As with many railroads in the region, the A&SAB began in the minds of timber investors and land developers seeking to access the agricultural resources of the Florida Panhandle and South Alabama. Chief among them was A. B. Steele, who created the railroad to build south out of Dothan towards the Gulf Coast. The company incorporated on February 14, 1906, and opened its line between Dothan and Panama City on July 15, 1908. Panama City was incorporated the following year at the terminus of the line. Plans were soon made to extend the railroad north to Atlanta, however financial difficulties and pressure from the Central of Georgia railroad put an end to any plans for extension.