Bermuda Commercial Bank Announces Annual Financial Results

Hamilton, Bermuda:  9 November 2005 - The Directors of Bermuda Commercial Bank Limited ("BCB" or "the Bank") are pleased to announce the annual results of the Bank for the financial year ending September 30, 2005.  Net income for the year ended September 30, 2005 increased $2.41 million, or 87.3% to $5.17 million from $2.76 million.  Total assets were $858.82 million at September 30, 2005, an increase of 46.5% or $272.44 million over the prior year.   Basic and diluted earnings per share as at September 30, 2005 are calculated at $1.19 and $1.04, respectively, compared to $0.64 and $0.54 at September 30, 2004.

Interest Income has almost doubled to $16.92 million from $8.90 million while net interest income increased $3.60 million, or 77.8% to $8.23 million from $4.63 million.  This growth results directly from the consistent and measured increase in US interest rates over the last year and a half and the significant impact these interest rates have on the Bank's income as a result of its low risk, highly liquid balance sheet.  The US economy continues to perform strongly and in an effort to control inflation the Federal Reserve Board increased interest rates eight times during BCB's reporting period resulting in a strong year on year increase in interest earned on the Bank's core US Dollar deposit portfolio. 

Bolstered by increased net interest income, total revenues increased to $14.14 million for the year ending September 30, 2005 compared to $10.42 million for the prior year, an increase of $3.72 million or 35.7%.  Complementing the higher net interest income, other income - primarily fees, commissions, and foreign exchange gains - increased from $5.78 million at September 30, 2004 to $5.91 million at September 30, 2005, an increase of $130,000 or 2.2%.  The increase in fees and commissions is attributable to a combination of new business and strong performances from our asset management and fund administration departments.

The Bank holds no investments other than cash and cash equivalents, and as such no investment income was reported for the years ended September 30, 2005 or 2004. 

Total expenses for the year ended September 30, 2005 were $8.97 million compared to prior year expenses of $7.66 million.  As a result of continued efforts to control costs, the Bank's Efficiency Ratio has improved to 63.9% from 73.5% last year.  Mr. John Deuss, Chairman and CEO, stated that "BCB has always been committed to strong cost discipline.  In the recent era of falling interest rates, this commitment enabled us to continuously report solid annual earnings.  Now, with interest rates rebounding we have begun to reap the rewards of this discipline with increases in income far outstripping our cost increases". 

Total Shareholders' Equity has increased from $48.17 million at September 30, 2004 to $51.32 million at September 30, 2005, an increase of $3.15 million, or 6.5%.  The Board of Directors approved increasing the half-yearly dividend to $0.25 per share, which brings the dividend for the year to $0.475 per share, representing an annual yield of 5.6%, an attractive yield considering current interest rate levels and the Bank's solid book value.  This yield of 5.6% is based on the Bermuda Stock Exchange bid price of $8.50 for the Bank's stock as of September 30, 2005.

President and Chief Operating Officer, Mr. Timothy W. Ulrich stated that "Strengthening income and shareholder value is the cornerstone of any business and Bermuda Commercial Bank is no exception.  Our management team is focused on steadily building our book of business and by consistently fortifying our balance sheet we have built a strong base of shareholder value.  Ten years ago BCB's management put in motion a policy of pursuing a low risk, highly liquid balance sheet.  Over the years we have maintained our commitment to this policy and at year end, cash and cash equivalents represented over 99% of the Bank's total assets.  Furthermore, with interest rates returning to more normal levels, this low risk policy is translating directly to our income statement in the form of increased earnings and shareholder value".

Customer deposits were $803.08 million at September 30, 2005, a $268.80 million increase over the 2004 year end balance of $534.28 million.  While very welcome, Mr. Ulrich noted that this dramatic increase has been largely driven by a small number of large customers and that significant fluctuations must be viewed as part of normal business dictated by client cash flow requirements.  Average customer deposit balances, the more significant driver of profitability, remained at levels similar to the strong averages recorded in the prior financial year.

BCB remains steadfast to its stated strategy of full automation, on-line delivery of services, and a highly liquid balance sheet.  The Bank continues to improve and refine its internet banking system while maintaining the personal and flexible service which has always been a hallmark of BCB.

During the year BCB commenced a full review of its policies, procedures and risk management systems.  A dedicated compliance department was established and the bank's compliance software systems were upgraded.  These initiatives have been independently evaluated by the Bank's internal audit department.

Mr. Ulrich added that BCB now also intends to actively increase the Bank's profile.  Over the last number of years we have focused on building our products and consolidating our workforce.  We offer a distinct portfolio of market-oriented services and we are now ready to reintroduce ourselves to the local and global marketplaces.  To this end, we have allocated significant resources to launch a more aggressive marketing campaign over the coming years.

Looking forward, BCB is committed to continued financial discipline and stability and will maintain its low risk, fee income structure.  The Bank will remain in tune with its clients' changing requirements and will continue to upgrade its core banking and eBanking platforms, offering increasingly enhanced products and services to the Bank's expanding client base.

The following table depicts selected financial data to accompany the preceding narrative.