EX-99.1 2 a4743620ex991.txt THE COLONIAL BANCGROUP, INC. EXHIBIT 99.1 Exhibit 99.1 Colonial BancGroup Announces Record Earnings Per Share of $0.34 and an 18% Increase in Net Income over the Third Quarter of 2003 MONTGOMERY, Ala.--(BUSINESS WIRE)--Oct. 19, 2004--The Colonial BancGroup, Inc. (NYSE: CNB) Chairman and CEO, Robert E. Lowder, announced today that the Company had record earnings for the quarter ended September 30, 2004 of $0.34 per diluted share, a 10% increase over the $0.31 recorded for the same quarter of the previous year. Net income for the quarter was $45.7 million, an 18% increase over the $38.8 million recorded in the third quarter of 2003. For the nine months ended September 30, 2004, net income was $128.1 million, compared to $112.2 million for the corresponding period of the prior year, a 14% increase. "The past three months have been remarkable in many of our market areas. No one in living memory has seen so many hurricanes affect so many people in such a short time. I'm proud that Colonial could step up and help countless numbers of our customers meet their financial needs in such trying times. For example, we put in place interest-only equity line products, special CD products, ATM fee waivers and other special considerations for those affected by the storms. I am also pleased to report the operating results for the third quarter are especially strong on both sides of the balance sheet, and reflect the dedication of our employees when the chips are really down," said Mr. Lowder. Colonial's net interest income for the quarter increased by $20 million, or 16% over the third quarter of 2003. For the nine months ended September 30, 2004, net interest income increased by $51 million, or 14%, over the corresponding period in the prior year. The net interest margin increased to 3.64%, a 21-basis-point increase over the third quarter of 2003 and four basis points over the second quarter of 2004, representing the fourth consecutive quarter of net interest margin expansion. The bank's average non-time deposits grew by $534 million, or 33% annualized (19% annualized excluding the effects of the acquisition of P.C.B. Bancorp, Inc. (PCB)), from the second quarter of 2004, and by $1.6 billion, or 31% (23% excluding PCB), from the third quarter of 2003. Total deposits increased by $1.9 billion, or 20% (14% excluding PCB), from September 30, 2003. Total loans, excluding mortgage warehouse loans, increased by $246 million, or 9% annualized, from June 30, 2004 to September 30, 2004 and grew by $1.2 billion, or 12% (7% excluding PCB), from September 30, 2003 to September 30, 2004. Mortgage warehouse loans increased 4%, annualized, from June 30, 2004. "Colonial's nonperforming assets ratio reached a record low of 0.33% at September 30, 2004 improving by five basis points from its previous record low at June 30, 2004. Annualized net charge-offs were 0.23% of average loans for the third quarter and 0.22% year to date. Our philosophy of emphasizing profitable loan growth while maintaining excellent asset quality continues to benefit our shareholders," said Mr. Lowder. Increases in deposit service charges, fees for electronic banking services and other income were offset by decreases in mortgage origination income and financial planning services, resulting in a 3% reduction in noninterest income, excluding securities gains, from the third quarter of 2003. Noninterest expense was $106.5 million in the current quarter, compared to $104.7 million for the second quarter of 2004. The 1.7% increase is primarily due to increases in expenses relating to the PCB acquisition, as the third quarter was the first full quarter which included the results of PCB. On September 28, 2004, Colonial announced plans to acquire Union Bank of Florida (Union) which had total assets of $1 billion, total deposits of $717 million and total loans of $639 million at September 30, 2004 making it Colonial's largest acquisition to date. The addition of Union's deposits is expected to bring Colonial's Florida deposits to $6.3 billion and its branches in Florida to 141. The acquisition also is expected to bring Colonial's South Florida deposits to $2.7 billion and its number of branches there to 46, with 18 locations in Broward County, 16 locations in Miami-Dade County and 12 in Palm Beach County. Once completed, this transaction should enhance Colonial's position as the seventh largest bank in Florida with 53% of the Company's deposits and 50% of its assets in that state. This transaction is expected to be completed in the first quarter of 2005. Colonial BancGroup operates 289 branches in Florida, Alabama, Georgia, Nevada and Texas with $18.2 billion in assets. The Company's common stock is traded on the New York Stock Exchange under the symbol CNB. In most newspapers the stock is listed as ColBgp. More detailed information on Colonial BancGroup's quarterly earnings was filed today on Form 8-K with the Securities and Exchange Commission and may be obtained from Colonial BancGroup's corporate website at www.colonialbank.com by clicking on the link entitled Colonial BancGroup Announces Record Earnings or under the Investor Relations area of the website in the section labeled Press Releases. This release and the above referenced Current Report on Form 8-K of which this release forms a part contain "forward-looking statements" within the meaning of the federal securities laws. The forward-looking statements in this release are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among other things, the following possibilities: (i) an inability of the company to realize elements of its strategic plans for 2004 and beyond; (ii) increases in competitive pressure in the banking industry; (iii) general economic conditions, either internationally, nationally or regionally, that are less favorable than expected; (iv) expected cost savings from recent and future acquisitions are not fully realized; (v) changes in the interest rate environment which may reduce margins; (vi) management's assumptions regarding allowance for loan losses may not be borne by subsequent events; (vii) changes which may occur in the regulatory environment (viii) costs of certain strategic initiatives and (ix) other factors more fully discussed in our periodic reports filed with the Securities and Exchange Commission. When used in this Report, the words "believes," "estimates," "plans," "expects," "should," "may," "might," "outlook," "anticipates" and similar expressions as they relate to BancGroup (including its subsidiaries) or its management are intended to identify forward-looking statements. Forward-looking statements speak only as to the date they are made. BancGroup does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (Unaudited) Statement of Condition Summary (Dollars in millions) % Change September 30, December 31, September 30, September 30, 2004 2003 2003 '03 to '04 ---------------------------------------------------------------------- Total assets $18,191 $16,273 $15,835 15% Total loans, net: Mortgage warehouse loans 1,051 982 1,145 -8% All other loans 11,511 10,606 10,265 12% Securities available for sale and investment securities 3,527 3,111 2,863 23% Core (non-time) deposits 7,141 5,868 5,445 31% Total deposits 11,182 9,769 9,305 20% Shareholders' equity 1,374 1,178 1,112 24% ---------------------------------------------------------------------- Nine Months Ended --------------------------- Earnings Summary % Change (In thousands, except per September 30, September 30, September 30, share amounts) 2004 2003 '03 to '04 ---------------------------------------------------------------------- Net interest income (taxable equivalent) $427,994 $377,590 13% Provision for loan losses 21,606 28,176 -23% Noninterest income excluding security gains(losses)(1) 96,590 96,237 0% Security gains(losses), net 7,417 3,859 92% Noninterest expense excluding loss on ext. of debt(1) 308,672 277,763 11% Loss on early extinguishment of debt 6,183 - - Net Income $128,121 $112,189 14% ---------------------------- EARNINGS PER SHARE: ---------------------------- Net Income Basic $0.98 $0.90 9% Diluted $0.98 $0.90 9% Average shares outstanding 130,267 124,050 Average diluted shares outstanding 131,405 124,826 ---------------------------------------------------------------------- ---------------------------- KEY RATIOS: ---------------------------- Net interest margin 3.61% 3.43% 5% Book value per share $10.28 $8.94 15% Dividends paid per share $0.435 $0.420 4% ---------------------------------------------------------------------- Three Months Ended --------------------------- Earnings Summary % Change (In thousands, except per September 30, September 30, September 30, share amounts) 2004 2003 '03 to '04 ---------------------------------------------------------------------- Net interest income (taxable equivalent) $150,266 $130,127 15% Provision for loan losses 7,153 9,306 -23% Noninterest income excluding security gains(losses)(1) 32,693 33,627 -3% Security gains(losses), net 367 142 158% Noninterest expense excluding loss on ext. of debt(1) 106,541 95,233 12% Loss on early extinguishment of debt - - - Net Income $45,673 $38,812 18% ---------------------------- EARNINGS PER SHARE: ---------------------------- Net Income Basic $0.34 $0.31 10% Diluted $0.34 $0.31 10% Average shares outstanding 133,568 124,354 Average diluted shares outstanding 134,730 124,997 ---------------------------------------------------------------------- ---------------------------- KEY RATIOS: ---------------------------- Net interest margin 3.64% 3.43% 6% Book value per share $10.28 $8.94 15% Dividends paid per share $0.145 $0.140 4% ---------------------------------------------------------------------- September 30, December 31, September 30, Nonperforming Assets 2004 2003 2003 ---------------------------------------------------------------------- Total non-performing assets ratio 0.33% 0.65% 0.72% Allowance as a percent of nonperforming loans 454% 240% 208% Net charge-offs ratio (annualized): Quarter to date 0.23% 0.30% 0.35% Year to date 0.22% 0.31% 0.31% ---------------------------------------------------------------------- (1) Certain reclassifications have been made to the 2003 financial statements to conform to the 2004 presentations. CONTACT: Colonial BancGroup, Inc. Glenda Allred, 334-240-5064
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) ---------------------------------------------------------------------------------------------------------------------------------- Nine Months Ended --------------------- Earnings Summary 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. Sept. 30, Sept. 30, (Dollars in thousands, except per share amounts) 2004 2004 2004 2003 2003 2004 2003 ---------------------------------------------------------------------------------------------------------------------------------- Net interest income $149,835 $143,635 $133,107 $130,816 $129,576 $426,577 $375,827 Provision for loan loss 7,153 6,519 7,934 9,202 9,306 21,606 28,176 Noninterest income:(1) Service charges on deposit accounts 15,033 15,029 14,185 14,237 14,304 44,247 39,377 Financial planning services 3,030 3,983 3,124 3,587 3,764 10,137 11,525 Electronic banking 3,157 3,180 2,812 2,554 2,489 9,149 7,632 Mortgage origination 2,162 2,373 1,990 2,243 4,274 6,525 14,990 Securities gains(losses), net 367 (392) 7,442 954 142 7,417 3,859 Other income 9,311 9,071 8,150 9,352 8,796 26,532 22,713 ---------------------------------------------------------------------------- Total noninterest income 33,060 33,244 37,703 32,927 33,769 104,007 100,096 Noninterest expense:(1) Salaries and employee benefits 55,509 54,283 50,700 50,524 50,295 160,492 145,625 Occupancy and equipment expenses 23,162 21,874 21,197 21,703 20,592 66,233 60,560 Amortization of intangibles 1,925 1,390 1,123 1,128 1,085 4,438 3,257 Merger related expenses 662 1,190 82 86 - 1,934 185 Loss on early extinguishment of debt - - 6,183 - - 6,183 - Other expense 25,283 25,965 24,327 23,921 23,261 75,575 68,136 ---------------------------------------------------------------------------- Total noninterest expense 106,541 104,702 103,612 97,362 95,233 314,855 277,763 Income before tax 69,201 65,658 59,264 57,179 58,806 194,123 169,984 Income tax 23,528 22,324 20,150 19,441 19,994 66,002 57,795 ---------------------------------------------------------------------------- Net Income $45,673 $43,334 $39,114 $37,738 $38,812 $128,121 $112,189 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------- Earnings per share - Diluted ---------------------------------------------------------------- Net Income $0.34 $0.33 $0.31 $0.30 $0.31 $0.98 $0.90 ---------------------------------------------------------------------------------------------------------------------------------- Selected ratios ---------------------------------------------------------------- Return on average assets* 1.02% 1.01% 0.98% 0.94% 0.95% 1.00% 0.95% Return on average equity* 13.74% 14.04% 13.10% 12.92% 13.92% 13.64% 13.66% Efficiency ratio(2) 58.23% 58.90% 59.45% 59.62% 58.16% 58.84% 58.62% Noninterest income(2)/ avg assets* 0.73% 0.78% 0.75% 0.80% 0.82% 0.76% 0.81% Noninterest expense(2)/ avg assets* 2.40% 2.43% 2.42% 2.45% 2.34% 2.41% 2.34% Net interest margin 3.64% 3.60% 3.58% 3.53% 3.43% 3.61% 3.43% Equity to assets 7.55% 7.30% 7.46% 7.24% 7.02% Tier one leverage 7.26% 7.30% 7.56% 7.50% 7.12% Tangible capital ratio 5.51% 5.16% 5.85% 5.60% 5.50% ---------------------------------------------------------------------------------------------------------------------------------- *Annualized (1) Certain reclassifications have been made to prior period financial statements to conform to current presentations. (2) Noninterest income excludes gains(losses) on sale of securities and noninterest expense excludes loss on early extinguishment of debt. *Annualized
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (Unaudited) ----------------------------------------------------------------------------------------------------------------------------------- STATEMENTS OF CONDITION Sept. 30, June 30, March 31, Dec. 31, Sept. 30, (Dollars in thousands) 2004 2004 2004 2003 2003 ----------------------------------------------------------------------------------------------------------------------------------- Assets:(2) Cash and due from banks $335,836 $357,862 $311,460 $329,152 $321,362 Interest-bearing deposits in banks 11,308 10,912 11,534 16,565 15,757 Federal funds sold and securities purchased under agreements to resell 262,415 37,144 9,000 - 30,000 Securities available for sale 3,520,259 3,338,855 3,008,651 3,100,321 2,852,344 Investment securities 6,759 7,377 8,745 10,387 10,952 Loans held for sale 508,317 545,905 365,245 378,324 366,080 Total loans, net: Mortgage warehouse loans 1,050,990 1,041,070 1,070,040 982,488 1,144,519 All other loans 11,511,363 11,264,957 10,758,947 10,606,407 10,264,929 Less: Allowance for loan losses (147,058) (147,000) (140,476) (138,549) (136,625) ------------------------------------------------------------ Loans, net 12,415,295 12,159,027 11,688,511 11,450,346 11,272,823 Premises and equipment, net 268,249 270,282 253,859 246,170 236,229 Intangible assets, net 392,560 395,381 281,139 282,190 254,148 Other real estate owned 9,286 11,084 15,432 17,821 16,809 Bank owned life insurance 212,290 209,955 185,098 182,857 180,528 Accrued interest and other assets 248,725 249,235 360,324 259,169 277,487 ----------------------------------------------------------------------------------------------------------------------------------- Total Assets $18,191,299 $17,593,019 $16,498,998 $16,273,302 $15,834,519 ----------------------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity: Non-interest bearing deposits $2,364,758 $2,336,072 $2,068,798 $2,021,901 $1,884,568 Interest-bearing deposits 4,213,962 4,036,973 3,519,129 3,314,328 3,002,640 Savings deposits 562,333 550,909 538,005 531,419 558,071 ------------------------------------------------------------ Total non-time deposits 7,141,053 6,923,954 6,125,932 5,867,648 5,445,279 Time deposits 4,041,032 3,962,168 3,923,840 3,900,944 3,859,949 ------------------------------------------------------------ Total deposits 11,182,085 10,886,122 10,049,772 9,768,592 9,305,228 Short-term borrowings 3,239,221 3,042,573 2,960,575 3,311,640 3,352,913 Subordinated debt 278,225 270,536 286,723 278,428 284,926 Junior subordinated debt 315,552 309,324 306,824 299,917 305,425 FHLB and other long-term debt 1,734,966 1,727,326 1,501,926 1,364,969 1,407,973 Other liabilities 67,463 73,643 162,781 71,451 66,260 ------------------------------------------------------------ Total liabilities 16,817,512 16,309,524 15,268,601 15,094,997 14,722,725 Common stock, par value $2.50 share (1) 334,043 333,601 318,000 317,437 311,057 Additional paid in capital 333,791 332,629 238,856 237,134 205,232 Retained earnings 697,215 670,908 646,022 625,326 605,351 Unearned compensation (648) (1,087) (1,157) (1,134) (1,930) Accumulated other comprehensive income(loss), net of taxes 9,386 (52,556) 28,676 (458) (7,916) ------------------------------------------------------------ Total shareholders' equity 1,373,787 1,283,495 1,230,397 1,178,305 1,111,794 ----------------------------------------------------------------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $18,191,299 $17,593,019 $16,498,998 $16,273,302 $15,834,519 ----------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------- (1) Common Shares Authorized 200,000,000 200,000,000 200,000,000 200,000,000 200,000,000 Common Shares Issued 133,617,232 133,440,337 127,199,880 126,974,668 124,422,742 Common Shares Outstanding 133,617,232 133,440,337 127,199,880 126,974,668 124,422,742 ----------------------------------------------------------------------------------------------------------------------------------- (2) Certain reclassifications have been made to prior period financial statements to conform to current presentations.
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES ----------------------------------------------------------------------------------------------------------------------- Three Months Ended --------------------------------------------------------------------------------------- AVERAGE VOLUME AND RATES (unaudited) September 30, June 30, September 30, (Dollars in thousands) 2004 2004 2003 --------------------------------------------------------------------------------------- Average Average Average Volume Interest Rate Volume Interest Rate Volume Interest Rate ----------------------------------------------------------------------------------------------------------------------- Assets: All other loans, net of unearned income(2)(3) $11,344,719 $160,229 5.62% $10,940,070 $148,516 5.46% $10,073,898 $145,035 5.72% Mortgage warehouse loans 1,035,679 10,544 4.05% 1,120,277 11,251 4.04% 1,683,548 16,100 3.79% Loans held for sale 468,791 5,018 4.28% 526,491 6,456 4.90% 605,562 7,301 4.82% Investment securities and securities available for sale and other interest-earning assets(3) 3,615,754 40,551 4.49% 3,470,991 38,463 4.43% 2,758,311 27,457 3.98% ----------------------- ---------------------- ---------------------- Total interest-earning assets(1) 16,464,943 $216,342 5.24% 16,057,829 $204,686 5.13% 15,121,319 $195,893 5.15% Nonearning assets(3) 1,265,714 1,202,454 1,162,627 ------------- ------------ ------------ Total assets $17,730,657 $17,260,283 $16,283,946 ----------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity: Interest-bearing non-time deposits $4,747,994 $10,847 0.91% $4,320,746 $9,254 0.86% $3,433,979 $6,317 0.73% Time deposits 4,002,410 25,044 2.49% 3,955,769 24,148 2.45% 3,829,347 25,741 2.67% Short-term borrowings 2,987,370 10,642 1.42% 3,205,953 8,213 1.03% 3,582,002 9,813 1.09% Long-term debt(3) 2,289,851 19,543 3.40% 2,265,437 18,956 3.36% 2,258,749 23,895 4.20% ----------------------- ---------------------- ---------------------- Total interest-bearing liabilities 14,027,625 $66,076 1.87% 13,747,905 $60,571 1.77% 13,104,077 $65,766 1.99% Noninterest-bearing demand deposits 2,273,263 2,166,471 1,941,749 Other liabilities(3) 107,009 104,932 131,777 ------------- ------------ ------------ Total liabilities 16,407,897 16,019,308 15,177,603 Shareholders' equity 1,322,760 1,240,975 1,106,343 ------------- ------------ ------------ Total liabilities and shareholders' equity $17,730,657 $17,260,283 $16,283,946 ----------------------------------------------------------------------------------------------------------------------- Rate differential 3.37% 3.36% 3.16% Net yield on interest-earning assets $150,266 3.64% $144,115 3.60% $130,127 3.43% ----------------------------------------------------------------------------------------------------------------------- (1) Interest earned and average rates on obligations of states and political subdivisions are reflected on a tax equivalent basis. Tax equivalent interest earned is: actual interest earned times 145%. The taxable equivalent adjustment has given effect to the disallowance of interest expense deductions, for federal income tax purposes, related to certain tax-free assets. (2) Loans, net of unearned income for the purpose of this presentation excludes mortgage warehouse lending. (3) Unrealized gains(losses) on available for sale securities and the adjustments for mark to market valuations have been classified in either nonearning assets or other liabilities. All quarters presented were changed to reflect this presentation.
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES --------------------------------------------------------------------------------------------------------- Nine Months Ended September 30, ---------------------------------------------------------- AVERAGE VOLUME AND RATES (unaudited) 2004 2003 ---------------------------------------------------------- (Dollars in thousands) Average Average Volume Interest Rate Volume Interest Rate --------------------------------------------------------------------------------------------------------- Assets All other loans, net of unearned income(2)(3) $10,959,787 $453,935 5.53% $9,994,465 $444,071 5.94% Mortgage warehouse loans 1,013,169 30,426 4.01% 1,585,351 47,248 3.98% Loans held for sale 443,810 15,986 4.80% 397,156 14,898 5.00% Investment securities and securities available for sale and other interest-earning assets(3) 3,422,798 114,941 4.48% 2,732,135 81,539 3.98% ----------------------- ---------------------- Total interest-earning assets(1) 15,839,564 $615,288 5.19% 14,709,107 $587,756 5.34% Nonearning assets(3) 1,203,669 1,116,020 ------------- ------------ Total assets $17,043,233 $15,825,127 --------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity: Interest-bearing non-time deposits $4,326,000 $28,051 0.87% $3,320,132 $20,254 0.82% Time deposits 3,959,890 73,642 2.48% 4,030,425 87,165 2.89% Short-term borrowings 3,009,151 25,902 1.15% 3,271,525 30,454 1.24% Long-term debt(3) 2,259,352 59,699 3.53% 2,136,705 72,293 4.52% ----------------------- ---------------------- Total interest-bearing liabilities 13,554,393 $187,294 1.85% 12,758,787 $210,166 2.20% Noninterest-bearing demand deposits 2,124,163 1,839,122 Other liabilities(3) 109,631 129,106 ------------- ------------ Total liabilities 15,788,187 14,727,015 Shareholders' equity 1,255,046 1,098,112 ------------- ------------ Total liabilities and shareholders' equity $17,043,233 $15,825,127 --------------------------------------------------------------------------------------------------------- Rate differential 3.34% 3.14% Net yield on interest-earning assets $427,994 3.61% $377,590 3.43% --------------------------------------------------------------------------------------------------------- (1) Interest earned and average rates on obligations of states and political subdivisions are reflected on a tax equivalent basis. Tax equivalent interest earned is: actual interest earned times 145%. The taxable equivalent adjustment has given effect to the disallowance of interest expense deductions, for federal income tax purposes, related to certain tax-free assets. (2) Loans, net of unearned income for the purpose of this presentation excludes mortgage warehouse lending. (3) Unrealized gains(losses) on available for sale securities and the adjustments for mark to market valuations have been classified in either nonearning assets or other liabilities. All periods presented were changed to reflect this presentation.
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES NONPERFORMING ASSETS AND LOAN LOSS RESERVE ANALYSIS (unaudited)
----------------------------------------------------------------------------------------------------- NONPERFORMING ASSETS Sept. 30, June 30, March 31, Dec. 31, Sept. 30, (Dollars in thousands) 2004 2004 2004 2003 2003 ----------------------------------------------------------------------------------------------------- Nonaccrual loans $32,159 $34,994 $59,618 $57,342 $65,205 Restructured loans 233 248 263 277 369 ------------------------------------------------------------------ Total nonperforming loans 32,392 35,242 59,881 57,619 65,574 Other real estate owned 9,286 11,084 15,432 17,821 16,809 ------------------------------------------------------------------ Total nonperforming assets $41,678 $46,326 $75,313 $75,440 $82,383 ------------------------------------------------------------------ Aggregate loans contractually past due 90 days for which interest is being accrued $11,627 $11,537 $10,683 $10,802 $7,675 Total charge-offs 24,853 15,997 7,297 41,427 31,278 Total recoveries (4,899) (3,138) (1,290) (5,956) (4,462) ------------------------------------------------------------------ Net charge-offs: Year to date 19,954 12,859 6,007 35,471 26,816 Quarter to date 7,095 6,852 6,007 8,655 10,299 ----------------------------- RATIOS ----------------------------- Period end: Total nonperforming assets as a percent of net loans and other real estate 0.33% 0.38% 0.64% 0.65% 0.72% Allowance as a percent of nonperforming assets 353% 317% 187% 184% 166% Allowance as a percent of nonperforming loans 454% 417% 235% 240% 208% Net charge-offs as a percent of average net loans (annualized): Quarter to date 0.23% 0.23% 0.21% 0.30% 0.35% Year to date 0.22% 0.22% 0.21% 0.31% 0.31% ----------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- September 30, 2004 June 30, 2004 September 30, 2003 ALLOWANCE FOR LOAN LOSSES % BY ------------------------------------------------------------------ CATEGORY Percent Percent Percent (Dollars in thousands) Loans reserve Loans reserve Loans reserve ----------------------------------------------------------------------------------------------------- Single Family Real Estate: Mortgage warehouse loans $1,050,990 0.25% $1,041,070 0.25% $1,144,519 0.25% 1-4 Family real estate portfolio - held to maturity 2,177,552 0.50% 2,108,335 0.50% 1,929,111 0.50% Other 9,333,811 1.43% 9,156,622 1.46% 8,335,818 1.49% ------------- ------------- ------------- Total loans $12,562,353 1.17% $12,306,027 1.19% $11,409,448 1.20% ----------------------------------------------------------------------------------------------------- Note: The allowance allocation reflected above for mortgage warehouse loans and 1-4 family real estate portfolio loans reflects an internally developed allocation used for illustrative purposes only.
8-K Supplemental (unaudited) Net Interest Income ------------------- Net interest income increased $6.2 million or 17% annualized from the second quarter of 2004 due to a four basis point improvement in the net interest margin from 3.60% to 3.64% and a $407 million increase in average earning assets. The Federal Reserve raised the target federal funds rate 50 basis points during the quarter in addition to a 25 basis point increase on June 30, 2004 which resulted in a 43 basis point increase in the average federal funds rate for the quarter. Colonial raised its prime rate in conjunction with each increase in the target federal funds rate. Approximately 76% of Colonial's loan portfolio is variable or adjustable rate and increases in rate when market rates rise. As a result, loan yields, excluding mortgage warehouse loans and loans held for sale, increased 16 basis points during the quarter while the yield on mortgage warehouse loans increased one basis point. The yield on loans held for sale declined 62 basis points due to decreased demand for this product. Average loan volume, excluding mortgage warehouse loans and loans held for sale, increased $405 million during the quarter. Mortgage warehouse loans and mortgage loans held for sale declined $142 million during the quarter. The average yield on securities improved six basis points and average volume increased $145 million in the quarter. The increases in volumes and rates resulted in an 11 basis point increase in the yield on interest earning assets. Overall funding costs increased 10 basis points in the quarter primarily due to a 39 basis point increase in the rate on short-term borrowings which are tied to floating rates. The average rate on long-term debt increased only four basis points due to the favorable impact of interest rate swap agreements entered into during the quarter. The average rate on interest bearing deposits remained relatively constant, only increasing one basis point in the third quarter of 2004. Colonial's growth in low cost deposits has decreased its dependence on borrowings whereby total average deposits now comprise 68% of the company's total funding compared to 66% for the second quarter of 2004 and 61% for the third quarter of 2003. The shift in funding mix contributes favorably to Colonial's interest rate risk profile and is expected to assist Colonial in containing funding costs in a rising interest rate environment. Colonial's interest rate risk profile was slightly asset sensitive at September 30, 2004. The following table reflects an analysis of the increases (decreases) in interest income and expense and the amounts attributable to volume and rate for the third quarter of 2004 compared to the second quarter of 2004: Analysis of Interest Income and Expense Changes (fully taxable equivalent basis) (dollars in thousands) Increases (Decreases) from Second Quarter 2004 Attributed to(1) ---------------- Interest Income: Total Volume Rate -------------------------- All other loans, net $11,713 $6,397 $5,316 Mortgage warehouse lending (707) (743) 36 Loans held for sale (1,438) (666) (772) Securities and other interest-earning assets 2,088 1,626 462 -------------------------- Total interest income 11,656 6,614 5,042 -------------------------- Interest Expense: Interest-bearing non-time deposits 1,593 1,024 569 Time deposits 896 409 487 Short-term borrowings 2,429 (585) 3,014 Long-term debt 587 277 310 -------------------------- Total interest expense 5,505 1,125 4,380 -------------------------- Net Interest Income $6,151 $5,489 $662 ========================== (1) Increases (decreases) are attributed to volume changes and rate changes on the following basis: Volume change equals change in volume multiplied by old rate. Rate change equals change in rate multiplied by old volume. The rate/volume change equals change in volume multiplied by change in rate, and it is allocated between volume change and rate change at the ratio that the absolute value of each of those components bear to the absolute value of their total. Securities ---------- Securities available for sale and investment securities totaled $3,527 million or 19.4% of total assets at September 30, 2004. The Company's securities had an effective duration of 3.62 years. Unrealized gain/loss on securities available for sale changed from a pretax loss of $80.9 million at June 30, 2004 to a pretax gain of $14.4 million at September 30, 2004 due to decreases in market rates on longer maturities. Loans ----- Changes in period-end loan balances for the third quarter consisted of the following: Period-end Period-end Balance Internal Balance (in millions) 6/30/2004 Change 9/30/2004 ------------------------------------- Commercial real estate and construction $7,853 $213 $8,066 Single-family real estate 1,647 39 1,686 Other loans 1,303 (36) 1,267 Home equity lines 462 30 492 ------------------------------------- Total $11,265 $246 $11,511 ===================================== Mortgage warehouse lending $1,041 $10 $1,051 ===================================== Loans held for sale $546 ($38) $508 ===================================== Loans, excluding mortgage warehouse lending, increased $246 million, or 9% annualized, over the second quarter of 2004. Continued emphasis on home equity lines resulted in an increase in equity line balances of approximately 26%, annualized, for the third quarter of 2004. Contribution of loan growth, from June 30, 2004 to September 30, 2004, by state or division is as follows: % of total loan growth ---------------------- Florida 83% Georgia 15% Mortgage warehouse lending unit 3% Texas 3% Nevada (1%) Alabama (7%) 1-4 family real estate portfolio loans 4% ------ 100% ------ Loans, excluding mortgage warehouse lending, increased from December 31, 2003 to September 30, 2004 by $905 million, or 11% annualized (5% annualized excluding the effects of the acquisition of P.C.B. Bancorp, Inc. (PCB)), primarily from the Company's Florida markets. Net charge-offs for the third quarter of 2004 were $7.1 million or 0.23%, annualized, of average loans. The loan loss provision for the third quarter 2004 was $7.2 million. Nonperforming assets declined by $4.6 million, or 10%, from June 30, 2004 as a result of the resolution of problem assets through loan payoffs, the sale of underlying loans or the sale of the underlying property. The ratio of nonperforming assets to net loans and other real estate declined to a historically low level of 0.33% compared to 0.38% at June 30, 2004. We expect our credit quality indicators to continue to be among the best for banks over $10 billion in assets. Deposits -------- Colonial continued to have strong deposit growth during the quarter with average non-time deposits growing $534 million, or 33% annualized (19% excluding PCB), from the second quarter of 2004. Total average deposits grew $581 million, or 22% annualized (11% excluding PCB), during the quarter. Period end total deposits increased $296 million, or 11% annualized from June 30, 2004 to September 30, 2004. Non-time deposits at September 30, 2004 increased $217 million, or 13% annualized, from June 30, 2004. Total deposit growth from December 2003 to September 2004 was $1.4 billion, or 19% annualized (12% annualized excluding PCB), and $1.9 billion, or 20% (14% excluding PCB), from September 2003. The Company's Florida markets contributed the majority of the deposit growth. Noninterest Expense ------------------- Noninterest expense increased $1.8 million over the second quarter of 2004. The increase was primarily due to increases in expenses of $1.9 million relating to the PCB acquisition, as the third quarter was the first full quarter which included the results of PCB partially offset by a net decrease in other expenses. The last of the PCB's four banks was fully integrated into Colonial's systems during August. Substantially all of the cost savings from integration should begin to be recognized during the fourth quarter of 2004. Franchise --------- On September 28, 2004, Colonial announced the signing of a definitive agreement to acquire Union Bank of Florida (Union) for approximately $233 million. The consideration consists of approximately 75% cash and 25% stock. Union is headquartered in Sunrise, Florida (Broward County) and had total assets of $1 billion, total deposits of $717 million and total loans of $639 million at September 30, 2004. Union currently operates 18 offices in Miami-Dade, Broward and Palm Beach counties. The Company is currently evaluating financing alternatives including debt and stock issuances as well as other balance sheet strategies to maximize the flexibility and profitability of the combined company. For additional information related to this transaction, please see the 8-K filed on September 28, 2004. The following is a summary of assets, deposits and branches at September 30, 2004 (pro forma including the impact of Union): % of total % of non-time % of total Number of Assets Deposits Deposits Branches ---------- ------------- ---------- ---------- Florida 50% 59% 53% 141 Alabama 25% 25% 31% 119 Georgia 8% 5% 6% 22 Texas 5% 5% 4% 12 Nevada 4% 5% 4% 13 Corporate/Other 8% 1% 2% ___ We continue to evaluate potential acquisitions as well as locations for new branches to strengthen our market share in the higher growth markets where we already have a presence while optimizing customer convenience and branch profitability. As a result of these evaluations, the Company closed six locations in Alabama and opened one in the Tampa Bay, Florida area during the quarter. An additional five branches are planned to open through the remainder of the year with four in Florida and one in Alabama. Outlook ------- The Company expects the target Federal Funds rate to continue to increase at a moderate pace. We expect to have low double digit growth in loans, excluding mortgage warehouse loans, for 2004. Mortgage warehouse loans for the remainder of 2004 are expected to remain at $1 billion to $1.2 billion. Asset quality is expected to remain excellent. Colonial expects to end the year with net charge-offs of 0.22% to 0.25% of average net loans. The Company has experienced strong growth in non-time deposits. We expect to show record year over year growth of 25-30% in non-time deposits and 3-4% growth in time deposits. Given current market conditions and the factors mentioned previously, we expect the net interest margin to range from 3.58% to 3.62% for 2004. Noninterest income (excluding securities gains) for the year 2004 is expected to remain relatively even with 2003 as a result of increases in service charges on deposit accounts, electronic banking services, and BOLI income offset by a decrease in mortgage banking revenues and a decrease in financial planning services revenue. We anticipate that noninterest expense (excluding the early extinguishment of debt and merger related expenses) will increase 11% to 13% in comparing 2003 to 2004 due to investments in several strategic initiatives related to revenue enhancement, including Colonial's business banking initiative, a new information technology center, new branches, completed acquisitions, technology related expenditures and normal operating increases. There are a number of uncertainties that would impact the expectations noted above, including the overall strength of the economy and changes in market rates.