ATB
Financial Reports Strong Third Quarter Results
Edmonton - February 18, 2004 - ATB Financial reported third quarter
earnings of $46.7 million for the period ended December 31, 2003, compared to
$90.0 million for the same period last year. Net income for the quarter includes
$2.1 million in loan loss provisions compared to $44.7 million of loan loss
recoveries in the third quarter of last year.
The third quarter results increased ATB's equity to $908.8 million as at
December 31, 2003, an increase of 18.1 per cent from last year.
"ATB Financial closed out the calendar year 2003 strongly. Despite the
ongoing challenges presented by BSE, the rising value of the Canadian dollar and
the low interest rate environment, ATB continues to produce solid financial
performance," said Bob Normand, President and Chief Executive Officer of
ATB Financial. "I am confident that ATB's growth strategy and commitment to
personal customer service will be key drivers of our ongoing success."
BSE Update
ATB Financial is responding to the evolving situation surrounding Bovine
Spongiform Encephalopathy (BSE). As one of Alberta's largest agricultural
lenders, we recognize that the ongoing crisis has the potential to create a
serious impact - not only on the Alberta beef industry and rural Alberta - but
on the entire province, and all of Canada.
By working with our customers on an individual basis, ATB Financial hopes to
mitigate the impact of the situation through our personalized lending approach.
Each situation is being treated as a unique case requiring a unique financial
solution. We recognize the difficult circumstances that our customers face, and
we will allow as much latitude and flexibility as permitted by prudent financial
practices.
Generally speaking, most ATB agriculture customers have been able to manage
through this crisis so far because: they have good equity in their business,
they have some level of revenue diversification, e.g. dairy, grains, and they
have benefited from related government aid programs. However, as this issue
continues, it will become more problematic for our customers. We continue to
monitor the situation and pursue solutions on behalf of our customers.
ATB Investor Services
ATB Investor Services continued to build strong momentum during the third
quarter, adding $100.6 million in assets under administration.
The Compass Portfolio Series completed its first full calendar year (2003)
with assets of $138 million. Performance for the year was strong across all six
Compass Portfolio Series.
On a consolidated basis, the revenue for Investor Services' third quarter
2003 was $0.9 million compared to $0.4 million for the same period ended
December 31, 2002. This represents a 149 per cent year over year increase.
ATB Investor Services continues to recruit and build its team of financial
advisors across the province. Early 2004 will see ATB Investor Services focus on
having a strong RSP season.
Energy and Commercial Banking
Industry specialization is proceeding as planned. Loan advances have not
grown at the pace projected, largely due to energy clients benefitting from high
commodity prices. As well, we have seen the equity markets respond favorably to
clients' requests for additional equity, which has in turn reduced their need to
borrow. These two factors are reflected in our outstanding balances being down
from the beginning of the year.
Interest on advances is less than anticipated, but this has been partially
offset by increased fee income and lower than anticipated non-interest expenses.
ATB in the Community
ATB Financial held fundraising campaigns for all 11 United Way associations
across Alberta. With corporate matching, ATB associates raised more than
$331,500 to support United Way agencies across the province.
ATB Financial sponsored the opening ceremonies of the Canadian Finals Rodeo (CFR)
for the fifth year in a row. A promotion ran in Edmonton and area ATB branches
for a chance to win a $1,000 CFR package.
In December, ATB Financial again supported the Christmas Bureau in Edmonton.
Through the generous support of our customers and staff, a record $27,800 was
raised to provide holiday meals for families in need.
Northpointe Branch Trust Fund
On December 10, 2003 ATB associates at the Northpointe Branch in north
Calgary suffered a tragic accident. An out-of-control car crashed into the
building's conference room where associates were meeting. The accident caused
serious physical and emotional harm to a number of ATB associates. Regrettably,
this tragedy also caused the death of Silvia Vega, a customer service
representative who was exceptionally well liked by the Northpointe branch
customers and her colleagues. ATB expresses its condolences to Silvia's family.
A Northpointe Trust Fund has been set up at all ATB Financial locations.
Branch Update
ATB continues to expand its presence in, or near, the larger retail markets.
Sod-turning events were held for a new branch in St. Albert and one in the
southwest Edmonton community of Hawkstone. ATB opened a new Canmore branch
December 15, 2003.
ATB Ranked #1
The Canadian Federation for Independent Business released its 2003 report
ranking financial institutions across the country. ATB continues to score well
and remains ranked number one for small business in Alberta.
ATB participated in an independent survey in 2003 that interviewed 13,000 ATB
customers from all 145 branches. Overall, ATB continues to rank in the top tier
of financial institutions for customer service.
During the third quarter, ATB completed a successful Home Equity Line of
Credit promotion, as well as a balance transfer promotion on MasterCard. The
retail Springboard savings account and business T-bill savings account were also
well received by customers.
Economic Outlook
Since our last report, prospects for the Alberta economy have altered in two
fundamental respects. The discovery of a second case of BSE has resulted in the
postponement of live cattle exports into the United States and a decline in
prices for cattle. This creates uncertainty in rural communities for the many
Albertans and Alberta businesses that service this sector.
A positive outlook comes from announcements made late in 2003 by energy
producers on investment intentions for the medium term. Commitments to move
ahead in oilsands development, pipeline, storage and refinery expansion are
expected to support strong growth in northern Alberta. Conventional oil and gas
drilling in Western Canada reached an all-time high in 2003, and prospects for
2004 remain very positive.
Unemployment in Alberta remains the lowest in the country and, with major
investment projects getting underway, employment growth should be strong in
2004. Housing starts, that fell modestly in 2003 from very high 2002 levels, are
expected to decline somewhat as demand and supply adjust.
The continued rise in the Canadian dollar is causing exporters' revenues in
U.S. dollars to fall. Recent developments suggest that Canadian interest rates
will remain low or decline over the near term to provide some offset to the rise
in the Canadian dollar.
Ron
P. Triffo Bob Normand
Chairman of the Board President & CEO
February 2004
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Management's Discussion and Analysis (unaudited)
Net Income
ATB reported net income of $46.7 million for the third quarter ended
December 31, 2003 compared to $46.2 million for the second quarter ended
September 30, 2003 and $90.0 million in the third quarter last year.
Last year's results included a $45.0 million recovery on previously
reported credit losses. Excluding this recovery, net income for the
third quarter ended December 31, 2003 was $1.8 million or 3.92 per cent
higher than the same period last year. Net income is $117.9 million for
the nine months ended December 31, 2003, compared to the same period
last year of $177.6 million.
Net Interest Income
Net interest income for the third quarter ended December 31, 2003 is
$100.5 million, up $1.2 million or 1.19 per cent from the second quarter
and $5.1 million or 5.36 per cent from the third quarter last year. The
increase in net interest income over the same quarter last year is due
to the continued growth of our loan products.
For the nine months ended December 31, 2003, net interest income is
$300.4 million, an increase $23.0 million or 8.28 per cent over the same
period last year. This increase is mainly due to average earning asset
growth of $1.1 billion over the past twelve months. The net interest
margin for the nine months ended December 31, 2003 is 2.91 per cent
unchanged from the same period last year.
Credit Quality
Gross impaired loans (before deducting the allowance for credit
losses) at the end of the quarter are $105.4 million, compared to $87.0
million a year ago. The allowance for credit losses exceeds the gross
amount of impaired loans by $101.9 million at December 31, 2003 compared
to $86.0 million a year earlier.
The impact on the income statement for the third quarter ended
December 31, 2003 was a charge of $2.1 million, compared to an expense
of $3.5 million in the previous quarter and a recovery of $44.7 million
in the third quarter of last year. Year-to-date provision is $28.8
million compared to a recovery of $48.1 million for the same period last
year.
Other Income
Other income for the third quarter ended December 31, 2003 is $29.1
million, a slight decrease of $0.4 million or 1.47 per cent from the
second quarter and a increase $2.3 million or 8.70 per cent from the
third quarter last year. For the nine months ended December 31, 2003,
other income is $87.6 million up $8.2 million or 10.39 per cent from the
same period last year. This increase is due to a combination of
increased service charge revenue due to growth in retail products and
increased credit fees, primarily in personal and business segment as a
result of fees collected from customers renegotiating their fixed-term
loans.
Non-interest
Expenses
Non-interest expenses are $80.8 million for the third quarter ended
December 31, 2003, an increase of 2.09 per cent compared to the previous
quarter and an 5.02 per cent increase compared to the third quarter last
year. For the nine months ended December 31, 2003, non-interest expenses
increased 6.18 per cent compared to the same period last year. This
increase in non-interest expenses is primarily due to increased salaries
and employee benefit costs, higher transaction volumes and public
awareness campaigns.
The efficiency ratio, expressed as a percentage of non-interest
expenses to operating revenue (net interest income plus other income) is
62.20 per cent for the nine months ended December 31, 2003, an
improvement from 63.71 per cent for the same period last year. This
improvement is largely due to increases in total revenue of 8.75 per
cent while holding expenses at 6.18 per cent.
Balance Sheet
ATB's total assets are $14.1 billion at December 31, 2003, an
increase of 2.25 per cent from September 30, 2003 and 7.40 per cent over
the past twelve months. Total loans grew by $225.1 million or 1.90 per
cent this quarter. Over the twelve-month period, total loans grew by
6.53 per cent compared to 10.45 per cent for the same period last year.
Total deposits grew by $267.0 million or 2.12 per cent during the
quarter. Deposit growth over the over the past twelve months is 7.34 per
cent compared to 4.87 per cent the same period last year.
The total equity as at December 31, 2003 is $908.8 million, up by
$117.9 million from March 31 and $139.2 million from a year ago.
Segmented Information
On a segmented basis total assets grew this quarter by 2.45 per cent
in personal and business banking and by 1.27 per cent in energy and
commercial banking. Net income for personal and business banking was
$41.5 million, an increase of 0.50 per cent from the previous quarter.
Energy and commercial's net income was $8.3 million this quarter, an
increase of 1.18 per cent from the previous quarter. The increase in
both segments is due to higher net interest income. Investor Services'
net loss is $2.1 million this quarter compared to a net loss of $1.8
million in the second quarter.
Caution Regarding Forward Looking Statements
This report includes forward-looking statements. ATB Financial
from time to time may make forward-looking statements in other written
or verbal communications. These statements include objectives for the
short and medium term and strategies to achieve those objectives. ATB
cautions readers not to place undue reliance on the forward-looking
statements as actual results may differ materially from plans,
objectives and expectations.
By their very nature forward looking statements involve
uncertainties and can change due to a variety of reasons including
legislative or regulatory changes, competition, technological changes,
and changes in interest rates and general economic conditions. The
foregoing list is not exhaustive and when relying on forward looking
statements these factors as well as other factors should be considered.
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Highlights