In 2004, we are taking a major step in our efforts to become an even more responsive banking partner for small businesses. We are creating a new small business lending unit in Florida that will initially serve our Florida and Alabama markets, processing small business loans up to $500,000. At the heart of the small business initiative is a centralized underwriting process developed by top professionals who will conduct the credit documentation process while our branches develop their small business opportunities. This process will enable us to leverage our production staff. We believe that loans to small businesses will naturally lead to other products and services such as cash management, merchant services, insurance, personal accounts and wealth management. We believe our cross-sell ratio for small business customers can reach 4.0 or higher.

The excitement at Colonial is tangible these days because all of our efforts over the past several years are beginning to pay off. We initiated forward-looking programs that are now coming together with systems, products, sales efforts and management structure. Our enthusiasm stems, in part, from the fact that we have not yet arrived at where we are heading; we have room to grow and we are in some of the best markets in the country to do that. We have proved that we can do what we set out to do. Now we are in position to scale even greater heights as we take advantage of the opportunities that lie ahead from Atlanta to Orlando to Dallas to Las Vegas.

Be assured, however, that no matter how much we grow, we will not waiver from our commitment to offer the deep resources of a strong regional bank while maintaining the personal touch of a community bank. This philosophy, added to the guiding hand of experienced boards of local business leaders in each region, sets us apart from our competitors wherever we operate.

Thank you for your investment in Colonial. As always, I continue to solicit your suggestions, comments and advice.

Sincerely,



Robert E. Lowder
Chairman of the Board and Chief Executive Officer