News Release:

August 24, 1998

Alberta Treasury Branches' posts record
first quarter earnings
For Immediate Release

Edmonton, AB—Alberta Treasury Branches (ATB) today released first quarter results for the period ended June 30, 1998, showing net income of $23.5 million, up $15.4 million from the same period last year, a 188.0 percent increase.

"The first quarter results are reflective of the strength of ATB in the Alberta marketplace," said Paul Haggis, Alberta Treasury Branches’ President and CEO. "New products and sales campaigns were successful in retaining customers and bringing in new business and we are continually looking for ways to meet the needs of our customers. ATB is clearly a vibrant and renewed organization."

Mr. Haggis added, "While loan quality continues to improve significantly, deposits also increased by $300.4 million during the first quarter, further demonstrating continued customer support of ATB. Expenses are up slightly over last year, largely due to a new compensation plan needed to recognize the commitment of our employees and their value to our customers. Record results have been achieved even with a $2.0 million charge for the new deposit guarantee fee. The new fee is payable to the Province of Alberta, in recognition of the value received through their unconditional guarantee of our customers’ deposits. Without a doubt, the new reinvigorated ATB is a meaningful alternative in today’s ever-changing financial services marketplace."

Some 18 months ago, ATB began examining the circumstances surrounding the 1994 refinancing of West Edmonton Mall. The guarantee for West Edmonton Mall financing is not, and never was, typical of the normal business activities of ATB. As a further commitment to strengthen our Balance Sheet, a provision has been established at June 30, 1998, to reflect a potential loss associated with the West Edmonton Mall loan guarantee.

Highlights of the first quarter financial results:

• Net interest income of $67.8 million, an increase of 12.60% over the previous year.
• Average interest spread increased to 3.11%, compared to 2.91% last year.
• As a result of continued recoveries on non-performing loans, the provision for credit losses has decreased $10.9 million to $1.9 million, when compared to the same period last year.
• Other income of $17.9 million, has increased by $1.7 million over the same period last year. ATB continues to provide affordable banking services in Alberta, with rates competitive with other financial institutions.
• Non-interest expense totaled $60.4 million, an increase of $4.8 million (8.66%) over last year.
• Total assets were $9.2 billion, up $606.2 million (7.1%) from last year.

Alberta Treasury Branches, established in 1938 by the Government of Alberta, is celebrating 60 years of providing financial services to Albertans. Today ATB serves Albertans in 240 communities through a network of 148 Branches and 129 Agencies.

Highlights of Results
For the Three Months Ended June 30
($ in thousands)

Key Performance Indicators
For the Three Months Ended June 30

ATB’s first quarter results emphasize our commitment to our business plan, "Here Today, Here Tomorrow" and our determination to be Albertans’ first choice for financial products in ATB’s chosen markets.

Net income for the quarter of $23.5 million, an increase of 188.0% over the same period last year, reduced ATB’s cumulative deficit to $43.0 million. Total revenue of $85.8 million is up 5.0% over the previous quarter and 12.1% over the same period last year.

Total assets grew $359.8 million, or 4.1%, in the quarter to June 30, 1998. As a result of the actions of our Credit and Asset Management teams, the quality of our loan portfolio improved in the quarter. Credit losses decreased by $10.9 million over the same period last year. Action taken on impaired loans returned approximately $134 million to earning assets.

Customer deposits increased by $300.4 million, or 3.44%, in the quarter.

Also of significance, is the work ATB began some 18 months ago in respect of circumstances surrounding the 1994 refinancing of West Edmonton Mall. The guarantee for the WEM financing is not, and never has been, typical of the normal business activities of ATB. A provision has been established at June 30, 1998 to reflect a potential for loss associated with the WEM loan guarantee.

New products in the individual financial services market, and mortgage and fixed date deposit campaigns were successful in retaining customers and bringing in new business.

ATB continually looks for new ways to meet the needs of its customers. For example, ATB continues to increase the number of automatic banking machines. The Student First program, a new product targeted at students in post-secondary institutions, was launched June 1, 1998. Beginning this fall, equity-linked GICs will be available on an ongoing basis and home equity lines of credit will be made more easily available.

For ATB’s independent business customers, we recently introduced life and disability insurance for their lines of credit. ATB is currently exploring opportunities to offer mezzanine-financing instruments for growth companies. Seven and ten year terms have been added to our Agri-Term product and we will be looking to add a contingency line of credit for agri-business customers in the coming months.

Productivity, which measures the amount spent for every dollar earned, improved in the first quarter to 70.4%. The lower the productivity ratio the better and our goal by the year 2001 is 64.0%. A number of projects are already active with more planned - all aimed at reducing the administrative burden at the branch level and freeing up sales staff to focus on customer needs.

Although our productivity ratio has improved, non-interest expense increased by 8.7% in the three months ended June 30, 1998 over the same period last year. This is largely attributable to an increase in salaries and employee benefit expenses, and a new deposit guarantee fee payable to the provincial government.

ATB’s management and non-bargaining unit employees began participating in a new competitive performance-based compensation plan on April 1, 1998. On June 26, bargaining unit employees ratified a new collective agreement, making their participation in the new compensation plan retroactive to April 1.

ATB continues to invest in our employees through training. As of June 30, 1998, 50% of the employees had completed sales training, reinforcing ATB’s commitment to become a dynamic sales organization.

To become more competitive, on April 8, 1998 we announced our intention to outsource information technology and document processing back office functions. A request for proposal was issued on May 22, 1998, with a target date for completion of November 1998.

ATB is making good progress towards its December 31, 1998 timeline for becoming year 2000 compliant for all systems controlled by ATB. We continue to encourage customers to assess and address year 2000 risks, and will be participating in public year 2000 symposiums in smaller Alberta regional centers, as well as Edmonton and Calgary, during September 1998. These symposiums will be held in partnership with the Canadian Bankers Association and local Chambers of Commerce.

With merger plans recently announced by the major Canadian banks, the financial services industry is rapidly changing. These changes represent exciting market opportunities for ATB. By bringing together our strong customer focus and a renewed emphasis on growth, we are better positioned than ever before to solidify our position to be Albertans’ first choice for financial products.

CONSOLIDATED BALANCE SHEET (Unaudited)
As atJune 30
($ in Thousands)

CONSOLIDATED STATEMENT OF INCOME (Unaudited)
For the Three Months Ended June 30
($ in Thousands)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited)
For the Three Months Ended June 30
($ in Thousands)

CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION (Unaudited)
For the Three Months Ended June 30
($ in Thousands)

Net Interest Income
Due primarily to continued higher interest spreads, net interest income in the first quarter, at $67.8 million, was $7.6 million or 12.60% higher than for the same period last year. The average spread, which is net interest income expressed as a percentage of average earning assets, was 3.11%, 20 basis points higher than a year ago. ATB has been able to achieve higher spreads than the majority of other financial institutions.

Loan Quality
Loan quality continues to improve significantly. In the quarter, gross impaired loans reduced from $414.3 million to $283.6 million. After deducting the general loan loss provisions, net impaired loans now stand at 1.12% of total loans, compared to 2.23% at March 31, 1998 and over 4.38% a year ago. This trend is expected to continue throughout the current year.

Non-Interest Expenses
Non-interest expenses totaled $60.4 million, an increase of $4.8 million or 8.66% over the same quarter last year. This increase is primarily a result of a 10.27% increase in salaries and employee benefits associated with the introduction of a competitive performance-based compensation plan for all ATB employees on April 1, 1998.

Balance Sheet
Total assets at the end of the first quarter are $9.18 billion. This represents an increase in the first three months of the year of $359.8 million.

Total loans decreased in the quarter as a result of the reduction in net impaired loans of $88.6 million and a reduction of commercial loans and mortgages of $25.6 million. However, loans within ATB’s three target markets increased overall by $60.7 million. The offering of new products such as the Cash Back and the 5 Year Rate Capper Mortgages have contributed significantly to this increase. In the first quarter last year, total assets increased by $107.5 million and total loans decreased $14.6 million.

Deposits increased by $300.4 million or 3.44% during the first quarter. Retail fixed date deposit products, including a 15-month GIC, Cashable GIC, and a three-year Premium Rate GIC have significantly contributed to this growth. Since April 1, 1998, the fixed date deposit portfolio grew by a total of $162.8 million compared to a decrease of $91.8 million in the same period last year.

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For further information please contact:

For more information contact:
Darlene Dickinson
Vice-President, Public Affairs
Alberta Treasury Branches
(403) 493-7307

Web Site: http://www.atb.com

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