8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 18, 2005

THE COLONIAL BANCGROUP, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	1-13508	63-0661573
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

One Commerce Street

Montgomery, Alabama 36104

(Address of principal executive offices)

(334) 240-5000

(Registrant’s telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02    Results of Operations and Financial Condition.

Item 7.01    Regulation FD Disclosure.

Information regarding the registrant’s earnings results for the year and quarter ended December 31, 2004 is furnished herein pursuant to Item 2.02 of this Current Report on Form 8-K and as Regulation FD Disclosure.

Item 9.01    Financial Statements and Exhibits.

The following exhibit is furnished as Regulation FD Disclosure to this Current Report on Form 8-K:

Exhibit No.	Exhibit
99.1	Press Release Announcing Year and Fourth Quarter Earnings and Supplemental Information

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

THE COLONIAL BANCGROUP, INC.
By:	/s/    SHEILA MOODY
	Sheila Moody Chief Accounting Officer

Date: January 18, 2005

EX-99.1

EXHIBIT 99.1

For more information contact: January 18, 2005

Glenda Allred (334) 240-5064

COLONIAL BANCGROUP ANNOUNCES RECORD

EARNINGS PER SHARE OF $1.33 AND

A 17% INCREASE IN NET INCOME OVER 2003

MONTGOMERY, AL — The Colonial BancGroup, Inc. Chairman and CEO, Robert E. Lowder, announced today that the Company had record earnings for 2004 of $1.33 per diluted share, an 11% increase over the $1.20 recorded in the previous year. Net income for the year was $175.3 million, a 17% increase over the $149.9 million recorded in 2003.

Net income for the fourth quarter 2004 was $47.2 million compared to net income of $37.7 million for the fourth quarter of 2003, an increase of 25%. Earnings per share were $0.35 in the fourth quarter of 2004 compared to $0.30 per share in the fourth quarter of 2003, a 17% increase.

“Colonial’s record performance in 2004 clearly demonstrates the results of locating the franchise in some of the most attractive and fastest growing markets in America,” said Mr. Lowder.

Net interest income for the year increased by 15% over 2003, while net interest income for the fourth quarter of 2004 increased 5.4% over the prior quarter. The net interest margin increased to 3.63% for 2004, an 18-basis-point increase over 2003 and was 3.68% for the fourth quarter of 2004, a four basis point improvement over the third quarter of 2004, representing the fifth consecutive quarter of net interest margin expansion.

Colonial’s average non-time deposits grew by $1.4 billion, or 26% (21% excluding the effects of the acquisition of P.C.B. Bancorp, Inc. (PCB)), from 2003, and by $284 million, or 16% annualized, from the third quarter to the fourth quarter of 2004. Total deposits increased by $1.9 billion, or 19% (14% excluding PCB), from December 31, 2003 and by $464.5 million or 16.6% annualized from September 30, 2004. “Colonial’s retail banking franchise gained tremendous momentum this year. Finishing the year with 21% internal growth in average non-time deposits and with 57% of the Company’s non-time deposits in Florida represent significant milestones for Colonial,” said Mr. Lowder.

Total loans, excluding mortgage warehouse loans, increased by $1.1 billion, or 10.7% (6.1% excluding PCB), from December 31, 2003 to December 31, 2004. Total loans, excluding mortgage warehouse loans, grew by $232 million or 8% annualized from September 30, 2004 to December 31, 2004. Mortgage warehouse loans increased 13.5% from December 31, 2003 and by 24.3% annualized from September 30, 2004.

“We are pleased with our loan growth and are extremely proud that we achieved good growth while improving upon already excellent credit quality. Colonial’s nonperforming asset ratio reached a record low of 0.29% at December 31, 2004, improving by four basis points from its previous record low at September 30, 2004. We have consistently improved our nonperforming asset ratio every quarter since the third quarter of 2003. Net charge-offs of 0.19% of average loans for 2004 is expected to be among the lowest reported for banks our size,” said Mr. Lowder. “Additionally, we believe that Colonial’s primarily floating or adjustable rate loan portfolio positions the bank well for increasing interest rates in the months ahead,” added Mr. Lowder.

Noninterest income for the year ended 2004 was $138 million, an increase of 3.8% over 2003. Increases in deposit service charges, fees for electronic banking services, gains on sales of securities and other income were offset by decreases in mortgage origination income and financial planning services revenues. Noninterest income for the fourth quarter 2004 increased 2.9% over the third quarter primarily due to an increase in income from the purchase of additional bank owned life insurance and net gains on the sale of property held for sale and ORE.

Noninterest expense for 2004 increased 12.6% over the prior year, excluding net losses on early extinguishment of debt. Colonial enhanced its franchise by adding 30 new locations including 16 through acquisitions during 2004. These new locations and acquisition related expenses accounted for one-third of the total increase in noninterest expense. Noninterest expense for the fourth quarter 2004 increased 6.8% over third quarter 2004, excluding losses on early extinguishment of debt. Increases in noninterest expense, other than new branches, for the year and the quarter relate to salaries and benefits, legal cost, occupancy expenses for branch closures, technology initiatives and accounting fees associated with Sarbanes Oxley 404 compliance.

In December 2004, Colonial prepaid $50 million of a Federal Home Loan Bank (FHLB) advance bearing interest at 5.69% resulting in a prepayment fee of $1.25 million. As previously announced, in the first quarter of 2004, Colonial prepaid $462 million in FHLB advances resulting in a prepayment fee of $6.18 million. Total prepayment fees incurred in 2004 were $7.4 million.

Colonial also announced today, in a separate release, that it has entered into a definitive agreement to acquire First Federal Savings Bank of Lake County (FFLC). FFLC, headquartered in Leesburg, Florida, had total assets of $1 billion, total deposits of $795 million and total loans of $884 million at December 31, 2004. FFLC currently operates 16 full-service offices in Lake, Sumter, Citrus and Marion counties in Central Florida. Once completed, this transaction coupled with Colonial’s pending acquisition of Union Bank of Florida (Broward County), will make Colonial the fifth largest commercial bank in Florida with 161 branches, approximately $7.4 billion in deposits and $11.0 billion in assets in that state.

Colonial BancGroup currently operates 292 branches in Florida, Alabama, Georgia, Nevada and Texas with $18.9 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 Reports Fourth Quarter 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 2005 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)	December 31, 2004		December 31, 2003		% Change December 31, '03 to '04
Total assets	$	18,897	$	16,273	16	%
Total loans, net:
Mortgage warehouse loans		1,115		982	14	%
All other loans		11,743		10,606	11	%
Securities available for sale and investment securities		3,654		3,111	17	%
Non-time deposits		7,331		5,868	25	%
Total deposits		11,647		9,769	19	%
Shareholders’ equity		1,394		1,178	18	%

	Twelve Months Ended						% Change December 31, '03 to '04		Three Months Ended						% Change December 31, '03 to '04
Earnings Summary     (In thousands, except per share amounts)	December 31, 2004			December 31, 2003					December 31, 2004			December 31, 2003
Net Income:
Net interest income (taxable equivalent)	$	586,326		$	508,935		15	%	$	158,332		$	131,339		21	%
Provision for loan losses		26,994			37,378		-28	%		5,388			9,202		-41	%
Noninterest income excluding security gains (losses)(1)		130,483			128,209		2	%		33,893			31,973		6	%
Security gains (losses), net		7,544			4,813		57	%		127			954		-87	%
Noninterest expense excluding loss on ext. of debt(1)		422,434			375,124		13	%		113,762			97,362		17	%
Loss on early extinguishment of debt		7,436			—		—			1,253			—		—
Net Income	$	175,348		$	149,927		17	%	$	47,227		$	37,738		25	%
EARNINGS PER SHARE:
Net Income
Basic	$	1.34		$	1.20		12	%	$	0.35		$	0.30		17	%
Diluted	$	1.33		$	1.20		11	%	$	0.35		$	0.30		17	%
Average shares outstanding		131,144			124,615					133,755			126,290
Average diluted shares outstanding		132,315			125,289					135,017			127,135
KEY RATIOS:
Net interest margin		3.63	%		3.45	%	5	%		3.68	%		3.53	%	4	%
Book value per share	$	10.41		$	9.28		12	%	$	10.41		$	9.28		12	%
Dividends paid per share	$	0.58		$	0.56		4	%	$	0.145		$	0.14		4	%

Nonperforming Assets	December 31, 2004		December 31, 2003
Total non-performing assets ratio	0.29	%	0.65	%
Allowance as a percent of nonperforming loans	548	%	240	%
Net charge-offs ratio:
Quarter to date (annualized)	0.12	%	0.30	%
Year to date	0.19	%	0.31	%

(1) Certain reclassifications have been made to the 2003 financial statements to conform to the 2004 presentations.

THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

																Twelve Months Ended
Earnings Summary (Dollars in thousands, except per share amounts)	4th Qtr. 2004			3rd Qtr. 2004			2nd Qtr. 2004			1st Qtr. 2004			4th Qtr. 2003			December 31, 2004			December 31, 2003
Net interest income	$	157,939		$	149,835		$	143,635		$	133,107		$	130,816		$	584,516		$	506,643
Provision for loan loss		5,388			7,153			6,519			7,934			9,202			26,994			37,378
Noninterest income:(1)
Service charges on deposit accounts		14,220			15,033			15,029			14,185			14,237			58,467			53,614
Financial planning services		3,233			3,030			3,983			3,124			3,587			13,370			15,112
Electronic banking		3,455			3,157			3,180			2,812			2,554			12,604			10,186
Mortgage banking		1,908			2,162			2,373			1,990			2,243			8,433			17,233
Securities gains (losses), net		127			367			(392	)		7,442			954			7,544			4,813
Other income		11,077			9,311			9,071			8,150			9,352			37,609			32,064
Total noninterest income		34,020			33,060			33,244			37,703			32,927			138,027			133,022
Noninterest expense:(1)
Salaries and employee benefits		57,603			55,509			54,283			50,700			50,524			218,095			196,149
Occupancy and equipment expenses		24,442			23,162			21,874			21,197			21,703			90,675			82,263
Amortization of intangibles		1,926			1,925			1,390			1,123			1,128			6,364			4,385
Merger related expenses		65			662			1,190			82			86			1,999			271
Loss on early extinguishment of debt		1,253			—			—			6,183			—			7,436			—
Other expense		29,726			25,283			25,965			24,327			23,921			105,301			92,056
Total noninterest expense		115,015			106,541			104,702			103,612			97,362			429,870			375,124
Income before tax		71,556			69,201			65,658			59,264			57,179			265,679			227,163
Income tax		24,329			23,528			22,324			20,150			19,441			90,331			77,236
Net Income	$	47,227		$	45,673		$	43,334		$	39,114		$	37,738		$	175,348		$	149,927
Earnings per share—Diluted
Net Income	$	0.35		$	0.34		$	0.33		$	0.31		$	0.30		$	1.33		$	1.20
Selected ratios
Return on average assets*		1.01	%		1.02	%		1.01	%		0.98	%		0.94	%		1.01	%		0.95	%
Return on average equity*		13.60	%		13.74	%		14.04	%		13.10	%		12.92	%		13.63	%		13.47	%
Efficiency ratio(2)		59.18	%		58.23	%		58.90	%		59.45	%		59.62	%		58.93	%		58.88	%
Noninterest income(2)/ avg assets*		0.73	%		0.73	%		0.78	%		0.75	%		0.80	%		0.75	%		0.81	%
Noninterest expense(2)/ avg assets*		2.45	%		2.40	%		2.43	%		2.42	%		2.45	%		2.42	%		2.37	%
Net interest margin		3.68	%		3.64	%		3.60	%		3.58	%		3.53	%		3.63	%		3.45	%
Equity to assets		7.37	%		7.55	%		7.30	%		7.46	%		7.24	%
Tier one leverage		7.15	%		7.26	%		7.30	%		7.56	%		7.50	%
Tangible capital ratio		5.40	%		5.51	%		5.16	%		5.85	%		5.60	%

(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 (Dollars in thousands)		December 31, 2004			September 30, 2004			June 30, 2004			March 31, 2004			December 31, 2003
Assets:(2)
Cash and due from banks		$	334,470		$	335,836		$	357,862		$	311,460		$	329,152
Interest-bearing deposits in banks			23,407			11,308			10,912			11,534			16,565
Federal funds sold and securities purchased     under agreements to resell			246,491			262,415			37,144			9,000			—
Securities available for sale			3,647,402			3,520,259			3,338,855			3,008,651			3,100,321
Investment securities			6,152			6,759			7,377			8,745			10,387
Loans held for sale			678,496			508,317			545,905			365,245			378,324
Total loans, net:
Mortgage warehouse loans			1,114,923			1,050,990			1,041,070			1,070,040			982,488
All other loans			11,742,888			11,511,363			11,264,957			10,758,947			10,606,407
Less: Allowance for loan losses			(148,802	)		(147,058	)		(147,000	)		(140,476	)		(138,549	)
Loans, net			12,709,009			12,415,295			12,159,027			11,688,511			11,450,346
Premises and equipment, net			270,236			268,249			270,282			253,859			246,170
Intangible assets, net			394,140			392,560			395,381			281,139			282,190
Other real estate owned			9,865			9,286			11,084			15,432			17,821
Bank owned life insurance			315,739			212,290			209,955			185,098			182,857
Accrued interest and other assets			261,743			248,725			249,235			360,324			259,169
Total Assets		$	18,897,150		$	18,191,299		$	17,593,019		$	16,498,998		$	16,273,302
Liabilities and Shareholders’ Equity:
Non-interest bearing deposits		$	2,464,817		$	2,364,758		$	2,336,072		$	2,068,798		$	2,021,901
Interest-bearing deposits			4,322,433			4,213,962			4,036,973			3,519,129			3,314,328
Savings deposits			543,717			562,333			550,909			538,005			531,419
Total non-time deposits			7,330,967			7,141,053			6,923,954			6,125,932			5,867,648
Time deposits			4,315,645			4,041,032			3,962,168			3,923,840			3,900,944
Total deposits			11,646,612			11,182,085			10,886,122			10,049,772			9,768,592
Short-term borrowings			3,523,624			3,239,221			3,042,573			2,960,575			3,311,640
Subordinated debt			273,598			278,225			270,536			286,723			278,428
Junior subordinated debt			313,213			315,552			309,324			306,824			299,917
FHLB and other long-term debt			1,631,617			1,734,966			1,727,326			1,501,926			1,364,969
Other liabilities			114,871			67,463			73,643			162,781			71,451
Total liabilities			17,503,535			16,817,512			16,309,524			15,268,601			15,094,997
Common stock, par value $2.50 share (1)			334,559			334,043			333,601			318,000			317,437
Additional paid in capital			343,694			333,791			332,629			238,856			237,134
Retained earnings			725,039			697,215			670,908			646,022			625,326
Unearned compensation			(449	)		(648	)		(1,087	)		(1,157	)		(1,134	)
Accumulated other comprehensive (loss) income, net of taxes			(9,228	)		9,386			(52,556	)		28,676			(458	)
Total shareholders’ equity			1,393,615			1,373,787			1,283,495			1,230,397			1,178,305
Total Liabilities and Shareholders’ Equity		$	18,897,150		$	18,191,299		$	17,593,019		$	16,498,998		$	16,273,302
(1)	Common Shares Authorized		200,000,000			200,000,000			200,000,000			200,000,000			200,000,000
	Common Shares Issued		133,823,776			133,617,232			133,440,337			127,199,880			126,974,668
	Common Shares Outstanding		133,823,776			133,617,232			133,440,337			127,199,880			126,974,668
(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)
(Dollars in thousands)	December 31, 2004						September 30, 2004						December 31, 2003
	Average Volume		Interest		Rate		Average Volume		Interest		Rate		Average Volume		Interest		Rate
Assets:
All other loans, net of unearned income(2)(3)	$	11,578,356	$	171,520	5.90	%	$	11,344,719	$	160,229	5.62	%	$	10,385,354	$	146,984	5.62	%
Mortgage warehouse loans		1,093,012		12,323	4.49	%		1,035,679		10,544	4.05	%		1,079,864		10,742	3.95	%
Loans held for sale		656,665		7,986	4.86	%		468,791		5,018	4.28	%		302,215		4,236	5.61	%
Investment securities and securities available for sale(3)		3,568,634		40,566	4.55	%		3,496,493		39,745	4.55	%		3,023,268		33,289	4.40	%
Other interest-earning assets		271,535		2,145	3.14	%		119,261		806	2.68	%		28,972		88	1.20	%
Total interest-earning assets(1)		17,168,202	$	234,540	5.44	%		16,464,943	$	216,342	5.24	%		14,819,673	$	195,339	5.24	%
Nonearning assets(3)		1,425,020						1,265,714						1,104,976
Total assets	$	18,593,222					$	17,730,657					$	15,924,649
Liabilities and Shareholders’ Equity:
Interest-bearing non-time deposits	$	4,859,792	$	11,579	0.95	%	$	4,747,994	$	10,847	0.91	%	$	3,753,045	$	7,499	0.79	%
Time deposits		4,177,959		27,849	2.65	%		4,002,410		25,044	2.49	%		3,907,667		24,777	2.52	%
Short-term borrowings		3,314,110		15,485	1.86	%		2,987,370		10,642	1.42	%		2,668,036		6,975	1.04	%
Long-term debt(3)		2,280,619		21,295	3.72	%		2,289,851		19,543	3.40	%		2,454,717		24,749	4.00	%
Total interest-bearing liabilities		14,632,480	$	76,208	2.07	%		14,027,625	$	66,076	1.87	%		12,783,465	$	64,000	1.99	%
Noninterest-bearing demand deposits		2,445,709						2,273,263						1,865,756
Other liabilities(3)		133,683						107,009						116,717
Total liabilities		17,211,872						16,407,897						14,765,938
Shareholders’ equity		1,381,350						1,322,760						1,158,711
Total liabilities and shareholders’ equity	$	18,593,222					$	17,730,657					$	15,924,649
Rate differential					3.37	%					3.37	%					3.25	%
Net yield on interest-earning assets			$	158,332	3.68	%			$	150,266	3.64	%			$	131,339	3.53	%

(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

	Twelve Months Ended December 31,
	2004						2003
AVERAGE VOLUME AND RATES (unaudited) (Dollars in thousands)	Average Volume		Interest		Rate		Average Volume		Interest		Rate
Assets
All other loans, net of unearned income(2)(3)	$	11,115,275	$	625,455	5.63	%	$	10,101,694	$	591,060	5.85	%
Mortgage warehouse loans		1,033,238		42,749	4.14	%		1,449,236		57,990	4.00	%
Loans held for sale		497,315		23,972	4.82	%		373,226		19,134	5.13	%
Investment securities and securities available for sale(3)		3,397,000		154,210	4.54	%		2,763,667		114,283	4.14	%
Other interest-earning assets		130,711		3,442	2.63	%		49,151		633	1.29	%
Total interest-earning assets(1)		16,173,539	$	849,828	5.25	%		14,736,974	$	783,100	5.31	%
Nonearning assets(3)		1,259,309						1,113,240
Total assets	$	17,432,848					$	15,850,214
Liabilities and Shareholders’ Equity:
Interest bearing non-time deposits	$	4,460,177	$	39,630	0.89	%	$	3,429,251	$	27,753	0.81	%
Time deposits		4,014,706		101,491	2.53	%		3,999,481		111,942	2.80	%
Short-term borrowings		3,085,807		41,387	1.34	%		3,119,413		37,429	1.20	%
Long-term debt(3)		2,264,698		80,994	3.58	%		2,216,861		97,041	4.38	%
Total interest-bearing liabilities		13,825,388	$	263,502	1.91	%		12,765,006	$	274,165	2.15	%
Noninterest-bearing demand deposits		2,204,989						1,845,835
Other liabilities(3)		115,677						125,987
Total liabilities		16,146,054						14,736,828
Shareholders’ equity		1,286,794						1,113,386
Total liabilities and shareholders’ equity	$	17,432,848					$	15,850,214
Rate differential					3.34	%					3.16	%
Net yield on interest-earning assets			$	586,326	3.63	%			$	508,935	3.45	%

(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

NONPERFORMING ASSETS AND LOAN LOSS RESERVE ANALYSIS (unaudited)

NONPERFORMING ASSETS (Dollars in thousands)	December 31, 2004			September 30, 2004			June 30, 2004			March 31, 2004			December 31, 2003
Nonaccrual loans	$	26,983		$	32,159		$	34,994		$	59,618		$	57,342
Restructured loans		191			233			248			263			277
Total nonperforming loans		27,174			32,392			35,242			59,881			57,619
Other real estate owned		9,865			9,286			11,084			15,432			17,821
Total nonperforming assets	$	37,039		$	41,678		$	46,326		$	75,313		$	75,440
Aggregate loans contractually past due 90 days for which interest is being accrued	$	8,096		$	11,627		$	11,537		$	10,683		$	10,802
Total charge-offs	$	29,811		$	24,853		$	15,997		$	7,297		$	41,427
Total recoveries		(6,213	)		(4,899	)		(3,138	)		(1,290	)		(5,956	)
Net charge-offs:
Year to date		23,598			19,954			12,859			6,007			35,471
Quarter to date		3,644			7,095			6,852			6,007			8,655
RATIOS
Period end:
Total nonperforming assets as a percent of net loans and other real estate		0.29	%		0.33	%		0.38	%		0.64	%		0.65	%
Allowance as a percent of nonperforming assets		402	%		353	%		317	%		187	%		184	%
Allowance as a percent of nonperforming loans		548	%		454	%		417	%		235	%		240	%
Net charge-offs as a percent of average net loans:
Quarter to date (annualized)		0.12	%		0.23	%		0.23	%		0.21	%		0.30	%
Year to date		0.19	%		0.22	%		0.22	%		0.21	%		0.31	%

	December 31, 2004				September 30, 2004				December 31, 2003
ALLOWANCE FOR LOAN LOSSES % BY CATEGORY (Dollars in thousands)	Loans		Percent reserve		Loans		Percent reserve		Loans		Percent reserve
Single Family Real Estate:
Mortgage warehouse loans	$	1,114,923	0.25	%	$	1,050,990	0.25	%	$	982,488	0.25	%
1-4 Family real estate portfolio—held to maturity		2,228,648	0.50	%		2,177,552	0.50	%		1,984,476	0.50	%
Other		9,514,240	1.42	%		9,333,811	1.43	%		8,621,931	1.46	%
Total loans	$	12,857,811	1.16	%	$	12,562,353	1.17	%	$	11,588,895	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 $8.1 million, or 5.4%, from the third quarter of 2004 due to a four basis point improvement in the net interest margin from 3.64% to 3.68% and a $703 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 September 21, 2004, which resulted in a 52 basis point increase in the Company’s average federal funds rate for the quarter. Colonial raised its prime rate in conjunction with each increase in the target federal funds rate.

Approximately 79% 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 28 basis points during the quarter while the yield on mortgage warehouse loans increased 44 basis points. The yield on loans held for sale increased 58 basis points due to increased demand for this product. Average loan volume, excluding mortgage warehouse loans and loans held for sale, increased $234 million during the quarter. Average mortgage warehouse loans and average mortgage loans held for sale increased $245 million during the quarter. The average yield on securities remained constant at 4.55% and average volume increased $72 million in the quarter. The aforementioned increases in volumes and rates resulted in a 20 basis point increase in the yield on interest earning assets.

Overall funding costs increased 20 basis points in the quarter primarily due to a 44 basis point increase in the rate on short-term borrowings and a 32 basis point increase in the rate on long-term debt, which are tied to floating rates or are subject to floating rate interest rate swap agreements. In December 2004, Colonial prepaid $50 million of a Federal Home Loan Bank (FHLB) advance bearing interest at 5.69% resulting in a prepayment fee of $1.25 million. The average rate on interest bearing deposits increased only 11 basis points in the fourth quarter of 2004.

Colonial’s growth in low cost deposits has decreased its dependence on borrowings whereby total average deposits comprise 67.2% of the company’s total funding for the fourth quarter of 2004 compared to 65.0% for the fourth 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 asset sensitive at December 31, 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 fourth quarter of 2004 compared to the third quarter of 2004:

Analysis of Interest Income and Expense Changes

(fully taxable equivalent basis)

(dollars in thousands)

	Increases (Decreases) from Third Quarter 2004
			Attributed to (1)
Interest Income:	Total		Volume			Rate
All other loans, net	$	11,291	$	3,349		$	7,942
Mortgage warehouse lending		1,779		605			1,174
Loans held for sale		2,968		2,216			752
Investment securities and securities available for sale		821		844			(23	)
Other interest earning assets		1,339		1,179			160
Total interest income		18,198		8,193			10,005
Interest Expense:
Interest-bearing non-time deposits		732		260			472
Time deposits		2,805		1,127			1,678
Short-term borrowings		4,843		1,258			3,585
Long-term debt		1,752		(78	)		1,830
Total interest expense		10,132		2,567			7,565
Net Interest Income	$	8,066	$	5,626		$	2,440

(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 bears to the absolute value of their total.

Securities

Securities available for sale and investment securities totaled $3.65 billion or 19.3% of total assets at December 31, 2004. The Company’s securities had an effective duration of 3.6 years. Unrealized gain/loss on securities available for sale changed from a pretax gain of $14.4 million

at September 30, 2004 to a pretax loss of $14.2 million at December 31, 2004 due to increases in market rates.

Loans

Changes in period-end loan balances for the fourth quarter consisted of the following:

(in millions)	Period-end Balance 9/30/2004		Internal Change		Period-end Balance 12/30/2004
Commercial real estate and construction	$	8,066	$	132	$	8,198
Single-family real estate		1,686		23		1,709
Other loans		1,267		54		1,321
Home equity lines		492		23		515
Total	$	11,511	$	232	$	11,743
Mortgage warehouse lending	$	1,051	$	64	$	1,115
Loans held for sale	$	508	$	170	$	678

Loans, excluding mortgage warehouse lending, increased $232 million, or 8% annualized, over the third quarter of 2004. Continued emphasis on home equity lines resulted in an increase in equity line balances of approximately 20%, annualized, for the fourth quarter of 2004.

Contribution of loan growth, from September 30, 2004 to December 31, 2004, by state or division is as follows:

	% of total loan growth
Texas	28%
Florida	27%
Mortgage warehouse lending unit	23%
Nevada	17%
Alabama	3%
Georgia	(2%)
1-4 family real estate portfolio loans	4%
	100%

Loans, excluding mortgage warehouse lending, increased $1.1 billion or 10.7% from December 31, 2003 to December 31, 2004 (6% 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 fourth quarter of 2004 were $3.6 million or 0.12%, annualized, of average loans. The loan loss provision for the fourth quarter 2004 was $5.4 million.

Nonperforming assets declined by $4.6 million, or 11%, from September 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 an historically low level of 0.29% compared to 0.33% at September 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 $284 million, or 16% annualized, from the third quarter of 2004. Total deposits grew $464.5 million, or 16.6% annualized, during the quarter. The Company’s Florida markets contributed the majority of the deposit growth.

Noninterest Income

Noninterest income increased $1.2 million, excluding gains on sales of securities, over the third quarter of 2004. Increases in electronic banking fees, financial planning service revenues, income from BOLI and net gains on the sale of property held for sale and ORE ($1.1 million) were partially offset by decreases in mortgage origination income and service charges on deposit accounts. Service charges on deposit accounts declined in the fourth quarter as average deposit balances were higher than the third quarter resulting in fewer assessed charges.

Noninterest Expense

Noninterest expense increased $7.2 million, excluding loss on early extinguishment of debt, over the third quarter of 2004. Increases in noninterest expense for the quarter relate to salaries and benefits, legal cost, occupancy expenses for branch closures, technology initiatives and accounting fees associated with Sarbanes Oxley 404 compliance.

Franchise

On September 28, 2004, Colonial announced for this acquisition the signing of a definitive agreement to acquire Union Bank of Florida (Union) for approximately $233 million. The consideration for this acquisition 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 $683 million and total loans of $631 million at December 31, 2004. Union currently operates 18 offices in Miami-Dade, Broward and Palm Beach counties.

As previously announced on November 18, 2004, the Company entered into a forward equity sales agreement with Lehman Brothers to secure financing for the cash portion of the acquisition of Union. The acquisition of Union and the settlement of the forward equity sales agreement are expected to close in the first quarter of 2005.

For additional information related to the Union acquisition and the forward equity sales agreement transactions, please see the Current Report on Form 8-K filed with the SEC on September 28, 2004 and the Supplemented Prospectus filed with the SEC on November 22, 2004.

On January 18, 2005, Colonial announced the signing of a definitive agreement to acquire First Federal Savings Bank of Lake County (FFLC) for approximately $232 million. Under the terms of the agreement, FFLC shareholders will elect either 2 shares of Colonial stock or $42 in cash for each FFLC share they own. The cash consideration will be capped at 35% of the transaction. FFLC is headquartered in Leesburg, Florida, and had total assets of $1 billion, total deposits of $795 million and total loans of $884 million at December 31, 2004. FFLC currently operates 16 full-service offices in Lake, Sumter, Citrus and Marion counties in Central Florida.

For additional information related to this transaction, please see the Current Report on Form 8-K filed with the SEC on January 18, 2005.

The following is a summary of assets, deposits and branches at December 31, 2004 (pro forma including the impact of Union and FFLC):

	% of total Assets	% of non-time Deposits	% of total Deposits	Number of Branches
Florida	52%	61%	56%	161
Alabama	22%	24%	28%	115
Georgia	6%	4%	6%	22
Texas	5%	5%	4%	12
Nevada	4%	5%	4%	13
Corporate/Other	11%	1%	2%	3

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, in 2004 the Company closed 7 locations in Alabama and opened 14 locations, Florida (10), Alabama (2), Georgia (1), Nevada (1).

Outlook

The outlook presented below includes the impact of the acquisition of Union Bank of Florida.

The Company expects the target Federal Funds rate to continue to increase at a moderate pace.

We expect loans, excluding mortgage warehouse loans, to end 2005 12% to 16% higher than December 31, 2004. Mortgage warehouse loans for 2005 are expected to remain at $1 billion to $1.2 billion.

Asset quality is expected to remain excellent. Colonial expects to incur net charge-offs of 0.19% to 0.22% of average net loans in 2005.

The Company continues to experience strong growth in deposits. We expect average non-time deposits to increase 12-16% and average time deposits to increase 5-10%.

Given current market conditions and the factors mentioned previously, we expect the net interest margin to range from 3.65% to 3.70% for 2005.

Noninterest income (excluding securities gains) for the year 2005 is expected to grow 15-20%, as a result of increases in service charges on deposit accounts, electronic banking services, mortgage banking revenues and financial planning services revenues.

We anticipate that noninterest expense (excluding the early extinguishment of debt and merger related expenses) will increase 12% to 13% in comparing 2004 to 2005 due to investments in several strategic initiatives related to revenue enhancement, including new branches, completed acquisitions, technology related expenditures, including new check imaging technology, 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.