Colonial Bancgroup Announces Third Quarter Earnings and Dividend.

MONTGOMERY, Ala.--(BUSINESS WIRE)--Oct. 19, 1998--Colonial BancGroup Inc. (NYSE:CNB) Chairman and CEO, Robert E. Lowder announced today earnings for the quarter ended September 30, 1998. Operating earnings (excluding acquisition, restructuring, and certain Year 2000 expenses) for the Montgomery-based bank holding company were $24,673,000 compared to $23,762,000 for the previous year, a 4% increase. Diluted earnings per share for the quarter excluding these same expenses was $.24 compared to $.23 for the same period in 1997, a 4% increase. All earnings per share information has been restated for the two for one stock split effected in the form of a 100% stock dividend paid on August 14, 1998. For the third quarter, on the same basis, the company's return on average equity was 15.55% compared to 17.66% for the same period in 1997 and return on assets was 1.08% for the quarter compared to 1.31% for the same period of the previous year. All financial results have been restated for material acquisitions accounted for as poolings of interests.

Operating earnings for the nine months ended September 30, 1998 were $77,059,000 compared to $66,605,000 for the same period in 1997, a 16% increase. Diluted operating earnings per share for the first nine months of 1998 was $.74, a 12% increase over 1997 earnings per share of $.66. Also, for the year to date 1998 the company's return on assets was 1.21% and return on equity was 16.92% compared to 1.28% and 17.46%, respectively, for the same period in 1997.

Net income for the third quarter including $3,295,000 ($2,223,000 after tax) in acquisition costs and nonrecurring third party Year 2000 expenses was $22,450,000 or $.21 per diluted share. For the nine months ended September 30, 1998 net income was $67,763,000 or $.65 per diluted share and includes $10,548,000 pre-tax in acquisition and restructuring costs and $3,410,000 pre-tax in nonrecurring Year 2000 expenses.

Third quarter operating earnings include $4,250,000 in additional amortization expense to increase reserves for accelerated prepayments of mortgage servicing rights. Colonial hedges the balance sheet value of its mortgage serving rights through various sources including its current new loan production capacity, increases in value of certain other assets, primarily investments and most recently, to a limited extent, derivative hedges. Through the first nine months of 1998 Colonial through its Colonial Mortgage Company (CMC) subsidiary originated $2.7 billion in new mortgage loans and experienced pay-offs on $1.9 billion. Primarily as a result of this net increase in loan volumes, CMC's operating earnings for the nine-month period was $13.7 million, a 16.6% increase over the prior year's earnings for the same period. The net unrealized gain in the Bank's available for sale investment portfolio has increased the Company's capital from December 31, 1997 to September 30, 1998 by $7.3 million, more than offsetting the mortgage servicing reserve increase of $5.9 million ($3.7 million after-tax), for the nine month period. Lastly, Colonial has increased its investments and entered into certain other hedges in order to offset further loss of value of the servicing asset that may result from declines in mortgage interest rates that may be anticipated from recent Federal Reserve actions. The counter party performance on any such hedge positions is guaranteed by the Chicago Board of Trade Clearing Corp.

Loans increased $298 million from June 30, 1998 to September 30, 1998 representing a 19.4% annualized internal loan growth (adjusted to account for the impact of bank acquisitions). Year to date internal loan growth has been 12.6%. Net interest income increased to $84,031,000 in the September quarter from $81,511,000 in the June quarter reflecting the above increase in loans and off-setting a decline in the net interest margin from 4.23% to 4.09%. "The market areas in which Colonial operates continue to thrive and our management teams in most areas are experiencing strong loan demand," said Mr. Lowder.

Asset quality remains excellent with non-performing assets at .72% of loans down from .74% at December 31, 1997 and .87% at September 30, 1997. Net charge-offs remain among the lowest for Colonial's peer group at .18% of loans compared to the same .18% rate in 1997.

Colonial's acquisition program continued in the third quarter with the completion of the mergers with First Bank in Dallas, Texas and Commercial National Bank in Daytona, Florida. These transactions along with the strong internal growth resulted in total assets for Colonial of slightly less than $9.2 billion at the end of the quarter.

In addition, in early October, Colonial completed the mergers of Interwest Bancorp in Reno, Nevada, Prime Bank in Melbourne, Florida, and First Macon Bank & Trust in Macon, Georgia. These acquisitions along with the scheduled completion of the acquisition of the Texas Bank & Trust in Dallas would result in total assets of approximately $9.7 billion. On a restated basis for pooling of interests accounting treatment, the operating earnings per share for Colonial for the nine month period would be reduced from $.74 per share to $.72 per share as a result of these acquisitions.

Noninterest expense increased (excluding acquisition, restructuring and certain Year 2000 costs) from $66.0 million in the June quarter to $71.2 million in September, an 8.0% increase. The increase in amortization of mortgage servicing rights from accelerated prepayments represents over half of this increase with the remainder ($2.45 million) attributable primarily to building the operating structure to absorb additional bank acquisitions. Currently, Colonial has 11 acquired banks that have not had a complete conversion to Colonial data and item processing systems. The future annual cost savings from these conversions are expected to exceed $4 million. Colonial has experienced delays in the achievement of these cost savings with respect to the seven unconverted Florida acquisitions due to the acquisition of Barnett Bank (Colonial's Florida item processor) by Nations Bank. All conversions are currently scheduled with the majority expected to be converted in the first quarter of 1999.

Colonial BancGroup currently operates 253 offices in Alabama, Florida, Georgia, Tennessee, Texas and Nevada and is traded on the New York Stock Exchange under the symbol CNB. In most newspapers the stock is listed as ColBgp. -0-

             The Colonial BancGroup Inc. and Subsidiaries
                       Selected Financial Data
                             (unaudited)
           (dollars in thousands except per share amounts)

                                                           %Change
                         Sept. 30,  Dec. 31,   Sept. 30    Sept. 30,
                            1998     1997/a     1997/a   1997 to 1998
Statement of Condition Summary

Total assets           $9,194,893 $7,707,761 $7,465,882      23%
Loans, net of unearned
 income                 6,441,776  5,716,769  5,530,062      16%
Total earnings assets   8,315,285  6,943,057  6,791,292      22%
Deposits                6,482,466  6,005,967  5,888,347      10%
Shareholders' equity      639,893    561,819    545,054      17%
Book value per share        $6.20      $5.69      $5.53      12%

                        Nine Months Ended         Three Month Ended
                                     %Change                    %Change

                        Sept. 30,      1997       Sept. 30,      1997
                      1998     1997/a to 1998   1998     1997/a to 1998
Earnings Summary
Net interest income
 (taxable
  equivalent)       $244,693 $210,911   16%   $ 84,734 $ 73,573   15%
Provision for
 loan losses          11,516   10,304   12%      3,927    2,982   32%
Noninterest income    88,044   65,509   34%     30,238   22,885   32%
Noninterest expense  212,062  163,682   30%     74,541   56,421   32%
Net income            67,763   63,835    6%     22,450   23,106   -3%
Net income excluding
 acquisition and
 restructuring
 costs and Year
 2000 expenses        77,059   66,605   16%     24,673   23,762    4%

Average shares
 outstanding         102,452   97,147          102,947   98,259
Average diluted
 shares outstanding  105,022  100,512          105,206  101,459
Earnings per share/b:
 Income excluding
  acquisition and
  restructuring costs
  and Year 2000 expenses
  Basic                $0.75    $0.69    9%      $0.24    $0.24    0%
  Diluted              $0.74    $0.66   12%      $0.24    $0.23    4%
 Net income:
  Basic                $0.66    $0.66    0%      $0.22    $0.24   -8%
  Diluted              $0.65    $0.64    2%      $0.21    $0.23   -9%

Selected Ratios:
 Income excluding
  acquisition and
  restructuring costs
  and Year 2000
  expenses to:
  Average assets        1.21%    1.28%            1.08%    1.31%
  Average shareholders'
   equity              16.92%   17.46%           15.55%   17.66%
 Efficiency ratio
  (excluding acquisition
   and Year 2000
   expenses)           59.54%   57.94%           61.97%   57.59%
 Net income to:
  Average assets        1.10%    1.22%            0.98%    1.27%
  Average shareholders'
   equity              15.40%   16.73%           14.15%   17.17%
 Efficiency ratio      63.73%   59.21%           64.83%   58.49%
 Equity to assets       6.96%    7.30%
 Total capital          7.84%    8.24%
 Tier one leverage      6.91%    7.59%

                      Sept. 30,  Dec. 31,  Sept. 30
                        1998      1997/a    1997/a
Nonperforming Assets

Total non-performing
 assets ratio           0.72%     0.74%     0.87%
Loan loss reserve ratio 1.15%     1.21%     1.25%
Allowance as a percent
 of nonperforming loans  199%      247%      210%
Net charge-offs ratio
 (annualized):
 Year to date           0.18%     0.24%     0.18%
 Quarter to date        0.23%     0.10%     0.19%

     (a) Restated financial results above reflect the business
combinations with United American Holding Corp., South Florida Banking
Corp., First Central Bank, Commercial Bank of Nevada and FirstBank.
These mergers were accounted for as poolings of interest and the
financial results have been restated accordingly.

     (b) Restated to reflect the 100% stock dividend effected in the
form of a two-for-one stock split paid on Aug. 14, 1998.