EX-99.1 3 dex991.htm PRESS RELEASE Press Release
EXHIBIT 99.1
 
 
For more information contact:
January 15, 2003
 
 
Investors:
Media:
Glenda Allred (334) 240-5064
Bob Howell (334) 240-5025
Flake Oakley (334) 240-5061
 
 
COLONIAL BANCGROUP ANNOUNCES RECORD EARNINGS AND DIVIDEND INCREASE
 
 
MONTGOMERY, AL — The Colonial BancGroup, Inc. Chairman and CEO, Robert E. Lowder, announced today record results for the year ended December 31, 2002. Record income from continuing operations for the year was $140,871,000 compared to $122,716,000 for the year ended December 31, 2001, a 15% increase. Earnings per share for the year ended 2002 were $1.17, a 10% increase over the $1.06 for the previous year. It was also announced that at today’s board of directors meeting the board voted to increase the quarterly dividend to shareholders from the $0.13 per share paid in 2002 to $0.14 for 2003, an 8% increase.
 
Net income for the year, including an $846,000 loss from discontinued operations related to the Company’s exit of the mortgage servicing business in 2000, was $140,025,000 compared to net income for 2001 of $122,103,000, an increase of 15%.

 
Net income for 2001 includes a net loss of $613,000 from the discontinued mortgage operations.
 
Income from continuing operations for the fourth quarter 2002 was $34,802,000 compared to income of $31,920,000 for the fourth quarter 2001, an increase of 9%. Earnings per share from continuing operations were $0.28 per share in the fourth quarter 2002 compared to $0.28 per share in the fourth quarter 2001. Operating earnings per share were $0.28 in the fourth quarter of 2002 compared to $0.30 in 2001. Operating earnings for the fourth quarter exclude approximately $317,000 in after tax merger related expenses in 2002 and $2.6 million in similar expenses in 2001.
 
Loan growth remained solid in the fourth quarter with total loans increasing $496 million, or 18% annualized, from September 30, 2002 to December 31, 2002. The Company’s mortgage warehouse unit contributed $308 million to the total increase. The remaining $188 million represents a $236 million increase, or 12% annualized, through the Company’s regional banking offices and a $48 million decrease in residential mortgage loans. The increase in loans within the mortgage warehouse unit as well as a $192 million increase in mortgage loans held for sale are primarily attributable to the current refinance boom in the residential mortgage market.
 
In these uncertain economic times, Colonial has remained committed to credit quality and has weathered this period with relatively few negative effects as evidenced industry measurements. Total non-performing assets for the year ended December 31, 2002 were 0.78% of loans and other real estate owned compared to 0.64% for the same period of the prior year. Net charge-offs for the year 2002 were 0.29% of average loans as

 
compared to 0.28% for 2001. Colonial believes these results will again compare favorably to our peers.
 
During the fourth quarter 2002 total non-performing assets rose approximately $13 million resulting in an increase in the non-performing asset ratio from 0.70% at September 30, 2002 to 0.78% at December 31, 2002. This increase was primarily due to the addition of one credit to non-accrual status in the amount of $18.9 million. The loan is secured by prime real-estate and the Company’s loan-to-value position is low at approximately 30%. Therefore, no loss on this credit is anticipated. If this loan were not included, total non-performing assets would have declined by $5.8 million during the fourth quarter 2002. Colonial’s strong asset quality is further evidenced by a total past due percentage at December 31, 2002 of only 1.16%, down from 1.28% at September 30, 2002. The net charge-off ratio for the fourth quarter was 0.44% compared to 0.34% for the fourth quarter of 2001.
 
The Company experienced deposit growth of 12% for the year ended 2002 as compared to the previous year. Deposits, including acquisitions, grew $997 million during 2002 and grew $379 million without the impact of acquisitions. Additionally, non-time retail deposits, including acquisitions, at December 31, 2002 were $4.9 billion compared to $4.0 billion at December 31, 2001, an increase of 23%. Total deposits, increased during the fourth quarter 2002 from $9.2 billion at September 30, 2002 to $9.3 billion at December 31, 2002.
 
Total noninterest income, including gains on the sale of investments, for the year ended December 31, 2002 was $102,332,000 compared to $93,709,000 for the year ended December 31, 2001, an increase of 9%. Excluding gains on the sale of

 
investments, the increase was $11.6 million, or 14%. Most of this increase was attributable to mortgage origination income, which was up 69% for the year, and financial planning services which increased 27% during 2002. For the quarter ended December 31, 2002, total noninterest income grew 15%, or $4 million, over the previous quarter. Excluding gains on the sales of investments noninterest income for the fourth quarter 2002 increased $896,000, or 14% annualized, compared to the third quarter of 2002 and $2.8 million, or 12%, compared to the fourth quarter of 2001.
 
Noninterest expense for the year ended December 31, 2002, as a percentage of average assets, was 2.26% as compared to 2.23% for the prior year. Noninterest expense was $85.5 million for the three months ended December 31, 2002 compared to $74.6 million for the fourth quarter of 2001. The increase over prior year fourth quarter reflects costs of newly acquired banking operations primarily in Dallas, Tampa and Palm Beach. Excluding merger related expenses, intangible amortization and expenses of these acquired locations, noninterest expenses were $76.2million for 2002 compared to $70.3 in 2001, an 8% increase. The increase in expenses reflects the Company’s emphasis on building for the future by making investments in retail banking and information technology along with our expansion efforts in growth markets.
 
As indicated in previous SEC filings, the 50 basis point reduction in the Fed Funds rate by the Federal Reserve on November 6, 2002 affected Colonial’s net interest margin. During the fourth quarter the Company experienced an 18 basis point reduction in quarter to date margin from 3.53% at September 30, 2002 to 3.35% at December 31, 2002. Pressure on the margin has come from the Company’s asset sensitive balance

 
sheet and the acceleration of prepayments on the Company’s investment portfolio consisting mainly of mortgage-backed securities.
 
“While our fourth quarter results were not as strong as we had anticipated, we are not disappointed with a 10% increase in earnings per share over the previous year, especially in this current economic environment. Even though 2002 was a very challenging year for Colonial, and for the banking industry as a whole, we remain committed to our focus on credit quality and building a solid franchise in growth markets. Indeed, our banking offices are located in four of the five fastest growing states as measured by population growth from July 2001 to July 2002*. Nevada, Florida, Texas and Georgia, grew 3.6%, 2.1%, 1.9% and 1.8%, respectively, as compared to the entire U.S. population growth of 1.1%. We are in the right places for growth and do not intend to lose our focus on credit quality in order to chase higher risk activities in the hope of making a short term earnings goals” said Mr. Lowder.
 
Colonial BancGroup currently operates 272 offices with $15.8 billion in assets in Alabama, Florida, Georgia, Nevada and Texas and 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 earnings is available on the company’s website at www.colonialbank.com or in the Current Report on Form 8-K filed today with the Securities and Exchange Commission.
 
*Source: Census Bureau
 
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 2003 and beyond; (ii) increases in competitive pressure in the banking industry; (iii) general economic conditions, either nationally or regionally, that are less favorable than expected; (iv) expected cost savings from recent 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 out of subsequent events; and (vii) changes which may occur in the regulatory environment. When used in this Report, the words “believes,” “estimates,” “plans,” “expects,” “should,” “may,” “might,” “outlook,” and “anticipates” and similar expressions as they relate to BancGroup (including its subsidiaries) or its management are intended to identify forward-looking statements. 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, except per share amounts)
   
December 31, 2002
   
December 31, 2001
     
% Change December 31, ’01 to ’02
  
Total Assets
   
$
15,822
   
$
13,185
     
20
%
Loans
   
 
11,692
   
 
10,368
     
13
%
Total earning assets
   
 
14,716
   
 
12,301
     
20
%
Deposits
   
 
9,320
   
 
8,323
     
12
%
Shareholders’ equity
   
 
1,071
   
 
865
     
24
%
Book value per share
   
$
8.66
   
$
7.50
     
15
%
 
Earnings Summary
    (In thousands, except per share amounts)
   
Twelve Months Ended
     
% Change December 31, ’01 to ’02
     
Three Months Ended
     
% Change December 31, ’01 to ’02
  
  
December 31, 2002
   
December 31, 2001
        
December 31, 2002
   
December 31, 2001
     
Net interest income (taxable equivalent)
   
$
464,076
   
$
424,678
     
9
%
   
$
120,227
   
$
110,039
     
9
%
Provision for loan losses
   
 
35,980
   
 
39,573
     
-9
%
   
 
11,203
   
 
14,730
     
-24
%
Noninterest income
   
 
102,332
   
 
93,709
     
9
%
   
 
29,978
   
 
29,909
     
0
%
Noninterest expense
   
 
312,779
   
 
284,168
     
10
%
   
 
85,510
   
 
74,644
     
15
%
Income from continuing operations
   
$
140,871
   
$
122,716
     
15
%
   
$
34,802
   
$
31,920
     
9
%
Net income
   
$
140,025
   
$
122,103
     
15
%
   
$
34,661
   
$
31,920
     
9
%
EARNINGS PER SHARE:
                                      
Income from continuing operations
                                              
Basic
   
$
1.18
   
$
1.07
     
10
%
   
$
0.28
   
$
0.28
     
0
%
Diluted
   
$
1.17
   
$
1.06
     
10
%
   
$
0.28
   
$
0.28
     
0
%
Net Income
                                              
Basic
   
$
1.17
   
$
1.06
     
10
%
   
$
0.28
   
$
0.28
     
0
%
Diluted
   
$
1.16
   
$
1.06
     
9
%
   
$
0.28
   
$
0.28
     
0
%
Average shares outstanding
   
 
119,583
   
 
114,811
            
 
123,683
   
 
115,173
         
Average diluted shares outstanding
   
 
120,648
   
 
115,881
            
 
124,371
   
 
116,235
         
 
Nonperforming Assets
     
December 31, 2002
       
December 31, 2001
  
Total non-performing assets ratio
     
0.78
%
     
0.64
%
Allowance as a percent of nonperforming loans
     
191
%
     
239
%
Net charge-offs ratio (annualized):
                  
Quarter to date
     
0.44
%
     
0.34
%
Year to date
     
0.29
%
     
0.28
%

 
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED STATEMENT OF INCOME (unaudited)
 
                                       
Twelve Months Ended
  
Earnings Summary
(Dollars in thousands, except per share amounts)
   
4th Qtr. 2002
     
3rd Qtr. 2002
     
2nd Qtr. 2002
     
1st Qtr. 2002
     
4th Qtr. 2001
     
December 31, 2002
     
December 31, 2001
  
Net Interest Income
   
$
119,540
 
   
$
115,879
 
   
$
116,095
 
   
$
109,656
 
   
$
109,340
 
   
$
461,170
 
   
$
421,929
 
Provision for Loan Loss
   
 
11,203
 
   
 
6,803
 
   
 
8,496
 
   
 
9,478
 
   
 
14,730
 
   
 
35,980
 
   
 
39,573
 
Noninterest Income:
                                                               
Service charges on deposit accounts
   
 
11,883
 
   
 
11,404
 
   
 
11,051
 
   
 
10,603
 
   
 
11,142
 
   
 
44,941
 
   
 
42,032
 
Financial Planning Services
   
 
2,717
 
   
 
3,182
 
   
 
2,434
 
   
 
2,660
 
   
 
2,171
 
   
 
10,993
 
   
 
8,670
 
Electronic Banking
   
 
2,075
 
   
 
2,184
 
   
 
2,125
 
   
 
1,873
 
   
 
2,057
 
   
 
8,257
 
   
 
6,918
 
Mortgage Origination
   
 
5,119
 
   
 
3,858
 
   
 
2,872
 
   
 
2,155
 
   
 
2,873
 
   
 
14,004
 
   
 
8,287
 
Securities gains (losses), net
   
 
4,062
 
   
 
976
 
   
 
664
 
   
 
(1
)
   
 
6,756
 
   
 
5,701
 
   
 
8,701
 
Other income
   
 
4,122
 
   
 
4,392
 
   
 
4,285
 
   
 
5,637
 
   
 
4,910
 
   
 
18,436
 
   
 
19,101
 
 
Total noninterest income
   
 
29,978
 
   
 
25,996
 
   
 
23,431
 
   
 
22,927
 
   
 
29,909
 
   
 
102,332
 
   
 
93,709
 
Noninterest Expense:
                                                               
Salaries and employee benefits
   
 
44,190
 
   
 
42,591
 
   
 
40,142
 
   
 
37,312
 
   
 
37,413
 
   
 
164,235
 
   
 
151,427
 
Occupancy and equipment expenses
   
 
19,178
 
   
 
17,921
 
   
 
16,893
 
   
 
16,472
 
   
 
16,832
 
   
 
70,464
 
   
 
64,707
 
Amortization of intangibles
   
 
1,046
 
   
 
892
 
   
 
713
 
   
 
162
 
   
 
861
 
   
 
2,813
 
   
 
6,251
 
Merger related expenses
   
 
476
 
   
 
321
 
   
 
13
 
   
 
64
 
   
 
2,710
 
   
 
874
 
   
 
3,049
 
Other expense
   
 
20,620
 
   
 
18,636
 
   
 
18,640
 
   
 
16,497
 
   
 
16,828
 
   
 
74,393
 
   
 
58,734
 
 
Total noninterest expense
   
 
85,510
 
   
 
80,361
 
   
 
76,401
 
   
 
70,507
 
   
 
74,644
 
   
 
312,779
 
   
 
284,168
 
Income from continuing operations before tax
   
 
52,805
 
   
 
54,711
 
   
 
54,629
 
   
 
52,598
 
   
 
49,875
 
   
 
214,743
 
   
 
191,897
 
Income tax
   
 
18,003
 
   
 
18,876
 
   
 
18,573
 
   
 
18,420
 
   
 
17,955
 
   
 
73,872
 
   
 
69,181
 
 
Income from continuing operations
   
 
34,802
 
   
 
35,835
 
   
 
36,056
 
   
 
34,178
 
   
 
31,920
 
   
 
140,871
 
   
 
122,716
 
Discontinued operations, net of tax
   
 
(141
)
   
 
(705
)
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
(846
)
   
 
(613
)
 
Net Income
   
$
34,661
 
   
$
35,130
 
   
 
36,056
 
   
$
34,178
 
   
$
31,920
 
   
 
140,025
 
   
 
122,103
 
Exclude discontinued operations, net of tax
   
 
141
 
   
 
705
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
846
 
   
 
613
 
Merger related costs (net of tax):
                                                               
Loan loss provisions
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
640
 
   
 
—  
 
   
 
640
 
Personnel costs
   
 
1
 
   
 
17
 
   
 
—  
 
   
 
35
 
   
 
257
 
   
 
53
 
   
 
421
 
Other
   
 
316
 
   
 
189
 
   
 
8
 
   
 
6
 
   
 
1,733
 
   
 
519
 
   
 
1,951
 
 
Total
   
 
317
 
   
 
206
 
   
 
8
 
   
 
41
 
   
 
2,630
 
   
 
572
 
   
 
3,012
 
 
OPERATING EARNINGS
   
$
35,119
 
   
$
36,041
 
   
$
36,064
 
   
$
34,219
 
   
$
34,550
 
   
 
141,443
 
   
 
125,728
 
 
                                                                
Earnings per share—Diluted
                                                               
Income from continuing operations
   
$
0.28
 
   
$
0.30
 
   
$
0.30
 
   
$
0.29
 
   
$
0.28
 
   
$
1.17
 
   
$
1.06
 
Operating earnings
   
$
0.28
 
   
$
0.30
 
   
$
0.30
 
   
$
0.29
 
   
$
0.30
 
   
$
1.17
 
   
$
1.09
 
Cash basis operating earnings
   
$
0.29
 
   
$
0.31
 
   
$
0.30
 
   
$
0.29
 
   
$
0.30
 
   
$
1.19
 
   
$
1.14
 
                                                                
Selected ratios from operating earnings
                                                               
Return on average assets
   
 
0.86
%
   
 
1.01
%
   
 
1.08
%
   
 
1.09
%
   
 
1.05
%
   
 
1.02
%
   
 
1.00
%
Return on average equity
   
 
12.50
%
   
 
14.23
%
   
 
14.78
%
   
 
15.85
%
   
 
15.80
%
   
 
14.54
%
   
 
15.22
%
Efficiency ratio
   
 
58.26
%
   
 
56.62
%
   
 
54.55
%
   
 
52.78
%
   
 
53.71
%
   
 
55.64
%
   
 
55.03
%
Noninterest income* (excl sec gains)/ avg assets
   
 
0.69
%
   
 
0.72
%
   
 
0.70
%
   
 
0.73
%
   
 
0.71
%
   
 
0.71
%
   
 
0.68
%
Noninterest expense*/ avg assets
   
 
2.23
%
   
 
2.28
%
   
 
2.31
%
   
 
2.22
%
   
 
2.20
%
   
 
2.26
%
   
 
2.23
%
Net interest margin
   
 
3.35
%
   
 
3.53
%
   
 
3.77
%
   
 
3.72
%
   
 
3.57
%
   
 
3.58
%
   
 
3.57
%
Equity to assets
   
 
6.77
%
   
 
6.98
%
   
 
7.03
%
   
 
7.21
%
   
 
6.56
%
                  
Tier one leverage
   
 
6.50
%
   
 
6.93
%
   
 
7.10
%
   
 
7.46
%
   
 
6.24
%
                  
                                                                
Selected ratios from cash basis operating earnings
                                                               
Return on average tangible assets
   
 
0.90
%
   
 
1.05
%
   
 
1.12
%
   
 
1.11
%
   
 
1.07
%
   
 
1.06
%
   
 
1.05
%
Return on average equity
   
 
12.81
%
   
 
14.55
%
   
 
15.03
%
   
 
15.92
%
   
 
16.16
%
   
 
14.78
%
   
 
15.92
%
Return on average tangible equity
   
 
17.01
%
   
 
18.49
%
   
 
18.74
%
   
 
18.33
%
   
 
18.36
%
   
 
18.48
%
   
 
17.98
%
 
*  Annualized
 
Note:
 
Net income includes pretax costs associated with mergers and acquisitions totaling $4,110,000 in the 4th quarter of 2001. In the 4th quarter 2001 these costs are composed of additional loan provision to align Manufacturer's loan provisions with Colonial standards, personnel costs to complete the mergers and other merger related expenses, consisting of severance pay, contract buyouts, brokerage commissions, legal, accounting, equipment write offs and other similar costs.
 
Note:
 
Discontinued operations are as a result of exit from the mortgage servicing business in December 2000.

 
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)
 
Statements Of Condition
(Dollars in thousands)
   
December 31, 2002
     
September 30, 2002
     
June 30,
2002
     
March 31,
2002
     
December 31, 2001
  
Assets:
                                             
Cash and due from banks
   
$
381,549
 
   
$
323,944
 
   
$
291,261
 
   
$
288,950
 
   
$
373,024
 
Interest-bearing deposits in banks and federal funds sold
   
 
37,872
 
   
 
126,940
 
   
 
20,571
 
   
 
25,312
 
   
 
15,084
 
Securities available for sale
   
 
2,618,129
 
   
 
2,547,853
 
   
 
2,317,982
 
   
 
1,977,148
 
   
 
1,852,439
 
Investment securities
   
 
20,006
 
   
 
24,248
 
   
 
24,917
 
   
 
27,519
 
   
 
30,055
 
Mortgage loans held for sale
   
 
347,101
 
   
 
154,752
 
   
 
31,079
 
   
 
23,653
 
   
 
35,453
 
Loans
   
 
11,692,430
 
   
 
11,196,422
 
   
 
10,369,823
 
   
 
10,236,272
 
   
 
10,367,665
 
Less: Allowance for loan losses
   
 
(135,265
)
   
 
(136,360
)
   
 
(132,326
)
   
 
(128,782
)
   
 
(122,200
)
    
  
  
  
  
Loans, net
   
 
11,557,165
 
   
 
11,060,062
 
   
 
10,237,497
 
   
 
10,107,490
 
   
 
10,245,465
 
Premises and equipment, net
   
 
231,574
 
   
 
224,986
 
   
 
232,623
 
   
 
226,870
 
   
 
198,983
 
Intangible assets, net
   
 
257,148
 
   
 
259,841
 
   
 
190,396
 
   
 
190,912
 
   
 
113,898
 
Other real estate owned
   
 
20,602
 
   
 
20,712
 
   
 
21,767
 
   
 
21,408
 
   
 
15,553
 
Accrued interest and other assets
   
 
351,209
 
   
 
345,387
 
   
 
304,741
 
   
 
295,032
 
   
 
305,149
 
    
  
  
  
  
Total Assets
   
$
15,822,355
 
   
$
15,088,725
 
   
$
13,672,834
 
   
$
13,184,294
 
   
$
13,185,103
 
    
  
  
  
  
Liabilities and Shareholders’ Equity:
                                             
Deposits
   
$
9,319,735
 
   
$
9,155,951
 
   
$
8,653,567
 
   
$
8,598,167
 
   
$
8,322,979
 
Short-term borrowings
   
 
3,355,678
 
   
 
2,748,976
 
   
 
2,105,037
 
   
 
1,644,251
 
   
 
2,128,133
 
Subordinated debt
   
 
283,317
 
   
 
286,356
 
   
 
270,361
 
   
 
264,924
 
   
 
265,550
 
Trust preferred securities
   
 
197,878
 
   
 
194,946
 
   
 
183,039
 
   
 
176,866
 
   
 
70,000
 
FHLB long-term debt
   
 
1,517,339
 
   
 
1,562,405
 
   
 
1,390,413
 
   
 
1,396,521
 
   
 
1,361,938
 
Other long-term debt
   
 
—  
 
   
 
0
 
   
 
28,100
 
   
 
58,147
 
   
 
88,652
 
Other liabilities
   
 
76,972
 
   
 
86,834
 
   
 
81,320
 
   
 
94,432
 
   
 
83,077
 
    
  
  
  
  
Total liabilities
   
 
14,750,919
 
   
 
14,035,468
 
   
 
12,711,837
 
   
 
12,233,308
 
   
 
12,320,329
 
Total shareholders’ equity
   
 
1,071,436
 
   
 
1,053,257
 
   
 
960,997
 
   
 
950,986
 
   
 
864,774
 
    
  
  
  
  
Total
   
$
15,822,355
 
   
$
15,088,725
 
   
$
13,672,834
 
   
$
13,184,294
 
   
$
13,185,103
 
    
  
  
  
  
                                              
Common Shares Issued
   
 
123,700,015
 
   
 
123,649,591
 
   
 
120,196,874
 
   
 
120,105,813
 
   
 
115,244,185
 
Common Shares Outstanding
   
 
123,700,015
 
   
 
123,649,591
 
   
 
118,196,874
 
   
 
120,105,813
 
   
 
115,244,185
 
Treasury Shares Outstanding
   
 
—  
 
   
 
—  
 
   
 
2,000,000
 
   
 
—  
 
   
 
—  
 

 
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
 
    
Three Months Ended
  
AVERAGE VOLUME AND RATES
(unaudited) (Dollars in thousands)
   
December 31,
2002
     
September 30,
2002
     
December 31,
2001
  
  
Average Volume
   
Interest
   
Rate
     
Average Volume
   
Interest
   
Rate
     
Average Volume
   
Interest
   
Rate
  
Assets
                                                               
Loans, net of unearned income
   
$
9,715,787
   
$
154,772
   
6.33
%
   
$
9,488,834
   
$
155,984
   
6.53
%
   
$
9,203,012
   
$
165,708
   
7.15
%
Mortgage warehouse lending
   
 
1,590,583
   
 
15,351
   
3.78
%
   
 
1,076,290
   
 
11,432
   
4.16
%
   
 
1,008,271
   
 
12,726
   
5.01
%
Mortgage loans held for sale
   
 
272,633
   
 
3,201
   
4.70
%
   
 
42,623
   
 
625
   
5.87
%
   
 
34,016
   
 
506
   
5.95
%
Investment securities and securities available for sale and other interest-earning assets
   
 
2,668,062
   
 
27,533
   
4.13
%
   
 
2,521,772
   
 
31,057
   
4.93
%
   
 
2,033,762
   
 
29,757
   
5.85
%
    
  
         
  
         
  
      
Total interest-earning assets(1)
   
 
14,247,065
   
$
200,857
   
5.60
%
   
 
13,129,519
   
$
199,098
   
6.02
%
   
 
12,279,061
   
$
208,697
   
6.76
%
Nonearning assets
   
 
1,010,113
                 
 
884,225
                 
 
742,806
              
Total assets
   
$
15,257,178
                 
$
14,013,744
                 
$
13,021,867
              
Liabilities and Shareholders’ Equity:
                                                               
Interest-bearing non-time deposits
   
$
3,142,215
   
$
7,983
   
1.01
%
   
$
2,954,052
   
$
9,510
   
1.28
%
   
$
2,585,940
   
$
9,561
   
1.47
%
Time deposits
   
 
4,427,504
   
 
36,191
   
3.24
%
   
 
4,413,896
   
 
37,643
   
3.38
%
   
 
4,454,799
   
 
53,762
   
4.79
%
Short-term borrowings
   
 
2,796,399
   
 
11,314
   
1.61
%
   
 
2,131,628
   
 
10,318
   
1.92
%
   
 
1,927,815
   
 
10,543
   
2.17
%
Long-term debt
   
 
2,129,454
   
 
25,142
   
4.68
%
   
 
2,005,537
   
 
25,017
   
4.95
%
   
 
1,740,740
   
 
24,792
   
5.65
%
    
  
         
  
         
  
      
Total interest-bearing liabilities
   
 
12,495,572
   
$
80,630
   
2.56
%
   
 
11,505,113
   
$
82,488
   
2.84
%
   
 
10,709,294
   
$
98,658
   
3.66
%
Noninterest-bearing demand deposits
   
 
1,641,688
                 
 
1,442,664
                 
 
1,353,198
              
Other liabilities
   
 
68,367
                 
 
74,249
                 
 
94,300
              
    
                
                
             
Total liabilities
   
 
14,205,627
                 
 
13,022,026
                 
 
12,156,792
              
Shareholders’ equity
   
 
1,051,551
                 
 
991,718
                 
 
865,075
              
    
                
                
             
Total liabilities and shareholders’ equity
   
$
15,257,178
                 
$
14,013,744
                 
$
13,021,867
              
Rate differential
                 
3.04
%
                 
3.18
%
                 
3.10
%
Net yield on interest-earning assets
          
$
120,227
   
3.35
%
          
$
116,610
   
3.53
%
          
$
110,039
   
3.57
%
 
(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.

THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
 
    
Twelve Months Ended December 31,
  
AVERAGE VOLUME AND RATES (unaudited)
(Dollars in thousands)
   
2002
     
2001
  
  
Average Volume
   
Interest
   
Rate
     
Average Volume
   
Interest
   
Rate
  
Assets
                                          
Loans, net of unearned income
   
$
9,427,620
   
$
621,089
   
6.59
%
   
$
9,303,798
   
$
746,272
   
8.02
%
Mortgage warehouse lending
   
 
1,093,151
   
 
45,299
   
4.14
%
   
 
815,387
   
 
46,858
   
5.75
%
Mortgage loans held for sale
   
 
89,566
   
 
4,503
   
5.03
%
   
 
22,941
   
 
1,439
   
6.27
%
Investment securities and securities available for sale and other interest-earning assets
   
 
2,325,052
   
 
115,448
   
4.97
%
   
 
1,739,058
   
 
110,808
   
6.37
%
    
  
         
  
      
Total interest-earning assets(1)
   
 
12,935,389
   
$
786,339
   
6.07
%
   
 
11,881,184
   
$
905,377
   
7.62
%
Nonearning assets
   
 
878,068
                 
 
711,116
              
    
                
             
Total assets
   
$
13,813,457
                 
$
12,592,300
              
Liabilities and Shareholders’ Equity:
                                          
Interest bearing non-time deposits
   
$
2,921,575
   
$
35,585
   
1.22
%
   
$
2,494,509
   
$
58,474
   
2.34
%
Time deposits
   
 
4,308,276
   
 
149,937
   
3.48
%
   
 
4,700,236
   
 
265,025
   
5.64
%
Short-term borrowings
   
 
2,103,496
   
 
37,430
   
1.78
%
   
 
1,695,628
   
 
66,471
   
3.92
%
Long-term debt
   
 
1,970,686
   
 
99,311
   
5.04
%
   
 
1,538,027
   
 
90,729
   
5.90
%
    
  
         
  
      
Total interest-bearing liabilities
   
 
11,304,033
   
$
322,263
   
2.85
%
   
 
10,428,400
   
$
480,699
   
4.61
%
Noninterest-bearing demand deposits
   
 
1,458,178
                 
 
1,238,235
              
Other liabilities
   
 
78,593
                 
 
99,584
              
    
                
             
Total liabilities
   
 
12,840,804
                 
 
11,766,219
              
Shareholders’ equity
   
 
972,653
                 
 
826,081
              
Total liabilities and shareholders’ equity
   
$
13,813,457
                 
$
12,592,300
              
Rate differential
                 
3.22
%
                 
3.01
%
Net yield on interest-earning assets
          
$
464,076
   
3.58
%
          
$
424,678
   
3.57
%
 
(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.

 
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
NONPERFORMING ASSETS AND LOAN LOSS RESERVE ANALYSIS (unaudited)
 
NONPERFORMING ASSETS
(Dollars in thousands)
   
December 31, 2002
     
September 30, 2002
     
June 30, 2002
     
March 31, 2002
     
December 31, 2001
  
Nonaccrual loans
   
$
70,282
 
   
$
56,336
 
   
$
39,452
 
   
$
44,646
 
   
$
49,675
 
Restructured loans
   
 
417
 
   
 
1,191
 
   
 
1,206
 
   
 
1,233
 
   
 
1,507
 
Total nonperforming loans
   
 
70,699
 
   
 
57,527
 
   
 
40,658
 
   
 
45,879
 
   
 
51,182
 
Other real estate owned
   
 
20,602
 
   
 
20,712
 
   
 
21,767
 
   
 
21,408
 
   
 
15,553
 
Total nonperforming assets
   
$
91,301
 
   
$
78,239
 
   
$
62,425
 
   
$
67,287
 
   
$
66,735
 
Aggregate loans contractually past due 90 days for which interest is being accrued
   
$
21,693
 
   
$
25,696
 
   
$
15,583
 
   
$
19,033
 
   
$
28,249
 
Net charge-offs:
                                             
Quarter to date
   
$
12,300
 
   
$
7,167
 
   
$
4,952
 
   
$
6,333
 
   
$
8,604
 
Year to date
   
$
30,752
 
   
$
18,452
 
   
$
11,285
 
   
$
6,333
 
   
$
28,724
 
RATIOS
                                             
Period end:
                                             
Total nonperforming assets as a percent of net loans and other real estate
   
 
0.78
%
   
 
0.70
%
   
 
0.60
%
   
 
0.66
%
   
 
0.64
%
Allowance as a percent of nonperforming assets
   
 
148
%
   
 
174
%
   
 
212
%
   
 
191
%
   
 
183
%
Allowance as a percent of nonperforming loans
   
 
191
%
   
 
237
%
   
 
325
%
   
 
281
%
   
 
239
%
Net charge-offs as a percent of average net loans (annualized):
                                             
Quarter to date
   
 
0.44
%
   
 
0.27
%
   
 
0.19
%
   
 
0.25
%
   
 
0.34
%
Year to date
   
 
0.29
%
   
 
0.24
%
   
 
0.22
%
   
 
0.25
%
   
 
0.28
%
 
    
December 31, 2002
     
September 30, 2002
     
December 31, 2001
  
ALLOWANCE FOR LOAN LOSSES % BY CATEGORY
(Dollars in thousands)
   
Loans
   
Percent reserve
     
Loans
   
Percent reserve
     
Loans
   
Percent reserve
  
Single Family Real Estate:
                                          
Short Term lines of credit secured by RE loans held for sale
   
$
1,670,226
   
0.25
%
   
$
1,455,329
   
0.25
%
   
$
1,286,532
   
0.25
%
1-4 Family real estate portfolio—held to maturity
   
 
1,945,299
   
0.50
%
   
 
1,993,164
   
0.50
%
   
 
1,956,143
   
0.50
%
Other
   
 
8,076,905
   
1.50
%
   
 
7,747,929
   
1.58
%
   
 
7,124,990
   
1.53
%
    
         
         
      
Total loans
   
$
11,692,430
   
1.16
%
   
$
11,196,422
   
1.22
%
   
$
10,367,665
   
1.18
%

 
8-K Supplemental
 
 
Net Interest Income
 
Net Interest Income in the fourth quarter 2002 grew $3.7 million or 13% annualized versus the third quarter 2002 and $10 million or 9% versus the fourth quarter 2001. This growth in net interest income was due to a significant increase in average earnings assets as detailed below:
 
      
4th quarter 2002
vs. 3rd quarter 2002 ($ in millions)
       
4th quarter 2002
vs. 4th quarter 2001 ($ in millions)
  
Net increase in investments
     
146
 
     
634
 
Mortgage warehouse loans
     
514
 
     
582
 
Mortgage loans held for sale
     
230
 
     
239
 
Residential loans
     
(30
)
     
(177
)
Regional loans
     
258
 
     
690
 
      
    
Total Earnings Assets
     
$1,118
 
     
$1,968
 
      
34% annualized increase
  
     
16% increase
 
 
The growth in average earning assets was offset by a decline in the net interest margin to 3.35%; a of drop of 18 basis points (bps) versus the third quarter and 22 bps versus a year ago. Several factors contributed to this decline. The significant increase in mortgage warehouse loans and in mortgages held for sale was fueled by the record low mortgage rates that have been available over most of the second half of 2002. While low mortgage rates increased volumes in these categories, they also accelerated the prepayments in the mortgage-backed investment portfolio and increased the premium amortization recognition for these investments. This factor and the replacement of these investments with lower yielding securities resulted in a reduction in the portfolio yield of 80 bps in the current quarter compared to third quarter 2002. Additionally, the Federal Reserve’s decision to reduce Federal Funds rates by 50 bps

 
on November 6, 2002 reduced the margin given our asset sensitive balance sheet. The yield on average earnings assets, excluding the investment portfolio, declined 35 bps versus the previous quarter while the average rate on interest bearing liabilities only fell 28 bps. Assuming a flat rate scenario there will be additional reductions in the average rates on Certificates of Deposit (CDs) liabilities as the CD portfolio at December 31, 2002 had an average life of 11.7 months and an average yield of 3.20%. New CD’s were added in December at an average rate of 1.57%.
 
We expect the net interest margin to improve slightly over the next six months to the 3.40-3.50% range assuming interest rates remain stable at current levels. The balance sheet is well positioned for rising rates as indicated in the following schedule of rate sensitive assets and liabilities as of December 31, 2002. Conversely a further reduction in interest rate would have a negative impact on the net interest margin.
 
($ in thousands):
   
1 month
and less
   
2 months
to 1 year
   
1 year+
Rate Sensitive Assets
   
$
8,321,340
   
$
2,319,503
   
$
3,971,417
    
  
  
Rate Sensitive Liabilities
                     
Estimated
   
 
2,200
   
 
1,614,509
   
 
1,599,412
Contractual
   
 
3,752,371
   
 
3,191,489
   
 
2,798,950
    
  
  
Total
   
$
3,754,571
   
$
4,805,998
   
$
4,398,362
    
  
  
Current Rate/Yields:
                     
Rate Sensitive Assets
   
 
4.81
   
 
6.01
   
 
5.92
Rate Sensitive Liabilities
                     
Estimated
   
 
1.10
   
 
1.07
   
 
.73
Contractual
   
 
1.41
   
 
3.11
   
 
4.55
    
  
  
Total
   
 
1.41
   
 
2.43
   
 
3.16
 
Loans
 
Loan growth for the fourth quarter consisted of the following:
 
(in millions)
   
Period End Balance 9/30/02
   
Net Internal Change
     
Period End Balance 12/31/02
Mortgage Warehouse loans
   
$
1,455
   
$
308
 
   
$
1,763
Single-family real estate
   
 
1,993
   
 
(48
)
   
 
1,945
Regional bank loans
   
 
7,748
   
 
236
 
   
 
7,984
    
  
  
Total
   
$
11,196
   
$
496
 
   
$
11,692
 
 

 
Annualized internal loan growth in the fourth quarter was 18%. The majority of this growth came from mortgage warehouse lending although regional bank loans also grew at a healthy annualized rate of 12% for the quarter.
 
Asset Quality
 
Approximately 46% of the charge-offs during the fourth quarter were comprised of two credits; one was domestic in the amount of $2.6 million and the other was an international credit in Argentina in the amount of $3.0 million. The Company’s exposure in Argentina has been reduced to $11.6 million of which 82% is current and on repayment terms.
 
Discontinued Operations
 
In July 2000 BancGroup announced definitive plans to exit the mortgage servicing business and discontinue operations of mortgage servicing as a separate business unit. As of December 31, 2000 all loan servicing transfers were completed and the mortgage servicing rights removed from the Company’s balance sheet. Due to the volume of loans transferred and the costs and complexity in providing certain documentation, the Company revised its estimate of the cost to complete disposition of this business resulting in $141,000, net of tax expense, in the fourth quarter of 2002. Currently, substantially all receivables associated with these sales have been collected and provision has been made for the Company’s best estimate of any costs associated with documentation deficiencies and related indemnifications.
 
Future Earnings Outlook
 
The outlook for the economy still remains uncertain. Given that the Federal Reserve changed their bias to neutral after the November rate cut, few economists expect any additional rate cuts in this business cycle, particularly in the face of potential fiscal stimulus, along with the monetary stimulus already present from the historically low level of rates. However, the uncertainty over whether the country will go to war, along with the lack of business investment and slow employment growth represent factors that are negatively affecting economic growth.
 

Management believes that Colonial’s rate sensitivity is well positioned for the time when rates increase, as is likely to occur when the economy eventually improves. As interest rates increase, mortgage warehouse volumes will decline; however, this should be offset by renewed regional loan growth.
 
An assumption of flat interest rates for 2003 would be expected to result in low single-digit loan growth and high single-digit core deposit growth. Noninterest income should continue to have strong growth as new services are added and emphasized across our growing franchise. Likewise, we plan to continue to grow our franchise, and thus, expenses related to that growth will likely increase. Our current expense targets to accommodate that growth reflect a low to mid single-digit increase over the fourth quarter run rate.
 
The magnitude of the uncertainties regarding the economy, interest rates and global conditions will certainly have a bearing on income for 2003. Our current expectations are that the above factors should result in 2003 earnings between $1.20 and $1.28 per share. However, changing economic conditions and interest rates may positively affect earnings and will almost certainly affect the Company’s expectations concerning the individual components of income.