Colonial BancGroup Reports Third Quarter Results

Capital

Colonial exceeds the requirement for regulatory definition of a "well capitalized" bank as follows:

Regulatory Well Capitalized Minimum Colonial Tier 1 Leverage ratio 5% 7.29% Tier 1 Risk Based Capital ratio 6% 10.00% Total Risk Based Capital ratio 10% 14.17%

"While these ratios reflect abundant capital, in the current financial markets it is prudent and necessary to further fortify our balance sheet so that we emerge from the current credit crisis a much stronger institution. To that end, we are actively examining opportunities to participate in the new programs offered by the Treasury, including the preferred stock initiative. To further preserve capital, Colonial is suspending its dividend, but is aware of the importance of resuming dividend payments as soon as market and capital conditions permit," said Mr. Lowder. The suspension of the dividend will preserve approximately $77 million per year in tangible common equity. "Our decision to suspend our dividend was a difficult one, especially given our retail shareholder base. However, our obligation to our shareholders also requires that we prudently conserve our capital given the challenges of the environment. In addition, through balance sheet management efforts, risk based assets were reduced by $583 million during the quarter, which also strengthened our capital position," said Mr. Lowder.

Liquidity

Colonial's retail franchise of over 340 branch locations provides a stable funding base, as deposits fund 70% of total assets. Total deposits at September 30, 2008 grew 9% over the same period of 2007 and 3% annualized over June 30, 2008, resulting in a loan to deposit ratio of 82%. Colonial is pleased that the FDIC has fully insured all noninterest bearing deposit accounts and has increased insurance coverage to $250,000 on all other deposit accounts until December 31, 2009. This expanded coverage will insure 85% of the Company's September 30, 2008 total deposits. In addition to Colonial's strong retail franchise, the Company has over $5 billion in unused wholesale funding available from a variety of sources and does not have any debt maturities in 2008 and only $42 million in 2009.

Asset Quality

During the third quarter of 2008, Colonial intensified its aggressive loan workout efforts, resulting in an increase in charge-offs and nonperforming assets. Colonial charged-off $121 million, or 3.17% of average loans, annualized, for the third quarter of 2008, compared to $73 million, or 1.85% of average loans, annualized, for the second quarter of 2008. Colonial's provision for loan losses of $159 million in the quarter was 131% of net charge-offs, increasing the allowance for loan losses to $285 million, or 1.88% of net loans, at September 30, 2008 from 1.60% at June 30, 2008. The ratio of nonperforming assets to net loans, other real estate and repossessions at September 30, 2008 was 4.43%, compared to 2.62% at June 30, 2008. As with prior periods, Colonial's problem assets remain primarily isolated to the residential construction portfolio and concentrated in Florida markets. "Since the crisis began to develop, we have concentrated on identifying troubled assets (and those which are likely to become troubled) and bringing intense focus and efforts to their resolution. We are committed to this approach, and both our net charge-offs and provision reflect that commitment," said Mr. Lowder. "Colonial, in addition to assessing the Treasury's preferred stock initiative, is also assessing its asset purchase and guarantee provisions. There is presently not enough information available to determine whether these programs are of interest to the Company, but as the details are clarified, Colonial will take full advantage of these and other programs, if they are appropriate."

Net interest income

Net interest income declined by $7.7 million from the second quarter of 2008, and the Company's net interest margin was relatively stable at 2.85% in the third quarter compared to 2.88% in the second quarter of 2008. The margin stability occurred despite the headwinds of the current banking environment: the increase in nonearning assets, migration to higher cost time deposits, and the increase in pricing of deposits created by the critical liquidity needs of several large banks in our markets.

Noninterest income

Core noninterest income for the third quarter of 2008 decreased 2% from the second quarter of 2008. Not surprisingly, most of the decrease was in wealth management services income, which decreased $691,000 from the second quarter of 2008 as customers showed a preference for FDIC insured products. This decrease was offset somewhat by another good quarter in revenue from mortgage banking origination and sales, which increased $142,000 in the third quarter of 2008 over the second quarter of 2008 as a result of higher sales of FHA and VA loans. Colonial increased its mortgage origination staffing in late 2007 to diversify its production to agency products which yield higher volumes and margins. During the third quarter of 2008, Colonial added similar teams of mortgage originators in the Tampa and San Antonio markets, and expects similar results from these new teams.

Colonial's valuable franchise

Colonial's strategy has been to locate in high growth markets that will be the first areas to benefit when the economy improves. "Colonial is making the most of a tough environment. We are reaching out to current and prospective customers to offer our products and services. We are recruiting bankers and adding experience to our team. When the economic situation improves, Colonial will be well positioned to take advantage with a valuable franchise in high growth markets that cannot be duplicated," concluded Mr. Lowder.

Colonial BancGroup operates 344 branches in Florida, Alabama, Georgia, Nevada and Texas with over $26 billion in assets. The Company's common stock is traded on the New York Stock Exchange under the symbol CNB and is located online at www.colonialbank.com. In some newspapers, the stock is listed as ColBgp.

Colonial's management will host a conference call on October 22, 2008 at 5:00 PM/ET to discuss the results for the third quarter of 2008. Individuals are encouraged to listen to the live webcast of the presentation as well as view a slide presentation by visiting Colonial's website at www.colonialbank.com. The webcast will be hosted under "Events and Presentations" located under the "Investor Relations" section of the website. To participate in the Q&A session of the conference call, dial (888) 504-7961 or (719) 457-2681 Toll International, (Leader: Lisa Free). A replay of the conference call will be available beginning at 8:00 PM/ET on October 22, 2008 and ending at midnight on October 31, 2008 by dialing (888) 203-1112 (Domestic Toll-Free) or (719) 457-0820 (Toll International). The passcode for both numbers is 2934355.

This release includes "forward-looking statements" within the meaning of the federal securities laws. Words such as "believes," "estimates," "plans," "expects," "should," "may," "might," "outlook," "potential" and "anticipates," the negative of these terms and similar expressions, as they relate to The Colonial BancGroup, Inc. (BancGroup) (including its subsidiaries or its management), are intended to identify forward-looking statements. The forward-looking statements in this release are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such statements. In addition to factors mentioned elsewhere in this release or previously disclosed in BancGroup's SEC reports (accessible on the SEC's website at www.sec.gov or on BancGroup's website at www.colonialbank.com), the following factors, among others, could cause actual results to differ materially from forward-looking statements and future results could differ materially from historical performance. These factors are not exclusive:

-- losses to our loan portfolio are greater than estimated or expected;

-- an inability to raise additional capital on terms and conditions that are satisfactory;

-- the impact of current economic conditions on our ability to borrow additional funds to meet our liquidity needs;

-- economic conditions affecting real estate values and transactions in BancGroup's market and/or general economic conditions, either nationally or regionally, that are less favorable then expected;

-- changes in the interest rate environment which expand or reduce margins or adversely affect critical estimates as applied, projected returns on investments, and fair values of assets;

-- deposit attrition, customer loss, or revenue loss in the ordinary course of business;

-- increases in competitive pressure in the banking industry and from non-banks;

-- costs or difficulties related to the integration of the businesses of BancGroup and institutions it acquires are greater than expected;

-- the inability of BancGroup to realize elements of its strategic plans for 2008 and beyond;

-- natural disasters in BancGroup's primary market areas which result in prolonged business disruption or materially impair the value of collateral securing loans;

-- management's assumptions and estimates underlying critical accounting policies prove to be inadequate or materially incorrect or are not borne out by subsequent events;

-- the impact of recent and future federal and state regulatory changes;

-- current and future litigation, regulatory investigations, proceedings or inquiries;

-- strategies to manage interest rate risk may yield results other than those anticipated;

-- changes which may occur in the regulatory environment;

-- a significant rate of inflation (deflation);

-- unanticipated litigation or claims;

-- acts of terrorism or war; and

-- changes in the securities markets.

Many of these factors are beyond BancGroup's control. The reader is cautioned not to place undue reliance on any forward looking statements made by or on behalf of BancGroup. Any such statement speaks only as of the date the statement was made or as of such date that may be referenced within the statement. BancGroup does not undertake any obligation to update or revise any forward-looking statements.

THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (Unaudited) Statement of Condition Summary Sept 30, June 30, Dec 31, % Change % Change 2008 2008 2007 June '08 Dec '07 to Sept '08 to Sept '08 (Dollars in millions) Assets $ 26,263 $ 26,031 $ 25,976 1 % 1 % Cash and due from banks 1,328 451 475 194 % 180 % Loans, net of unearned income 15,168 15,469 15,923 -2 % -5 % Securities 3,826 3,454 3,683 11 % 4 % Deposits 18,493 18,349 18,544 1 % 0 % Shareholders' equity 2,389 2,422 2,274 -1 % 5 %

Three Months Ended Nine Months Ended Sept 30, June 30, % Change Sept 30, Sept 30, % Change 2008 2008 June '08 2008 2007 Sept '07 to Sept '08 to Sept '08 Key Ratios: Tier I capital ratio 10.00 % (a) 10.12 % -1 % 10.00 % (a) 8.94 % 12 % Total risk-based capital ratio 14.17 % (a) 14.16 % 0 % 14.17 % (a) 11.50 % 23 % Tangible common equity ratio 5.27 % 5.43 % -3 % 5.27 % 5.32 % -1 % Tangible capital ratio 6.43 % 6.60 % -3 % 6.43 % 6.56 % -2 % Net interest margin 2.85 % 2.88 % -1 % 2.89 % 3.59 % -19 % Loans to deposits ratio 82.02 % 84.30 % -3 % 82.02 % 89.79 % -9 % Dividends paid per common share $ 0.095 $ 0.095 0 % $ 0.38 $ 0.5625 -32 %

Three Months Ended Nine Months Ended Earnings Summary Sept 30, June 30, % Change Sept 30, Sept 30, % Change 2008 2008 June '08 2008 2007 Sept '07 to Sept '08 to Sept '08 (In thousands, except per share amounts) Net Income: Net interest income $ 166,749 $ 174,424 -4 % $ 522,797 $ 566,173 -8 % Provision for loan losses 159,399 79,000 102 % 273,942 13,155 1982 % Core noninterest income (1) 51,697 52,698 -2 % 156,067 152,117 3 % Securities and derivatives gains (losses), net (6,057 ) 3,025 -300 % 3,043 2,097 45 % Securities restructuring charges - - 0 % - (36,006 ) 100 % Gain on sale of mortgage loans - - 0 % - 3,850 -100 % Gain on sale of merchant services - - 0 % - 4,900 -100 % Total noninterest income 45,640 55,723 -18 % 159,110 126,958 25 % Core noninterest expense (1) 162,155 159,506 2 % 479,471 401,325 19 % Severance expense - 550 -100 % 786 4,045 -81 % Merger related expenses - - 0 % - 2,298 -100 % Net losses related to the early extinguishment of debt 284 4,111 -93 % 10,327 6,908 49 % Total noninterest expense 162,439 164,167 -1 % 490,584 414,576 18 % Minority interest expense/REIT preferred dividends 5,336 5,336 0 % 16,008 7,648 109 % Income (loss) before tax (114,785 ) (18,356 ) 525 % (98,627 ) 257,752 -138 % Income tax expense (benefit) (43,575 ) (9,400 ) 364 % (43,258 ) 85,799 -150 % Net Income (Loss) $ (71,210 ) $ (8,956 ) 695 % $ (55,369 ) $ 171,953 -132 % Earnings (loss) per share - Diluted $ (0.35 ) $ (0.05 ) 600 % $ (0.30 ) $ 1.11 -127 % Average diluted shares outstanding 200,757 188,730 182,216 154,310 (1) Represents non-GAAP measures. (a) Estimated

SOURCE: The Colonial BancGroup, Inc.

The Colonial BancGroup, Inc. Lisa Free, 334-676-5105