Correction: Fitch Downgrades Colonial Bancgroup Inc.'s Ratings; On Negative Rating Watch.

NEW YORK -- (This amends a previous release issued yesterday. It corrects the rating designation for Colonial Bank, N.A.'s 'F3' short-term deposits, which are placed on Rating Watch Negative, not affirmed.)

Fitch Ratings has downgraded the ratings of the Colonial Bancgroup, Inc. (CNB) and its subsidiaries, and placed the ratings on Rating Watch Negative. (A full list of ratings affected by this action follows this release.)

The degree of credit problems at CNB has accelerated beyond Fitch's expectations, with credit costs increasing beyond manageable levels, materially affecting the company's earnings, and causing net charge-offs (NCOs) to increase to 11.15% (annualized) for fourth-quarter 2008 (4Q'08). Although CNB has been aggressive in addressing its problem assets and has increased reserve levels, the downgrade largely reflects the prospect of prolonged credit stress, which Fitch believes will continue to hamper the company's performance and weigh heavily on its financial condition. The preponderance of credit concerns remains in CNB's residential real estate construction portfolio; the majority of the portfolio resides in the troubled Florida market, which drove non-performing assets (NPAs) to 4.83% at Dec. 31, 2008.

The company did receive preliminary approval to participate in the Treasury's Capital Purchase Program (CPP), but it has yet to be funded. Receipt of the funds is contingent upon the company's ability to raise an additional $300 million in equity - a condition Fitch believes will be difficult to meet, considering the prevailing market environment. CNB has indicated that it is in the process of raising this external capital and has signed a non-binding letter of intent with a private equity firm (SunTx Capital Partners). Management anticipates completing the capital raising activities and accessing TARP capital funding by the end of 1Q'09.

A positive resolution of the Negative Watch hinges upon CNB's receipt of the additional capital and the stabilization of asset quality deterioration. Conversely, should the company fail to raise the necessary capital and significant credit quality deterioration persist, multiple-notch downgrades would result.

Fitch has downgraded the following ratings and placed them on Rating Watch Negative:

The Colonial BancGroup, Inc.

--Long-term Issuer Default Rating (IDR) to 'BB' from 'BBB-';

--Short-term IDR to 'B' from 'F3';

--Subordinated debt to 'BB-' from 'BB+'

--Individual to 'C/D' from 'C'.

Colonial Bank, N.A.

--Long-term IDR to 'BB+' from 'BBB-';

--Long-term deposits to 'BBB-' from 'BBB';

--Short-term IDR to 'B' from 'F3';

--Subordinated debt to 'BB' from 'BB+';

--Individual to 'C/D' from 'C'.

Colonial Capital Trust IV

--Preferred stock to 'BB' from 'BB+'.

CBG Florida REIT

--Preferred stock to 'BB' from 'BB+'.

Fitch has also placed the following short-term rating on Rating Watch Negative:

Colonial Bank, N.A.

--Short-term deposits 'F3';

In addition, Fitch has affirmed the following ratings:

Colonial BancGroup, Inc.

--Support '5';

--Support Floor 'NF'.

Colonial Bank, N.A.

--Support '5';

--Support Floor 'NF'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.