WHAT THE PRESIDENT OF ATB
IS SAYING

May 29, 2009

ATB's spirit is alive and well

ATB records record loan and deposit growth

Our annual report and our financial results for 2009 were released Wednesday, May 27 and there's lots of news to discuss - on both sides of the ledger. In the past two days, I've watched some of the news coverage and frankly, it's disappointing to see so much of the focus on so-called "bonuses for executives" and very little attention paid to what we think is the real story - and that's ATB's record growth in loans and deposits.

While global financial markets were in crisis and the financial industry buzz-phrase was "credit crunch", ATB's 5,000 associates rallied behind Albertans and contributed to record loan growth. Bankers love numbers, and here are some we're proud of: in 2008-09, our loans grew $3.2 billion, or more than 16 per cent. Even more interesting is the fact that business loans jumped by almost 22%. We had record deposit growth, too, as Albertans sought a trusted partner with whom they could safely keep their money.

Our Corporate Financial Services business grew nearly 40 per cent and developed a customer list of Alberta's most sophisticated and innovative companies. And our Investor Services business outperformed its wealth-management competitors in both customer satisfaction and mutual fund returns.

Those day-to-day operations produced income that dropped 20 per cent from last year, which is not surprising given the volatile vagaries of financial markets.

Our 5,000 associates did a remarkable job, and those who met performance targets in areas such as growth, customer satisfaction, and profitability will be paid about $24.5 million in performance pay. This strong belief that associates' pay should be tied to performance and results has been part of ATB's compensation plan for a decade.

Less satisfying was our ongoing experience with that ugly little acronym: ABCP.

We held $1.1 billion in asset backed commercial paper when the market for it froze in August 2007. Though our holdings were restructured into longer-term notes in January 2009, we will still need to reflect its present-day fair value on an ongoing basis. These are provisions for potential losses, not actual losses. This year, our ABCP provision reduced our net income to $6.4 million from $231 million.

The question on some minds (and it's a good one) is: How can ATB justify paying $24.5 million in performance pay when profit was only $6 million?

Let's imagine a newspaper owner who faces a similar situation. Say the owner offers performance pay, too, if employees meet their targets.

In 2008-09, the newspaper won the most awards ever. Circulation hit record highs. So did ad sales. Readers and staff are happier than ever. Profits were down 20 per cent to $45 million - not bad, considering the paper operated in the most challenging industry environment in a generation.

During the year, however, property prices fell and the newspaper's office building dropped in value by $40 million. Even though the company didn't sell the building and has no intention of selling it, if accounting rules dictate that the drop in value needed to be reflected as an expense, profits on paper would be reduced to $5 million.

Would the owner still reward employees - employees who contributed to an outstanding year in every respect, and had nothing to do with the building's value - with performance pay? Would it be fair and right and good business?

Our Board could have worried more about newspaper headlines than our customers and our associates and made the easy decision to scrap performance pay for everyone. But the Board made the tougher - and smarter - business decision to remove the impact of ABCP from performance pay calculations for our associates who had nothing to do with the ABCP market failure. They contributed to outstanding results, and they deserved every penny of their performance pay.

The Board did, however, reduce ATB senior executives' performance pay by 40 per cent, and that was the right thing to do, too, because my executive colleagues and I completely agree that we are accountable for corporate results.

Please be assured that we're on solid financial ground at ATB. Our assets are up to over $26 billion. We're doing more business than ever. And we're determined to come through this next year stronger than ever.

In the coming months, you'll see ATB doing innovative and bold things to improve our ability to serve our 670,000 customers.

You'll see us getting better and better at customer experiences and we're piloting some industry-leading innovations in new branches. High-definition videoconferencing will connect our wealth-management experts with rural customers who crave that expertise. A brand new banking system will put us at the leading edge of technology and customer service. You'll see exciting new sponsorships, and our new focus on telling Alberta stories about customers and communities, the people we sponsor and the causes we support.

I have been a banker for 31 years and with ATB now for two years. I was born and grew up in Alberta, and moved back here to work for ATB. There are lots of things unique about Alberta, and I'm proud to say, ATB is one of them.

My goal, along with the 5,000 associates I work with at ATB, is to build on that uniqueness to create value for Albertans. Albertans have good reason to be proud of ATB, and we'll work hard to make you even more proud in the years to come.

Dave Mowat
President and CEO, ATB Financial