UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2004

Commission File No. 0-15423

BANCTRUST FINANCIAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Alabama	63-0909434
(State of Incorporation)	(IRS Employer Identification No.)
100 Saint Joseph Street Mobile, Alabama	36602
(Address of Principal Executive Office)	(Zip Code)

251-431-7800

(Telephone Number)

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK $.01 PAR

(Title of Class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12b-2 of the Act).    Yes  x    No  ¨

Aggregate market value of the Common Stock ($.01 Par) held by nonaffiliates of the registrant as of February 25, 2005 (assuming that all officers, directors and 5% shareholders are affiliates):  $190,566,051

Shares of Common Stock ($.01 Par) outstanding at March 10, 2005: 11,066,926

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2005 annual meeting are incorporated by reference into Part III.

TABLE OF CONTENTS

PART I
Item 1:	Business	1
Item 2:	Properties	10
Item 3:	Legal Proceedings	10
Item 4:	Submission of Matters to a Vote of Security Holders	10
PART II
Item 5:	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	11
Item 6:	Selected Financial Data	12
Item 7:	Management’s Discussion and Analysis of Financial Condition and Results of Operation	13
Item 7A:	Quantitative and Qualitative Disclosures About Market Risk	32
Item 8:	Financial Statements and Supplementary Data	32
Item 9:	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	68
Item 9A:	Controls and Procedures	68
Item 9B:	Other Information	69
PART III
Item 10:	Directors and Executive Officers of the Registrant	69
Item 11:	Executive Compensation	69
Item 12:	Security Ownership of Certain Beneficial Owners and Management	69
Item 13:	Certain Relationships and Related Transactions	69
Item 14:	Principal Accountant Fees and Services	69
PART IV
Item 15:	Exhibits, Financial Statement Schedules	70

Part I

Forward-Looking Statements

This Annual Report on Form 10-K contains certain forward-looking information with respect to the financial condition, results of operations and business of BancTrust Financial Group, Inc. (the “Company” or “BancTrust”), included in the Notes to Consolidated Financial Statements in Item 8, statements contained in Item 1 below with respect to the Company’s plans for the future, and in Item 7 below with respect to security maturities, loan maturities, loan growth, expectations for and the impact of interest rate changes, the adequacy of the loan loss reserve, expected loan losses, the ability to improve the efficiency ratio and the impact of inflation, unknown trends or regulatory action and other matters. These “forward-looking statements” (as defined in Section 21E of the Securities and Exchange Act of 1934) can generally be identified by words such as “should,” “could,” “may,” “expects,” “anticipates,” “plans,” “intends,” or words of similar meaning. The Company cautions readers that forward-looking statements, including without limitation those noted above, are subject to risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. Factors that may cause actual results to differ materially from those contemplated include, among others: (1) interest rate fluctuations; (2) changes in economic conditions; (3) effectiveness of the Company’s marketing efforts; (4) acquisitions and the integration of acquired businesses; (5) competition; (6) changes in technology; (7) changes in law; (8) changes in fiscal, monetary, regulatory and tax policy; (9) customers’ financial failures; (10) fluctuations in stock and bond markets; (11) the discretion of applicable regulatory authorities; (12) changes in political conditions; (13) war; (14) inflation; and (15) other risks and uncertainties listed from time to time in the Company’s public announcements and in its filings with the Securities and Exchange Commission (the “SEC”).

Item 1. Business

General

BancTrust is a registered bank holding company incorporated under Alabama law. BancTrust was originally incorporated as a Delaware corporation under the name Mobile National Corporation. In 1993, the Company changed its name to South Alabama Bancorporation, Inc. It operated under that name until May of 2002, when it changed its name to BancTrust Financial Group, Inc. In 1996, BancTrust changed its state of domicile from Delaware to Alabama. BancTrust’s corporate headquarters are located at 100 St. Joseph Street, Mobile, Alabama 36602. BancTrust’s subsidiaries have offices in Autauga (1), Baldwin (3), Barbour (2), Clarke (1), Escambia (3), Marengo (4), Mobile (7), Monroe (2), and Montgomery (2) Counties in Alabama and in Bay (2), Okaloosa (3), and Walton (3) Counties in Florida.

As of December 31, 2004, BancTrust and its subsidiaries had approximately 380 full-time equivalent employees. BancTrust had total consolidated assets at December 31, 2004 of approximately $1.2 billion and total consolidated deposits of approximately $986.9 million.

BancTrust offers a broad range of banking and trust services through the following subsidiaries:

• BankTrust, formerly South Alabama Bank, headquartered in Mobile, Alabama (the “Mobile Bank”);

• Sweet Water State Bank, headquartered in Sweet Water, Alabama (the “Sweet Water Bank”);

• BankTrust of Alabama, formerly CommerceSouth Bank Alabama, headquartered in Eufaula, Alabama (the “Eufaula Bank”);

• BankTrust (Florida), formerly CommerceSouth Bank Florida, headquartered in Santa Rosa Beach, Florida (the “Santa Rosa Beach Bank”);

• BancTrust Company, Inc., formerly South Alabama Trust Company, Inc., headquartered in Mobile, Alabama (the “Trust Company”); and

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• BancTrust Financial Services, Inc., headquartered in Mobile, Alabama (a subsidiary of the Mobile Bank).

• Credit Plan, Inc., headquartered in Eufaula, Alabama (a subsidiary of the Eufaula Bank).

BancTrust reviews policies for its subsidiaries and coordinates certain elements of their common internal functions, such as loan review, marketing and business development, accounting, auditing, compliance and computer operations. BancTrust utilizes the services and capabilities of its staff and the staffs of its subsidiaries in conducting its business.

The Company’s banking subsidiaries all offer similar banking services, including business and personal checking accounts, money market accounts, savings accounts, certificates of deposit, overdraft protection, the extension of business and personal loans, mortgages on commercial and residential real estate, access to automated teller machines through the Cirrus System, Inc., Pulse EFT Association and Star Honor Technologies, Inc., retail repurchase agreements, safe deposit box facilities, credit card privileges, traveler’s checks, letters of credit, foreign transfers and remittances and wire transfers. The Company’s banking subsidiaries also offer general banking advice and consultation to the public as well as other customer convenience and community oriented services. Additionally, these banks offer additional services through relationships with correspondent banks which may be requested by their customers. BancTrust does not currently offer international banking services. BancTrust offers the foregoing services to business and individuals through its 33 offices located in the southern half of Alabama and the Florida panhandle. In addition to its offices, BancTrust operates a network of automated teller machines that are linked with shared automated tellers in all 50 states. The Trust Company offers general, corporate and personal trust services. Its primary market area consists of BancTrust’s Alabama market area. In 2004, the Santa Rosa Beach Bank obtained authority to offer and began marketing trust services in our Florida market. Mutual funds, annuities and certain insurance products and securities are offered to customers in all of our markets through BancTrust Financial Services, Inc., a subsidiary of the Mobile Bank.

The following table reflects certain basic information concerning BancTrust and its subsidiaries as of December 31, 2004:

(Dollars in Thousands)
	Eufaula Bank			Mobile Bank			Santa Rosa Beach Bank			Sweet Water Bank			Trust Company			Consolidated1
Banking Offices		5			17			8			3			2			33
Employees		63			185			76			25			19			380
Percent of Ownership		100	%		100	%		100	%		100	%		100	%		100	%
Loans (Net of unearned income)	$	161,692		$	461,089		$	239,426		$	41,484		$	0		$	903,691
Investments		20,086			111,648			11,398			7,495			963			151,590
Total Assets		217,720			629,277			288,589			52,471			2,244			1,191,222
Deposits		165,743			536,088			241,921			46,946			n/a			986,904
Equity Capital	$	38,607		$	59,336		$	42,134		$	4,677		$	2,051		$	122,183

¹ Amounts include BancTrust and its subsidiaries. All material intercompany balances have been eliminated in consolidation.

Further segment information is included in Note 20 of the Notes to Consolidated Financial Statements, which are contained in Item 8 of this Form 10-K.

Business Combinations

BancTrust continually evaluates business combination opportunities and sometimes conducts due diligence activities in connection with possible business combinations. As a result, business combination discussions and,

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in some cases, negotiations take place. Since 1993, BancTrust has grown significantly through acquisitions of eight financial institutions representing in the aggregate (at the time the acquisitions were completed) approximately $770 million in assets.

Future business combinations involving cash, debt or equity securities can be expected. Any future business combination or series of business combinations that BancTrust undertakes may be material in terms of assets acquired or liabilities assumed to BancTrust’s financial condition. Recent business combinations in the financial services industry have typically involved the payment of a premium over book and fair values. This practice may result in dilution of book value and net income per share for the acquirer.

Consolidation of Subsidiaries

In 2003 BancTrust began the process of consolidating its subsidiary banks with the merger of BankTrust of Brewton (formerly the First National Bank, Brewton) into the Mobile Bank. BancTrust merged the Monroe County Bank and the Commercial Bank of Demopolis into the Mobile Bank in 2004. For operational reasons, BancTrust expects to maintain the Eufaula Bank as a separate subsidiary for two to three years before merging it into the Mobile Bank. BancTrust also expects to maintain the Santa Rosa Beach Bank as a separate subsidiary for the foreseeable future. BancTrust expects this consolidation of its subsidiaries to have a beneficial effect on its efficiency and net income.

Sale of BankTrust of Florida

On October 15, 2004, BancTrust completed the sale of all of the stock of BankTrust of Florida for $7.5 million in cash. BankTrust of Florida represented total assets of approximately $43.7 million and total deposits of approximately $37.7 million at December 31, 2003. The Company recorded a gross gain on the sale of $1.5 million.

Competition

BancTrust’s subsidiaries compete aggressively in the markets they serve with statewide and regional bank holding companies, most of which have substantially greater total resources than BancTrust and numerous branch offices located throughout BancTrust’s market area. BancTrust’s subsidiaries also compete with local banks, credit unions, finance companies, insurance companies, mortgage companies, securities brokerage firms, money market mutual funds, and loan production offices operated by out of state banks and other providers of financial services in the areas they serve.

BancTrust’s subsidiaries’ compete with these institutions based on factors such as products and services offered, delivery of services, product pricing, convenience and personal contacts.

Supervision and Regulation

General

BancTrust is a bank holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act. As such, BancTrust and its non-bank subsidiaries are subject to the supervision, examination, and reporting requirements of the Bank Holding Company Act and the regulations of the Federal Reserve Board.

The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve Board before: (1) it may acquire direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, the bank holding company will directly or indirectly own or control more than 5.0% of the voting shares of the bank; (2) it or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of any bank; or (3) it may merge or consolidate with any other bank holding company.

The Bank Holding Company Act further provides that the Federal Reserve Board may not approve any transaction that would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any section of the United States, or the effect of

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which may be substantially to lessen competition or to tend to create a monopoly in any section of the country, or that in any other manner would be in restraint of trade, unless the anticompetitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the community to be served. The Federal Reserve Board is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks concerned and the convenience and needs of the community to be served.

The Bank Holding Company Act generally prohibits BancTrust from engaging in activities other than banking or managing or controlling banks or other permissible subsidiaries and from acquiring or retaining direct or indirect control of any company engaged in any activities other than those activities determined by the Federal Reserve Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In determining whether a particular activity is permissible, the Federal Reserve Board must consider whether the performance of such an activity reasonably can be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices.

The Gramm-Leach-Bliley Act, which became effective in March 2000, significantly relaxes previously existing restrictions on the activities of banks and bank holding companies. Under the Gramm-Leach-Bliley Act, an eligible bank holding company may elect to be a “financial holding company” and thereafter may engage in a range of activities that are financial in nature and that were not previously permissible for banks and bank holding companies. For a bank holding company to be eligible for financial holding company status, all of its subsidiary financial institutions must be well-capitalized and well managed. Financial holding company status is achieved by a declaration to the Federal Reserve Board that a bank holding company elects to be a financial holding company. A financial holding company may engage directly or through a subsidiary in the statutorily authorized activities of (i) securities dealing, underwriting, and market making; (ii) insurance underwriting and agency activities; (iii) merchant banking; (iv) insurance company portfolio investments; and (v) in any activity that the Federal Reserve Board determines by rule or order to be financial in nature or incidental to such financial activity. The Federal Reserve Board must deny expanded authority to any bank holding company that received less than a satisfactory rating on its most recent Community Reinvestment Act review as of the time it submits its declaration. BancTrust is not a financial holding company.

The Gramm-Leach-Bliley Act also permits securities brokerage firms and insurance companies to own banks and bank holding companies. The Act is also designed to streamline and coordinate regulation of integrated financial holding companies, to provide generally for “umbrella” regulation of financial holding companies by the Federal Reserve Board, and to promote regulation of banking activities by bank regulators, securities activities by securities regulators, and insurance activities by insurance regulators.

Each of the subsidiary banks of BancTrust is a member of the Federal Deposit Insurance Corporation (the “FDIC”), and, as such, their respective deposits are insured by the FDIC to the extent provided by law. Each such subsidiary bank is also subject to numerous state and federal statutes and regulations that affect its business, activities, and operations, and each is supervised and examined by one or more state or federal bank regulatory agencies. BancTrust’s subsidiary banks are state-chartered banks subject to supervision and examination by the state banking authorities of the states in which they are located. The federal banking regulator for each of the subsidiary banks, as well as the appropriate state banking authority for each of the subsidiary banks, regularly examines the operations of the subsidiary banks and is given authority to approve or disapprove mergers, consolidations, the establishment of branches, and similar corporate actions. The federal and state banking regulators also have the power to prevent the continuance or development of unsafe or unsound banking practices or other violations of law.

Payment of Dividends

BancTrust is a legal entity separate and distinct from its banking and other subsidiaries. The principal source of cash flow for BancTrust, including cash flow to pay dividends to its shareholders, is dividends from its

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subsidiary banks and trust company. There are statutory and regulatory limitations on the payment of dividends by these subsidiaries to BancTrust, as well as on the payment of dividends by BancTrust to its shareholders.

As to the payment of dividends, BancTrust’s state-chartered banking subsidiaries and trust company subsidiary are subject to the respective laws and regulations of the state in which the subsidiary is located and to the regulations of the FDIC. Various federal and state statutory provisions limit the amount of dividends BancTrust’s subsidiary banks can pay to BancTrust without regulatory approval. The approval of the Federal Reserve Board is required for any dividend by a state chartered bank that is a member of the Federal Reserve System (a “state member bank”) if the total of all dividends declared by the bank in any calendar year would exceed the total of its net profits (as defined by regulatory agencies) for that year combined with its retained net profits for the preceding two years. In addition, a state member bank may not pay a dividend in an amount greater than its net profits then on hand. State member banks may also be subject to similar restrictions imposed by the laws of the states in which they are chartered.

If, in the opinion of a federal bank regulatory agency, an institution under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice (which, depending on the financial condition of the depository institution, could include the payment of dividends), such agency may require, after notice and hearing, that such institution cease and desist from such practice. The federal banking agencies have indicated that paying dividends that deplete an institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. Under current federal law, an insured institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. See “Supervision and Regulation—Prompt Corrective Action” on page 7. Moreover, the Federal Reserve Board and the FDIC have issued policy statements which provide that bank holding companies and insured banks should generally pay dividends only out of current operating earnings.

Under Alabama law, a bank may not pay a dividend in excess of 90% of its net earnings until the bank’s surplus is equal to at least 20% of its capital. An Alabama state bank is also required by Alabama law to obtain the prior approval of the Superintendent of the State Banking Department of Alabama for the payment of dividends if the total of all dividends declared by it in any calendar year will exceed the total of (a) its net earnings (as defined by statute) for that year, plus (b) its retained net earnings for the preceding two years, less any required transfers to surplus. In addition, no dividends may be paid from an Alabama state bank’s surplus without the prior written approval of the Superintendent.

Under Florida law, the directors of a bank, after charging off bad debts, depreciation, and other worthless assets, if any, and making provision for reasonably anticipated future realized losses on loans and other assets, may quarterly, semiannually, or annually declare a dividend of so much of the aggregate of the net profits of that period combined with its retained net profits of the preceding two years as the directors shall judge expedient, and, with the approval of the Florida Office of Financial Regulation, a bank may declare a dividend from retained net profits which accrued prior to the preceding two years, but each bank shall, before the declaration of a dividend on its common stock, carry 20 percent of its net profits for such preceding period as is covered by the dividend to its surplus fund, until the same shall at least equal the amount of its common and preferred stock then issued and outstanding. No bank shall declare any dividend at any time that its net income from the current year combined with the retained net income from the preceding 2 years is a loss or which would cause the capital accounts of the bank to fall below the minimum amount required by law, regulation, order, or any written agreement with the Florida Office of Financial Regulation or a state or federal regulatory agency.

At December 31, 2004 BancTrust’s subsidiaries were able to pay dividends totaling approximately $6.7 million without the need for regulatory approval.

Capital Adequacy

BancTrust is subject to risk-based capital requirements and guidelines imposed by the Federal Reserve Board, which are substantially similar to the capital requirements and guidelines imposed by the Federal Reserve Board and the Federal Deposit Insurance Corporation on the depository institutions within their respective jurisdictions.

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For this purpose, a depository institution’s or holding company’s assets and certain specified off-balance-sheet commitments and obligations are assigned to various risk categories. A depository institution’s or holding company’s capital, in turn, is classified in one of three tiers: core (“Tier 1”) capital, which includes common equity, non-cumulative perpetual preferred stock, a limited amount of cumulative perpetual preferred stock at the holding company level and minority interests in equity accounts of consolidated subsidiaries, less goodwill, and less most intangible assets; supplementary (“Tier 2”) capital, which includes, among other items, perpetual preferred stock not meeting the Tier 1 definition, mandatory convertible securities, subordinated debt and allowances for loan and lease losses, subject to certain limitations; and market risk (“Tier 3”) capital, which includes qualifying unsecured subordinated debt.

BancTrust, like other bank holding companies, currently is required to maintain Tier 1 capital and “total capital” (the sum of Tier 1, Tier 2 and Tier 3 capital) equal to at least 4% and 8%, respectively, of its total risk-weighted assets (including certain off-balance-sheet items, such as standby letters of credit). In addition, in order for a holding company or depository institution to be considered “well capitalized” for regulatory purposes, its Tier 1 and total capital ratios must be 6% and 10% on a risk-adjusted basis, respectively. At December 31, 2004, BancTrust met both requirements, with Tier 1 capital equal to 9.46% and total capital equal to 10.49% of its total risk-weighted assets. The Federal Reserve System has allowed bank holding companies to include trust preferred securities in Tier 1 Capital up to a maximum of 25% of Tier 1 Capital. On March 1, 2005 the Federal Reserve System issued a new rule (12 CFR Parts 208 and 225) that reduces the amount of trust preferred securities that may be included in Tier 1 Capital to 25% of Tier 1 capital less goodwill and any deferred tax liability. Under this new rule, all $18.0 million of trust preferred stock currently included by the Company in its calculation of Tier 1 and total capital will continue to be included in Tier 1 and total capital. Consequently, Management does not believe this new rule will have any material adverse impact on BancTrust; however, it does to some extent limit BancTrust’s ability to utilize trust preferred securities as a capital raising strategy in the future.

The Federal Reserve Board also requires bank holding companies to maintain a minimum “leverage ratio” (Tier 1 capital to adjusted total assets) of 3% if the holding company has the highest regulatory rating and meets certain other requirements, or of 3% plus an additional “cushion” of at least 100 to 200 basis points if the holding company does not meet these requirements. At December 31, 2004, BancTrust’s leverage ratio was 8.28%.

The Federal Reserve Board may set capital requirements higher than the minimum noted above for holding companies whose circumstances warrant it. For example, holding companies experiencing or anticipating significant growth may be expected to maintain capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the Federal Reserve Board has indicated that it will consider a “tangible Tier 1 capital leverage ratio” (deducting all intangibles) and other indicia of capital strength in evaluating proposals for expansion or new activities.

Each of BancTrust’s banking subsidiaries is subject to similar risk-based and leverage capital requirements adopted by its applicable federal banking agency, and each was in compliance with the applicable capital requirements as of December 31, 2004.

Failure to meet capital guidelines could subject a bank to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on the taking of brokered deposits, and to certain other restrictions on its business. As described below, substantial additional restrictions can be imposed upon FDIC-insured depository institutions that fail to meet applicable capital requirements. See “Supervision and Regulation — Prompt Corrective Action.”

The Federal Reserve Board, the Office of the Comptroller of the Currency, and the FDIC also have recently adopted final regulations requiring regulators to consider interest rate risk (when the interest rate sensitivity of an institution’s assets does not match the sensitivity of its liabilities or its off-balance-sheet position) in the evaluation of a bank’s capital adequacy. The bank regulatory agencies’ methodology for evaluating interest rate risk requires banks with excessive interest rate risk exposure to hold additional amounts of capital against such exposures.

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Prompt Corrective Action

Current federal law establishes a system of prompt corrective action to resolve the problems of undercapitalized institutions. Under this system the federal banking regulators have established five capital categories (“well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized”) and must take certain mandatory supervisory actions, and are authorized to take other discretionary actions, with respect to institutions in the three undercapitalized categories, the severity of which will depend upon the capital category in which the institution is placed. Generally, subject to a narrow exception, current federal law requires the banking regulator to appoint a receiver or conservator for an institution that is critically undercapitalized. The federal banking agencies have specified by regulation the relevant capital level for each category.

Under the final agency rule implementing the prompt corrective action provisions, an institution that (1) has a Total Capital Ratio of 10% or greater, a Tier 1 Capital Ratio of 6.0% or greater, and a Leverage Ratio of 5.0% or greater and (2) is not subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the appropriate federal banking agency is deemed to be “well capitalized.” An institution with a Total Capital Ratio of 8.0% or greater, a Tier 1 Capital Ratio of 4.0% or greater, and a Leverage Ratio of 4.0% or greater is considered to be “adequately capitalized.” A depository institution that has a Total Capital Ratio of less than 8.0%, a Tier 1 Capital Ratio of less than 4.0%, or a Leverage Ratio of less than 4.0% is considered to be “undercapitalized.” A depository institution that has a Total Capital Ratio of less than 6.0%, a Tier 1 Capital Ratio of less than 3.0%, or a Leverage Ratio of less than 3.0% is considered to be “significantly undercapitalized,” and an institution that has a tangible equity capital to assets ratio equal to or less than 2.0% is deemed to be “critically undercapitalized.” For purposes of the regulation, the term “tangible equity” includes core capital elements counted as Tier 1 Capital for purposes of the risk-based capital standards plus the amount of outstanding cumulative perpetual preferred stock (including related surplus), minus all intangible assets with certain exceptions. A depository institution may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position if it receives an unsatisfactory examination rating.

An institution that is categorized as undercapitalized, significantly undercapitalized, or critically undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal banking agency. A bank holding company must guarantee that a subsidiary depository institution meets its capital restoration plan, subject to certain limitations. The obligation of a controlling bank holding company to fund a capital restoration plan is limited to the lesser of 5.0% of an undercapitalized subsidiary’s assets or the amount required to meet regulatory capital requirements. An undercapitalized institution is also generally prohibited from increasing its average total assets, making acquisitions, establishing any branches, or engaging in any new line of business, except in accordance with an accepted capital restoration plan or with the approval of the FDIC. In addition, the appropriate federal banking agency is given authority with respect to any undercapitalized depository institution to take any of the actions it is required to or may take with respect to a significantly undercapitalized institution as described below if it determines “that those actions are necessary to carry out the purpose” of the law.

At December 31, 2004, the Mobile Bank, the Eufaula Bank and the Sweet Water Bank had the requisite capital levels to qualify as well capitalized for prompt corrective action purposes. The Santa Rosa Beach Bank had the requisite capital levels to qualify as adequately capitalized.

FDIC Insurance Assessments

The FDIC currently uses a risk-based assessment system for insured depository institutions that takes into account the risks attributable to different categories and concentrations of assets and liabilities. The risk-based assessment system, which went into effect on January 1, 1994, assigns an institution to one of three capital categories: (1) well capitalized; (2) adequately capitalized; and (3) undercapitalized. These three categories are substantially similar to the prompt corrective action categories described above, with the “undercapitalized” category including institutions that are undercapitalized, significantly undercapitalized, and critically undercapitalized for prompt corrective action purposes. An institution is also assigned by the FDIC to one of three

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supervisory subgroups within each capital group. The supervisory subgroup to which an institution is assigned is based on a supervisory evaluation provided to the FDIC by the institution’s primary federal regulator and information which the FDIC determines to be relevant to the institution’s financial condition and the risk posed to the deposit insurance funds (which may include, if applicable, information provided by the institution’s state supervisor). An institution’s insurance assessment rate is then determined based on the capital category and supervisory category to which it is assigned. Under the final risk-based assessment system, there are nine assessment risk classifications (i.e., combinations of capital groups and supervisory subgroups) to which different assessment rates are applied.

The FDIC may terminate an institution’s insurance of deposits upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC.

Community Reinvestment Act

The Community Reinvestment Act (the “CRA”) requires federal bank regulatory agencies to encourage financial institutions to meet the credit needs of low- and moderate-income borrowers in their local communities. An institution’s size and business strategy determines the type of examination that it will receive. Large, retail-oriented institutions will be examined using a performance-based lending, investment and service test. Small institutions will be examined using a streamlined approach. All institutions may opt to be evaluated under a strategic plan formulated with community input and preapproved by the bank regulatory agency.

The CRA regulations provide for certain disclosure obligations. Each institution must post a notice advising the public of its right to comment to the institution and its regulator on the institution’s CRA performance and to review the institution’s CRA public file. Each lending institution must maintain for public inspection a public file that includes a listing of branch locations and services, a summary of lending activity, a map of its communities and any written comments from the public on its performance in meeting community credit needs. The CRA requires public disclosure of a financial institution’s written CRA evaluations. This promotes enforcement of CRA requirements by providing the public with the status of a particular institution’s community reinvestment record.

The Gramm-Leach-Bliley Act made various changes to the CRA. Among other changes, CRA agreements with private parties must be disclosed and annual CRA reports must be made to a bank’s primary federal regulator. A bank holding company will not be permitted to become a financial holding company and no new activities authorized under the Gramm-Leach-Bliley Act may be commenced by a holding company or by a bank financial subsidiary if any of its bank subsidiaries received less than a “satisfactory” CRA rating in its latest CRA examination. All four banks owned by BancTrust have a “satisfactory” CRA rating.

Privacy

Financial institutions are required to disclose their policies for collecting and protecting confidential information. Customers generally may prevent financial institutions from sharing personal financial information with nonaffiliated third parties except for third parties which market the institution’s own products and services. Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing through electronic mail to consumers.

USA Patriot Act

On October 26, 2001, President Bush signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”), which is designed to deny terrorists and others the ability to obtain access to the United States financial system. Title III of the USA Patriot Act is the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001. Among its provisions, the USA Patriot Act mandates or will require financial institutions to implement additional policies and procedures with respect to, or additional measures, including additional due diligence and recordkeeping, designed to address, any or all of the following matters, among others: money laundering; suspicious

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activities and currency transaction reporting; and currency crimes. The U.S. Department of the Treasury, in consultation with the Federal Reserve Board and other federal financial institution regulators, has promulgated rules and regulations implementing the USA Patriot Act which (i) prohibit U.S. correspondent accounts with foreign banks that have no physical presence in any jurisdiction; (ii) require financial institutions to maintain certain records for correspondent accounts of foreign banks; (iii) require financial institutions to produce certain records relating to anti-money laundering compliance upon request of the appropriate federal banking agency; (iv) require due diligence with respect to private banking and correspondent banking accounts; (v) facilitate information sharing between the government and financial institutions; (vi) require financial institutions to have in place a money laundering program; and (vii) impose minimum verification of identity standards for all new accounts.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 (“SOX”) comprehensively revised the laws affecting corporate governance, accounting obligations and corporate reporting for companies with equity or debt securities registered under the Exchange Act (such as BancTrust). In particular, SOX established (a) new requirements for audit committees, including independence, expertise, and responsibilities; (b) additional responsibilities regarding financial statements for the Chief Executive Officer and Chief Financial Officer of the reporting company; (c) new standards for auditors and regulation of audits; (d) increased disclosure and reporting obligations for the reporting company and their directors and executive officers; and (e) new and increased civil and criminal penalties for violations of the securities laws.

Effects of Governmental Policy

The earnings and business of BancTrust and its subsidiary banks have been and will be affected by the policies of various regulatory authorities of the United States, particularly the Federal Reserve Board. Important functions of the Federal Reserve Board, in addition to those enumerated above, include the regulation of the supply of money in light of general economic conditions within the United States. The instruments of monetary policy employed by the Federal Reserve Board for these purposes influence in various ways the overall level of investments, loans, other extensions of credit and deposits, and the interest rates paid on liabilities and received on interest-earning assets.

Banking is a business that depends on interest rate differentials. In general, the difference between the interest paid by banks on their deposits and other borrowings and the interest received by banks on loans extended to customers and securities held in their investment portfolios comprises the major portion of their respective earnings. The earnings and gross income of banks thus have been and will be subject to the influence of economic conditions generally, both domestic and foreign, and also to monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve Board. The nature and timing of any future changes in such policies and their impact on the subsidiary banks of BancTrust are not predictable.

Available Information

BancTrust’s website address is http://www.banctrustfinancialgroupinc.com. The Company makes available on its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. These documents are made available on BancTrust’s website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. You may also request a copy of these filings, at no cost, by writing or telephoning BancTrust at the following address:

BancTrust Financial Group, Inc.

Attn: F. Michael Johnson

100 St. Joseph Street

Mobile, Alabama 36602

(251) 431-7800

9

Executive Officers of the Registrant

The following table reflects certain information concerning the executive officers of BancTrust. Each such officer holds his office(s) until the first meeting of the Board of Directors following the annual meeting of shareholders each year, or until a successor is chosen, subject to removal at any time by the Board of Directors. Except as otherwise indicated, no family relationships exist among the executive officers and directors of BancTrust, and no such officer holds his office(s) by virtue of any arrangement or understanding between him and any other person except the Board of Directors.

Name, Age and Office(s) with BancTrust	Other Positions with BancTrust
J. Stephen Nelson – age 67(1) Chairman (since 1993)	Director (since 1993)
W. Bibb Lamar, Jr. – age 61(2) President and CEO (since 1989)	Director (since 1989)
Michael D. Fitzhugh – age 56(3) Executive Vice President (since 2004)	None
F. Michael Johnson – age 59(4) Chief Financial Officer, Executive Vice President & Secretary (since 1993)	None
Caulie T. Knowles, III– age 46(5) Executive Vice President (since 2004)	None

(1) Previously: Chairman, 1993-2003, Chief Executive Officer, 1984-2003, and Director, 1979-2003, BankTrust of Brewton, which was merged into the Mobile Bank in 2003.

(2) Chief Executive Officer, since 1989, and Chairman, since 1998, the Mobile Bank. Previously: President (1989-1998), the Mobile Bank.

(3) President, Chief Operating Officer and Director of the Mobile Bank since 1998.

(4) Executive Vice President and Cashier, since 1986, the Mobile Bank.

(5) President, Chief Executive Officer and Director of the Santa Rosa Beach Bank since 1997 and President, Chief Executive Officer and Director of the Eufaula Bank since 2002. Chief Operating Officer of CommerceSouth, Inc. from 2002 until its merger with BancTrust in 2003.

Item 2. Properties

BancTrust’s corporate headquarters occupy an approximately 30,000 square foot facility located at 100 St. Joseph Street, in downtown Mobile, Alabama 36602. BancTrust leases this entire facility, which also houses the headquarters of the Trust Company and the headquarters of the Mobile Bank. The primary term of the lease for this building expires on December 31, 2005. The Company has exercised an option to extend the term of this lease for an additional 5 years, and the Company has an option to extend this lease for one additional term of five years.

In addition to its corporate headquarters, BancTrust, through its subsidiaries, operates 32 office or branch locations, of which 29 are owned and three are subject to either building or ground leases. BancTrust paid annual rents in 2004 of approximately $297,000. At December 31, 2004, there were no significant encumbrances on the offices, equipment or other operational facilities owned by BancTrust and its subsidiaries.

Item 3. Legal Proceedings

As of the date of this report there are no material pending legal proceedings to which BancTrust or any of the Banks or the Trust Company is a party, other than ordinary routine litigation incidental to our business.

Item 4. Submission of Matters to a Vote of Security Holders

None

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Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Prices and Cash Dividends Per Share

BancTrust’s common stock trades on The Nasdaq Small Cap Stock Market^® under the symbol BTFG.

At December 31, 2004, the Company had approximately 3,300 shareholders, of record or through registered clearing agents.

	BID PRICES PER SHARE				REGULAR CASH DIVIDENDS DECLARED PER SHARE
	HIGH		LOW
2004
1st Quarter	$	18.42	$	15.74	$	.13
2nd Quarter		18.37		16.00		.13
3rd Quarter		19.76		16.25		.13
4th Quarter		24.61		17.62		.13
2003
1st Quarter	$	14.99	$	10.90	$	.13
2nd Quarter		18.01		13.75		.13
3rd Quarter		16.39		14.87		.13
4th Quarter		16.90		15.02		.13

Securities Authorized for Issuance under Equity Compensation Plans

The equity compensation plans information required by this Item 5 is incorporated by reference to BancTrust’s Proxy Statement for its 2005 annual meeting, where it appears under the heading, “Equity Compensation Plan Information.”

Share Repurchases

On September 28, 2001, the Company announced that it intended to repurchase up to 425 thousand shares of its common stock. Approximately one year before implementation of the stock repurchase plan, the Company purchased 61 thousand of its shares. As of December 31, 2004, the Company had purchased 195 thousand shares under the stock repurchase plan. These purchases were accomplished primarily through private transactions and were accounted for under the cost method. The Company share purchases, including those that predate the repurchase plan, ranged in price from $8.00 per share to $15.33 per share, and the weighted average price per share paid by the Company was $9.42. The Company has not repurchased any of its shares under this repurchase plan since November 14, 2002.

The following table provides information about purchases by BancTrust during the quarter ended December 31, 2004 of equity securities that are registered by BancTrust pursuant to Section 12 of the Exchange Act.

Period	Number of shares purchased(1)	Average price paid per share		Shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs(2)
10/01/04-10/31/04	635	$	18.27	0	229,951
11/01/04-11/30/04	0	$	0.00	0	229,951
12/01/04-12/31/04	636	$	22.31	0	229,951
Total	1,271	$	20.29	0	229,951

(1) 1,271 shares were purchased on the open market to provide shares to participants in BancTrust’s grantor trust related to its deferred compensation plan for directors.

(2) Under a share repurchase program announced on September 28, 2001, BancTrust may buy up to 425,000 shares of its common stock. The repurchase program does not have an expiration date.

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Item 6. Selected Financial Data

(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	2004			2003			2002			2001			2000
RESULTS OF OPERATIONS:
Interest revenue	$	53,828		$	31,391		$	34,159		$	40,317		$	43,420
Interest expense		12,487			7,696			11,105			17,695			19,461
Net interest revenue		41,341			23,695			23,054			22,622			23,959
Provision for loan losses		4,017			2,082			910			1,787			1,235
Non-interest revenue		11,063			7,652			7,291			6,341			5,392
Non-interest expense		33,580			20,973			19,256			18,436			17,598
Income from continuing operations before income taxes		14,807			8,292			10,179			8,740			10,518
Income taxes		4,247			2,291			2,971			2,514			3,071
Income from continuing operations		10,560			6,001			7,208			6,226			7,447
Income from discontinued operations before income taxes		696			509			182			0			0
Gain on sale of discontinued operations before income taxes		1,484			0			0			0			0
Total income from discontinued operations before income taxes		2,180			0			0			0			0
Income taxes		1,439			188			67			0			0
Income from discontinued operations		741			321			115			0			0
Net income	$	11,301		$	6,322		$	7,323		$	6,226		$	7,447
Basic net income per share from continuing operations	$	.96		$	.68		$	.84		$	.73		$	.87
Basic net income per share from discontinued operations	$	.07		$	.04		$	.01		$	.00		$	.00
Diluted net income per share from continuing operations	$	.95		$	.67		$	.83		$	.73		$	.87
Diluted net income per share from discontinued operations	$	.07		$	.04		$	.01		$	.00		$	.00
Basic net income per share	$	1.03		$	.72		$	.85		$	.73		$	.87
Diluted net income per share	$	1.02		$	.71		$	.84		$	.73		$	.87
Cash dividends declared per share	$	.52		$	.52		$	.48		$	.44		$	.40
YEAR-END STATEMENT OF CONDITION:
Total assets	$	1,191,222		$	1,076,900		$	665,810		$	592,372		$	577,116
Loans, net of unearned income		903,691			688,802			390,452			382,313			378,353
Deposits		986,904			811,145			524,738			501,477			486,835
Shareholders’ equity		122,183			116,666			80,904			73,914			70,835
AVERAGE BALANCES:
Total assets	$	1,109,679		$	678,596		$	636,497		$	576,381		$	555,507
Average earning assets		944,878			587,928			561,834			536,380			514,999
Loans		766,928			410,290			383,829			382,818			367,281
Deposits		876,844			531,650			513,470			486,012			468,137
Shareholders’ equity		119,820			82,136			78,658			73,204			66,604
PERFORMANCE RATIOS:
Net income to:
Average total assets		1.02	%		0.93	%		1.15	%		1.08	%		1.34	%
Average shareholders’ equity		9.43	%		7.70	%		9.31	%		8.50	%		11.18	%
Average shareholders’ equity to average total assets		10.80	%		12.10	%		12.36	%		12.70	%		11.99	%
Dividend payout ratio		54.10	%		71.97	%		56.66	%		60.25	%		46.05	%

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

The following discussion and analysis focuses on information about BancTrust Financial Group, Inc. and its subsidiaries that is not otherwise apparent from the consolidated financial statements and related footnotes appearing below in this Annual Report. Reference should be made to those statements and the financial data presented elsewhere in this report for a complete understanding of the following discussion and analysis.

On April 16, 2002, Gulf Coast Community Bancshares, Inc., the parent company of Wewahitchka State Bank (BankTrust of Florida), was merged into the Company. On October 15, 2004, BankTrust of Florida was sold to an unrelated financial institution. Therefore, the results of operations of BankTrust of Florida have been included as discontinued operations in the consolidated results of the Company from April 16, 2002 through October 15, 2004.

On December 30, 2003, CommerceSouth, Inc. (“CommerceSouth”) the parent company of CommerceSouth Bank Alabama (now BankTrust of Alabama) and CommerceSouth Bank Florida (now BankTrust, Florida) was merged into the Company. This merger has been accounted for under the purchase method of accounting. Therefore, the results of operations of these two banks have been included in the consolidated results of the Company from December 30, 2003.

Overview

Net income for 2004 was $11.3 million compared to $6.3 million in 2003. On a per share basis, basic earnings were $1.03 in 2004 and $.72 in 2003, and diluted earnings were $1.02 in 2004 and $.71 in 2003. Return on average assets in 2004 was 1.02 percent compared to .93 percent in 2003. Total assets at year-end 2004 were $1.191 billion compared to $1.077 billion at year-end 2003. BankTrust of Florida had assets of approximately $50 million at the time of its sale on October 15, 2004.

Management and staff spent considerable time and effort in 2004 on the successful integration of CommerceSouth and BancTrust. A new, comprehensive strategic planning process which began prior to the merger established goals and time frames for the integration process, and for operation of the Company for several years to come. Areas addressed in the plan include, but are not limited to: (1) internal growth and market expansion, (2) performance goals, (3) credit culture, (4) personnel development, (5) management succession, (6) technology infrastructure to support the overall plan and (7) marketing and product development and enhancement. The plan is to be periodically monitored and updated by a team of senior officers from all areas of the Company.

In 2004 the Company completed the merger of the Demopolis Bank and the Monroeville Bank into the Mobile Bank. These mergers were part of a process which was started in 2003 to consolidate existing charters and operations. The mergers were successful and have resulted in reductions in staff as well as the elimination of certain duplicate operations.

In early 2004, following an evaluation of the growth potential of our various markets, we decided to sell our smallest Florida bank and we redirected the proceeds of the sale to our higher growth markets in Florida. The transaction was completed on October 15, 2004. We continue to evaluate the feasibility of similar opportunities.

One of the challenges in 2004 was funding the rapid loan growth which has occurred in our Gulf Coast and metropolitan Montgomery markets. Loans have grown much faster than core deposits, and the Company has placed additional emphasis on non-core funding sources such as brokered deposits and Federal Home Loan Bank borrowings. The Company expects this trend to continue in 2005. In addition to core and non-core funding sources, BancTrust is exploring the possibility of an equity issuance.

13

Critical Accounting Policies and Estimates

The accounting principles followed by the Company and the methods of applying these principles conform with accounting principles generally accepted in the United States of America and with general practices within the banking industry. Critical accounting policies relate to the allowance for loan losses. A description of these policies is as follows:

Allowance for Loan Losses

The allowance for loan losses is maintained at a level considered by Management to be sufficient to absorb losses inherent in the loan portfolio. BancTrust’s determination of its allowance for loan losses is determined in accordance with Statement of Financial Accounting Standards Nos. 114 and 5. The amount of the allowance for loan losses and the amount of the provision charged to expense is based on periodic reviews of the portfolio, past loan loss experience, current and expected economic conditions and such other factors which, in Management’s judgement, deserve current recognition in estimating loan losses.

A regular, formal and ongoing loan review is conducted to identify loans with unusual risks and probable loss. Management uses the loan review process to stratify the loan portfolio into risk grades. For higher-risk graded loans in the portfolio the Banks determine estimated amounts of loss based on several factors, including historical loss experience, Management’s judgement of economic conditions and the resulting impact on higher-risk graded loans, the financial capacity of the borrower, secondary sources of repayment (including collateral) and regulatory guidelines. This determination also considers the balance of impaired loans (which are generally considered to be non-performing loans). Specific allowances for impaired loans are based on comparisons of the recorded carrying values of the loans to the present value of these loans’ estimated cash flows at each loan’s effective interest rate, the fair value of the collateral, or the loan’s observable market price. Recovery of the carrying value of loans is dependent to a great extent on economic, operating and other conditions that may be beyond the Company’s control.

In addition to evaluating probable losses on individual loans, Management also determines probable losses for all other loans in the portfolio. The amount of the allowance for loan losses related to all other loans in the portfolio is determined based on historical and current loss experience, portfolio mix by loan type and by collateral type, current economic conditions, the level and trend of loan quality ratios, and such other factors which, in Management’s judgement, deserve current recognition in estimating inherent loan losses. The methodology and assumptions used to determine the allowance are continually reviewed as to their appropriateness given the most recent losses realized and other factors that influence the estimation process. The model assumptions and resulting allowance level are adjusted accordingly as these factors change.

Financial Condition

Average Assets and Liabilities

Average assets in 2004 were $1.110 billion, compared to $678.6 million in 2003. Excluding the Eufaula and Santa Rosa Beach Banks, which were acquired in the CommerceSouth transaction, and the assets of discontinued operations, average assets increased $8.9 million. Average loans, net, in 2004 were $757.8 million or 87.1 percent higher than average loans, net, of $405.0 million in 2003. Excluding the Eufaula and Santa Rosa Beach Banks, average loans, increased $38.9 million. Loan growth was slow during the years 2000 through 2002 in the markets served by BancTrust; however, there was a significant increase in loan demand beginning in 2003, and the demand accelerated in 2004. Management anticipates that strong loan demand will continue through 2005, especially in the areas of the Company along the Gulf Coast.

Average deposits of $876.8 million in 2004 were 64.9 percent higher than average deposits of $531.7 million in 2003. Excluding the Eufaula and Santa Rosa Beach Banks, average deposits increased $15.8 million. Short-term and long-term borrowings consist of federal funds purchased, Federal Home Loan Bank (FHLB) borrowings, a loan from an unrelated commercial bank, overnight repurchase agreements, payable to trust, and

14

deposits in the treasury tax and loan account. Reliance on these funds at the Company historically has been low; however, Management has recently increased its reliance on these types of funds as loan demand has outpaced deposit growth. The $10.0 million loan from the unrelated commercial bank, which is included in long-term debt, was used to partially fund the acquisition of CommerceSouth.

The Company’s average equity as a percent of average total assets in 2004 was 10.8 percent, compared to 12.1 percent in 2003. Average equity in 2004 and 2003 included approximately $46.9 million and $4.2 million, respectively, recorded as intangible assets related to acquisitions accounted for as purchases.

Table 1

DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY

(IN MILLIONS)	2004		2003		2002		2001		2000
Average Assets
Cash and non-interest bearing deposits	$	39.0	$	25.6	$	24.2	$	19.6	$	17.9
Interest bearing deposits		.5		.0		.9		.9		.6
Federal funds sold		8.3		12.8		18.2		14.8		6.6
Investment securities		169.1		164.8		158.9		137.9		140.6
Loans, net		757.8		405.0		378.3		378.0		362.9
Premises and equipment, net		37.2		14.8		14.4		13.5		12.8
Other real estate owned, net		0.7		0.5		0.2		0.2		0.2
Intangible assets		46.9		4.2		4.0		4.1		4.2
Other assets		11.8		5.9		6.6		7.4		9.7
Assets related to discontinued operations		38.4		45.0		30.8		0.0		0.0
Average Total Assets	$	1,109.7	$	678.6	$	636.5	$	576.4	$	555.5
Average Liabilities and Shareholders’ Equity
Non-interest bearing demand deposits	$	163.4	$	95.0	$	85.7	$	79.6	$	76.0
Interest bearing demand deposits		235.8		141.1		139.6		131.7		129.8
Savings deposits		101.9		40.3		38.0		34.8		34.6
Time deposits		375.7		255.3		250.1		239.9		227.8
Total deposits		876.8		531.7		513.4		486.0		468.2
Short-term borrowings		20.5		8.5		8.1		7.0		9.9
FHLB advances and long-term debt		50.0		12.6		6.0		6.0		6.5
Other liabilities		9.0		4.6		3.6		4.2		4.3
Liabilities related to discontinued operations		33.6		39.1		26.7		0.0		0.0
Shareholders’ equity		119.8		82.1		78.7		73.2		66.6
Average Total Liabilities and Shareholders’ Equity	$	1,109.7	$	678.6	$	636.5	$	576.4	$	555.5

Loans

Average loan growth was strong in both 2004 and 2003 as economic conditions in the Company’s markets began to improve. The average loan to deposit ratio was 87.5 percent in 2004 compared to 77.2 percent in 2003 and 74.8 in 2002. The loan to deposit ratio of the Company at year-end 2004 rose to 91.6 percent compared to 84.9 percent at year-end 2003 and 74.4 percent at year-end 2002.

It is Management’s goal to make loans with relatively short maturities or, in the case of loans with longer maturities, with floating rate arrangements when possible. Of the outstanding loans in the categories of commercial, financial and agricultural, real estate-construction and real estate-mortgage at December 31, 2004, $497.4 million, or 58.9 percent, mature within one year and are therefore subject to interest rate changes, if needed, to adjust for asset/liability management purposes. Of the remaining loans in these categories maturing

15

after one year, 46.9 percent are on a floating rate basis. Of the total loans outstanding in these categories at December 31, 2004, 78.1 percent are available for repricing within one year, either because the loans mature within one year or because they are based on a variable rate arrangement.

The Company makes available to its customers fixed rate, longer-term loans, especially in the residential real estate-mortgage area. BancTrust is able to offer, through third party arrangements, certain mortgage loan products which do not require that the longer-term loans be carried on the books of the Company. These products allow the Company to gain the benefit of a larger variety of product offerings and have generated a significant amount of fee income during the recent period of lower mortgage rates. These fees have come from first and second home purchases as well as significant home refinancing volume. As interest rates rise, the Company expects that the refinancing volume will decrease somewhat; however, first and second home purchase volume is expected to remain strong in our Gulf Coast markets.

Table 2 shows the distribution of loans by major category at December 31, 2004, and at each of the previous four year-ends. Table 3 depicts maturities of selected loan categories and the interest rate structure for such loans maturing after one year.

Table 2

DISTRIBUTION OF LOANS BY CATEGORY

(IN MILLIONS)	DECEMBER 31,
	2004		2003		2002		2001		2000
Commercial, financial, and agricultural	$	345.9	$	399.2	$	216.0	$	203.6	$	196.8
Real estate – construction		194.9		59.4		26.0		23.2		16.7
Real estate – mortgage		304.0		173.2		95.5		100.5		104.4
Installment		60.2		57.8		53.2		56.0		61.8
Total loans	$	905.0	$	689.6	$	390.7	$	383.3	$	379.7

Table 3

SELECTED LOANS BY TYPE AND MATURITY

(IN MILLIONS)	DECEMBER 31, 2004 MATURING
	WITHIN ONE YEAR		AFTER ONE BUT WITHIN FIVE YEARS		AFTER FIVE YEARS		TOTAL
Commercial, financial, and agricultural	$	221.1	$	105.2	$	19.6	$	345.9
Real estate – construction		163.1		31.8		0.0		194.9
Real estate – mortgage		113.2		174.2		16.6		304.0
	$	497.4	$	311.2	$	36.2	$	844.8
Loans maturing after one year with:
Fixed interest rates			$	172.6	$	12.0
Floating interest rates				138.6		24.2
			$	311.2	$	36.2

Securities

Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities requires that securities be classified into one of three categories: held to maturity,

16

available for sale, or trading. Securities classified as held to maturity are stated at amortized cost. This classification means that Management has the positive intent, and the Company has the ability, to hold the securities until they mature. Securities classified as available for sale are stated at fair value. Securities in this category are held for indefinite periods of time, and include securities that Management intends to use as part of its asset/liability strategy, or that may be sold in response to changes in interest rates, changes in prepayment risks, changes in liquidity needs, the need to increase regulatory capital or other similar factors. At December 31, 2004, all of the Company’s securities were in the available for sale category. The Company holds no trading securities or those classified as held to maturity.

The maturities and weighted average yields of securities available for sale at December 31, 2004, are presented in Table 4 at amortized cost using the average stated contractual maturities. The average stated contractual maturities may differ from the average expected life because of amortized principal payments or because borrowers may have the right to call or prepay obligations. Tax equivalent adjustments, using a 34 percent tax rate, have been made when calculating yields on tax-exempt obligations. Included in other investments are equity securities, primarily FHLB stock in the amount of $3.7 million, which do not mature but are included in the after 10 years category. Mortgage backed securities are shown only in the total as these securities have monthly principal payments.

Table 4

MATURITY DISTRIBUTION OF INVESTMENT SECURITIES

DECEMBER 31, 2004 (DOLLARS IN THOUSANDS)	WITHIN ONE YEAR				AFTER ONE BUT WITHIN FIVE YEARS				AFTER FIVE BUT WITHIN TEN YEARS				AFTER TEN YEARS				TOTAL
	AMOUNT		YIELD		AMOUNT		YIELD		AMOUNT		YIELD		AMOUNT		YIELD		AMOUNT		YIELD
Securities available for sale
U.S. Treasury securities	$	0	0.00	%	$	300	4.50	%	$	0	0.00	%	$	0	0.00	%	$	300	4.50	%
U.S. Government sponsored enterprises		0	0.00			20,644	3.68			12,385	3.84			4,493	4.04			37,522	3.74
State and political subdivisions		2,039	4.73			12,933	5.36			18,607	6.13			20,181	7.39			53,760	6.37
Other investments		514	1.99			2,573	5.25			0	0.00			6,402	4.96			9,489	4.88
Mortgage backed securities		0	0.00			0	0.00			0	0.00			0	0.00			49,144	4.48
Total securities available for sale	$	2,553	4.18	%	$	36,450	4.39	%	$	30,992	5.21	%	$	31,076	6.41	%	$	150,215	5.00	%

Deposits and Short-Term Borrowings

Deposit growth in 2002 and 2003 was slow, increasing by 3.6 percent over the two-year period. In 2004 average deposits grew $345.1 million, or 64.9 percent, compared to 2003. The CommerceSouth transaction accounted for $329.4 million of this increase with the remaining increase, which amounted to a 3.0 percent increase, resulting from growth in the Gulf Coast markets of Alabama. The mix of deposits, on average, has not significantly changed over the past few years. BancTrust defines core deposits as total deposits less certificates of deposit of $100,000 or more. Core deposits, as a percentage of total deposits, represented 77.6 percent and 78.5 percent at year-end 2004 and 2003 respectively. While the primary emphasis at BancTrust remains on attracting and retaining core deposits from customers who will use other products and services offered by the Company, Management has recognized that, in order to fund loan growth, it is necessary from time to time to pursue non-core funding sources such as large certificates of deposit and other borrowed funds more vigorously than in the past. Management has been pursuing such non-core funding sources, and this trend is expected to continue in 2005.

Table 6 reflects maturities of time deposits of $100,000 or more at December 31, 2004. Deposits of $221.3 million in this category represented 22.4 percent of total deposits at year-end 2004, compared to $174.1 million representing 21.5 percent of total deposits at year-end 2003.

17

Short-term borrowings include three items: 1) federal funds purchased, 2) securities sold under agreements to repurchase, which are overnight transactions with large corporate customers, commonly referred to as repos, and 3) other, representing borrowings from the FHLB, from the Federal Reserve through its discount operations and U.S. Treasury tax and loan funds on deposit subject to a note payable to the U.S. Treasury Department. The Company sold federal funds of $8.3 million on average during 2004 while average short-term borrowings were $20.5 million. Management has sought to control the volume of funds in this category within certain acceptable limits; however, a greater reliance on these types of funds will be necessary in order to fund loan growth in the future.

Table 5

AVERAGE DEPOSITS

(DOLLARS IN MILLIONS)	AVERAGE FOR THE YEAR
	2004				2003				2002
	AVERAGE AMOUNT OUTSTANDING		AVERAGE RATE PAID		AVERAGE AMOUNT OUTSTANDING		AVERAGE RATE PAID		AVERAGE AMOUNT OUTSTANDING		AVERAGE RATE PAID
Non-interest bearing demand deposits	$	163.4			$	95.0			$	85.7
Interest bearing demand deposits		235.8	.74	%		141.1	.75	%		139.6	1.37	%
Savings deposits		101.9	1.04			40.3	.79			38.0	1.51
Time deposits		375.7	2.06			255.3	2.31			250.1	3.28
Total average deposits	$	876.8			$	531.7			$	513.4

Table 6

MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE

(IN MILLIONS)	AT DECEMBER 31, 2004
	UNDER 3 MONTHS		3-12 MONTHS		OVER 12 MONTHS		TOTAL
	$	114.7	$	72.7	$	33.9	$	221.3

Table 7

SHORT-TERM BORROWINGS

(DOLLARS IN THOUSANDS)	2004						2003						2002
	MAXIMUM MONTH-END BALANCE		AVERAGE BALANCE DURING YEAR		WEIGHTED AVERAGE INTEREST RATE		MAXIMUM MONTH-END BALANCE		AVERAGE BALANCE DURING YEAR		WEIGHTED AVERAGE INTEREST RATE		MAXIMUM MONTH-END BALANCE		AVERAGE BALANCE DURING YEAR		WEIGHTED AVERAGE INTEREST RATE
Federal funds purchased	$	21,986	$	11,156	1.92	%	$	13,905	$	949	1.90	%	$	1,450	$	529	2.32	%
Securities sold under agreement to repurchase		10,203		6,629	0.68			9,375		6,994	0.51			9,981		6,836	.94
Other		11,000		2,725	1.98			9,315		524	1.34			2,814		735	1.87
Total short-term borrowings			$	20,510	1.53	%			$	8,467	0.72	%			$	8,100	1.12	%

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FHLB Advances and Long-term Debt

The Company uses FHLB advances as an alternative to other funding sources with similar maturities. They are flexible, allowing the Company to quickly obtain the necessary maturities and rates that best suit its overall asset/liability management strategy. FHLB advances totaled $30.5 million at December 31, 2004, an increase of $10.0 million from December 31, 2003.

Of the outstanding FHLB advances at December 31, 2004, $20.5 million had fixed interest rates and $10.0 million had a variable interest rate that reprices quarterly. Note 11 to the Consolidated Financial Statements, included elsewhere in this report, includes additional information relating to outstanding balances, scheduled maturities and rates of FHLB advances.

The Company borrowed funds from a trust in 2003 to finance a portion of the purchase price of CommerceSouth, Inc. The trust was created to issue trust preferred securities which the Company is currently allowed by the Federal Reserve Bank to include in the Company’s calculations of Tier I capital. This payable to trust was $18.0 million at December 31, 2004 and December 31, 2003. The Company does not have the option to repay any amounts of the payable to trust until 2008.

Other long term debt consists of a loan from an unrelated bank to the Company. This loan was incurred in January of 2004 to finance a portion of the purchase of CommerceSouth, Inc. This loan was $10.0 million at December 31, 2004 and is secured by a portion of BancTrust’s stock of the Mobile Bank. This loan matures in 2008 and requires monthly interest payments. The Company has the option to repay any part of the principal at any time without penalty. This loan does not require principal payments until the end of the third year, at which time the remaining principal must be amortized over the remaining life of the loan.

Asset/Liability Management and Liquidity

The purpose of asset/liability management is to maximize return while minimizing risk. Maximizing return means achieving or exceeding the Company’s profitability and growth goals. Minimizing risk means managing four key risk factors: 1) liquidity, 2) interest rate sensitivity, 3) capital adequacy, and 4) asset quality. Asset/liability management at the Company involves a comprehensive approach to statement of condition management which meets the risk and return criteria established by Management and the Board of Directors. To this point, Management has not used derivative financial instruments as part of its asset liability management process.

The Company’s primary market risk is its exposure to interest rate changes. Interest rate risk management strategies are designed to optimize net interest income while minimizing fluctuations caused by changes in the interest rate environment. It is through these strategies that the Company seeks to manage the maturity and repricing characteristics of its statement of condition.

The Company uses modeling techniques to simulate net interest income and the impact on fair values of the Company’s assets and liabilities under various rate scenarios. Important elements of these techniques include the mix of floating versus fixed rate assets and liabilities, and the scheduled, as well as expected, repricing and maturing volumes and rates on the existing statement of condition. Under a scenario simulating a hypothetical 100 basis point rate increase applied to all interest earning assets and interest bearing liabilities, the Company would expect a net increase in net interest income of $2.5 million over one year. Under a scenario simulating a hypothetical 100 basis point decrease, the Company would expect a net decrease in net interest income of $5.2 million. These hypothetical examples are not a precise indicator of future events. Instead, they are reasonable estimates of the results anticipated if the assumptions used in the modeling techniques were to occur.

Liquidity represents the ability of a bank to meet loan commitments as well as deposit withdrawals. Liquidity is derived from both the asset side and the liability side of the statement of condition. On the asset side, liquidity is provided by marketable investment securities, maturing loans, federal funds sold and cash and cash equivalents. On the liability side, liquidity is provided by a stable base of core deposits. Additionally, the Company has available, if needed, federal funds lines of credit and FHLB lines of credit. The Company has an

19

Asset/Liability Committee consisting of certain members of Management and of the Board of Directors. One of the duties of the committee is to monitor the liquidity position of the Company and to formulate and implement corrective measures in the event certain liquidity parameters are exceeded.

Contractual Obligations

Tables 8 and 9 present information about the Company’s contractual obligations, which by their terms are not short-term, and commitments at December 31, 2004.

Table 8

CONTRACTUAL OBLIGATIONS

(IN THOUSANDS)	ONE YEAR OR LESS		OVER ONE YEAR THROUGH FIVE YEARS		OVER FIVE YEARS		TOTAL
FHLB advances and long-term debt (1)	$	8,500	$	32,000	$	18,000	$	58,500
Operating leases		266		1,020		382		1,668
Certificates of deposit		344,534		76,435		647		421,616
Total	$	353,300	$	109,455	$	19,029	$	481,784

(1) Refer to Note 11, Federal Home Loan Bank Advances and Long-Term Debt in the Notes to Consolidated Financial Statements for additional information about these obligations, including certain redemption features.

Table 9

COMMITMENTS

(IN THOUSANDS)	ONE YEAR OR LESS		OVER ONE YEAR THROUGH FIVE YEARS		OVER FIVE YEARS		TOTAL
Lines of credit – unused	$	150,825	$	18,970	$	2,409	$	172,204
Standby letters of credit		27,816		4,621		0		32,437
Total	$	178,641	$	23,591	$	2,409	$	204,641

Interest Rate Sensitivity

By monitoring the Company’s interest rate sensitivity, Management attempts to maintain a desired balance between the growth of net interest revenue and the risks that might result from significant changes in interest rates in the market. One tool for measurement of this risk is gap analysis, whereby the repricing of assets and liabilities is compared within certain time categories. By identifying mismatches in repricing opportunities within a time category, interest rate risk can be identified. The interest sensitivity analysis presented in Table 10 is based on this type of gap analysis, which assumes that rates earned on interest earning assets and rates paid on interest bearing liabilities will move simultaneously in the same direction and to the same extent. However, the rates associated with these assets and liabilities actually change at different times and in varying amounts.

Changes in the composition of earning assets and interest bearing liabilities can increase or decrease net interest revenue without affecting interest sensitivity. The interest rate spread between assets and their corresponding liability can be significantly changed while the repricing interval for both remains unchanged, thus impacting net interest revenue. Over a period of time, net interest revenue can increase or decrease if one side of the statement of condition reprices before the other side. An interest sensitivity ratio of 1.0 (earning assets divided by interest bearing liabilities), which represents a matched interest sensitive position, does not guarantee maximum net interest revenue. Before investing, Management must evaluate several factors, including the general direction of interest rates, in order to determine the type of investment and the maturity needed. Management may, from time to

20

time, accept calculated risks associated with interest sensitivity in an attempt to maximize net interest revenue. The Company does not currently use derivative financial instruments to manage interest rate sensitivity.

At December 31, 2004, the Company’s three-month gap position, (earning assets divided by interest bearing liabilities), was 119 percent and at twelve months the gap position, on a cumulative basis, was 105 percent, both within the range established by Management as acceptable. The Company’s three-month gap position indicates that, in a period of rising interest rates, each $1.19 of assets which reprice upward could be followed with $1.00 in liabilities which could reprice upward within three months. Thus, under this scenario, net interest revenue might increase during the three-month period of rising rates, as interest income increases would exceed increases in interest expense. Likewise, over a twelve-month period, each $1.05 of assets which re-price upward could be followed by $1.00 in liabilities which could re-price upward, resulting in an increase in net interest revenue. In a period of falling rates, the opposite effect might occur. While certain categories are contractually tied to interest rate movements, most are subject only to competitive pressures and do not necessarily reprice directly with changes in market rates. Management has a certain amount of flexibility when adjusting rates on these products, therefore the repricing of assets and liabilities would not necessarily take place at the same time and in the same amounts.

Table 10

INTEREST SENSITIVITY ANALYSIS

(DOLLARS IN THOUSANDS)	DECEMBER 31, 2004 INTEREST SENSITIVE WITHIN (CUMULATIVE)						NON-INTEREST SENSITIVE WITHIN 5 YEARS			TOTAL
	3 MONTHS		3-12 MONTHS		1-5 YEARS
EARNING ASSETS
Loans (1)	$	570,057	$	665,737	$	889,220	$	15,819		$	905,039
Unearned income		0		0		0		(1,348	)		(1,348	)
Less allowance for loan losses		0		0		0		(10,244	)		(10,244	)
Net loans		570,057		665,737		889,220		4,227			893,447
Investment securities		2,541		5,848		49,498		102,092			151,590
Federal funds sold		6,000		6,000		6,000		0			6,000
Interest bearing deposits in other financial institutions		414		414		414		0			414
Total earning assets	$	579,012	$	677,999	$	945,132	$	106,319		$	1,051,451
LIABILITIES
Non-interest bearing deposits	$	0	$	0	$	0	$	186,628		$	186,628
Interest bearing demand deposits (2)		247,834		247,834		247,834					247,834
Savings deposits (2)		0		0		0		130,826			130,826
Large denomination time deposits		114,718		187,427		221,296		0			221,296
Other time deposits		70,714		157,107		199,673		647			200,320
Short-term borrowings		14,768		14,768		14,768		0			14,768
FHLB advances and long-term debt		38,000		40,000		58,500		0			58,500
Total interest bearing liabilities	$	486,034	$	647,136	$	742,071	$	318,101		$	1,060,172
Interest sensitivity gap	$	92,978	$	30,863	$	203,061
Earning assets/interest bearing liabilities		1.19		1.05		1.27
Interest sensitivity gap/earning assets		.16		.05		.21

(1) Non-accrual loans are included in the “Non-Interest Sensitive Within 5 Years” category.

(2) Certain types of savings accounts are included in the “Non-Interest Sensitive Within 5 Years” category. In Management’s opinion, these liabilities do not reprice in the same proportions as rate-sensitive assets, as they are not responsive to general interest rate changes in the economy.

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Capital Resources

Tangible shareholders’ equity (shareholders’ equity less goodwill, other intangible assets and accumulated other comprehensive income) was $74.8 million at December 31, 2004, compared to $65.5 million at December 31, 2003. At year-end 2004, the Tier I capital ratio decreased to 9.46 percent from 10.25 percent at year-end 2003. The decrease was due in part to the fact that risk weighted assets from year-end 2003 to year-end 2004 increased by 20.5 percent, whereas total capital grew by only 11.7 percent. In December 2003 the Company formed a trust which issued $18.0 million of trust preferred securities, the proceeds of which were used to partially finance the purchase of CommerceSouth. These securities, for regulatory purposes, are added to tangible common shareholders’ equity to calculate Tier I capital. The Company’s leverage ratio, defined as tangible shareholders’ equity divided by quarterly average assets, was 8.28 percent at year-end 2004 compared to 13.19 percent at December 31, 2003, again a function of the growth in total assets. The Federal Reserve and the FDIC require that bank holding companies and banks maintain certain minimum levels of capital as defined by risk-based capital guidelines. These guidelines consider risk factors associated with various components of assets, both on and off the statement of condition. Under these guidelines, capital is measured in two tiers, and these capital tiers are used in conjunction with “risk-based” assets in determining “risk-based” capital ratios. The ratios, expressed as a percentage of total risk-adjusted assets, for Tier I and Total capital were 9.46 percent and 10.49 percent, respectively, at December 31, 2004. The Company exceeded the minimum risk-based capital guidelines at December 31, 2004, 2003, and 2002. The minimum guidelines are shown on Table 11. (see Capital Adequacy on page 5, Regulatory Issue on page 30 and Note 15 of Notes to Consolidated Financial Statements).

Table 11

RISK-BASED CAPITAL

(DOLLARS IN THOUSANDS)	DECEMBER 31,
	2004			2003			2002
Tier I capital –
Tangible common shareholders’ equity	$	74,815		$	65,546		$	71,977
Payable to trust		18,000			18,000			0
Total Tier I capital	$	92,815		$	83,546		$	71,977
Tier II capital –
Allowable portion of the allowance for loan losses	$	10,117		$	8,607		$	5,451
Total capital (Tier I and Tier II)	$	102,932		$	92,153		$	77,428
Risk-adjusted assets	$	981,643		$	814,843		$	483,916
Quarterly average assets		1,121,447			633,606			658,953
Risk-based capital ratios:
Tier I capital		9.46	%		10.25	%		14.87	%
Total capital (Tier I and Tier II)		10.49	%		11.31	%		16.00	%
Minimum risk-based capital guidelines:
Tier I capital		4.00	%		4.00	%		4.00	%
Total capital (Tier I and Tier II)		8.00	%		8.00	%		8.00	%
Tier I leverage ratio		8.28	%		13.19	%		10.92	%

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Results of Operations Net Interest Revenue

Net interest revenue, the difference between amounts earned on assets and the amounts paid on liabilities, is the most significant component of earnings for a financial institution. Changes in interest rates, changes in the volume of assets and liabilities, and changes in the asset/liability mix are the major factors that influence net interest revenue. Presented in Table 12 is an analysis of net interest revenue, weighted average yields on earning assets and weighted average rates paid on interest bearing liabilities for the past three years.

Net yield on interest earning assets is net interest revenue, on a tax equivalent basis, divided by total interest earning assets. This ratio is a measure of the Company’s effectiveness in pricing interest earning assets and funding them with both interest bearing and non-interest bearing liabilities. The Company’s net yield in 2004, on a tax equivalent basis, increased 28 basis points to 4.50 percent compared to 4.22 percent in 2003. After a rapid decline that began in 2001, interest rates stabilized in 2003, and so did the Company’s net yield on interest earning assets. Rates began to rise in mid-2004, and the net yield began to increase. Added to the positive effect of rising interest rates on the net interest margin was a large increase in loan volume at the Company. Interest rates and loan volume are expected to continue to rise in 2005, and Management expects that the Company will continue to benefit from a favorable net interest margin. One possible source of pressure on the net interest margin in 2005 is the fact that loans at the Company have been growing faster than deposits, and this might cause Management to more aggressively price deposits in order to fund loan growth.

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Table 12

NET INTEREST REVENUE

	2004							2003							2002
(DOLLARS IN THOUSANDS)	AVERAGE AMOUNT OUTSTANDING			AVERAGE RATE		INTEREST EARNED/ PAID		AVERAGE AMOUNT OUTSTANDING			AVERAGE RATE		INTEREST EARNED/ PAID		AVERAGE AMOUNT OUTSTANDING			AVERAGE RATE		INTEREST EARNED/ PAID
Interest Earning Assets
Taxable securities	$	108,191		3.99	%	$	4,314	$	112,448		3.85	%	$	4,331	$	108,573		5.27	%	$	5,724
Non-taxable securities		60,936		4.07			2,480		52,338		4.64			2,428		50,349		4.90			2,465
Total securities		169,127		4.02			6,794		164,786		4.10			6,759		158,922		5.15			8,189
Loans(1)		766,928		6.12			46,933		410,290		5.97			24,509		383,829		6.68			25,646
Federal funds sold		8,257		1.15			95		12,800		0.95			122		18,147		1.60			291
Deposits in other financial institutions		566		1.06			6		52		1.92			1		936		3.53			33
Total interest earning assets		944,878		5.70			53,828		587,928		5.34			31,391		561,834		6.08			34,159
Non-interest Earning Assets
Cash and due from banks		38,985							25,621							24,214
Premises and equipment, net		37,208							14,803							14,406
Other real estate		650							538							199
Other assets		11,688							5,799							6,479
Intangible assets		46,885							4,181							3,981
Assets related to discontinued operations		38,435							45,040							30,834
Allowance for loan losses		(9,050	)						(5,314	)						(5,450	)
Total	$	1,109,679						$	678,596						$	636,497
Interest Bearing Liabilities
Interest bearing demand and savings deposits	$	337,743		0.83	%	$	2,807	$	181,356		0.76	%	$	1,382	$	177,587		1.40	%	$	2,492
Time deposits		375,685		2.06			7,736		255,315		2.31			5,897		250,135		3.28			8,192
Short-term borrowings		20,510		1.53			314		8,467		0.72			61		8,100		1.12			91
FHLB advances and long-term debt		50,030		3.26			1,630		12,621		2.82			356		6,000		5.50			330
Total interest bearing liabilities		783,968		1.59			12,487		457,759		1.68			7,696		441,822		2.51			11,105
Non-interest bearing liabilities
Demand deposits		163,416							94,979							85,748
Liabilities related to discontinued operations		33,578							39,117							26,714
Other		8,897							4,605							3,555
		205,891							138,701							116,017
Shareholders’ equity		119,820							82,136							78,658
Total	$	1,109,679						$	678,596						$	636,497
Net Interest Revenue				4.11	%	$	41,341				3.66	%	$	23,695				3.57	%	$	23,054
Net yield on interest earning assets				4.38	%						4.03	%						4.10	%
Tax equivalent adjustment				0.12							.19							0.20
Net yield on interest earning assets (tax equivalent)				4.50	%						4.22	%						4.30	%

(1) Loans classified as non-accrual are included in the average volume classification. Loan fees of $2,761, $922 and $817 for the years ended 2004, 2003, and 2002, respectively, are included in the interest amounts for loans.

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Table 13 reflects the changes in sources of taxable-equivalent interest income and expense between 2004 and 2003 and between 2003 and 2002. The variances resulting from changes in interest rates and the variances resulting from changes in volume are shown.

Tax-equivalent net interest revenue in 2004 was $17.7 million higher than in 2003. Total interest revenue increased by $22.5 million, while total interest expense increased $4.8 million. Both total interest revenue and total interest expense increased almost entirely due to volume, a result of the growth experienced during 2004, especially in loan volume.

Tax-equivalent net interest revenue in 2003 was $624 thousand higher than in 2002. Total interest revenue decreased by $2.8 million, which was more than offset by the decrease in total interest expense of $3.4 million. Both total interest revenue and total interest expense decreased due to rate, as a result of interest earning assets and interest bearing liabilities continuing to reprice downward due to the general lowering of interest rates which began in 2001.

Table 13

ANALYSIS OF TAXABLE-EQUIVALENT INTEREST INCREASES (DECREASES)

(DOLLARS IN THOUSANDS)	2004 CHANGE FROM 2003									2003 CHANGE FROM 2002
	AMOUNT			Due to(1)						AMOUNT			Due to(1)
				VOLUME			RATE						VOLUME			RATE
Interest Revenue:
Taxable securities	$	(17	)	$	(167	)	$	150		$	(1,393	)	$	154		$	(1,547	)
Non-taxable securities		75			543			(468	)		(53	)		137			(190	)
Total securities		58			376			(318	)		(1,446	)		291			(1,737	)
Loans		22,424			21,329			1,095			(1,138	)		1,647			(2,785	)
Federal funds sold		(27	)		(45	)		18			(169	)		(64	)		(105	)
Deposits		5			8			(3	)		(32	)		(31	)		(1	)
Total		22,460			21,668			792			(2,785	)		1,843			(4,628	)
Interest Expense:
Interest bearing demand and savings deposits		1,425			1,208			217			(1,110	)		29			(1,139	)
Other time deposits		1,839			2,697			(858	)		(2,295	)		122			(2,417	)
Short-term borrowing		253			133			120			(30	)		3			(33	)
FHLB advances and long-term debt		1,274			1,080			194			26			250			(224	)
Total		4,791			5,118			(327	)		(3,409	)		404			(3,813	)
Net interest revenue	$	17,669		$	16,550		$	1,119		$	624		$	1,439		$	(815	)

(1) The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amount of the change in each.

Provision for Loan Losses and Allowance for Loan Losses

The provision for loan losses is the cost of providing an allowance that is adequate to absorb inherent losses on loans in the portfolio. Management reviews the adequacy of the allowance for loan losses on a continuous basis by assessing the quality of the loan portfolio and adjusting the allowance when appropriate. Loan review procedures are in place to ensure that potential problem loans are identified. The procedures include a continuous review of the portfolios at the affiliate banks by the Company’s loan review department.

25

Management’s evaluation of each loan includes a review of the financial condition and capacity of the borrower, the value of the collateral, current economic trends, historical losses, work-out and collection arrangements, and possible concentrations of credit. The loan review process also includes an evaluation of credit quality within the mortgage and installment loan portfolios. In establishing the allowance, loss percentages are applied to groups of loans with similar risk characteristics. These loss percentages are determined by historical experience, portfolio mix, and other economic factors. Each quarter this review is quantified in a report to Management which uses it to determine whether an appropriate allowance is maintained. This report is then submitted to the Company’s Board of Directors quarterly. The amount of the allowance is affected by: (i) loan charge-offs, which decrease the allowance; (ii) recoveries on loans previously charged-off, which increase the allowance; and (iii) the provisions for loan losses charged to income, which increase the allowance.

Table 14 sets forth certain information with respect to the Company’s average loans, allowance for loan losses, charge-offs and recoveries for the five years-ended December 31, 2004.

Table 14

SUMMARY OF LOAN LOSS EXPERIENCE

(DOLLARS IN THOUSANDS)	YEAR-ENDED DECEMBER 31,
	2004			2003			2002			2001			2000
Allowance for loan losses –
Balance at beginning of year	$	8,342		$	5,381		$	5,328		$	4,608		$	4,128
Balance of acquired banks		0			3,424			0			0			0
Charge-offs
Commercial, financial and agricultural		1,254			1,909			331			394			597
Real estate – construction		5			0			0			0			0
Real estate – mortgage		569			182			81			123			374
Installment		562			758			741			894			397
Total charge-offs		2,390			2,849			1,153			1,411			1,368
Recoveries
Commercial, financial and agricultural		63			37			30			43			321
Real estate – construction		0			0			0			0			0
Real estate – mortgage		17			19			9			37			120
Installment		195			248			257			264			172
Total recoveries		275			304			296			344			613
Net charge-offs		2,115			2,545			857			1,067			755
Addition to allowance charged to operating expense		4,017			2,082			910			1,787			1,235
Allowance for loan losses – balance at end of year	$	10,244		$	8,342		$	5,381		$	5,328		$	4,608
Loans at end of year, net of unearned income	$	903,691		$	688,802		$	390,452		$	382,313		$	378,353
Ratio of ending allowance to ending loans		1.13	%		1.21	%		1.38	%		1.39	%		1.22	%
Average loans, net of unearned income	$	766,928		$	410,290		$	383,829		$	382,818		$	367,281
Non-performing loans	$	3,270		$	4,199		$	4,022		$	2,588		$	2,503
Ratio of net charge-offs to average loans		.28	%		.62	%		.22	%		.28	%		.21	%
Ratio of ending allowance to total non-performing loans		313.27	%		198.67	%		133.79	%		205.87	%		184.10	%

26

Net charge-offs decreased to $2.1 million in 2004 compared to $2.5 million in 2003. The allowance for loan losses as a percentage of loans was 1.13 percent at December 31, 2004, and 1.21 percent at December 31, 2003. Management believes the decrease in this ratio is acceptable because of improved asset quality as evidenced by the improvement in (1) the ratio of non-performing loans to loans (see Table 16), (2) the ratio of non-performing assets to loans and other real estate owned (see Table 16), (3) the ratio of the allowance for loan losses to non-performing loans (see Table 14), (4) the decrease in loans with Management reservation as a percentage of loans and (5) an improving economy. The changes in the allocation of the allowance for loan losses (see table 15) from 2003 to 2004 are primarily attributable to the changes in the loan portfolio mix (see table 2). Loan charge-offs, changes in risk grades and adjustments to allocations on individual loans also affected the allocation of the allowance for loan losses. Management reviews the adequacy of the allowance for loan losses on a continuous basis by assessing the quality of the loan portfolio, including non-performing loans, and adjusts the allowance when appropriate. Management believes the current methodology used to determine the required level of reserves is adequate. Management considered the allowance adequate at December 31, 2004.

Table 15

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

(DOLLARS IN THOUSANDS)	2004				2003				2002				2001				2000
	ALLOWANCE ALLOCATION		PERCEN- TAGE OF LOANS IN EACH CATEGORY TO TOTAL LOANS		ALLOWANCE ALLOCATION		PERCEN- TAGE OF LOANS IN EACH CATEGORY TO TOTAL LOANS		ALLOWANCE ALLOCATION		PERCEN- TAGE OF LOANS IN EACH CATEGORY TO TOTAL LOANS		ALLOWANCE ALLOCATION		PERCEN- TAGE OF LOANS IN EACH CATEGORY TO TOTAL LOANS		ALLOWANCE ALLOCATION		PERCEN- TAGE OF LOANS IN EACH CATEGORY TO TOTAL LOANS
Commercial, financial & agricultural	$	6,144	38.22	%	$	5,843	57.89	%	$	3,419	55.29	%	$	2,644	53.12	%	$	1,924	51.83	%
Real estate		3,425	55.12			1,791	33.72			1,140	31.10			1,804	32.27			1,771	31.89
Installment		675	6.66			708	8.39			822	13.61			880	14.61			913	16.28
Total	$	10,244	100.00	%	$	8,342	100.00	%	$	5,381	100.00	%	$	5,328	100.00	%	$	4,608	100.00	%

Non-Performing Assets

Non-performing assets include accruing loans 90 days or more past due, loans on non-accrual, renegotiated loans and other real estate owned. Commercial, business and installment loans are classified as non-accrual by Management upon the earlier of: (i) a determination that collection of interest is doubtful; or (ii) the time at which such loans become 90 days past due unless collateral or other circumstances reasonably assure full collection of principal and interest.

Table 16 sets forth certain information with respect to accruing loans 90 days or more past due, loans on non-accrual, renegotiated loans and other real estate owned.

Non-performing loans were $3.3 million at year-end 2004 compared to $4.2 million at year-end 2003. Accruing loans 90 days or more past due increased by $35 thousand from 2003 to 2004. Loans on non-accrual decreased by $936 thousand. Renegotiated loans consists of one large loan that is performing as scheduled.

Total non-performing assets as a percentage of loans and other real estate owned at year-end 2004 was .44 percent compared to .76 percent at year-end 2003 and 1.07 percent at year-end 2002.

27

Table 16

SUMMARY OF NON-PERFORMING ASSETS

(DOLLARS IN THOUSANDS)	DECEMBER 31,
	2004			2003			2002			2001			2000
Accruing loans 90 days or more past due	$	102		$	67		$	21		$	1,008		$	365
Loans on non-accrual		2,196			3,132			2,975			1,580			2,138
Renegotiated loans		972			1,000			1,026			0			0
Total non-performing loans		3,270			4,199			4,022			2,588			2,503
Other real estate owned		664			1,057			152			387			328
Total non-performing assets	$	3,934		$	5,256		$	4,174		$	2,975		$	2,831
Loans 90 days or more past due as a percentage of loans		0.01	%		0.01	%		0.01	%		0.26	%		0.10	%
Total non-performing loans as a percentage of loans		0.36	%		0.61	%		1.03	%		0.68	%		0.66	%
Total non-performing assets as a percentage of loans and other real estate owned		0.44	%		0.76	%		1.07	%		0.78	%		0.75	%

Details of Non-Accrual Loans

The impact of non-accrual loans on interest income the past three years is shown in Table 17. Not included in the table are loans totaling $5.2 million at December 31, 2004, as to which Management has reservations about the ability of the borrowers to comply with present repayment terms. These credits were considered in determining the adequacy of the allowance for loan losses and, while current, are regularly monitored for changes within a particular industry or general economic trends which could cause the borrowers severe financial difficulties. Any loans, other than those described earlier in this paragraph, which are classified for regulatory purposes as loss, doubtful, substandard or special mention, and which are not included as non-performing loans, do not (i) represent or result from trends or uncertainties which Management reasonably expects will materially impact future operating results, or (ii) represent material credits about which Management is aware of any information which causes Management to have serious doubts as to the ability of such borrower to comply with the loan repayment terms.

Table 17

DETAILS OF NON-ACCRUAL LOANS

(IN THOUSANDS)	2004		2003		2002		2001		2000
Principal balance at December 31,	$	2,196	$	3,312	$	2,975	$	1,580	$	2,138
Interest that would have been recorded under original terms for the years-ended December 31,	$	169	$	152	$	156	$	165	$	154
Interest actually recorded in the financial statements for the years-ended December 31,	$	70	$	45	$	121	$	29	$	48

Non-Interest Revenue and Non-Interest Expense

Non-interest revenue was $11.1 million in 2004, compared to $7.7 million in 2003, an increase of 44.6 percent. Excluding the Eufaula and Santa Rosa Beach Banks, securities gains, net and the gain on the sale of the credit card portfolio, non-interest revenue decreased $537 thousand, or 7.9 percent, due primarily to the decrease of $427 thousand in mortgage loan referral fees. Despite the decrease from 2003, mortgage fee income was a significant source of non-interest revenue in 2004, accounting for $1.9 million. Trust revenue of $1.8 million was the Company’s second-largest single source of non-interest revenue in 2004. These two sources accounted for approximately 33.0 percent of total non-interest revenue at BancTrust in 2004. The low rate environment that has existed for several years, combined with the fact that our branch network extends across high growth markets along the Gulf Coast counties of Alabama and Florida, has presented an opportunity to increase fee revenue in

28

the mortgage area. While refinancing activity has slowed, this branch network should provide increased opportunities for mortgage fees generated from new purchases of homes and condominiums. Management intends to continue to pursue this and additional opportunities to increase non-interest revenue.

Securities gains increased to $645 thousand in 2004 from $360 thousand in 2003. In making the decision to sell securities, Management considers the likelihood of these securities being called, the current types and rates of bonds available for reinvestment and the need to fund loan growth. In 2003 the decision was made to outsource credit card operations, and the resulting sale of the Company’s credit card portfolio resulted in a one-time gain of $460 thousand.

Table 18

NON-INTEREST REVENUE

(IN THOUSANDS)	YEAR-ENDED DECEMBER 31,
	2004		2003		2002
Non-Interest Revenue:
Service charges on deposit accounts	$	4,910	$	3,081	$	2,964
Trust revenue		1,756		1,716		1,898
Securities gains, net		645		360		873
Gain on sale of credit card portfolio				460
Other income, charges and fees		3,752		2,035		1,556
Total	$	11,063	$	7,652	$	7,291

One measure of profitability in the banking industry is the efficiency ratio, calculated as non-interest expense divided by net interest revenue (tax adjusted) plus non-interest revenue. The lower the ratio, the more efficient the company. The ratio can be lowered by increasing revenue or by decreasing expenses. The efficiency ratio in 2004 was 62.8 percent compared to 64.7 percent in 2003. The increase in the net interest margin in 2004 was the primary cause of the decrease in the efficiency ratio compared to 2003. Included in the calculation in 2004 was $749 thousand in intangible amortization expense compared to $0 in 2003.

Non-interest expense increased 60.1 percent in 2004 compared to 2003. Excluding the Eufaula and Santa Rosa Beach Banks, non-interest expense increased 0.2 percent. Salaries and pensions and other employee benefits costs, the largest non-interest expense category, increased 54.7 percent in 2004. Excluding the Eufaula and Santa Rosa Beach Banks, salaries and pensions and other employee benefits costs increased 4.7 percent. Higher pension plan and benefit costs and the addition of new personnel needed for the expansion of the Company accounted for most of the increase. Net occupancy expenses increased 66.3 percent in 2004 and resulted primarily from the CommerceSouth purchase. Furniture and equipment expense increased 70.0 percent in 2004 and resulted primarily from the CommerceSouth purchase. Intangible amortization was $749 thousand in 2004. The Company’s goodwill qualifies for the non-amortization provisions of SFAS No. 142, and as a result no goodwill amortization expense was recorded in 2004, 2003 or 2002. Other operating expenses in 2004 increased $3.2 million, or 54.1 percent, from 2003. Excluding the Eufaula and Santa Rosa Beach Banks, other operating expense decreased 9.9 percent. In 2004 the Company consolidated two of its banks into the Mobile Bank. Duplicate operations in several areas were eliminated, and this has reduced personal and other operational costs.

29

Table 19

NON-INTEREST EXPENSE

(IN THOUSANDS)	YEAR-ENDED DECEMBER 31,
	2004		2003		2002
Non-Interest Expense:
Salaries	$	13,243	$	9,475	$	8,458
Pension and other employee benefits		5,274		2,494		2,283
Furniture and equipment expenses		2,743		1,614		1,611
Net occupancy expenses		2,463		1,481		1,340
Intangible amortization		749		0		0
Other operating expenses		9,108		5,909		5,564
Total	$	33,580	$	20,973	$	19,256

Income Taxes

Income tax expense from continuing operations was $4.2 million in 2004, compared to $2.3 million in 2003, and $3.0 million in 2002. The effective combined tax rate was 28.7 percent in 2004, compared to 27.6 percent in 2003 and 29.2 percent in 2002.

Inflation and Other Issues

Because the Company’s assets and liabilities are essentially monetary in nature, the effect of inflation on the Company’s assets is less significant compared to most commercial and industrial companies. Inflation has an impact on the growth of total assets in the banking industry and the resulting need to increase capital at higher than normal rates in order to maintain an appropriate equity to assets ratio. Inflation also has a significant effect on other expenses, which tend to rise during periods of general inflation. Management believes, however, that the Company’s financial results are influenced more by its ability to react to changes in interest rates than by inflation.

Regulatory Issue

As Noted in the Capital Adequacy section on page 5 of this Annual Report and in Note 15 in the Notes to Consolidated Financial Statements, the Federal Reserve System has allowed bank holding companies to include trust preferred securities in Tier 1 capital up to a maximum of 25% of Tier 1 capital. On March 1, 2005 the Federal Reserve System issued a new rule (12 CFR Parts 208 and 225) that reduces the amount of trust preferred securities that may be included in Tier 1 capital to 25% of Tier 1 capital less goodwill and any deferred tax liability. Under this new rule, all $18.0 million of trust preferred stock currently included by the Company in its calculation of Tier 1 and total capital will continue to be included in Tier 1 and total capital. Consequently, Management does not believe this new rule will have any material adverse impact on BancTrust; however, it does to some extent limit BancTrust’s ability to utilize trust preferred securities as a capital raising strategy in the future.

Except as discussed in this Management’s Discussion and Analysis, Management is not aware of trends, events or uncertainties that will have or that are reasonably likely to have a material effect on the liquidity, capital resources or operations of the Company. Management is not aware of any current recommendations by regulatory authorities which, if they were implemented, would have such an effect.

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SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

	2004
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	FIRST			SECOND		THIRD		FOURTH			TOTAL
Interest revenue	$	12,409		$	12,476	$	13,536	$	15,407		$	53,828
Interest expense		2,906			2,861		3,093		3,627			12,487
Net interest revenue		9,503			9,615		10,443		11,780			41,341
Provision for loan losses		398			588		1,268		1,763			4,017
Non-interest revenue		2,620			2,942		2,876		2,625			11,063
Non-interest expense		8,312			8,334		8,330		8,604			33,580
Income from continuing operations before income taxes		3,413			3,635		3,721		4,038			14,807
Income tax expense		914			1,131		1,193		1,009			4,247
Income from continuing operations		2,499			2,504		2,528		3,029			10,560
Income from discontinued operations before income taxes		128			145		442		(19	)		696
Gain on sale of discontinued operations before income taxes		0			0		0		1,484			1,484
Total income from discontinued operations before income tax		128			145		442		1,465			2,180
Income taxes		172			54		164		1,049			1,439
Income from discontinued operations		(44	)		91		278		416			741
Net income	$	2,455		$	2,595	$	2,806	$	3,445		$	11,301
Basic net income per share from continuing operations	$	.23		$	.23	$	.23	$	.27		$	.96
Basic net income per share from discontinued operations	$	(.01	)	$	.01	$	.03	$	.04		$	.07
Diluted net income per share from continuing operations	$	.23		$	.23	$	.22	$	.27		$	.95
Diluted net income per share from discontinued operations	$	(.01	)	$	.01	$	.03	$	.04		$	.07
Basic net income per share	$	.22		$	.24	$	.26	$	.31		$	1.03
Diluted net income per share	$	.22		$	.24	$	.25	$	.31		$	1.02

	2003
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	FIRST		SECOND		THIRD		FOURTH		TOTAL
Interest revenue	$	8,004	$	7,965	$	7,767	$	7,655	$	31,391
Interest expense		2,198		2,031		1,786		1,681		7,696
Net interest revenue		5,806		5,934		5,981		5,974		23,695
Provision for loan losses		268		639		237		938		2,082
Non-interest revenue		2,039		2,373		1,728		1,512		7,652
Non-interest expense		5,304		5,182		5,356		5,131		20,973
Income from continuing operations before income tax		2,273		2,486		2,116		1,417		8,292
Income tax expense		638		744		587		322		2,291
Income from continuing operations		1,635		1,742		1,529		1,095		6,001
Income from discontinued operations before income taxes		133		174		120		82		509
Income taxes		49		65		44		30		188
Income from discontinued operations		84		109		76		52		321
Net income	$	1,719	$	1,851	$	1,605	$	1,147	$	6,322
Basic net income per share from continuing operations	$	.19	$	.20	$	.17	$	.12	$	.68
Basic net income per share from discontinued operations	$	.01	$	.01	$	.01	$	.01	$	.04
Diluted net income per share from continuing operations	$	.19	$	.19	$	.17	$	.12	$	.67
Diluted net income per share from discontinued operations	$	.01	$	.01	$	.01	$	.01	$	.04
Basic net income per share	$	.20	$	.21	$	.18	$	.13	$	.72
Diluted net income per share	$	.20	$	.20	$	.18	$	.13	$	.71

31

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The information required by this Item 7A is included in Item 7 at page 19 under the heading “Asset/Liability Management and Liquidity.”

Item 8. Financial Statements and Supplementary Data

Management’s Report on Financial Statements

The Management of BancTrust Financial Group, Inc. is responsible for the preparation, content, integrity, objectivity and reliability of the financial statements and all other financial information included in this Annual Report on Form 10-K. These statements have been prepared in accordance with accounting principles generally accepted in the United States of America. In preparing the consolidated financial statements, Management made judgments and estimates based upon currently available facts, events and transactions.

Management depends upon the Company’s accounting system and the internal control structure to meet its responsibility for the reliability of these statements. These systems and controls are designed to provide reasonable assurance that the assets are safeguarded from material loss and that the transactions executed are in accordance with Management’s authorizations and are properly recorded in the financial records. The concept of reasonable assurance recognizes that the cost of internal accounting controls should not exceed the benefits derived and that there are inherent limitations of any system of internal accounting controls.

Management is required to evaluate, and to report on its evaluation of, the effectiveness of the Company’s disclosure controls and procedures and the Company’s internal control over financial reporting. Management has found both the Company’s disclosure controls and procedures and its internal control over financial reporting to be effective as of December 31, 2004 and Management’s report on these items is included in Item 9A of this Annual Report on Form 10-K.

The independent public accounting firm of KPMG LLP has been engaged to audit the Company’s financial statements and to express an opinion as to whether the Company’s statements present fairly, in all material respects, the financial position, cash flows and the results of operations, all in accordance with accounting principles generally accepted in the United States of America. Their audit is conducted in conformity with auditing standards generally accepted in the United States of America and includes procedures believed by them to be sufficient to provide reasonable assurance that the financial statements are free of material misstatement. They also issue an attestation report on Management’s assessment of the effectiveness of BancTrust’s internal control over financial reporting.

The Audit Committee of the Board of Directors, composed of directors who meet the standards of independence set by the National Association of Securities Dealers, Inc., oversees Management’s responsibility in the preparation of these statements. This committee has the responsibility to review periodically the scope, findings and opinions of the audits of the independent public accountants and internal auditors. KPMG LLP and the internal auditors have free access to the Audit Committee and also to the Board of Directors to meet independent of Management to discuss the internal control structure, accounting, auditing and other financial reporting concerns.

We believe these policies and procedures provide reasonable assurance that our operations are conducted in accordance with a high standard of business conduct and that the financial statements reflect fairly the financial position, results of operations and cash flows of the Company.

J. STEPHEN NELSON Chairman W. BIBB LAMAR, JR. President and CEO

F. MICHAEL JOHNSON

Chief Financial Officer

32

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

BancTrust Financial Group, Inc.:

We have audited the accompanying consolidated statements of condition of BancTrust Financial Group, Inc. and subsidiaries (the Company) as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of BancTrust Financial Group, Inc. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 15, 2005 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/ KPMG LLP

Birmingham, Alabama

March 15, 2005

33

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

BancTrust Financial Group, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting contained in Item 9A of this Annual Report on Form 10-K, that BancTrust Financial Group, Inc. and subsidiaries (the Company) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of condition of BancTrust Financial Group, Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2004, and our report dated March 15, 2005, expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Birmingham, Alabama

March 15, 2005

34

BancTrust Financial Group, Inc. and Subsidiaries

Consolidated Statements of Condition

As of December 31, 2004 and 2003

(Dollars and Shares in Thousands)

	December 31,
	2004			2003
ASSETS:
Cash and due from banks	$	41,558		$	42,054
Federal funds sold		6,000			29,333
Total cash and cash equivalents		47,558			71,387
Interest bearing deposits		414			157
Securities available for sale		151,590			186,591
Loans		905,039			689,595
Less: Unearned income		(1,348	)		(793	)
Allowance for loan losses		(10,244	)		(8,342	)
Loans, net		893,447			680,460
Premises and equipment, net		38,430			33,272
Accrued income receivable		6,028			5,030
Goodwill		41,952			41,952
Other intangible assets		4,558			5,315
Cash surrender value of life insurance		4,721			4,537
Other assets		2,524			4,516
Assets of discontinued operations		0			43,683
Total	$	1,191,222		$	1,076,900
LIABILITIES:
Deposits
Interest bearing	$	800,276		$	668,488
Non-interest bearing		186,628			142,657
Total deposits		986,904			811,145
Short-term borrowings		14,768			25,317
FHLB advances and long-term debt		58,500			38,500
Acquisition related payable		0			38,422
Other liabilities		8,867			9,128
Liabilities of discontinued operations		0			37,722
Total liabilities		1,069,039			960,234
SHAREHOLDERS’ EQUITY:
Preferred stock – no par value Shares authorized – 500 Shares outstanding – none
Common stock – $.01 par value Shares authorized – 20,000 Shares issued – 11,277 in 2004 and 11,186 in 2003		113			112
Additional paid in capital		77,829			76,833
Accumulated other comprehensive income, net		501			1,569
Deferred compensation payable in common stock		864			955
Retained earnings		46,148			40,560
Less:
Treasury stock, at cost 256 shares in 2004 and 2003		(2,408	)		(2,408	)
Common stock held in grantor trust, 49 shares in 2004 and 37 shares in 2003		(864	)		(955	)
Total shareholders’ equity		122,183			116,666
Total	$	1,191,222		$	1,076,900

See notes to consolidated financial statements.

35

BancTrust Financial Group, Inc.

Consolidated Statements of Income

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

	Year Ended December 31,
	2004		2003		2002
INTEREST REVENUE:
Loans	$	46,933	$	24,509	$	25,646
Investment securities – taxable		4,314		4,331		5,724
Investment securities – non-taxable		2,480		2,428		2,465
Federal funds sold		95		122		291
Interest bearing deposits		6		1		33
Total interest revenue		53,828		31,391		34,159
INTEREST EXPENSE:
Deposits		10,543		7,279		10,684
FHLB advances and long-term debt		1,630		356		330
Short-term borrowings		314		61		91
Total interest expense		12,487		7,696		11,105
Net interest revenue		41,341		23,695		23,054
Provision for loan losses		4,017		2,082		910
Net interest revenue after provision for loan losses		37,324		21,613		22,144
NON-INTEREST REVENUE:
Service charges on deposit accounts		4,910		3,081		2,964
Trust revenue		1,756		1,716		1,898
Securities gains, net		645		360		873
Gain on sale of credit card portfolio		0		460		0
Other income, charges and fees		3,752		2,035		1,556
Total non-interest revenue		11,063		7,652		7,291
NON-INTEREST EXPENSE:
Salaries		13,243		9,475		8,458
Pensions and other employee benefits		5,274		2,494		2,283
Furniture and equipment expense		2,743		1,614		1,611
Net occupancy expense		2,463		1,481		1,340
Intangible amortization		749		0		0
Other expense		9,108		5,909		5,564
Total non-interest expense		33,580		20,973		19,256
Income from continuing operations before income taxes		14,807		8,292		10,179
Income tax expense		4,247		2,291		2,971
Income from continuing operations		10,560		6,001		7,208
Income from discontinued operations before income taxes (including gain on sale of discontinued operations of $1,484)		2,180		509		182
Income taxes expense		1,439		188		67
Income from discontinued operations		741		321		115
Net income	$	11,301	$	6,322	$	7,323
Basic net income per share from continuing operations	$	.96	$	.68	$	.84
Basic net income per share from discontinued operations	$	.07	$	.04	$	.01
Diluted net income per share from continuing operations	$	.95	$	.67	$	.83
Diluted net income per share from discontinued operations	$	.07	$	.04	$	.01
Basic earnings per share	$	1.03	$	.72	$	.85
Diluted earnings per share	$	1.02	$	.71	$	.84
Weighted average shares outstanding – basic		10,981		8,754		8,658
Weighted average shares outstanding – diluted		11,074		8,888		8,696

See notes to consolidated financial statements.

36

BancTrust Financial Group, Inc.

Consolidated Statements of Shareholders’ Equity and Comprehensive Income

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

	Common Stock			Additional Paid in Capital		Accumulated Other Comprehensive Income, Net			Deferred Compensation Payable in Common Stock			Retained Earnings			Treasury Stock			Common Stock Held in Grantor Trust			Total
	Shares Issued	Amount
Balance, December 31, 2001	8,592	$	86	$	37,828	$	880					$	35,614		$	(494	)				$	73,914
Comprehensive income:
Net income													7,323									7,323
Minimum pension liability adjustment, net of taxes							(581	)														(581	)
Net change in fair values of securities available for sale, net of taxes							2,186															2,186
Total comprehensive income																						8,928
Dividends declared ($.48 per share)													(4,149	)								(4,149	)
Common stock options exercised	8				71																	71
Common stock issued in business combination	385		4		4,050																	4,054
Treasury stock purchased – 194 share																(1,914	)					(1,914	)
Balance, December 31, 2002	8,985		90		41,949		2,485						38,788			(2,408	)					80,904
Comprehensive income:
Net income													6,322									6,322
Minimum pension liability adjustment, net of taxes							161															161
Net change in fair values of securities available for sale, net of taxes							(1,077	)														(1,077	)
Total comprehensive income																						5,406
Dividends declared ($.52 per share)													(4,550	)								(4,550	)
Common stock options exercised	45				387																	387
Common stock issued in business combination	2,156		22		34,497					955									(955	)		34,519
Balance, December 31, 2003	11,186		112		76,833		1,569			955			40,560			(2,408	)		(955	)		116,666
Comprehensive income:
Net income													11,301									11,301
Minimum pension liability adjustment, net of taxes							63															63
Net change in fair values of securities available for sale, net of taxes							(1,131	)														(1,131	)
Total comprehensive income																						10,233
Dividends declared ($.52 per share)													(5,713	)								(5,713	)
Purchase of deferred compensation treasury shares										190									(190	)		0
Deferred compensation paid in common stock held in grantor trust										(281	)								281			0
Shares issued to dividend reinvestment plan	5				108																	108
Common stock options exercised	86		1		888					0								$	0			889
Balance, December 31, 2004	11,277	$	113	$	77,829	$	501		$	864		$	46,148		$	(2,408	)	$	(864	)	$	122,183

See notes to consolidated financial statements.

37

BancTrust Financial Group, Inc.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

	Year Ended December 31,
	2004			2003			2002
OPERATING ACTIVITIES:
Net income from continuing operations	$	10,560		$	6,001		$	7,208
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		3,954			2,496			1,702
Provision for loan losses		4,017			2,082			910
Securities gains, net		(645	)		(360	)		(873	)
Increase in cash surrender value of life insurance		(184	)		0			0
Loss on sales of other real estate owned		31			0			0
Gain on sale of credit card portfolio		0			(460	)		0
Deferred income tax provision (benefit)		(665	)		(473	)		234
Increase (decrease) in operating assets, net of effect of business acquisition:
Accrued income receivable		(998	)		500			794
Other assets		508			(2,229	)		(1,566	)
Increase (decrease) in operating liabilities, net of effect of business acquisition		1,874			2,598			626
Net cash provided by operating activities		18,452			10,155			9,035
INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits		(257	)		526			950
Net increase in loans		(217,221	)		(31,497	)		(8,826	)
Purchases of premises and equipment, net		(7,735	)		(2,112	)		(1,972	)
Proceeds from sales of other real estate owned		610			128			337
Proceeds from maturities of securities available for sale		53,766			73,679			69,299
Proceeds from sales of securities available for sale		46,496			28,189			34,751
Purchases of securities available for sale		(66,714	)		(78,411	)		(131,515	)
Cash paid to acquisition shareholders		(38,422	)		0			0
Net cash acquired in business combination		0			9,266			0
Net cash used in investing activities		(229,477	)		(232	)		(36,976	)
FINANCING ACTIVITIES:
Net increase in deposits		175,759			8,447			23,261
Net increase (decrease) in short-term borrowings		(10,549	)		(2,607	)		3,964
Proceeds from FHLB advances		16,500			10,000			0
Payment on FHLB advances		(6,500	)		(2,000	)		0
Proceeds from issuance of long-term debt		10,000			18,000			0
Dividends paid		(5,605	)		(4,550	)		(4,149	)
Purchases of treasury stock		0			0			(1,914	)
Proceeds from issuance of common stock		889			387			71
Net cash provided by financing activities		180,494			27,677			21,233
NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS		6,702			189			(1,563	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(23,829	)		37,789			(8,271	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		71,387			33,598			41,869
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	47,558		$	71,387		$	33,598

See notes to consolidated financial statements.

38

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

Note 1. Summary of Significant Accounting Policies

PRINCIPLES OF CONSOLIDATION – The accompanying consolidated financial statements include the accounts of BancTrust Financial Group, Inc. (the “Company” or “BancTrust”) and its wholly-owned subsidiaries, BankTrust (the “Mobile Bank”), Sweet Water State Bank (the “Sweet Water Bank”), BankTrust of Alabama (the “Eufaula Bank”) and BankTrust, Florida (the “Santa Rosa Beach Bank” and collectively, with the banks listed above, the “Banks”), and BancTrust Company, Inc. (the “Trust Company”). All significant intercompany accounts and transactions are eliminated. The Banks are engaged in the business of obtaining funds, primarily in the form of deposits, and investing such funds in commercial, installment and real estate loans and investment securities in South Alabama and Northwest Florida. The Banks also offer a range of other commercial bank services including investment products. The Trust Company offers trust services.

BASIS OF FINANCIAL STATEMENT PRESENTATION – The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with general practices within the banking industry. In preparing the financial statements, Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statement of condition and revenues and expenses for the period. Actual results could differ significantly from those estimates. All dollars and shares are in thousands except per share amounts. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses.

A substantial portion of the Company’s loans are secured by real estate in South Alabama and Northwest Florida. Accordingly, the ultimate collectibility of a substantial portion of the Company’s loan portfolio is susceptible to changes in market conditions in these areas. Management believes that the allowance for losses on loans is adequate. While Management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for losses on loans. Such agencies may require the Company to make changes to the allowance based on their judgment about information available to them at the time of their examination.

CASH AND CASH EQUIVALENTS – For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and federal funds sold. Federal funds are generally sold for one day periods.

Supplemental disclosures of cash flow information for the years ended December 31, 2004, 2003 and 2002 are as follows:

	2004		2003		2002
Cash paid for:
Interest	$	12,501	$	8,792	$	12,196
Income taxes		5,081		2,126		3,095
Non-cash transactions:
Transfer of loans to other real estate owned		217		1,187		641
Fair value of assets acquired		0		379,758		39,967
Capital stock issued to acquire assets		0		34,519		4,054
Liabilities assumed		0		345,239		35,913

39

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

SECURITIES AVAILABLE FOR SALE – Securities available for sale are carried at fair value. Unrealized gains and losses are excluded from earnings and reported, net of tax, as a separate component of shareholders’ equity until realized. Securities available for sale may be used as part of the Company’s asset/liability strategy and may be sold in response to changes in interest rate risk, prepayment risk or other similar economic factors. The specific identification method is used to compute gains or losses on the sale of these assets.

LOANS AND INTEREST INCOME – Loans are reported at the principal amounts outstanding, adjusted for unearned income, deferred loan origination fees and costs, purchase premiums and discounts, write-downs, and the allowance for loan losses. Loan origination fees, net of certain deferred origination costs, and purchase premiums and discounts are recognized as an adjustment to the yield of the related loans.

Interest on commercial and real estate loans is accrued and credited to income based on the principal amount outstanding. Interest on installment loans is recognized using the interest method.

The accrual of interest on loans is discontinued when, in the opinion of Management, there is an indication that the borrower may be unable to meet contractual payments as they become due. Generally, loans 90 days and over past due are placed on non- accrual unless there is sufficient collateral to assure collectibility of principal and interest and the loan is in the process of collection. Upon such discontinuance, all unpaid accrued interest is reversed against current income. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgement as to the collectibility of principal. Generally, loans are restored to accrual status when the obligation is brought current and has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectibility of the total contractual principal and interest is no longer in doubt.

ALLOWANCE FOR LOAN LOSSES – The allowance for loan losses is maintained at a level considered by Management to be sufficient to absorb losses inherent in the loan portfolio. BancTrust’s determination of its allowance for loan losses is determined in accordance with Statements of Financial Accounting Standards Nos. 114 and 5. The amount of the allowance for loan losses and the amount of the provision charged to expense is based on periodic reviews of the portfolio, past loan loss experience, current economic conditions and such other factors which, in Management’s judgment, deserve current recognition in estimating loan losses.

A regular, formal and ongoing loan review is conducted to identify loans with unusual risks and probable loss. Management uses the loan review process to stratify the loan portfolio into risk grades. For higher-risk graded loans in the portfolio the Banks determine estimated amounts of loss based on several factors, including historical loss experience, management’s judgement of economic conditions and the resulting impact on higher-risk graded loans, the financial capacity of the borrower, secondary sources of repayment including collateral and regulatory guidelines. This determination also considers the balance of impaired loans (which are generally considered to be non-performing loans). Specific allowances for impaired loans are based on comparisons of the recorded carrying values of the loans to the present value of these loans’ estimated cash flows discounted at each loan’s effective interest rate, the fair value of the collateral, or the loans’ observable market price. Recovery of the carrying value of loans is dependent to a great extent on economic, operating and other conditions that may be beyond the Company’s control.

In addition to evaluating probable losses on individual loans, Management also determines probable losses for all other loans that are not individually evaluated. The amount of the allowance for loan losses related to all other loans in the portfolio is determined based on historical and current loss experience, portfolio mix by loan type and by collateral type, current economic conditions, the level and trend of loan quality ratios, and such other factors which, in Management’s judgement, deserve current recognition in estimating inherent loan losses. The

40

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

methodology and assumptions used to determine the allowance are continually reviewed as to their appropriateness given the most recent losses realized and other factors that influence the estimation process. The model assumptions and resulting allowance level are adjusted accordingly as these factors change.

PREMISES AND EQUIPMENT – Premises and equipment are stated at cost less accumulated depreciation and amortization. The provision for depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets or terms of the leases as applicable. The Company periodically evaluates whether events have occurred that indicate that premises and equipment have been impaired. Measurement of any impact of such impairment is based on those assets’ fair values. There were no impairment losses recorded in 2004, 2003 or 2002.

OTHER REAL ESTATE OWNED – Other real estate owned is carried at the lower of the recorded investment in the loan or fair value, as determined by Management, less costs to dispose. Any excess of the recorded investment over fair value, less costs to dispose, is charged to the allowance for loan losses at the time of foreclosure. A provision is charged to earnings and a related valuation account for subsequent losses on other real estate owned is established when, in the opinion of Management, such losses have occurred. The ability of the Company to recover the carrying value of real estate is based upon future sales of the real estate. The ability to accomplish such sales is subject to market conditions and other factors, all of which are beyond the Company’s control. The recognition of sales and sales gains is dependent upon whether the nature and term of the sales, including possible future involvement of the Company, if any, meet certain defined requirements. If not met, sale and gain recognition would be deferred.

INCOME TAXES – The Company files a consolidated federal income tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

INTANGIBLE ASSETS – Goodwill and intangible assets with indefinite useful lives are not amortized but are tested for impairment annually. Measurement of any impairment of such assets is based on the asset’s fair value, with the resulting charge recorded as a loss. There were no significant impairment losses recorded in 2004, 2003 or 2002. Core deposit intangible assets are amortized over seven years using the straight-line method.

TREASURY STOCK – Treasury stock repurchases and sales are accounted for using the cost method.

TRUST COMPANY ASSETS AND INCOME – Assets held by the Trust Company in a fiduciary capacity for customers are not included in the consolidated financial statements. Fiduciary fees on trust accounts are recognized on the accrual basis.

STOCK OPTIONS – The Company utilizes the intrinsic value method of accounting for stock option grants. As the option exercise price is equal to the fair value of the stock at the date of grant, no compensation cost is recognized. The Company has two incentive stock option plans, the South Alabama Bancorporation 1993 Incentive Compensation Plan (the “1993 Plan”), and the South Alabama Bancorporation, Inc. 2001 Incentive Compensation Plan (the “2001 Plan”). The 1993 Plan was terminated in 2001 upon the adoption of the 2001 Plan. The remaining granted and outstanding options under the 1993 Plan are convertible into common shares of the Company. At December 31, 2004, options for 219 shares were granted and outstanding under the 1993 Plan.

41

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

The Company may grant options for up to 250 shares to employees and directors under the 2001 Plan and has granted options of 107 shares under the 2001 Plan through December 31, 2004, of which 103 shares are outstanding. Under the 1993 and 2001 Plans, the option exercise price equals the stock’s market price at the date of grant. The options vest one year after date of issuance and expire after 10 years.

Had compensation costs for these plans been determined consistent with SFAS No. 123 “Accounting for Stock Based Compensation” the Company’s net income and earnings per share would have been reduced to the following pro forma amounts:

	2004			2003			2002
Net income as reported	$	11,301		$	6,322		$	7,323
Compensation expense, net of applicable taxes		(157	)		(17	)		(29	)
Pro forma net income	$	11,144		$	6,305		$	7,294
Earnings per share:
As reported
Basic	$	1.03		$	.72		$	.85
Diluted		1.02			.71			.84
Pro forma
Basic	$	1.01		$	.72		$	.84
Diluted		1.01			.71			.84

A summary of the status of the Company’s stock option plans at December 31, 2004, 2003, and 2002 and the changes during the years then ended is as follows:

	2004				2003				2002
	Shares		Weighted Avg. Exercise Price		Shares		Weighted Avg. Exercise Price		Shares		Weighted Avg. Exercise Price
Outstanding at beginning of year	314		$	11.61	360		$	11.77	360		$	10.77
Granted	94			17.19	5			11.68	8			9.95
Exercised	(86	)		10.39	(45	)		8.66	(8	)		8.67
Forfeited	(0	)		N/A	(6	)		8.66	0			N/A
Outstanding at end of year	322			13.56	314			11.61	360			11.77
Exercisable at end of year	228			12.07	309			11.61	352			11.54
Weighted average fair value of the options granted			$	4.92			$	3.45			$	3.41

At December 31, 2004, 150 of the 322 options had exercise prices between $8.67 and $11.91 with a weighted average exercise price of $10.00 and an average remaining contractual life of 3.34 years. 167 of these options had exercise prices between $13.75 and $17.20 with a weighted average exercise price of $16.51 and an average remaining contractual life of 6.79 years. The remaining 5 options outstanding at December 31, 2004 consist of options with an exercise price of $22.19 and an average remaining contractual life of 3.55 years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 2004, 2003, and 2002, respectively; risk-free interest rates of 3.62%, 2.94%, and 2.89%; expected dividend yields of 2.9%, 4.5%, and 4.4%; expected lives of 5 years in 2004, 2003 and 2002; and expected volatility of 40%, 43%, and 56%, respectively.

42

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

RECLASSIFICATIONS – Certain reclassifications of 2003 and 2002 balances have been made to conform with classifications used in 2004.

RECENT ACCOUNTING PRONOUNCEMENTS – In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities.” FIN 46 is an Interpretation of ARB No. 51 and addresses consolidation by business enterprises of variable interest entities (VIEs). This Interpretation is based on the concept that an enterprise controlling another entity through interests other than voting interests should consolidate the controlled entity. Business enterprises are required under the provisions of the Interpretation to identify VIEs, based on specified characteristics, and then determine whether they should be consolidated. An enterprise that holds the majority of the variable interests is considered the primary beneficiary and would consolidate the VIE. In addition to the primary beneficiary, an enterprise that holds a significant variable interest in a VIE is required to make certain interim and annual disclosures.

The Interpretation was effective immediately for all enterprises with variable interest in VIEs created after January 31, 2003. A public company with variable interest in a VIE created before February 1, 2003 was required to apply the provisions of this Interpretation for the first interim or annual reporting period ending after December 15, 2003; however, early adoption was permitted. Effective December 29, 2003, the Company adopted the Interpretation. The effect of adoption of the Interpretation did not have a material impact on the Company’s consolidated financial statements.

On December 24, 2003, the FASB issued a revision of FIN 46 (FIN46(R)), which replaced the Interpretation issued in January 2003. The revised Interpretation clarifies some of the provisions of FIN 46 and provides additional exemptions for certain entities. Under the provisions of FIN 46(R), the Company is permitted to continue the application of FIN 46 until the reporting period ending March 31, 2004, at which time the Company will adopt the provisions of FIN 46(R).

The adoption of FIN 46(R) did not have a material impact on the Company’s consolidated financial position or results of operations.

In October 2003, the American Institute of Certified Public Accountants (AICPA) issued Statement of Accounting Position (SOP) 03-03, which addresses accounting for differences between contractual cash flows expected to be collected from an investor’s initial investment in loans or debt securities (loans) acquired in a transfer if those differences are attributable, at least in part, to credit quality. It includes such loans acquired in purchase business combinations. This SOP would apply to loans originated by the Company and would limit the yield that may be accreted (accretable yield) to the excess of the investor’s estimate of undiscounted expected principal, interest, and other cash flows (cash flows expected at acquisition to be collected) over the investor’s initial investment in the loan. This SOP requires that the excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) not be recognized as an adjustment of yield, loss accrual, or valuation allowance. This SOP prohibits investors from displaying accretable yield and nonaccretable difference in the balance sheet. Subsequent increases in cash flows expected to be collected generally would be recognized prospectively through adjustment of the loan’s yield over its remaining life. Decreases in cash flows expected to be collected would be recognized as impairment. This SOP prohibits “carrying over” or creation of valuation allowances in the initial accounting of all loans acquired in a transfer that are within the scope of this SOP. The prohibition of the valuation allowance carryover applies to the purchase of an individual loan, a pool of loans, a group of loans, and loans acquired in a purchase business combination. This SOP is effective for loans acquired in fiscal years beginning after December 15, 2004. The Company adopted this SOP and its effect on the consolidated financial statements was not material.

43

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

During the first quarter of 2004, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) 105, “Loan Commitments Accounted for as Derivative Instruments”. This SAB addresses the accounting for loan commitments entered into after March 31, 2004, and certain disclosure requirements relevant in the context of mortgage banking activities. Management has analyzed the effects of SAB 105, which were not material to the Company’s operations or financial position.

In March 2004, the Emerging Issues Task Force reached a consensus on Issue 03-01, “Meaning of Other Than Temporary Impairment” (Issue 03-01). The Task Force reached a consensus on an other-than-temporary impairment model for debt and equity securities accounted for under Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities” and cost method investments and provided for additional disclosures. In September 2004, the FASB approved a Staff Position to delay the requirement to record impairment losses under Issue 03-01. The approved delay will apply to all securities within the scope of Issue 03-01 and is expected to end when new guidance is issued and comes into effect. The Staff Position did not affect the disclosure requirements of Issue 03-01. The Company has provided the expanded disclosures in Note 4 and will continue to monitor changes to Issue 03-01. The Company does not consider it, or the related Staff Position, to have a material impact on the Company’s financial position or results of operations.

On December 16, 2004, the FASB published SFAS No. 123(R), “Share-Based Payment”. This Statement is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and its related implementation guidance. It will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. This Statement is the result of a two-year effort to respond to requests from investors and many others that the FASB improve the accounting for share-based payment arrangements with employees. Public entities (other than those filing as small business issuers) will be required to apply SFAS No. 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. SFAS No. 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. In addition to the accounting standard that sets forth the financial reporting objectives and related accounting principles, SFAS No. 123(R) includes an appendix of implementation guidance that provides expanded guidance on measuring the fair value of share-based payment awards. SFAS No. 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Although those disclosures helped to mitigate the problems associated with accounting under Opinion 25, many investors and other users of financial statements said that the failure to include employee compensation costs in the income statement impaired the transparency, comparability, and credibility of financial statements. The Company will adopt SFAS No. 123(R) as prescribed. The effect of this statement on the consolidated financial statements is not expected to be material.

Note 2. Business Combinations and Disposition

On December 30, 2003, CommerceSouth, Inc., the parent company of CommerceSouth Bank Alabama (now BankTrust of Alabama and referred to herein as the “Eufaula Bank”) and CommerceSouth Bank Florida (now BankTrust and referred to herein as the “Santa Rosa Beach Bank”), was merged into the Company. The Company acquired 100 percent of the outstanding stock, which was all voting stock, of the Eufaula Bank and the

44

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

Santa Rosa Beach Bank. This merger has been accounted for under the purchase method of accounting. Therefore, the results of operations of the Eufaula Bank and the Santa Rosa Beach Bank have been included in the consolidated results of the Company from December 30, 2003. The Eufaula Bank had total assets of $184,227 at December 31, 2003, and the Santa Rosa Beach Bank had total assets of $190,494 at December 31, 2003. The Eufaula Bank has five locations in central and southeastern Alabama, and the Santa Rosa Beach Bank has eight branches in the Florida panhandle. The Company’s Board of Directors viewed the acquisition of CommerceSouth, Inc. as an opportunity to achieve economies of scale by reason of its larger size, enhanced competitive position, and expanded market area. In determining the price, the Company considered the following: (1) anticipated effect of the merger on the Company’s earnings per share; (2) anticipated effect on the Company’s book value per share; (3) the complementary nature of CommerceSouth, Inc’s. retail branch network with the Company’s existing operations; and (4) enhanced opportunities for growth. The purchase price was $73,441 and was settled with 2,156 shares of the Company’s common stock, 40 common stock options valued at $220 using the Black-Scholes pricing model and cash of $38,922, of which $38,422 is reflected as acquisition related payable in the accompanying 2003 statement of condition. The cash amount includes transaction costs of approximately $500. Each share issued was valued at $15.908 which was the average price at which the shares were trading during the period of twenty consecutive trading days ending on the trading day which preceded by two trading days the effective time of the merger. As a result of the purchase, the Company recorded goodwill of $37,970 and a core deposit intangible asset of $5,241.

On April 16, 2002, Gulf Coast Community Bancshares, Inc., the parent company of Bank Trust of Florida, was merged into the Company. The Company acquired 100 percent of the outstanding stock, which was all voting stock, of Wewahitchka State Bank. This merger has been accounted for under the purchase method of accounting. Therefore, the results of operations of Wewahitchka State Bank have been included in the consolidated results of the Company from April 16, 2002. Wewahitchka State Bank has three locations in the Florida panhandle. The Company’s Board of Directors viewed the acquisition of Wewahitchka State Bank as an opportunity to acquire a franchise in the northwest Florida market. In determining the price, the Company considered the following: (1) anticipated effect of the merger on the Company’s earnings per share, (2) anticipated effect on the Company’s book value per share, (3) the value to the Company of a presence in the Florida panhandle, and (4) alternative methods of entering the Florida panhandle and cost of those methods. The purchase price was $4,054 and was settled with 385 shares of the Company’s common stock. Each share issued was valued a $10.76 which was the average price at which the shares were trading during the period of twenty consecutive trading days ending on the trading day which preceded by two days the effective time of the merger. As a result of the purchase, the Company recorded goodwill of $1,799 and a core deposit intangible asset of $88.

Assuming the December 30, 2003 acquisition of CommerceSouth, Inc. had occurred on January 1, 2003, the consolidated result of operations on a pro forma basis for the year ended December 31, 2003 would have been as follows:

	Year ended December 31, 2003
Net interest income from continuing operations	$	34,469
Net income from continuing operations		7,153
Net income per share from continuing operations – basic	$	.66
Net income per share from continuing operations – diluted		.65

45

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

Sale of BankTrust of Florida

On October 15, 2004, BancTrust sold all of the stock of the Wewahitchka Bank for $7.5 million. The Wewahitchka Bank represented total assets of approximately $43.7 million and total deposits of approximately $37.5 million at December 31, 2003. The Company recorded a gross gain on the sale of $1.5 million. The operations of the Wewahitchka Bank have been accounted for as discontinued operations for all periods presented in accordance with FASB 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.”

Note 3. Restrictions On Cash and Due From Bank Accounts

The Banks are required to maintain average reserve balances with the Federal Reserve Bank. The average of those reserve balances for the years ended December 31, 2004 and 2003 was approximately $14,008 and $5,047, respectively.

Note 4. Securities Available for Sale

The following summary sets forth the amortized cost amounts and the corresponding market values of investment securities available for sale at December 31, 2004 and 2003:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
2004:
U.S. Treasury securities	$	300	$	7	$	0	$	307
Obligations of U.S. Government sponsored enterprises		86,666		264		615		86,315
Obligations of states and political subdivisions		53,760		1,768		77		55,451
Federal Home Loan Bank Stock		3,687		0		0		3,687
Other investments		5,802		73		45		5,830
Total	$	150,215	$	2,112	$	737	$	151,590

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
2003:
U.S. Treasury securities	$	4,080	$	16	$	0	$	4,096
Obligations of U.S. Government sponsored enterprises		98,068		806		569		98,305
Obligations of states and political subdivisions		71,048		2,729		31		73,746
Federal Home Loan Bank Stock		2,270		0		0		2,270
Other investments		7,912		263		1		8,174
Total	$	183,378	$	3,814	$	601	$	186,591

Securities available for sale with a carrying value of approximately $96,250 and $82,006 at December 31, 2004 and 2003, respectively, were pledged to secure deposits of public funds and trust deposits. Additionally, securities available for sale with a carrying value of approximately $7,423 and $7,448 at December 31, 2004 and 2003, respectively, were pledged to secure repurchase agreements.

Proceeds from the sales of securities available for sale were $46,496 in 2004, $28,189 in 2003 and $34,751 in 2002. Gross realized gains on the sale of these securities were $698 in 2004, $389 in 2003 and $875 in 2002, and gross realized losses were $53 in 2004, $29 in 2003 and $2 in 2002.

46

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

Maturities of securities available for sale as of December 31, 2004, are as follows:

	Amortized Cost		Fair Value
Due in 1 year or less	$	2,553	$	2,555
Due in 1 to 5 years		36,450		36,721
Due in 5 to 10 years		30,992		31,428
Due in over 10 years		31,076		31,724
Mortgage backed securities		49,144		49,162
Total	$	150,215	$	151,590

The following table shows the Company’s combined investments’ gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2004.

	Less than 12 months				12 Months or more				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government sponsored enterprises	$	44,389	$	228	$	21,045	$	387	$	65,434	$	615
Obligations of states and political subdivisions		9,411		57		1,765		20		11,176		77
Other investments		2,003		45		0		0		2,003		45
Total	$	55,803	$	330	$	22,810	$	407	$	78,613	$	737

At December 31, 2004, the Company had 101 investment securities that were in an unrealized loss position or impaired for the less than 12 months’ timeframe and 25 investments securities in an unrealized loss position or impaired for the more than 12 months’ time frame. All of these investment securities’ impairments are deemed by Management to be temporary. The majority of these securities are backed by 1-4 family mortgages. These securities have fluctuated with the changes in market interest rates on home mortgages. The securities not backed by 1-4 family mortgages have changed due to current market conditions, and not due to credit concerns related to the issuers of the securities. The Company does not expect any other-than-temporary impairments to develop related to these investment securities.

Note 5. Loans

A summary of loans follows:

	December 31,
	2004		2003
Commercial, financial and agricultural	$	345,942	$	399,192
Real estate – construction		194,865		59,316
Real estate – mortgage		303,999		173,248
Consumer, installment and single pay		60,233		57,839
Total	$	905,039	$	689,595

47

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

In the normal course of business, the Banks make loans to directors, executive officers, significant shareholders and their affiliates (related parties). Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers, and in Management’s opinion do not involve more than the normal risk of collectibility. The aggregate dollar amount of these loans was $46,795 at December 31, 2004, and $42,693 at December 31, 2003. During 2004, $61,210 of new loans and advances were made, and principal repayments totaled $47,459. Changes in parties designated as related parties resulted in a net decrease in related party loans of $9,649 from December 31, 2003 to December 31, 2004. Outstanding commitments to extend credit to related parties totaled $22,179 at December 31, 2004.

At December 31, 2004 and 2003, non-accrual loans totaled $2,196 and $3,132, respectively. The amount of interest income that would have been recorded during 2004, 2003 and 2002, if these non-accrual loans had been current in accordance with their original terms, was $169, $152 and $156, respectively. The amount of interest income actually recognized on these loans during 2004, 2003 and 2002 was $70, $45 and $121, respectively.

At December 31, 2004 and 2003, the recorded investments in loans that were considered to be impaired under SFAS No. 114 were $2,196 and $3,132, respectively (all of which were carried on a non-accrual basis). Included in this amount is $2,175 in 2004 and $3,044 in 2003 of impaired loans for which the related allowance for loan losses is $795 in 2004 and $814 in 2003. The amounts of impaired loans that did not have specific allowances for loan losses were $21 in 2004 and $88 in 2003. The average recorded investment amounts in impaired loans during the years ended December 31, 2004 and 2003, were approximately $2,390 and $2,458, respectively.

Loans include loans held for sale of $1,942 at December 31, 2004 and $3,201 at December 31, 2003 and are accounted for at the lower of cost or market in the aggregate.

Note 6. Allowance for Loan Losses

The allowance for loan losses is summarized as follows:

	Year Ended December 31,
	2004			2003			2002
Balance at the beginning of year	$	8,342		$	5,381		$	5,328
Balance of acquired banks		0			3,424			0
Provision charged to operating expense		4,017			2,082			910
Losses charged off		(2,390	)		(2,849	)		(1,153	)
Recoveries		275			304			296
Balance at the end of the year	$	10,244		$	8,342		$	5,381

48

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

Note 7. Premises and Equipment

Premises and equipment are summarized as follows:

	Estimated Lives	December 31,
		2004		2003
Land and land improvements		$	11,873	$	10,208
Bank buildings and improvements	40 years		24,586		21,082
Furniture, fixtures and equipment	3-10 years		15,698		13,876
Leasehold improvements	Lesser of lease period or estimated useful life		2,439		2,477
Total			54,596		47,643
Less accumulated depreciation and amortization			16,166		14,371
Premises and equipment – net		$	38,430	$	33,272

The provision for depreciation and amortization charged to operating expense in 2004, 2003, and 2002 amounted to $2,577, $1,405 and $1,466, respectively.

Note 8. Goodwill and Intangible Assets

The following details the changes in the carrying amount of goodwill and information related to other intangible assets for 2004 and 2003:

	Mobile		Eufaula		Santa Rosa Beach		Total
Balance at December 31, 2002	$	3,981	$	0	$	0	$	3,981
Goodwill acquired at December 30, 2003		0		20,085		17,886		37,971
Balance at December 31, 2003		3,981		20,085		17,886		41,952
Balance at December 31, 2004	$	3,981	$	20,085	$	17,886	$	41,952

The Company’s intangible assets subject to amortization were $4,492 at December 31, 2004 and $5,241 at December 31, 2003 with an original cost of $5,341 at both December 31, 2004 and 2003 and with accumulated amortization of $749 at December 31, 2004 and $0 at December 31, 2003. Amortization expense for core deposit intangible assets for the years ended December 31, 2004 and 2003 was $749 and $0, respectively. Such intangible assets are amortized over 7 years. Estimated amortization expense related to other intangible assets for the next five years is $749 per year for the years 2005 through 2009.

49

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

Note 9. Deposits

The following summary presents the detail of interest bearing deposits:

	December 31,
	2004		2003
Interest bearing checking accounts	$	139,667	$	117,269
Savings accounts		130,826		83,221
Money market savings accounts		108,167		94,516
Time deposits ($100 or more)		221,296		174,103
Other time deposits		200,320		199,379
Total	$	800,276	$	668,488

The following summary presents the detail of interest expense on deposits:

	Year Ended December 31,
	2004		2003		2002
Interest bearing checking accounts	$	721	$	627	$	1,024
Savings accounts		1,063		319		574
Money market savings accounts		1,023		436		894
Time deposits ($100 or more)		3,738		2,782		3,213
Other time deposits		3,998		3,115		4,979
Total	$	10,543	$	7,279	$	10,684

The following table reflects maturities of time deposits at December 31, 2004:

	Less than 1 year		1 to 5 years		5 to 10 years		Total
$100 or more	$	187,427	$	33,869	$	0	$	221,296
Other time deposits		157,107		42,566		647		200,320
Total	$	344,534	$	76,435	$	647	$	421,616

Note 10. Short-Term Borrowings

Following is a summary of short-term borrowings:

	December 31,
	2004			2003
Federal funds purchased	$	7,345		$	13,905
Securities sold under agreement to repurchase		7,423			7,448
Other short-term borrowings		0			3,964
Total	$	14,768		$	25,317
Weighted average interest rate at year-end		1.68	%		.91	%
Weighted average interest rate on amounts outstanding during the year (based on average of daily balances)		1.53	%		.72	%

50

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

Information concerning securities sold under agreement to repurchase summarized as follows:

	2004			2003			2002
Average balance during the year	$	6,629		$	6,994		$	6,836
Average interest rate during the year		.68	%		.51	%		.94	%
Maximum month-end balances during the year	$	10,203		$	9,375		$	9,981

Federal funds purchased and securities sold under agreements to repurchase generally represented overnight borrowing transactions. Other short-term borrowings consist of demand notes owed to the U.S. Treasury.

In 2004 and 2003, federal funds purchased had average balances of $11,156 and $949, respectively, maximum month end balances of $21,986 and $13,905, respectively, and average interest rates during the year of 1.92% and 1.90%, respectively. At December 31, 2004 and 2003, federal funds purchased had interest rates of 2.62% and 1.25%, respectively. Federal funds purchased activity was not material in 2002.

At December 31, 2004 and 2003, securities sold under agreements to repurchase had interest rates of 0.75 percent and 0.50 percent, respectively. Included in the balances of securities sold under agreements to repurchase at December 31, 2004 and 2003, were repurchase agreements to related parties of $2,102 and $2,532, respectively.

Note 11. Federal Home Loan Bank Advances and Long-Term Debt

Federal Home Loan Bank (FHLB) borrowings are summarized as follows:

	December 31,
	2004			2003			2002
Balance at the end of the year	$	30,500		$	20,500		$	6,000
Average balance during the year		22,136			12,473			6,000
Maximum month-end balances during the year		30,500			20,500			6,000
Daily weighted average interest rate during the year		2.57	%		2.81	%		5.67	%
Weighted average interest rate at year-end		2.72	%		2.12	%		5.67	%

Information concerning rates, call dates and maturity dates at December 31, 2004 are as follows:

	Amount		Interest Rate		Call Date
FHLB Advance due March 6, 2006	$	10,000	1.77	%	callable quarterly
FHLB Advance due November 2, 2009		10,000	2.76		11/02/2006 (quarterly thereafter)
FHLB Advance due October 24, 2005		6,500	2.28		not callable
FHLB Advance due November 10, 2005		2,000	5.90		callable quarterly
FHLB Advance due June 23, 2008		2,000	5.51	%	callable quarterly
Total	$	30,500

Of the outstanding FHLB advances at December 31, 2004, $20.5 million had fixed interest rates and $10.0 million had a variable interest rate that reprices quarterly. The FHLB advances are secured by the borrowing bank’s investment in FHLB stock, which totaled $3,687 and $2,270 at December 31, 2004 and 2003, respectively, and also

51

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

by a blanket floating lien on portions of the borrowing bank’s 1 to 4 family residential mortgage loan portfolio which totaled approximately $118,036. The FHLB advances require quarterly interest payments. If called prior to maturity, replacement funding will be offered by the FHLB at the then current rate.

The Company created a business trust to issue trust preferred securities to finance a portion of the purchase of CommerceSouth, Inc. This trust is not consolidated pursuant to Fin 46 and the trust’s sole asset is a loan from the Company in the amount of $18,000. The payable to trust matures in 2033 and requires quarterly interest payments. This payable has a floating rate based on three month LIBOR plus 2.90%. The Company does not have the option to repay any part of this payable until 2008. This loan has covenants generally associated with such borrowings which the Company was in compliance with at December 31, 2004. The payable to trust is summarized as follows:

	December 31, 2004			December 31, 2003
Balance at the end of the year	$	18,000		$	18,000
Average balance during the year		18,000			148
Maximum month-end balances during the year		18,000			18,000
Daily weighted average interest rate during the year		4.47	%		4.07	%
Weighted average interest rate at year-end		5.40	%		4.07	%

Other long-term debt consists of a loan from an unrelated bank to the Company. This loan was obtained in January of 2004 to finance a portion of the purchase of CommerceSouth, Inc. This loan is secured by a portion of BancTrust’s stock of the Mobile Bank. This loan matures in 2008, requires monthly interest payments and has a floating rate based on LIBOR plus 1.10%. The Company has the option to repay any part of the principal at any time without penalty. This loan does not require principal payments until the end of the third year, at which time the remaining principal must be amortized over the remaining life of the loan. This loan has covenants generally associated with such borrowings which the Company was in compliance with at December 31, 2004. This loan is summarized as follows:

	December 31, 2004
Balance at the end of the year	$	10,000
Average balance during the year		9,891
Maximum month-end balances during the year		10,000
Daily weighted-average interest rate during the year		2.59	%
Weighted-average interest rate at year-end		3.39	%

52

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

Note 12. Accounting for Income Taxes

The components of income tax expense from continuing operations are as follows:

	Year Ended December 31,
	2004			2003			2002
Current income tax expense:
Federal	$	4,495		$	2,376		$	2,340
State		417			388			397
Total current income tax expense		4,912			2,764			2,737
Deferred income tax expense (benefit):
Federal		(558	)		(405	)		207
State		(107	)		(68	)		27
Total deferred income tax expense (benefit)		(665	)		(473	)		234
Total income tax expense	$	4,247		$	2,291		$	2,971

The components of income tax expense from discontinued operations are as follows:

	Year Ended December 31,
	2004		2003		2002
Current income tax expense:
Federal	$	1,218	$	119	$	(86	)
State		210		20		(11	)
Total current income tax expense (benefit)		1,428		139		(97	)
Deferred income tax expense:
Federal		9		41		138
State		2		8		26
Total deferred income tax expense		11		49		164
Total income tax expense	$	1,439	$	188	$	67

Total income tax expense from continuing operations differed from the amount computed using the applicable statutory Federal income tax rate of 34 percent applied to pretax income for the following reasons:

	Year Ended December 31,
	2004			2003			2002
Income tax expense at statutory rate	$	5,034		$	2,819		$	3,461
Increase (decrease) resulting from:
Tax exempt interest		(940	)		(872	)		(879	)
Reduced interest deduction on debt used to carry tax-exempt securities		39			46			67
State income tax, net of federal benefit		215			212			286
Other, net		(101	)		86			36
Total	$	4,247		$	2,291		$	2,971
Effective tax rate		28.7	%		27.6	%		29.2	%

53

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

The tax effects of temporary differences that give rise to deferred tax assets and liabilities at December 31, 2004 and 2003 are presented below:

	December 31,
	2004			2003
Deferred tax assets:
Allowance for loan losses	$	3,843		$	3,128
Deferred compensation		816			896
Accrued pension cost		214			252
Other		478			396
Total deferred tax assets		5,351			4,672
Deferred tax liabilities:
Unrealized gain on securities available for sale		(515	)		(1,184	)
Core deposit intangibles		(1,684	)		(1,965	)
Differences between book and tax basis of property		(2,376	)		(1,855	)
Investment securities acquired in business combination		(379	)		(577	)
Other		(137	)		(127	)
Total deferred tax liabilities		(5,091	)		(5,708	)
Net deferred tax asset (liability)	$	260		$	(1,036	)

There was no valuation allowance during either 2004 or 2003 as a result of the substantial amount of income taxes paid in prior years. Management believes that is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

Note 13. Retirement Plans

PENSION PLAN – BancTrust maintains a pension plan which generally provides for a monthly benefit commencing at age 65 equal to 1% of the employee’s average monthly base compensation during the highest five consecutive calendar years out of the 10 calendar years preceding retirement, multiplied by years of credited service, not to exceed 40 years. The pension plan was frozen as of January 1, 2003, meaning that no new hires after that date will participate in the plan.

Changes during the year in the projected benefit obligations and in the fair value of plan assets were as follows:

	Projected Benefit Obligation
	2004			2003
Balance at beginning of year	$	9,330		$	9,052
Service cost		549			524
Interest cost		586			600
Benefits paid		(275	)		(625	)
Actuarial (gain) loss		121			(221	)
Balance, end of year	$	10,311		$	9,330

54

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

	Plan Assets
	2004			2003
Balance at beginning of year	$	6,100		$	5,480
Return on plan assets		644			847
Employer contribution		941			398
Benefits paid		(275	)		(625	)
Balance, end of year	$	7,410		$	6,100

The net pension liability recognized in the consolidated statements of condition was as follows:

	2004			2003
Funded status	$	(2,901	)	$	(3,229	)
Unrecognized transition obligation		26			26
Unrecognized prior service cost		41			48
Unrecognized net loss		2,132			2,296
Net pension liability recognized	$	(702	)	$	(859	)

The accumulated benefit obligation for the pension plan was $8,750 and $7,706 at December 31, 2004 and 2003, respectively.

Amounts recognized in the 2004 and 2003 consolidated statement of condition were as follows:

	2004			2003
Accrued pension liability	$	(1,340	)	$	(1,605	)
Intangible asset		67			74
Accumulated other comprehensive income		571			672
Net amount recognized	$	(702	)	$	(859	)

Components of the plan’s net cost were as follows:

	2004			2003			2002
Service cost	$	549		$	525		$	511
Interest cost		586			600			528
Expected return on plan assets		(499	)		(558	)		(624	)
Net amortization		8			7			9
Recognized net loss		140			92			0
Net pension cost	$	784		$	666		$	424

The weighted-average rates assumed in the actuarial calculations for the net periodic pension costs were:

	2004		2003		2002
Discount	6.40	%	6.75	%	7.25	%
Annual salary increase	3.50		5.00		5.00
Long-term return on plan assets	8.00		8.50		8.50

55

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

The expected long-term return on plan assets is based on historical returns on each of the categories.

The weighted average rates assumed in the actuarial calculations for the benefit obligations at November 30, (the measurement date) include the following:

	2004		2003
Discount	6.25	%	6.40	%
Annual salary increase	.00	%	3.50	%

The weighted-average asset allocation of pension benefit plan assets at December 31 were:

	2004		2003
Debt Securities	65.00	%	70.00	%
Equity Securities	15.00	%	15.00	%
Other	20.00	%	15.00	%
Total	100.00	%	100.00	%

The target weighted-average asset allocation of pension benefit plans at December 31 were:

Asset Category	2004	2003
Debt Securities	70%	70%-60%
Equity Securities	20%	40%-30%
Other	10%

BancTrust expects to contribute $841 to the pension plan in 2005.

At December 31, 2004, the pension plan is expected to make the following benefit payments, which reflect expected future service, as approximated:

2005	$	215
2006	$	324
2007	$	365
2008	$	411
2009	$	508
2010-2014	$	4,435

MOBILE BANK SUPPLEMENTAL PLAN – The Mobile Bank maintains an unfunded and unsecured Supplemental Retirement Plan designed to supplement the benefits payable under the BancTrust pension plan for certain key employees selected by the Mobile Bank’s Board of Directors. Each participant was a participant in a pension plan of another bank prior to employment by the Mobile Bank. The Supplemental Plan is designed to afford the participant the same pension that would be received under the BancTrust pension plan if the participant were given years of service credit, as if the participant was employed by the Company during his or her entire banking career, reduced by any benefits actually payable to the participant under the BancTrust pension plan and any retirement benefit payable under any plan of another bank. Benefits for total and permanent disability are supplemented in the same manner. Because the Supplemental Plan is intended to complement benefits otherwise available to the participants, the exact amounts to be paid, if any, to any participant, cannot be determined until retirement or disability. Management does not believe any current expense and any liabilities associated with the Supplemental Plan are material.

56

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

SAVINGS AND PROFIT SHARING PLAN – BancTrust maintains the BancTrust Financial Group, Inc. Employee Savings and Profit Sharing Plan. Subject to certain employment and vesting requirements, all BancTrust personnel are permitted to participate in the plan. An eligible employee may defer up to 10% of his or her pay into the plan. The employer makes a matching contribution as follows: $1.00 for every $1.00 on the first 2%, $0.75 per $1.00 on the next 2% and $0.50 per $1.00 on the next 2%. The Company may also, at its discretion, contribute to the plan an amount based on the Company’s level of profitability each year. The Company made total contributions of $811, $444 and $478 during 2004, 2003, and 2002, respectively.

DEFERRED COMPENSATION PLANS – The Company maintains a deferred compensation plan for certain executive officers and directors. The plan is designed to provide supplemental retirement benefits for its participants. Aggregate compensation expense under the plan was $56 for the year ended December 31, 2004 and $0 for previous years. The Company has purchased certain life insurance policies to partially fund the Company’s obligations under such deferred compensation arrangements.

The Company maintains a grantor trust to allow its directors to defer their directors’ fees. Amounts earned by the directors are invested in the Company’s common stock. The plan does not permit diversification into securities other than the Company’s common stock and the obligation to the participant must be settled by the delivery of a fixed number of shares of the Company’s common stock. The director is allowed to defer a portion or all of his director fees. At December 31, 2004 and 2003, the grantor trust held 49 and 37 shares, respectively of the Company’s common stock. These shares have been classified in equity as treasury stock. The related deferred compensation obligation payable in common stock is also classified in equity.

Note 14. Earnings Per Share

Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the years ended December 31, 2004, 2003 and 2002. Diluted earnings per share for the years ended December 31, 2004, 2003 and 2002 are computed by dividing net income by the weighted average number of shares of common stock outstanding and the dilutive effects of the shares awarded under the 1993 and the 2001 Stock Option plans, based on the treasury stock method using an average fair value of the stock during the respective periods.

The following table presents the earnings per share calculations for the years ended December 31, 2004, 2003 and 2002. The Company excluded from the calculation of earnings per share 18, 38 and 155 shares for the years ended December 31, 2004, 2003 and 2002, respectively, which shares were subject to options issued with exercise prices in excess of the average market value per share.

December 31, 2004	Net Income		Weighted Average Shares	Earnings Per Share
Basic:
Income from continuing operations	$	10,560	10,981	$	.96
Income from discontinued operations		741	10,981		.07
Net income		11,301	10,981	$	1.03
Dilutive stock options plan shares			93
Diluted:
Income from continuing operations		10,560	11,074	$	.95
Income from discontinued operations		741	11,074		.07
Net income	$	11,301	11,074	$	1.02

57

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

December 31, 2003	Net Income		Weighted Average Shares	Earnings Per Share
Basic:
Income from continuing operations	$	6,001	8,754	$	.68
Income from discontinued operations		321	8,754		.04
Net income		6,322	8,754	$	.72
Dilutive stock options plan shares			134
Diluted:
Income from continuing operations		6,001	8,888	$	.67
Income from discontinued operations		321	8,888		.04
Net income	$	6,322	8,888	$	.71

December 31, 2002	Net Income		Weighted Average Shares	Earnings Per Share
Basic:
Income from continuing operations	$	7,208	8,658	$	.84
Income from discontinued operations		115	8,658		.01
Net income		7,323	8,658	$	.85
Dilutive stock options plan shares			38
Diluted:
Income from continuing operations		7,208	8,696	$	.83
Income from discontinued operations		115	8,696		.01
Net income	$	7,323	8,696	$	.84

Note 15. Regulatory Matters

The Company’s principal source of funds for dividend payments is dividends from the Banks. Dividends payable by a bank in any year, without prior approval of the appropriate regulatory body, are limited to the bank’s net profits (as defined) for that year combined with its net profits for the two preceding years. The dividends, as of January 1, 2005, that the Banks could declare, without the approval of regulators, totaled $6,673.

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

Quantitative measures established by regulation to ensure capital adequacy require the Banks to maintain minimum amounts and ratios (set forth in the tables below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2004 and 2003, that the Banks meet all capital adequacy requirements to which they are subject.

58

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

As of December 31, 2004 and 2003, the most recent notification from the regulatory authorities categorized the Banks as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Banks must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the tables below.

The Federal Reserve System has allowed bank holding companies to include trust preferred securities in Tier 1 capital up to a maximum of 25% of Tier 1 capital. On March 1, 2005 the Federal Reserve System issued a new rule (12 CFR Parts 208 and 225) that reduces the amount of trust preferred securities that may be included in Tier 1 capital to 25% of Tier 1 capital less goodwill and any deferred tax liability. Under this new rule, all $18.0 million of trust preferred stock currently included by the Company in its calculation of Tier 1 and total capital will continue to be included in Tier 1 and total capital. Consequently, Management does not believe this new rule will have any material adverse impact on BancTrust; however, it does to some extent limit BancTrust’s ability to utilize trust preferred securities as a capital raising strategy in the future.

Actual capital amounts and ratios are presented in the table below for the Banks and on a consolidated basis for the Company.

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2004
Total Capital (to Risk Weighted Assets)
Consolidated	$	102,932	10.5	%	$	78,531	8.0	%
Santa Rosa Beach Bank		24,653	9.5			20,813	8.0		$	26,016	10.0	%
Eufaula Bank		18,462	10.2			14,493	8.0			18,117	10.0
Mobile Bank		59,562	11.9			39,925	8.0			49,907	10.0
Sweet Water Bank		5,201	12.3			3,386	8.0			4,233	10.0
Tier I Capital (to Risk Weighted Assets)
Consolidated	$	92,815	9.5	%	$	39,266	4.0	%
Santa Rosa Beach Bank		21,601	8.3			10,406	4.0		$	15,609	6.0	%
Eufaula Bank		16,691	9.2			7,247	4.0			10,870	6.0
Mobile Bank		54,798	11.0			19,963	4.0			29,944	6.0
Sweet Water Bank		4,671	11.0			1,693	4.0			2,540	6.0
Tier I Capital (to Average Assets)
Consolidated	$	92,815	8.3	%	$	44,858	4.0	%
Santa Rosa Beach Bank		21,601	8.3			10,391	4.0		$	15,586	6.0	%
Eufaula Bank		16,691	8.7			7,659	4.0			11,489	6.0
Mobile Bank		54,798	8.9			24,538	4.0			36,807	6.0
Sweet Water Bank		4,671	8.6			2,185	4.0			3,277	6.0

59

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2003
Total Capital (to Risk Weighted Assets)
Consolidated	$	92,153	11.3	%	$	65,187	8.0	%
Santa Rosa Beach Bank		15,249	10.5			11,631	8.0		$	14,538	10.0	%
Eufaula Bank		17,323	11.8			11,768	8.0			14,710	10.0
Mobile Bank		55,440	12.5			35,419	8.0			44,274	10.0
Sweet Water Bank		5,075	11.7			3,467	8.0			4,334	10.0
Tier I Capital (to Risk Weighted Assets)
Consolidated	$	83,546	10.3	%	$	32,594	4.0	%
Santa Rosa Beach Bank		13,481	9.3			5,815	4.0		$	8,723	6.0	%
Eufaula Bank		15,692	10.7			5,884	4.0			8,826	6.0
Mobile Bank		51,208	11.6			17,709	4.0			26,564	6.0
Sweet Water Bank		4,533	10.5			1,734	4.0			2,600	6.0
Tier I Capital (to Average Assets)
Consolidated	$	83,546	13.2	%	$	25,344	4.0	%
Santa Rosa Beach Bank		13,481	7.9			6,851	4.0		$	10,277	6.0	%
Eufaula Bank		15,692	9.6			6,556	4.0			9,834	6.0
Mobile Bank		51,208	8.9			22,908	4.0			34,363	6.0
Sweet Water Bank		4,533	8.4			2,165	4.0			3,247	6.0

Note 16. Fair Value of Financial Instruments

SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the statement of condition, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Also, the fair value estimates presented herein are based on pertinent information available to Management as of December 31, 2004 and 2003. Such amounts have not been comprehensively revalued for purposes of these financial statements since those dates, and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

The following methods and assumptions were used by the Company in estimating its fair values disclosures for financial instruments:

SECURITIES AVAILABLE FOR SALE – Fair values for securities available for sale are primarily based on quoted market prices. If a quoted market price is not available, fair value is estimated using market prices for similar securities.

60

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

LOANS – For equity lines and other loans with short-term or variable rate characteristics, the carrying value reduced by an estimate for credit losses inherent in the portfolio is a reasonable estimate of fair value. The fair value of all other loans is estimated by discounting their future cash flows using interest rates currently being offered for loans with similar terms, reduced by an estimate of credit losses inherent in the portfolio. The discount rates used are commensurate with the interest rate and prepayment risks involved for the various types of loans.

DEPOSITS – The fair value disclosed for demand deposits (i.e., interest and non-interest bearing demand, savings and money market savings) is, as required by SFAS No. 107, equal to the amounts payable on demand at the reporting date (i.e., their carrying amounts). Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates of deposit to a schedule of aggregated monthly maturities.

FHLB ADVANCES AND LONG TERM DEBT – The fair value of the Company’s fixed rate borrowings are estimated using discounted cash flows, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The carrying amount of the Company’s variable rate borrowings approximates their fair values.

COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT – The value of these unrecognized financial instruments is estimated based on the fee income associated with the commitments which, in the absence of credit exposure, is considered to approximate their settlement value. As no significant credit exposure exists and because such fee income is not material to the Company’s financial statements at December 31, 2004 and 2003, the fair value of these commitments is not presented.

Many of the Company’s assets and liabilities are short-term financial instruments whose carrying amounts reported in the statement of condition approximate fair value. These items include cash and due from banks, interest-bearing bank balances, federal funds sold, other short-term borrowings and accrued interest receivable and payable balances. The estimated fair values of the Company’s remaining on-balance sheet financial instruments as of December 31, 2004 and 2003, are summarized below.

	2004				2003
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets:
Securities available for sale	$	151,590	$	151,590	$	186,591	$	186,591
Loans		893,447		891,808		680,460		683,402
Financial liabilities:
Deposits	$	986,904	$	988,227	$	811,145	$	811,369
FHLB advance and long-term debt		58,500		57,963		38,500		38,761

SFAS No. 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. The disclosures also do not include certain intangible assets, such as customer relationships, deposit base intangibles and goodwill. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

61

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

Note 17. Commitments and Contingencies

In the normal course of business, there are outstanding commitments and contingent liabilities, such as commitments to extend credit, letters of credit and others, which are not included in the consolidated financial statements. These financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the financial statements. A summary of these commitments and contingent liabilities is presented below.

	December 31,
	2004		2003
Standby letters of credit	$	32,437	$	22,843
Commitments to extend credit		172,204		135,689

The Company, as part of its ongoing operations, issues financial guarantees in the form of financial and performance standby letters of credit. Standby letters of credit are contingent commitments issued by the Company generally to guarantee the performance of a customer to a third party. A financial standby letter of credit is a commitment by the Company to guarantee a customer’s repayment of an outstanding loan or financial obligations. In a performance standby letter of credit, the Company guarantees a customer’s performance under a contractual non-financial obligation for which it receives a fee. The Company has recourse against the customer for any amount it is required to pay to a third party under a standby letter of credit. Revenues are recognized over the life of the standby letter of credit. The maximum potential amount of future payments the Company could be required to make under its standby letters of credit at December 31, 2004 was $32,437, and that sum represents the Company’s maximum credit risk. At December 31, 2004, the Company had $324 of unearned fees associated with standby letter of credit agreements. The Company holds collateral to support standby letters of credit when deemed necessary. Collateral varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial property.

At December 31, 2004, the Company was under contract to lease certain bank premises and equipment. The terms of these contracts vary and are subject to certain changes at renewal. Future minimum rental payments required under operating leases having initial or remaining non-cancelable terms in excess of one year as of December 31, 2004 were not significant.

Rental expense under all operating leases amounted to $297, $195, and $153 in 2004, 2003, and 2002, respectively.

The Company and its Banks are the subject of claims and disputes arising in the normal course of business. Management, through consultation with the Company’s legal counsel, is of the opinion that these matters will not have a material impact on the results of operations.

Note 18. Non-Interest Revenue

Components of other non-interest revenue are as follows:

	Year Ended December 31,
	2004		2003		2002
Mortgage loan referral fees	$	1,899	$	925	$	707
Other		1,853		1,110		849
Total	$	3,752	$	2,035	$	1,556

62

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

Note 19. Non-Interest Expense

Components of other non-interest expense are as follows:

	Year Ended December 31,
	2004		2003		2002
Advertising	$	781	$	336	$	370
Data processing		648		108		86
Professional services		794		501		441
Stationery and supplies		858		563		620
Telephone		762		394		369
Other		5,265		4,007		3,678
Total	$	9,108	$	5,909	$	5,564

Note 20. Segment Reporting

Under Statement No. 131, Disclosure about Segments of an Enterprise and Related Information, certain information is disclosed for the four reportable operating segments of the Company. The reportable segments are determined using the internal management reporting system. They are composed of the Company’s significant subsidiaries. The accounting policies for each segment are the same as those used by the Company as described in Note 1 – Summary of Significant Accounting Policies. The segment results include certain overhead allocations and intercompany transactions that were recorded at current market prices. All intercompany transactions have been eliminated to determine the consolidated balances. During 2003 and 2004 the Company merged its Brewton, Monroeville and Demopolis Banks into the Mobile Bank. All prior segment information has been restated to reflect these mergers. The column “other” includes BancTrust and the Trust Company. The results for the four reportable segments of the Company are included in the following table:

	2004
	Mobile Bank		Sweet Water Bank		Eufaula Bank		Santa Rosa Beach Bank		All Other			Elimi- nations			Consoli- dated
Total interest revenue	$	29,359	$	2,915	$	9,246	$	12,350	$	38		$	(80	)	$	53,828
Total interest expense		5,923		559		2,136		2,887		1,062			(80	)		12,487
Net interest revenue		23,436		2,356		7,110		9,463		(1,024	)					41,341
Provision for loan losses		1,889		120		585		1,423								4,017
Net interest income after provision		21,547		2,236		6,525		8,040		(1,024	)					37,324
Total non-interest revenue		4,730		546		1,966		2,157		1,848			(184	)		11,063
Total non-interest expense		15,610		1,794		6,011		6,562		3,787			(184	)		33,580
Income before taxes		10,667		988		2,480		3,635		(2,963	)					14,807
Provision for income taxes		3,329		345		742		1,302		(1,471	)					4,247
Net income from continuing operations	$	7,338	$	643	$	1,738	$	2,333	$	(1,492	)				$	10,560
Other significant items:
Total assets	$	629,277	$	52,471	$	217,720	$	288,589	$	152,661		$	(149,496	)	$	1,191,222
Total investment securities		111,648		7,495		20,086		11,398		963						151,590
Total loans, net of unearned income		461,089		41,493		161,683		239,426								903,691
Investment in subsidiaries		291								146,805			(147,096	)
Total interest revenue from customers		29,359		2,915		9,196		12,320		38						53,828
Total interest revenue from affiliates						50		30					(80	)

63

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

	2003
	Mobile Bank		Sweet Water Bank		Eufaula Bank		Santa Rosa Beach Bank		All Other			Elimi- nations			Consoli- dated
Total interest revenue	$	28,403	$	2,907	$	22	$	28	$	33		$	(2	)	$	31,391
Total interest expense		6,994		684		4		7		9			(2	)		7,696
Net interest revenue		21,409		2,223		18		21		24						23,695
Provision for loan losses		1,842		240												2,082
Net interest income after provision		19,567		1,983		18		21		24						21,613
Total non-interest revenue		5,356		570		6		4		1,723			(7	)		7,652
Total non-interest expense		15,725		2,081		8		7		3,159			(7	)		20,973
Income before taxes		9,198		472		16		18		(1,412	)					8,292
Provision for income taxes		2,675		125		5		6		(520	)					2,291
Net income from continuing operations	$	6,523	$	347	$	11	$	12	$	(892	)				$	6,001
Other significant items:
Total assets(1)	$	598,704	$	52,604	$	184,227	$	190,494	$	175,210		$	(168,022	)	$	1,076,900
Total investment securities		143,552		7,821		21,860		12,639		719						186,591
Total loans, net of unearned income		377,254		41,422		127,582		142,544								688,802
Investment in subsidiaries		190								141,597			(141,787	)
Total interest revenue from customers		28,403		2,907		22		28		31						31,391
Total interest revenue from affiliates										2			(2	)

(1) Total consolidated assets includes assets of the Wewahitchka Bank of $43,683.

	2002
	Mobile Bank		Sweet Water Bank		All Other			Elimi- nations			Consoli- dated
Total interest revenue	$	30,783	$	3,345	$	31		$			$	34,159
Total interest expense		10,065		1,035		5						11,105
Net interest revenue		20,718		2,310		26						23,054
Provision for loan losses		760		150								910
Net interest income after provision		19,958		2,160		26						22,144
Total non-interest revenue		4,741		636		1,926			(12	)		7,291
Total non-interest expense		14,725		1,892		2,651			(12	)		19,256
Income before taxes		9,974		904		(699	)					10,179
Provision for income taxes		2,965		264		(258	)					2,971
Net income from continuing operations	$	7,009	$	640	$	(441	)				$	7,208
Other significant items:
Total assets(1)	$	568,794	$	51,808	$	84,101		$	(82,854	)	$	665,810
Total investment securities		167,945		9,747								177,692
Total loans, net of unearned income		352,112		38,340								390,452
Investment in subsidiaries		105				81,510			(81,615	)
Total interest revenue from customers		30,783		3,345		31						34,159
Total interest revenue from affiliates

(1) Total consolidated assets includes assets of the Wewahitchka Bank of $43,961.

64

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

Note 21. Comprehensive Income

Comprehensive income is the change in equity during a period from transactions and other events and circumstances from non-owner sources. In addition to net income, the Company has identified changes related to other non-owner transactions in the consolidated statement of shareholders’ equity and comprehensive income. In the calculation of comprehensive income, certain reclassification adjustments are made to avoid double counting items that are displayed as part of net income and other comprehensive income in that period or earlier periods. The following table reflects the reclassification amounts and the related tax effect for the three years ended December 31:

	2004
	Before Tax Amount			Tax Effect			After Tax Amount
Unrealized losses arising during the period	$	(1,179	)	$	(442	)	$	(737	)
Less realized gains from continuing operations		(645	)		(236	)		(409	)
Less realized losses from discontinued operations		24			9			15
Net change in unrealized loss on securities		(1,800	)		(669	)		(1,131	)
Additional minimum pension liability adjustment		101			38			63
Net change in unrealized losses	$	(1,699	)	$	(631	)	$	(1,068	)
	2003
	Before Tax Amount			Tax Effect			After Tax Amount
Unrealized losses arising during the period	$	(1,093	)	$	(410	)	$	(683	)
Less realized gains from continuing operations		(360	)		(135	)		(225	)
Less realized gains from discontinued operations		(270	)		(101	)		(169	)
Net change in unrealized loss on securities		(1,723	)		(646	)		(1,077	)
Additional minimum pension liability adjustment		258			97			161
Net change in unrealized losses	$	(1,465	)	$	(549	)	$	(916	)
	2002
	Before Tax Amount			Tax Effect			After Tax Amount
Unrealized gains arising during the period	$	4,379		$	1,633		$	2,746
Less realized gains from continuing operations		(873	)		(323	)		(550	)
Less realized gains from discontinued operations		(16	)		(6	)		(10	)
Net change in unrealized gain on securities		3,490			1,304			2,186
Additional minimum pension liability adjustment		(930	)		(349	)		(581	)
Net change in unrealized gains	$	2,560		$	955		$	1,605

65

BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

Note 22. Condensed Parent Company Financial Statements

Condensed Statements of Condition

	December 31,
	2004			2003
ASSETS
Cash and short-term investments	$	3,794		$	31,070
Investment in subsidiaries – eliminated upon consolidation		146,805			135,636
Investment in discontinued operations		0			5,961
Other assets		1,303			2,653
Total	$	151,902		$	175,320
LIABILITIES
Long term debt	$	28,000		$	18,000
Acquisition related payable		0			38,422
Other liabilities		1,719			2,232
Total liabilities		29,719			58,654
SHAREHOLDERS’ EQUITY
Preferred stock – no par value Shares authorized – 500 Shares outstanding – none
Common stock – $.01 par value Shares authorized – 20,000 Shares issued – 11,277 in 2004 and 11,186 in 2003		113			112
Capital surplus		77,829			76,833
Accumulated other comprehensive income, net		501			1,569
Deferred compensation payable in common stock		864			955
Retained earnings		46,148			40,560
Treasury stock, 256 in 2004 and 2003, at cost		(2,408	)		(2,408	)
Common stock held in grantor trust, 49 in 2004 and 37 in 2003		(864	)		(955	)
Total shareholders’ equity		122,183			116,666
Total	$	151,902		$	175,320

Condensed Statements of Operations

	Year Ended December 31,
	2004		2003			2002
Cash dividends from subsidiaries	$	4,925	$	18,650		$	7,545
Other income		93		0			15
Total income		5,018		18,650			7,560
Interest expense long term debt		1,062		6			0
Expenses – other		722		1,122			790
Income before undistributed income of subsidiaries		3,234		17,522			6,770
(Dividends in excess of)/Equity in undistributed earnings of subsidiaries		7,326		(11,521	)		438
Income from continuing operations		10,560		6,001			7,208
Income from discontinued operations		741		321			115
Net income	$	11,301	$	6,322		$	7,323

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BancTrust Financial Group, Inc.

Notes to Consolidated Financial Statements—(Continued)

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars and Shares in Thousands, Except Per Share Amounts)

Condensed Statements of Cash Flows

	Year Ended December 31,
	2004			2003			2002
OPERATING ACTIVITIES
Net income from continuing operations	$	10,560		$	6,001		$	7,208
Adjustments to reconcile net income to net cash provided by operating activities:
(Dividends in excess of)/Equity in undistributed earnings of subsidiaries		(7,326	)		11,521			(438	)
Other		926			(1,213	)		145
Net cash provided by operating activities		4,160			16,309			6,915
INVESTING ACTIVITIES
Investment in subsidiary		(5,000	)		0			0
Sale of land		0			0			396
Cash paid to acquisition shareholders		(38,422	)		0			0
Other		0			738			(98	)
Net cash provided by (used in) investing activities		(43,422	)		738			298
FINANCING ACTIVITIES
Proceeds from short term borrowing		0			700			1,650
Repayments of short term borrowing		0			(700	)		(1,650	)
Cash dividends		(5,605	)		(4,550	)		(4,149	)
Proceed from issuance of long-term debt		10,000			18,000
Proceeds from issuance of common stock		889			387			71
Purchase of treasury stock		0			0			(1,914	)
Net cash used in financing activities		5,284			13,837			(5,992	)
Net cash used in discontinued operations		6,702			0			(1,400	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(27,276	)		30,884			(179	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		31,070			186			365
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	3,794		$	31,070		$	186

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no changes in or disagreements with accountants on accounting and financial disclosure.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this annual report on Form 10-K. Disclosure controls are controls and other procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (SEC) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to Management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer believe the controls and procedures in place are effective to ensure that information required to be disclosed complies with the SEC’s rules and forms.

Management’s Report on Internal Control over Financial Reporting

Management of BancTrust Financial Group, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. BancTrust’s internal control over financial reporting was designed under the supervision of the Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial statements in accordance with generally accepted accounting principles.

Management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2004. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on its assessment, Management believes that, as of December 31, 2004, BancTrust’s internal control over financial reporting is effective.

BancTrust’s independent registered public accounting firm, KPMG LLP, has issued an attestation report on Management’s assessment of the effectiveness of BancTrust’s internal control over financial reporting as of December 31, 2004. The report, which expresses unqualified opinions on Management’s assessment, and on the effectiveness of BancTrust’s internal control over financial reporting as of December 31, 2004, is included on page 34 of this Annual Report on Form 10-K.

W. Bibb Lamar, Jr. Chairman and Chief Executive Officer F. Michael Johnson Chief Financial Officer

Changes in Internal Controls

There were no changes in the Company’s internal controls, or in other factors that could significantly affect these controls, subsequent to the date of their evaluation by the Chief Executive Officer and Chief Financial Officer.

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Part III

Item 9B. Other Information

None

Item 10. Directors and Executive Officers of the Registrant

Certain information called for by Item 10 regarding BancTrust’s executive officers is included on page 10 in Part I of this Report on Form 10-K under the caption “Executive Officers of the Registrant” pursuant to General Instruction G. The balance of the information called for by Item 10 is set forth in BancTrust’s Proxy Statement for the 2004 annual meeting under the captions “VOTING SECURITIES – Section 16(a) Beneficial Ownership Reporting Compliance”, “ELECTION OF DIRECTORS” and “CODE OF ETHICS” and is incorporated herein by reference.

Item 11. Executive Compensation

The information called for by Item 11 is set forth in BancTrust’s Proxy Statement for the 2005 annual meeting under the caption “EXECUTIVE COMPENSATION” and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information called for by Item 12 is set forth in BancTrust’s Proxy Statement for the 2005 annual meeting under the captions “VOTING SECURITIES – Security Ownership of Directors, Nominees, 5% Stockholders and Officers” and “Equity Compensation Plan Information” and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

The information called for by Item 13 is set forth in BancTrust’s Proxy Statement for the 2005 annual meeting under the caption “CERTAIN TRANSACTIONS AND MATTERS” and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information called for by Item 14 is set forth in BancTrust’s Proxy Statement for the 2005 annual meeting under the heading “INDEPENDENT ACCOUNTANTS” and is incorporated herein by reference.

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Part IV

Item 15. Exhibits, Financial Statement Schedules

(a) 1. Financial Statements:

The following consolidated financial statements of the registrant and its subsidiaries and Reports of Independent Registered Public Accounting Firm are included in Item 8 above:

Reports of Independent Registered Public Accounting Firm

Consolidated Statements of Condition as of December 31, 2004 and 2003

Consolidated Statements of Income for the years ended December 31, 2004, 2003 and 2002

Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the years ended December 31, 2004, 2003 and 2002

Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002

Notes to Consolidated Financial Statements.

(a) 2. Financial Statement Schedules

None.

(a) 3. Exhibits:

(3) Articles of Incorporation and By-Laws.

1. Amended and Restated Articles of Incorporation of BancTrust Financial Group, Inc., filed as exhibit (3).6 to BancTrust’s Annual Report on Form 10-K for the year ended December 31, 2002 (No. 0-15423) are incorporated hereby by reference.

2. Bylaws of SAB Newco, Inc., filed as Exhibit (3).3 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 1996 (No. 0-15423), are incorporated herein by reference.

(4) Instruments defining the rights of security holders, including indentures.

1. Amended and Restated Articles of Incorporation of BancTrust Financial Group, Inc., filed as exhibit (3).6 to BancTrust’s Annual Report on Form 10-K for the year ended December 31, 2003 (No. 0-15423) are incorporated hereby by reference.

2. Bylaws of SAB Newco, Inc. filed as Exhibit (3).3 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 1996 (No. 0-15423), are incorporated herein by reference.

3. Specimen of Common Stock Certificate of South Alabama Bancorporation, Inc., filed as Exhibit (4).4 to the registrant’s annual report on 10-K for the year ended 1996 (No. 0-15423), is incorporated herein by reference.

(10) Material Contracts.

1. *The Bank of Mobile Retirement Plan (Restated), dated September 12, 1990, filed as Exhibit (10).8 to the registrant’s annual report on Form 10-K for the year 1991 (No. 0-15423), is incorporated herein by reference.

2. *Contracts pursuant to Supplemental Retirement Plan of The Bank of Mobile, N.A, effective January 1, 1988, filed as Exhibit (10).7 to the registrant’s annual report on Form 10-K for the year 1990 (No. 0-15423), are incorporated herein by reference.

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3. *Restated Contracts pursuant to Supplement Retirement Plan of The Bank of Mobile, dated April 1, 1992, filed as Exhibit (10).10 to registrant’s Form 10-K for the year 1992 (No. 0-15423), is incorporated herein by reference.

4. *First National Bank Employees’ Profit Sharing Plan, as amended and restated effective January 1, 1989, filed as Exhibit (10).12 to registrant’s annual report on Form 10-K for the year 1993 (No. 0-15423), is incorporated by reference.

5. *First National Bank Employees’ Pension Plan, as amended and restated effective January 1, 1989, filed as Exhibit (10).13 to registrant’s Form 10-K for the year 1993 (No. 0-15423), is incorporated herein by reference.

6. *Split Dollar Insurance Agreements of First National Bank, filed as Exhibit (10).15 to registrant’s annual report on Form 10-K for the year 1993 (No. 0-15423), is incorporated herein by reference.

7. *Deferred Compensation Agreements of First National Bank, filed as Exhibit (10).16 to registrant’s annual report on Form 10-K for the year 1993 (No. 0-15423), is incorporated herein by reference.

8. *South Alabama Bancorporation 1993 Incentive Compensation Plan dated October 19, 1993 as adopted by shareholders May 3, 1994 filed as Exhibit (10).18 to registrant’s form 10-K for the year 1994 (No. 0-15423), is incorporated herein by reference.

9. Lease, entered into April 17, 1995 between Augustine Meaher, Jr., Robert H. Meaher individually and Executor of the Estate of R. Lloyd Hill, Joseph L. Meaher and Augustine Meaher, III, and The Bank of Mobile, filed as Exhibit (10).1 to registrant’s Form 10-Q for the Quarter ended June 30, 1995 (No. 0-15423), is incorporated herein by reference.

10. Lease, entered into April 17, 1995 between Augustine Meaher, Jr. and Margaret L. Meaher, and The Bank of Mobile, filed as Exhibit (10).2 to registrant’s Form 10-Q for the Quarter ended June 30, 1995 (No. 0-15423), is incorporated herein by reference.

11. Lease, entered into April 17, 1995 between Hermione McMahon Sellers (f/k/a Hermione McMahon Dempsey) a widow, William Michael Sellers, married, and Mary S. Burnett, married, and The Bank of Mobile, filed as Exhibit (10).3 to registrant’s Form 10-Q for the Quarter ended June 30, 1995 (No. 0-15423), is incorporated herein by reference.

12. Lease, entered into May 1, 1995 between Augustine Meaher, Jr., Robert H. Meaher individually and Executor of the Estate of R. Lloyd Hill, Joseph L. Meaher and Augustine Meaher, III, and The Bank of Mobile, filed as Exhibit (10).4 to registrant’s Form 10-Q for the Quarter ended June 30, 1995 (No. 0-15423), is incorporated herein by reference.

13. *Change in Control Compensation Agreement, dated as of November 14, 1995, between The Bank of Mobile and W. Bibb Lamar, Jr., filed as Exhibit (10).24 to the registrant’s annual report on Form 10-K for the year 1995 (No. 0-15423), is incorporated herein by reference.

14. *Change in Control Compensation Agreements, between The Bank of Mobile or First National Bank, Brewton and certain officers filed as Exhibit (10).25 to the registrant’s annual report on Form 10-K for the year 1995 (No. 0-15423), is incorporated herein by reference.

15. *Monroe County Bank Profit Sharing Plan, Amended and Restated January 1, 1989, filed as Exhibit (10).23 to the registrant’s annual report on Form 10-K for the year 1996 (No. 0-15423), is incorporated herein by reference.

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16. *Monroe County Bank Pension Plan as Amended and Restated January 1, 1989, filed as Exhibit (10).24 to the registrant’s annual report on Form 10-K for the year 1996 (No. 0-15423), is incorporated herein by reference.

17. *Amendment Number One to South Alabama Bancorporation 1993 Incentive Compensation Plan, dated May 9, 1997 filed as Exhibit (10).28 to the registrant’s annual report on Form 10-K for the year 1997 (No. 0-15423), is incorporated herein by reference.

18. *Change in Control Compensation Agreement dated as of March 31, 1997, by and between the registrant and John B. Barnett, III, filed as Exhibit (10).29 to the registrant’s annual report on Form 10-K for the year 1997 (No. 0-15423), is incorporated herein by reference.

19. Ground Lease Agreement, dated March 31, 1999, by and between Northside, Ltd. and the Mobile Bank, filed as Exhibit 10.29 to the registrant’s Registration Statement on Form S-4 filed on July 2, 1999 (No. 333-82167), is incorporated herein by reference.

20. *Amendment No. 2 to South Alabama Bancorporation 1993 Incentive Compensation Plan, filed as Exhibit 10.30 to the registrant’s Registration Statement on Form S-4 filed on July 2, 1999 (No. 333-82167), is incorporated herein by reference.

21. *South Alabama Bancorporation Employee Savings and Profit Sharing Plan, filed as Exhibit 10.31 to the registrant’s Registration Statement on Form S-4 filed on July 2, 1999 (No. 333-82167), is incorporated herein by reference.

22. *South Alabama Bancorporation, Inc. 2001 Incentive Compensation Plan filed as Appendix B to the registrant’s Proxy Statement on Schedule 14A filed on April 30, 2001 (No. 0-15423), is incorporated herein by reference.

23. Agreement and Plan of Merger dated as of July 23, 2003, as amended, between the registrant and CommerceSouth, Inc. filed as Appendix A to the registrant’s Registration Statement on Form S-4 filed on August 28, 2003 (No. 333-108295), as amended, is incorporated herein by reference.

* Indicates compensatory plan identified pursuant to Item 14(a)(3) of Form 10-K.

(21) Subsidiaries of the registrant.

1. Subsidiaries of BancTrust Financial Group, Inc.

(23) Consents

1. Consent of KPMG LLP

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(31) Rule 13(a)-14(a)/15(d)-14(a) Certifications

1. Certification by the Chief Executive Officer pursuant to Rule 13(a)-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

2. Certification by the Chief Financial Officer pursuant to Rule 13(a)-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(32) Section 1350 certifications

1. Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

2. Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BANCTRUST FINANCIAL GROUP, INC.
By:	/s/    F. Michael Johnson
	F. Michael Johnson
	Chief Financial Officer and Secretary
Dated: March 14, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/    W. BIBB LAMAR, JR.         W. Bibb Lamar, Jr.	President and CEO (Principal executive officer)	March 14, 2005
/s/    F. MICHAEL JOHNSON         F. Michael Johnson	Chief Financial Officer and Secretary (Principal financial and accounting officer)	March 14, 2005
/s/    STEPHEN G. CRAWFORD         Stephen G. Crawford	Director	March 14, 2005
/s/    DAVID C. DE LANEY         David C. De Laney	Director	March 14, 2005
Robert N. Dixon	Director
Gregory G. Faison	Director
/s/    JAMES A. FAULKNER         James A. Faulkner	Director	March 14, 2005
Broox G. Garrett, Jr.	Director
W. Dwight Harrigan	Director
James P. Hayes, Jr.	Director
/s/    CLIFTON C. INGE         Clifton C. Inge	Director	March 14, 2005

74

Name	Title	Date
/s/    W. BIBB LAMAR, JR.         W. Bibb Lamar, Jr.	Director	March 14, 2005
/s/    JOHN H. LEWIS, JR.         John H. Lewis, Jr.	Director	March 15, 2005
Harris V. Morrissette	Director
/s/    J. STEPHEN NELSON         J. Stephen Nelson	Director and Chairman	March 14, 2005
/s/    PAUL D. OWENS, JR.         Paul D. Owens, Jr.	Director	March 14, 2005
Dennis A. Wallace	Director
/s/    EARL H. WEAVER         Earl H. Weaver	Director	March 14, 2005

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EXHIBIT INDEX

SEC Assigned Exhibit No.		Description of Exhibit	Page No.
(21	).1	Subsidiaries of BancTrust Financial Group, Inc.
(23	).1	Consent of KPMG LLP
(31	).1	Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(31	).2	Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(32	).1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002
(32	).2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002

76