Third Quarter Results
For the quarter ended December 31, 2002
Message
to Stakeholders
ATB Financial assets surpass $13 billion
Edmonton, February 13,2003 - ATB Financial reported third quarter
earnings of $90.0 million for the period ending December 31, 2002, compared to
$46.7 million for the same period last year, an increase of 92.69 per cent. Net
income for the quarter includes $45.0 million in recoveries of previously
reported credit provisions on the West Edmonton Mall account.
This quarter's results increased ATB's equity to $769.6 million as at
December 31, 2002, an increase of over 36 per cent from last year. This level of
equity would be considered satisfactory for a federally regulated
financial institution.
"The financial performance and growth that ATB Financial has experienced
demonstrates our continued commitment to Albertans,"
said Bob Normand, President and CEO of ATB Financial. "Since 1996, we have
added almost $900 million dollars to our bottom line with growth in all market
segments. At the same time, we continue to provide our customers with the
personal service they value most in servicing their financial needs."
Financial Highlights
- Total assets of $13.1 billion is an increase of 6.13 per cent over last
year.
- Total loans at $11.3 billion is an increase of 10.45 per cent over last
year.
- Retail deposits of $11.2 billion is an increase of 6.97 per cent over last
year.
- The allowance for credit losses, including specific and general loan loss
allowance, exceeds gross impaired loans by $86.0 million. Net impaired loans
represent a negative 0.75 per cent of total loans at December 31, 2002,
which remains unchanged from December 31, 2001.
- Net interest income of $95.4 million is an increase of 3.04 per cent for
the same quarter last year. The increase is mainly due to growth in average
earning assets.
- Non-interest expenses of $76.9 million is an increase of 8.70 per cent
from $70.8 million for the same quarter last year.
- ATB Financial's efficiency ratio (non-interest expenses as a percentage of
operating revenues) is 62.99 per cent, compared to 59.17 per cent for the
same three-month period last year.
Investor Services
Under the banner of ATB Investor Services our clients now have access to
enhanced investment solutions at remarkably competitive pricing. ATB Investor
Services has partnered with some of the best financial solution providers in the
world, in the construction of the Compass Portfolio Series.
These professionally managed portfolios, constructed with in-depth asset
allocation strategies, are among the first of their kind in Canada. Previously
accessible only to the wealthiest of investors, these portfolios are now
available to all our clients and provide a range of solutions for the most
conservative investor to those willing to accept higher risk.
In addition, we have access to the universe of mutual funds and can provide
customer solutions for the affluent investor. The ATB Investor Services team of
licensed professionals is now in a position to offer full-service financial
advice and solutions to all levels of client needs in Alberta.
Through our partnership with Qtrade Investor, access to an online brokerage
service is provided for clients who prefer to directly manage some of their own
investments.
Personal Banking
With ATB's 1% Below Prime Investment Loan, customers can maximize
their RSP contribution. This investment loan provides low-cost borrowing to help
our customers achieve their financial goals. Life and disability insurance
protection is automatically approved on below prime investment loans up to
$13,500, providing comprehensive loan protection, with no health questions
asked.
The Century GIC Series 3 was offered in October 2002 and once again
the demand for this uniquely Albertan investment was strong. The Century GIC is
only on sale during the month of October until 2005. All purchasers of the Century GIC series are eligible to win a $100,000 prize. The draw takes place in
December 2005.
Throughout the year, we offer a wide selection of other fixed-date products,
such as the Springboard GIC, with extremely competitive rates.
A 10-year Guaranteed Rate Mortgage was launched in November 2002. This
innovative product offers our customers long-term rate protection with
flexibility. After a five-year term, customers have the option of renewing for
another five years at the same rate, or can switch to a new product. This
10-year Guaranteed Mortgage product is unique to ATB Financial and is not
offered by any other financial institution in Canada.
Agri-industry
The Co-operation and Referral Agreement signed with Rabobank last year has
progressed satisfactorily and we recently extended this agreement to 2005. The
general intent of the agreement is to undertake joint initiatives that are of
mutual benefit to both financial institutions and that enhance the financial
services available to our customers.
We continue to recognize the effects of the severe drought of 2002 and its
impact on some individual agricultural customers in selected geographic regions
and within certain industry sectors. We also recognize the risk and potential of
the drought continuing into 2003. We have found the most effective response is
to look at the unique circumstances of each individual customer. We will
continue to develop sustainable solutions to resolve any short-term debt
servicing deficiencies, whatever the cause. Our trained staff are proactively
contacting customers with potential financial pressure to present options and
assist whenever possible.
Business Banking
During the quarter, ATB Financial sponsored a number of Real Cash, Real
Profit seminars in Edmonton, Calgary and Lethbridge. These two-day seminars help
entrepreneurs understand the difference between being profitable and being able
to meet their day-to-day financial commitments. The seminars are now being
expanded, with future seminars being offered in Calgary, Edmonton, Fort McMurray,
Grande Prairie, Lethbridge, Medicine Hat, and Red Deer. A condensed version of
the Real Cash, Real Profit seminars were held in Calgary and Edmonton in
conjunction with Small Business Week in October 2002.
Together with the Calgary Chamber of Commerce, ATB Financial hosted the
Disney Keys to Excellence program in November 2002. The program was held at
Spruce Meadows in Calgary. Presenters from Disney World's Disney Institute spoke
to over 200 participants, many of who were small business owners and
entrepreneurs. Some of the topics covered included leadership excellence,
loyalty, management, managing for creativity, and value chain management.
A new rate capper loan program was launched in January 2003. Geared to our
business customers who want the advantages of both a variable rate loan and a
fixed rate loan all in one, this loan program provides peace of mind against a
rise in long-term interest rates.
Access
A state of the art branch opened at Whitemud and Calgary Trail in Edmonton in
December 2002, with the Petrolia and Terrace Plaza branches relocating to this
new location. We continue to expand our branch network with new facilities
currently under construction in Calgary and Rocky Mountain House. Renovations
were also recently completed at the Killarney branch in Edmonton.
Processes
An agreement was signed with ACL Services Ltd., to provide an integrated
solution, including software, customization and implementation services, that
will assist in detecting money laundering, terrorist property, and other
fraudulent activities. This solution helps ATB Financial to be proactive in
response to the new Proceeds of Crime (Money Laundering) and Terrorist Financing
Act, which came into effect in January 2003.
ATB in the Community
Each year, ATB Financial customers and employees support their local United
Way fund-raising campaigns. ATB is proud to support all 11 United Way
associations throughout the province. During the 2002 campaign, held in
September and October, ATB Financial and its associates raised $235,000 to
support this worthwhile cause.
As a Grey Cup Festival sponsor, a promotion was run in Calgary and area ATB
Financial branches for a chance to win the ultimate $7,000 Grey Cup package.
Thousands of entries were submitted and the winner and three friends jetted to
Edmonton and were provided with hotel accommodation, tickets to all Grey Cup
cabarets and events, game tickets, Grey Cup jackets and a $2,000 credit balance
on an ATB Financial MasterCard.
Through our customers and staff from Edmonton and area branches, and
corporate office fundraisers, $20,000 was raised for the Christmas Bureau in
Edmonton. These funds provide holiday meals for families in need.
Ron P. Triffo
Chairman of the Board
Bob Normand
President &
Chief Executive Officer
February 2003
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Management's Discussion and Analysis (unaudited)
Net Income
ATB reported net income of $90.0 million for the third quarter
ended December 31, 2002, compared to $50.5 million for the second
quarter ended September 30, 2002 and $46.7 million in the third
quarter last year. This quarter includes $45.0 million in recoveries
for previously reported credit provisions on the West Edmonton Mall
account. Excluding this recovery, net income for the third quarter
ended December 31, 2002 was $45.0 million, a decrease of $5.5 million
over the previous quarter. This decrease is due to a combination of
higher non-interest expenses and provisions for losses.
Net income is $177.6 million for the nine months ended December 31,
2002, an increase of $45.9 million or 34.85 per cent from the same
period last year.
Net Interest Income
Net interest income for the third quarter ended December 31, 2002
is $95.4 million, up $1.9 million or 2.04 per cent from the second
quarter and $2.8 million or 3.04 per cent from the third quarter last
year. The increase in net interest income over the previous quarter is
due to growth in loans.
For the nine months ended December 31, 2002, net interest income is
$277.4 million, a decrease of $2.7 million or 0.95 per cent over the
same period last year. This decrease is due to the low interest rate
environment, which causes a downward pressure on interest margins. The
net interest margin decreased to 2.91 per cent for the nine months
ended December 31, 2002 from 3.06 per cent for the same period last
year. This decrease in margins is offset by an increase in loans.
Credit 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 $87.0 million, compared
to $93.2 million a year ago. The allowance for credit losses exceeds
the gross amount of impaired loans by $86.0 million at December 31,
2002, compared to $77.9 million a year earlier.
The impact on the income statement for the third quarter ended
December 31, 2002, was a recovery of credit losses of $44.7 million,
compared to a recovery of $4.7 million in the previous quarter and a
charge of $2.2 million in the third quarter last year. For the current
quarter, amounts include the $45.0 million recovery on the West
Edmonton Mall account.
Other Income
Other income for the third quarter ended December 31, 2002 is $26.7
million, an increase of $0.2 million or 0.75 per cent from the second
quarter and a decrease of $0.3 million or 1.07 per cent from the third
quarter last year. For the nine months ended December 31, 2002, other
income is $79.3 million, up $5.1 million or 6.91 per cent from the
same period last year. The increase is attributed to credit fees,
primarily in the individual financial services segment, as a result of
fees collected from customers renegotiating fixed-term loans to lock
in lower interest rates. Card fee revenue also increased due to an
increased number of cards in circulation.
Non-interest Expenses
Non-interest expenses are $76.9 million for the third quarter ended
December 31, 2002, an increase of 3.59 per cent compared to the
previous quarter and an 8.70 per cent increase compared to the third
quarter last year. For the nine months ended December 31, 2002,
non-interest expenses increased 9.21 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
amortization expense related to new technology systems and higher
transaction volumes.
The efficiency ratio, expressed as a percentage of non-interest
expenses to operating revenue (net interest income plus other income)
is 63.71 per cent for the nine months ended December 31, 2002,
compared to 58.74 per cent for the same period last year.
Balance Sheet
ATB's total assets are $13.1 billion at December 31, 2002, an
increase of 2.84 percent from September 30, 2002. Total loans grew by
$503.0 million or 4.64 per cent this quarter. This increase was
achieved through a combination of growth in all market segments and
conversions of loan guarantees into loans. Over the twelve-month
period, total loans grew by 10.45 per cent compared to 6.85 per cent
for the same period last year.
Total deposits grew by $267.7 million or 2.28 per cent during the
quarter. Deposit growth over the previous year is 4.87 per cent
compared to 6.14 per cent the year before. Lower deposit growth rate
this year reflects management's decision to retire some higher-cost
institutional deposits.
On a segment basis, the largest growth was recorded within
individual financial services. Average loans increased by 11.70 per
cent from a year ago, average deposits by 9.38 per cent, and total
assets by 12.14 per cent. In the independent business and commercial
financial services segment, average loans increased by 6.79 per cent
from a year ago.
Total equity as at December 31, 2002, is $769.6 million, up by
$177.6 million from March 31, and $203.8 million from a year ago.
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