Third Quarter Results
Nine months ended December 31, 2001
Message
to Stakeholders
ATB MAINTAINS MOMENTUM IN 3rd QUARTER
Edmonton, Alberta - ATB Financial (ATB) reported increased
earnings in the third quarter, with net income of $46.7 million for the period
ending December 31, 2001, compared to $41.4 million for the same period last
year. The third quarter results increased ATB's equity to $565.8 million as at
December 31, 2001.
"ATB has established a strong track record for sustained
earnings and increased marketshare over the past five years," said Bob
Normand, President and CEO of ATB Financial. "We are committed to being
Albertans' first choice for financial services."
Financial Highlights
- Total assets of $12.4 billion is an increase of 7.76 percent over last
year.
- Total loans at $10.3 billion is an increase of 6.85 percent over last
year.
- Total deposits of $11.4 billion is an increase of 6.14 percent over last
year.
- Net interest income of $92.6 million is up slightly by 0.18 percent from
$92.4 million for the same quarter last year.
- Non-interest expenses of $70.8 million is an increase of 5.46 percent from
$67.1 million for the same quarter last year.
- ATB's efficiency ratio, non-interest expenses as a percentage of operating
revenues, is 58.74 percent compared to 57.81 percent for the same nine-month
period last year.
- The allowance for credit losses, including specific and general loan loss
allowance, exceeds gross impaired loans by $86.6 million. Net impaired loans
represent a negative 0.83 percent of total loans at December 31, 2001,
compared to a negative 0.58 percent at December 31, 2000.
The New
Visual Identity
On January 21, 2002, a new corporate identity was launched for
Alberta Treasury Branches, now known as ATB Financial. The new corporate
identifier retains "ATB", which is the acronym of our legal name, and
adds "Financial" to better describe what we do: we provide a broad
range of financial services to Albertans. As our legal name remains Alberta
Treasury Branches, no changes are required to customer accounts, or contracts
and agreements with customers and suppliers. Signage will be gradually replaced
on all branches, starting with large urban centers, followed by mid-size urban
markets and rural communities.
Products and Services
A Cooperation and Services Agreement was signed with Rabobank International,
the international corporate and investment banking arm of the Dutch-based
Rabobank Group, to provide financial services to each others' customers. The
alliance will focus on opportunities in the value-added agri-industry and
forestry sectors, providing a global reach to ATB's customers doing business
outside of Alberta. The agreement also provides an opportunity for joint lending
and a referral service for Rabobank agricultural customers who are relocating to
Alberta.
The personal Internet banking platform was upgraded in December 2001. The new
platform provides improved speed and enhanced functionality including online
bill registration, postdated bill payments, postdated transfers, MasterCard
balance information, and downloading capability of information into money
management software applications like Quicken. ATB Online personal customers
using the bill payment feature between December 12, 2001 and July 31, 2002, will
have their name entered into a draw. The first prize is a 2002 Chevy Avalanche
1500 4x4 and the second prize, an ATB Alberta Gold MasterCard with a $5,000
credit balance.
Two new MasterCard products were launched to support Alberta 4-H. For every
dollar charged to the Alberta Gold 4-H MasterCard and the Alberta Agri-Business
MasterCard, one percent will be donated to the 4-H Millennium Fund, administered
by the 4-H Foundation of Alberta, to enhance the quality of 4-H programs
throughout the province.
A new equity linked GIC was launched in October 2001. The Tri-Sector GIC
provides growth from a selected group of 15 pharmaceutical, technology and
telecommunications, and financial companies in Canada and the US. The demand for
this product has been very positive and it will also be available during the RSP
season.
The 30-month mortgage, reintroduced in September 2001, has been very popular
with renewing and new mortgage customers. With current market conditions the
Lower than Prime mortgage has also attracted mortgage customers wanting to take
advantage of the low interest rate environment.
Community Involvement
ATB supported all 11 Alberta United Way Associations in a province-wide
fundraising effort. Through employee contributions, special events and a
corporate donation, over $194,000 was raised to support United Way campaigns in
Alberta communities.
Economic Update
Recent economic indicators in North America continue to be mixed. US
industrial production continues to fall, albeit at a slower pace, while consumer
confidence shows signs of improvement. However, unemployment levels continue to
rise in both Canada and the US. The effect of interest rate declines that began
over a year ago are now being felt and most economic observers believe the
American economy will begin to gain momentum by the second half of 2002.
Alberta has seen its unemployment rate rise over the past quarter, with
weaknesses appearing in the accommodation, construction, trades, and
transportation sectors. Due to continued high in-migration, low mortgage rates,
and very low rental vacancies, Alberta has experienced record housing re-sales
and the highest level of new housing starts in a decade.
The economic outlook is one of continuing uncertainty. Drought conditions in
southern Alberta pose a serious challenge to agricultural producers and their
communities. Conventional oil and gas drilling is slowing as a result of a
one-third drop in cash flow to the energy industry. Investment in the province
is expected to decline due to reduced drilling activity and the deferral of
certain provincial government capital projects. However, investment levels will
continue to remain high in historical terms. With the strategic importance of
the oil sands, expansion of mining and refining capacity continue to proceed.
Announcements
Amolak Grewal was appointed Chief Operating Officer, effective
November 26, 2001. Amolak is responsible for the retail, independent business,
agri-industry, commercial banking and wealth management lines of business. This
includes the operation and performance of the Marketing, Sales, and Electronic
Banking and Central Services business units. Other appointments include Ken
Casey, Senior Vice-President Electronic Banking and Central Services; and Harry
Todd, Vice-President Credit.
Annual Public Meeting
The ATB Financial Annual Public Meeting will take place on
Tuesday, June 25, 2002, at 3:00 p.m. (MST) at the Westin Hotel (10135 - 100th
Street) in Edmonton, Alberta. To pre-register, please call (780) 408-7309.
Ron P. Triffo
Chairman of the Board
Bob Normand
President &
Chief Executive Officer
February 2002
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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, 2001 compared to $44.1 million for the second
quarter ended September 30, 2001 and $41.4 million in the third
quarter ended December 31, 2000. Third quarter net income exceeded
last quarter's net income by 5.94 percent and last fiscal year's third
quarter net income by 12.72 percent. Net income is $131.7 million for
the nine months ended December 31, 2001, an increase of $8.4 million
or 6.78 percent over net income for the same period in 2000.
Net Interest Income
Net interest income for the third quarter ended December 31, 2001,
is $92.6 million, down $2.3 million or 2.39 percent from the second
quarter and virtually unchanged, up $0.2 million or 0.18 percent from
the third quarter last year.
Quarterly Margins and Asset Growth
For the nine months ended December 31, 2001, net interest income is
$280.1 million, an increase of $10.1 million or 3.75 percent over the
same period last year. The increase in net interest income over the past
year is due to growth in average assets of 11.00 percent. As expected,
the net interest margin decreased over the first three quarters of
fiscal 2002, down to 3.06 percent for the nine months ended December 31,
2001 from 3.27 percent for the same period last year. The lower net
interest margin is primarily attributable to the continued declining
market rate environment. ATB has been able to lessen the negative impact
of the declining interest rate environment by entering into interest
rate swap agreements.
Other Income
Other income for the third quarter ended December 31, 2001 is $27.0
million, an increase of $3.2 million or 13.29 percent from the second
quarter and $4.9 million or 21.89 percent from the third quarter in
the last fiscal period. The increase in third quarter other income
continues to be related to credit fees and card fee revenue.
Non-interest Expenses
Non-interest expenses are $70.8 million for the third quarter ended
December 31, 2001, an increase of 3.32 percent compared to
non-interest expenses last quarter and a 5.46 percent increase
compared to non-interest expenses for the third quarter last year. For
the nine months ended December 31, 2001, non-interest expenses
increased 7.30 percent compared to the last fiscal period. This
increase in non-interest expenses is primarily due to increased
salaries and related payroll costs. Also, the deposit guarantee fee
payable to the Province of Alberta increased due to deposit growth
over the year as well as a 14.29 percent deposit guarantee fee rate
increase.
The efficiency ratio, expressed as a percentage of non-interest
expenses to operating revenue (net interest income plus other income)
is 58.74 percent for the nine months ended December 31, 2001, compared
to 57.81 percent for the same period ended December 31, 2000. This
increase is consistent with ATB's projection for 2002 fiscal year.
Loan Quality
The quality of ATB's loan portfolio continued to improve over the
past year. Gross impaired loans (before deducting the allowance for
credit losses) at the end of the quarter are $93.2 million, compared
to $116.3 million a year ago. The allowance for credit losses exceeds
the gross amount of impaired loans by $86.6 million at December 31,
2001 compared to $57.1 million a year earlier. The ratio of credit
losses to average loans is 0.20 percent for the nine months ended
December 31, 2001, compared to 0.26 percent for the last fiscal
period.
Balance Sheet
ATB's total assets are $12.4 billion at December 31, 2001, an
increase of 6.03 percent from March 31, 2001 and an increase of 7.76
percent from December 31, 2000. Loans are up 6.85 percent from a year
ago due to moderate growth in all customer segments. In the past year
loans to individuals increased by $489.2 million or 9.02 percent,
agriculture loans increased by $67.0 million or 5.33 percent and
independent business and commercial loans increased by $115.1 million
or 3.78 percent. Deposits grew by $662.7 million or 6.14 percent over
the past twelve months. Third quarter earnings increased ATB's equity
to $565.8 million at December 31, 2001. Total assets at December 31,
2001 are less than total assets at September 30, 2001 due to the
reduction of liquid assets during the third quarter. Due to
higher-than-planned growth of consumer deposits as well as equity
growth during the first two quarters of this year, a decision was made
to retire some higher-interest institutional deposits during the
quarter. Liquid assets (consisting of cash resources and securities)
at December 31, 2001 are 14.05 percent of total assets, well above the
regulatory requirement of 6.00 percent.
Caution Regarding Forward Looking Statements
This report includes forward looking statements. ATB 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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