on or prior to March 1, 1998, 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(e).

(f) 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 that any of the conditions precedent to the obligations of such Party
to consummate the Merger (other than as contemplated by Section 13.2(d) of
this Agreement) cannot be satisfied or fulfilled by the date specified in
Section 13.2(e) of this Agreement as the date after which such Party may
terminate this Agreement.

13.3 Damages. In the event of termination pursuant to section 13.2, this
Agreement shall become void and have no effect, except as provided in Article 11
and except that Acquired Corporation and BancGroup shall be liable for damages
for any willful breach of warranty, representation, covenant or other agreement
contained in this Agreement.

ARTICLE 14

DEFINITIONS

(a) The following terms, which are capitalized in this Agreement, shall
have the meanings set forth below for the purpose of this Agreement:

Acquired Corporation....... ASB Bancshares, Inc., a Delaware corporation.

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Acquired Corporation
Company.................. Shall mean Acquired Corporation, the Bank, any
Subsidiary of Acquired Corporation or the Bank, or
any person or entity acquired as a Subsidiary of
Acquired Corporation or the Bank in the future and
owned by Acquired Corporation or the Bank at the
Effective Date.

Acquired Corporation
Stock.................... Shares of common stock, par value $0.01 per share,
of Acquired Corporation.

Acquisition Proposal....... Shall mean, with respect to a Party, any tender
offer or exchange offer or any proposal for a
merger, acquisition of all of the stock or assets
of, or other business combination involving such
Party or any of its Subsidiaries or the acquisition
of a substantial equity interest in, or a
substantial portion of the assets of, such Party or
any of its Subsidiaries.

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 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....................... Ashville Savings Bank, an Alabama state bank.

Closing.................... The submission of the certificates of officers,
legal opinions and other actions required to be
taken in order to consummate the Merger in
accordance with 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.

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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Debentures................. Shall mean BancGroup's 1997 Subordinated
Acquisition Debentures, Series A, described in
Section 3.1(b) hereof.

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.

Deferred Compensation
Agreement................ Shall mean that certain agreement between Joe W.
Adkins, Sr. and ASB Bancshares, Inc. to be executed
as contemplated by this Agreement.

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.

Exhibits................... A through F, 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....................... Means generally accepted accounting principles
applicable to banks and bank holding companies,
consistently applied during the periods involved.

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 knowledge of
BancGroup, or of Acquired Corporation and the Bank,
in the case of knowledge of Acquired Corporation.

Law........................ Any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities or business,
including, without limitation, those promulgated,
interpreted or enforced by any Agency.

Liability.................. Any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost
or expense (including, without limitation, 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

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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, (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, and (iv) Liens which are not reasonably
likely to have, individually or in the aggregate, a
Material Adverse Effect on a Party.

Litigation................. Any action, arbitration, complaint, criminal
prosecution, governmental or other examination or
investigation, hearing, inquiry, administrative or
other proceeding, but shall not include regular,
periodic examinations of depository institutions
and their Affiliates by Regulatory Authorities,
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 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, Assets, 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 effect" shall not
be deemed to include the impact of (w) changes in
banking and similar Laws of general applicability
or interpretations thereof by courts or
governmental authorities, (x) changes in generally
accepted accounting principles or regulatory
accounting principles generally applicable to banks
and their holding companies, (y) actions and
omissions of a Party (or any of its Subsidiaries)
taken with the prior informed consent of the other
Party in contemplation of the transactions
contemplated hereby, and (z) the Merger and
compliance with the provisions of this Agreement on
the operating performance of the Parties.

Merger..................... The merger of Acquired Corporation with BancGroup
as contemplated in this Agreement.

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Merger Consideration....... The BancGroup Common Stock and Debentures to be
distributed in exchange for all of the issued and
outstanding shares of Acquired Corporation Stock as
provided in section 3.1 hereof.

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 either Acquired Corporation or
BancGroup, and "Parties" shall mean both Acquired
Corporation 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 Acquired Corporation 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 Acquired Corporation.

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 Acquired
Corporation, to register the shares of BancGroup
Common Stock offered to stockholders of the Bank
pursuant to his Agreement, including the Proxy
Statement.

Resulting Corporation...... BancGroup, as the surviving corporation resulting
from the Merger.

SEC........................ United States Securities and Exchange Commission.

Stock Option Agreement..... The agreement dated as of the date hereof between
BancGroup and Acquired Corporation granting to
BancGroup the right to acquire up to 19.9 percent
of Acquired Corporation common stock.

Stockholders Meeting....... The special meeting of stockholders of Acquired
Corporation 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.

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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. (a) Except as otherwise provided in this Section 15.1, each
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that BancGroup shall bear and pay the filing
fees payable in connection with the Registration Statement and the Proxy
Statement and printing costs incurred in connection with the printing and
mailing of the Registration Statement and the Proxy Statement.

(b) Nothing contained in this Section 15.1 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.

15.2 Benefit and Assignment. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by any Party hereto (whether by operation of Law or
otherwise) without the prior written consent of the other Party. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the Parties and their respective successors and
assigns.

15.3 Governing Law. Except to the extent the laws of the State of Delaware
apply to the Merger, 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.

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
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.

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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.

IN WITNESS WHEREOF, Acquired Corporation 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: ASB BANCSHARES, INC.

BY: /s/ FRANCES K. WISE BY: /s/ JOE W. ADKINS
---------------------------------- ----------------------------------
ITS: Executive Vice President ITS: Chairman and President
--------------------------------- ---------------------------------

(CORPORATE SEAL)

ATTEST: THE COLONIAL BANCGROUP, INC.

BY: /s/ DONNA R. PIEL BY: /s/ W. FLAKE OAKLEY, IV
---------------------------------- ----------------------------------
ITS: Assistant Secretary ITS: Chief Financial Officer
--------------------------------- ----------------------------------

(CORPORATE SEAL)
</TABLE>

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APPENDIX B

THE CARSON MEDLIN COMPANY
INVESTMENT BANKERS

August 28, 1997

Board of Directors
ASB Bancshares, Inc.
255 5th Street
Ashville, AL 35953

Members of the Board:

You have requested our opinion as to the fairness, from a financial point
of view, of the consideration to be received by the unaffiliated shareholders of
ASB Bancshares, Inc. ("ASB") under the terms of a certain Agreement and Plan of
Merger dated August 28, 1997 (the "Agreement") pursuant to which ASB will be
acquired by The Colonial BancGroup, Inc. ("Colonial") (the "Merger"). Under the
terms of the Agreement, each of the 52,614 outstanding shares of ASB common
stock held by the unaffiliated shareholders shall be converted into the right to
receive consideration of $245.18 per shares in Colonial common stock, subject to
certain limitations. The foregoing summary of the Merger is qualified in its
entirety by reference to the Agreement.

The Carson Medlin Company is a National Association of Securities Dealers,
Inc. (NASD) member investment banking firm which specializes in the securities
of southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks
regarding their financial and stock price performance. We are familiar with the
commercial banking industry in Alabama and the major commercial banks operating
in that market. We have been retained by ASB in a financial advisory capacity to
render our opinion hereunder, for which we will receive compensation.

In reaching our opinion, we have analyzed the respective financial
positions, both current and historical, of Colonial and ASB. We have reviewed:
(i) the Agreement; (ii) the annual reports to shareholders of Colonial,
including audited financial statements for the three years ended December 31,
1996; (iii) audited financial statements of ASB for the three years ended
December 31, 1996; (iv) bank call reports for ASB for the two years ending
December 31, 1996 and for the six months ended June 30, 1997; (v) the unaudited
interim financial statements of Colonial for the six months ended June 30, 1997;
(vi) the unaudited interim financial statements of ASB for the six months ended
June 30, 1997; and, (vii) certain financial and operating information with
respect to the business, operations and prospects of Colonial and ASB. We also:
(i) held discussions with members of the senior management of Colonial and ASB
regarding historical and current business operations, financial condition and
future prospects of their respective companies; (ii) reviewed the historical
market prices and trading activity for the common stocks of Colonial and ASB and
compared them with those of certain publicly traded companies which we deemed to
be relevant; (iii) compared the results of operations of Colonial and ASB with
those of certain banking companies which we deemed to be relevant; (iv) compared
the proposed financial terms of the Merger with the financial terms, to the
extent publicly available, of certain other recent business combinations of
commercial banking organizations; and (v) conducted such other studies,
analyses, inquiries and examinations as we deemed appropriate.

We have relied upon and assumed, without independent verification, the
accuracy and completeness of all information provided to us. We have not
performed or considered any independent appraisal or evaluation of the assets of
ASB or Colonial. The opinion we express herein is necessarily based upon market,
economic and other relevant considerations as they exist and can be evaluated as
of the date of this letter.

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Based upon the foregoing, it is our opinion that the consideration provided
for in the Agreement is fair, from a financial point of view, to the
unaffiliated shareholders who are the holders of 52,614 of the outstanding
shares of ASB Bancshares, Inc.

Very truly yours,

/s/ THE CARSON MEDLIN COMPANY

--------------------------------------
THE CARSON MEDLIN COMPANY

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APPENDIX C

SEC. 262. APPRAISAL RIGHTS.

(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsection (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record in a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also a
membership or membership interest of a member if a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stick of a corporation, which stock is deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to
sec. 251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or
sec. 264 of this title:

(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either, (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc., or, (ii)
held of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement or merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 254 of this title to accept for
such stock anything except:

a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;

b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc., or held of record by more than 2,000
holders;

c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or

d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.

(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.

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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificates of incorporation contains such a provision,
the procedures of this sections, including those set forth in subsections (d)
and (e) of this section, shall apply as nearly as is practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less that 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meetings with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demands will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby
demands the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder or each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or

(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, of the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holder of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 after the date of mailing of
such notice, demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second notice
to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only to
be sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall not be more than
10 days prior to the date the notice is given, provided, that if the notice
is given on or after the effective date of the merger or consolidation, the
records date shall be such effective date. If no record date is fixed and
the notice is given prior to the effective date, the record date shall be
the close of business on the day next preceding the day on which the notice
is given.

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(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.

Notwithstanding the foregoing, at any time within 60 days after the
effective date of the merger or consolidation, any stockholder shall have the
right to withdraw his demand for appraisal and accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.

(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register of
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the resulting or
surviving corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall be given by 1 or more publications at least 1
week before the day of the hearing, in a newspaper of general circulation
published in the City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by publication shall be
approved by the Court, and the costs thereof shall be borne by the surviving or
resulting corporation.

(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, at its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted her
certificates of stock to the Register on Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.

(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation to the
certificated representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.

(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without

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limitation, reasonable attorney's fees and the fees and expenses of experts, to
be charged pro rata against the value of all the shares entitled to an
appraisal.

(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided within subsection (e) of this section, or of such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.

(l) the shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.

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APPENDIX D

STOCK OPTION AGREEMENT

STOCK OPTION AGREEMENT, dated as of August 28, 1997 (the "Agreement"), by
and between ASB Bancshares, Inc., a Delaware corporation ("Issuer"), and The
Colonial BancGroup, Inc., a Delaware corporation ("Grantee").

WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger dated as of August 28, 1997 (the "Merger Agreement"), providing for,
among other things, the merger of Issuer with and into Grantee, with Grantee as
the surviving corporation; and

WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement, Grantee has required that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);

NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Issuer and
Grantee agree as follows:

1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger
Agreement.

2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase from time to time up to 16,740 shares (as adjusted as
set forth herein)(the "Option Shares"), of Common Stock, par value $0.01
per share ("Issuer Common Stock"), of Issuer at a purchase price per Option
Share (the "Purchase Price") equal to $245.18; provided, however, that in
no event shall the number of shares for which this option is exercisable
exceed 19.9% of the outstanding shares of Issuer Common Stock.

3. Exercise of Option. (a) Provided that (i) Grantee shall not be in
material breach of the agreements or covenants contained in this Agreement
or the Merger Agreement, and (ii) no preliminary or permanent injunction or
other order against the delivery of shares covered by the Option issued by
any court of competent jurisdiction in the United States shall be in
effect, Grantee may exercise the Option, in whole or in part, at any time
and from time to time following the occurrence of a Purchase Event (as
defined below); provided that the Option shall terminate and be of no
further force or effect upon the earliest to occur of (A) the Effective
Date, or (B) termination of the Merger Agreement in accordance with the
terms thereof prior to the occurrence of a Purchase Event or a Preliminary
Purchase Event, (C) termination of the Merger Agreement in accordance with
the terms thereof after the occurrence of a Purchase Event or a Preliminary
Purchase Event (other than a termination of the Merger Agreement by Grantee
due to a material breach by Issuer in accordance with Section 13.2(b) of
the Merger Agreement or a termination due to the failure to fulfill
conditions set forth in Sections 8.1, 9.5, 10.1, 10.3, 10.4, 10.6, 10.7, or
10.9 of the Merger Agreement), or (D) eighteen months after termination of
the Merger Agreement following the occurrence of a Purchase Event or a
Preliminary Purchase Event, provided that the termination of the Merger
Agreement was due to one of the reasons listed in the parenthetical of
Clause (C) above; and provided further, that any purchase of shares upon
exercise of the Option shall be subject to compliance with applicable law
including, without limitation, the Bank Holding Company Act of 1956, as
amended (the "BHC Act"). The rights set forth in Section 8 shall terminate
when the right to exercise the Option terminates (other than as a result of
a complete exercise of the Option) as set forth herein.

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(b) As used herein, a "Purchase Event" means any of the following events:

(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed, or publicly announced an
intention to authorize, recommend, or propose, or shall have entered into
any agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect an Acquisition Transaction (as defined below). As used
herein, the term Acquisition Transaction shall mean (A) a merger,
consolidation, or other business combination involving Issuer, (B) the
disposition, by sale, lease, exchange, or otherwise, of assets of Issuer or
any of its subsidiaries representing in either case all or substantially
all of the consolidated assets of Issuer, or (C) the issuance, sale, or
other disposition of (including by way of merger, consolidation, share
exchange, or any similar transaction) securities representing 25% or more
of the voting power of Issuer; or

(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Securities Exchange Act of 1934 (the "1934
Act")) of or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the 1934 Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 25%
or more of the then outstanding shares of Issuer Common Stock.

(i) any person (other than Grantee or any subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the 1934 Act),
or shall have filed a registration statement under the 1933 Act with
respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 25% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer" or
an "Exchange Offer," respectively); or

(ii) (1) the holders of Issuer Common Stock shall not have approved
the Merger Agreement at the meeting of such stockholders held for the
purpose of voting on the Merger Agreement, (2) such meeting shall not have
been held or shall have been canceled prior to termination of the Merger
Agreement, (3) the Issuer's Board of Directors or any person representing
such Board shall have commenced negotiations with any person other than
Grantee regarding an Acquisition Transaction, or (4) Issuer's Board of
Directors shall have withdrawn or modified in a manner adverse to Grantee
the recommendation of Issuer's Board of Directors with respect to the
Merger Agreement, in each case after it shall have been publicly announced
(or otherwise disclosed to the Issuer prior to such public announcement)
that any person (other than Grantee or any subsidiary of Grantee) shall
have (A) made, or disclosed to Issuer an intention to make, a proposal to
engage in an Acquisition Transaction, (B) commenced a Tender Offer or filed
a registration statement under the 1933 Act with respect to an Exchange
Offer, or (C) filed an application (or given a notice), whether in draft or
final form, under the BHC Act, the Bank Merger Act, or the Change in Bank
Control Act of 1978, or other appropriate banking agency, for approval to
engage in an Acquisition Transaction.

As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the 1934 Act.

(d) In the event Grantee wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") or any other regulatory authority is
required in connection with such purchase, Issuer shall cooperate with Grantee
in the filing of the required notice or application for approval and the
obtaining of such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods).

4. Payment and Delivery of Certificates. (a) On each Closing Date, Grantee
shall (i) pay to Issuer, in immediately available funds by wire transfer to a
bank account designated by Issuer, an amount equal to the

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Purchase Price multiplied by the number of Option Shares to be purchased on such
Closing Date, and (ii) present and surrender this Agreement to the Issuer at the
address of the Issuer specified in Section 12(f) hereof.

(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Grantee (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges, and encumbrances of any kind
whatsoever and subject to no pre-emptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Grantee shall deliver to Issuer a
letter agreeing that Grantee shall not offer to sell or otherwise dispose of
such Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.

(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:

THE STOCK REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE LAW AND THE TRANSFER OF THE STOCK
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS ARISING UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A
STOCK OPTION AGREEMENT DATED AS OF AUGUST 28, 1997. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT
BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.

It is understood and agreed that: (i) the reference to restrictions arising
under the 1933 Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the United States Securities and
Exchange Commission ("SEC"), or an opinion of counsel in form and substance
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the 1933 Act; and (ii) the reference to
restrictions pursuant to this Agreement in the above legend shall be removed by
delivery of a substitute certificate without such reference if the Option Shares
evidenced by such certificate containing such reference have been sold or
transferred in compliance with the provisions of this Agreement under
circumstances that do not require the retention of such reference.

5. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:

(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of Issuer. This Agreement has been duly executed and delivered by
Issuer.

(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue (and at all times from the
date hereof until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance), upon
exercise of the Option, the number of shares of Issuer Common Stock
necessary for Grantee to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which may be
issued pursuant to Section 7 upon exercise of the Option. The shares of
Issuer Common Stock to be issued upon due exercise of the Option, including
all additional shares of Issuer Common Stock or other securities which may
be issuable pursuant to Section 7, upon issuance pursuant hereto, shall be
duly and validly issued, fully paid and nonassessable, and shall be
delivered free and clear of all liens, claims, charges, and encumbrances of
any kind or nature whatsoever, including any statutory preemptive rights of
any stockholder of Issuer.

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6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that:

(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.

(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the 1933 Act.

7. Adjustment upon Changes in Capitalization, etc. (a) In the event of a
change in Issuer Common Stock by reason of a stock dividend, stock split,
split-up, recapitalization, combination, exchange of shares, or similar
transaction, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, shall be adjusted appropriately, subject to the
limitation set forth in Section 2 hereof, and proper provision shall be made in
the agreements governing such transaction so that Grantee shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Grantee would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common Stock
are issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a) or a sale of the Issuer
Common Stock for cash at its fair market value), the number of shares of Issuer
Common Stock subject to the Option shall be adjusted so that, after such
issuance, the shares of Issuer Common Stock subject to the Option, together with
any shares of Issuer Common Stock previously issued pursuant hereto, equal 19.9%
of the number of shares of Issuer Common Stock then issued and outstanding.

(b) In the event that Issuer shall enter into an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then-outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of the Issuer or any other person or cash or any other property
or the outstanding shares of Issuer Common Stock immediately prior to such
merger shall after such merger represent less than 50% of the outstanding shares
and share equivalents of the merged company; or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than
Grantee or one of its subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provisions so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the Acquiring
Corporation (as defined below), (y) any person that controls the Acquiring
Corporation, or (z) in the case of a merger described in clause (ii), the Issuer
(in each case, such person being referred to as the "Substitute Option Issuer").

(c) The Substitute Option shall have the same terms as the Option, provided
that, if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to Grantee. The Substitute Option Issuer shall also enter into
an agreement with the then-holder or holders of the Substitute Option in
substantially the same form as this Agreement, which shall be applicable to the
Substitute Option.

(d) The Substitute Option shall be exercisable for such number of shares of
the Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of shares of the Issuer
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of the Substitute
Option per share of the Substitute Common Stock (the "Substitute Purchase
Price") shall then be equal to the Purchase Price multiplied by a fraction in
which the numerator is the number of shares of the Issuer Common Stock for

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which the Option was theretofore exercisable and the denominator is the number
of shares for which the Substitute Option is exercisable.

(e) The following terms have the meanings indicated:

(i) "Acquiring Corporation" shall mean (x) the continuing or surviving
corporation of a consolidation or merger with the Issuer (if other than the
Issuer), (y) the Issuer in a merger in which the Issuer is the continuing
or surviving person, and (z) the transferee of all or substantially all of
the Issuer's assets.

(ii) "Substitute Common Stock" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option.

(iii) "Assigned Value" shall mean the higher of (x) the price per
share of the Issuer Common Stock at which a Tender Offer or Exchange Offer
therefor has been made by any person after the date hereof (other than
Grantee), (y) the price per share of the Issuer Common Stock to be paid by
any person (other than the Grantee) pursuant to an agreement with the
Issuer, or (z) the highest closing sales price per share of Issuer Common
Stock quoted on the National Association of Securities Dealers Automated
Quotation National Market System ("NASDAQ/NMS") (or if Issuer Common Stock
is not quoted on the NASDAQ/NMS, the highest bid price per share on any day
as quoted on the principal trading market or securities exchange on which
such shares are traded as reported by a recognized source chosen by Grantee
or, if there is no such information available, the value of such shares as
determined by a nationally recognized investment banking firm selected by
Grantee) within the six-month period immediately preceding the Agreement,
provided, however, that in the event of a sale of all or substantially all
of the Issuers' assets, the Assigned Value shall be the sum of the price
paid in such sale for such assets and the current market value of the
remaining assets of the Issuer as determined by a nationally recognized
investment banking firm selected by Grantee (or by a majority in interest
of the Grantees if there shall be more than one Grantee (a "Grantee
Majority")), divided by the number of shares of the Issuer Common Stock
outstanding at the time of such sale.

(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event-higher than the
closing price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger, or sale, provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the Issuer, the person
merging into the Issuer or by any company which controls or is controlled
by such merger person, as Grantee may elect, and provided further that if
there is no such trading information available, the price of such shares
shall be determined by a nationally recognized investment banking firm
selected by Grantee.

(f) In no event pursuant to any of the foregoing paragraphs shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute Option Issuer shall make a cash payment
to Grantee equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by Grantee (or a Grantee Majority).

(g) Issuer shall not enter into any transaction described in subsection (b)
of this Section 7 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assumes in writing all the obligations of Issuer
hereunder and takes all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer) (other
than any diminution in value resulting from the fact that the shares of
Substitute Common Stock are restricted securities as defined in Rule 144 under
the 1933 Act or any successor provision).

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(h) The provisions of Sections 8, 9, and 10 shall apply, with appropriate
adjustments, to any securities for which the Option becomes exercisable pursuant
to this Section 7 and, as applicable, references in such sections to "Issuer,"
"Option," "Purchase Price," and "Issuer Common Stock" shall be deemed to be
references to "Substitute Option Issuer," "Substitute Option," "Substitute
Purchase Price," and "Substitute Common Stock," respectively.

8. Repurchase at the Option of Grantee. (a) Subject to the last sentence
of Section 3(a), at the request of Grantee at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d)) and ending 30 days
immediately thereafter, Issuer shall, to the extent permitted by applicable law,
repurchase from Grantee the Option and all shares of Issuer Common Stock
purchased by Grantee pursuant hereto with respect to which Grantee then has
beneficial ownership. The date on which Grantee exercises its right under this
Section 8 is referred to as the "Request Date". Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:

(i) the aggregate Purchase Price paid by Grantee for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Grantee then has beneficial ownership;

(ii) The excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and

(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Grantee for each share of
Issuer Common Stock with respect to which the Option has been exercised and
with respect to which Grantee then has beneficial ownership, multiplied by
the number of such shares.

(b) If Grantee exercises its right under this Section 8, Issuer shall, to
the extent permitted by applicable law, within 10 business days after the
Request Date, pay the Section 8 Repurchase Consideration to Grantee in
immediately available funds, and contemporaneously with such payment Grantee
shall surrender to Issuer the Option and the certificates evidencing the shares
of Issuer Common Stock purchased thereunder with respect to which Grantee then
has beneficial ownership, and Grantee shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then free and clear of
all liens, claims, charges, and encumbrances of any kind whatsoever.
Notwithstanding the foregoing, to the extent that prior notification to or
approval of the Board of Governors of the Federal Reserve System or other
regulatory authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Grantee shall have the
ongoing option to revoke its request for repurchase pursuant to this Section 8,
in whole or in part, or to require that Issuer deliver from time to time that
portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
approval and expeditiously process the same (and each party shall cooperate with
the other in the filing of any such notice or application and the obtaining of
any such approval). If the Board of Governors of the Federal Reserve System or
any other regulatory authority disapproves of any part of Issuer's proposed
repurchase pursuant to this Section 8, Issuer shall promptly give notice of such
fact to Grantee. If the Board of Governors of the Federal Reserve System or
other agency prohibits the repurchase in part but not in whole, then Grantee
shall have the right (i) to revoke the repurchase request, or (ii) to the extent
permitted by the Board of Governors of the Federal Reserve System or other
agency, determine whether the repurchase should apply to the Option and/or
Option Shares and to what extent to each, and Grantee shall thereupon have the
right to exercise the Option as to the number of Option Shares for which the
Option was exercisable at the Request Date less the sum of the number of shares
covered by the Option in respect of which payment has been made pursuant to
Section 8(a)(ii) and the number of shares covered by the portion of the Option
(if any) that has been repurchased. Grantee shall notify Issuer of its
determination under the preceding sentence within five (5) days of receipt of
notice of disapproval of the repurchase.

Notwithstanding anything herein to the contrary, all of the Grantee's
rights under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a).

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(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) or (iii) the highest closing sales per
share of Issuer Common Stock quoted on the NASDAQ/NMS (or if Issuer Common Stock
is not quoted on the market or securities exchange on which such shares are
traded as reported by a recognized source chosen by Grantee and reasonably
acceptable to Issuer) during the 60 business days preceding the Request Date;
provided, however, that in the event of a sale of less than all of Issuer's
assets, the Applicable Price shall be the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of Issuer as
determined by a nationally recognized investment banking firm selected by
Grantee, divided by the number of shares of the Issuer Common Stock outstanding
at the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) and (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by Grantee
and reasonably acceptable to Issuer, which determination shall be conclusive for
all purposes of the Agreement.

(d) As used herein, "Repurchase Event" shall occur if (i) any person (other
than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the 1934
Act), or the right to acquire beneficial ownership of, or any "group" (as such
term is defined under the 1934 Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 50% or more of the
then outstanding shares of Issuer Common Stock, or (ii) any of the transactions
described in Section 7(b)(i), 7(b)(ii), or 7(b)(iii) shall be consummated.

(e) In connection with the application of the provisions of this Section 8,
Grantee acknowledges that Issuer's ability to fund the Section 8 Repurchase
Consideration in accordance with the provisions of this Section 8 may be
dependant upon the ability of Issuer to obtain the prior approval of the Board
of Governors of the Federal Reserve System and applicable provisions of Florida
law and that, unless there has been an agreement of the type described in
Section 7(b), Issuer's obligations under this Section 8 do not impose on the
Issuer an obligation to otherwise finance the payment of the Section 8
Repurchase Consideration through the incurrence of indebtedness or the issuance
of capital instruments or securities by Issuer in either case sufficient in
amount to satisfy the payment of the Section 8 Repurchase Consideration.
Accordingly, Issuer shall not be deemed to be in breach of this Section 8 if,
after making its best efforts to obtain regulatory authorization for a capital
distribution required to pay the Section 8 Repurchase Consideration, it is
unable to do so.

9. Quotation; Listing. If the Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the NASDAQ/NMS or any securities exchange, Issuer, upon
the request of Grantee, will promptly file an application, if required, to
authorize for quotation or trading or listing shares of Issuer Common Stock or
other securities to be acquired upon exercise of the Option on the NASDAQ/NMS or
such other securities exchange and will use its best efforts to obtain approval,
if required, of such quotation or listing as soon as practicable.

10. Division of Option. This Agreement (and the Option granted hereby),
are exchangeable, without expense, at the Option of the Grantee, upon
presentation and surrender of this Agreement at the principal office of Issuer
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction, or mutilation of this Agreement, and (in the case of loss, theft,
or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement executed
and delivered shall constitute an additional contractual obligation on the part
of the Issuer, whether or not the Agreement so lost, stolen, destroyed or
mutilated shall at any time be enforceable by anyone.

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11. Miscellaneous. (a) Expenses. Each of the parties hereto shall bear
and pay all costs and expenses incurred by it or on its behalf in connection
with the transactions contemplated hereunder, including fees and expenses of its
own financial consultants, investment bankers, accountants and counsel.

(b) Waiver and Amendments. Any provision of this Agreement may be waived
at any time in writing by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered, or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.

(c) Entire Agreement; No Third-Party Beneficiary; Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferee of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 11(h)) any rights or
remedies hereunder. If any terms, provision, covenant, or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or enforceable, the remainder of the
terms, provisions, covenants, and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired, or invalidated.
If for any reason such court or regulatory agency determines that the Option
does not permit Grantee to Acquire, or does not require Issuer to repurchase,
the full number of shares of Issuer Common Stock as provided in Sections 3 and 8
(as adjusted pursuant to Section 7), it is the express intention of Issuer to
allow Grantee to Acquire or to require Issuer to repurchase such lesser number
of shares as may be permissible without any amendment or modification hereof.

(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Alabama without regard to any
applicable conflicts of law rules.

(e) Descriptive Headings. The description headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.

(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):

If to Issuer to: ASB Bancshares, Inc.
P.O. Box 219
Ashville, Alabama 35953-0219
Telecopy Number: (205)594-4641

Attention: Joe W. Adkins
President

with a copy to: Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404)881-4777

Attention: Ralph F. MacDonald, III

If to Grantee to: The Colonial BancGroup, Inc.
P.O. Box 1108
Montgomery, Alabama 36192
Telecopy Number (334) 240-6040

Attention: W. Flake Oakley
Chief Financial Officer

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<PAGE> 163

ASB BANCSHARES, INC.

The undersigned hereby constitutes and appoints Joe W. Adkins and Frances K.
Wise, or either of them, as proxies, each with full power of substitution, to
vote the number of shares of common stock of ASB Bancshares, Inc. ("ASB") which
the undersigned would be entitled to vote if personally present at the Special
Meeting of ASB Shareholders to be held at the corporate offices of ASB located
at 255 Fifth Street, Ashville, Alabama 35953, at 6:00 p.m., local time, on
February 3, 1998, and at any adjournment or postponement thereof (the "Special
Meeting") upon the proposals described in the Proxy Statement and the Notice of
Special Meeting of Shareholders, both dated December 29, 1997, the receipt of
which is acknowledged by the undersigned's signature below.

1. MERGER. To consider and vote upon the proposed merger (the "Merger") of ASB
with and into The Colonial BancGroup, Inc. ("BancGroup"), a Delaware
corporation, in accordance with an Agreement and Plan of Merger, dated as of
August 28, 1997, by and between ASB and BancGroup (the "Agreement").
BancGroup will be the surviving corporation in the Merger. Each share of
common stock, par value $0.01 per share, of ASB ("ASB Common Stock")
outstanding at the time of the Merger (except for shares held by Joe W.
Adkins, Chairman, Chief Executive Officer and President of ASB, his wife,
Dorothy G. Adkins, his sister, Carolyn Spann, and stockholders who perfect
their dissenters' rights of appraisal) will be converted into the right to
receive such number of shares of BancGroup Common Stock ("BancGroup Common
Stock"), par value $2.50 per share, equal to $245.18 divided by the Market
Value of the BancGroup Common Stock as determined in accordance with the
Agreement, subject to a maximum and minimum number of shares to be issued,
with cash paid in lieu of fractional shares at the Market Value of such
fractional shares. Shares held by Mr. and Mrs. Adkins and Mrs. Spann will be
converted into subordinated debentures of BancGroup as described more fully
in the accompanying Proxy Statement and Prospectus. The Agreement is
attached to the Proxy Statement and Prospectus as Appendix A.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

2. OTHER MATTERS. To transact such other business as may properly come before
the Special Meeting or any adjournments or postponements thereof.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1 ABOVE.

Please sign exactly as name appears below. When shares are held jointly, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.

Dated: , 1998
--------------------

--------------------------------
Signature

--------------------------------
Signature if held jointly

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF ASB BANCSHARES, INC.
AND MAY BE REVOKED PRIOR TO ITS EXERCISE.