Capital G Bank suffered a $5.5 million drop in net earnings for the year ended January 31, 2009, as a result of a $1.7 million write-down, increased losses and the allocation of higher reserves in its investment and loan portfolios in response to adverse market conditions.

The bank's net earnings at the end of January were $1.3 million, down from $6.8 million for the same period in 2008, as it incurred higher than expected costs for the implementation of a new core banking application platform last September.

But John Kephart, president and CEO of Capital G Bank, pointed to the fact that the bank had posted a profit and had not been forced to make any redundancies as reasons to be optimistic for the future.

"Although the Bermuda economy continues to show stress related to the continuing global crisis, our portfolio of local loans continues to perform well," he said.

"In common with most major banks in the world we had some exposure to the mortgage backed securities market but as a result of our very conservative investment strategy this represented only a small portion of our portfolio and as such, our write-down of $1.7m was reasonable on a relative basis and absorbed within current year earnings. The remaining portfolio continues to perform.

"Despite the financial challenges, Capital G Bank still managed to post a profit of $1.3 million for 2008 and unlike other institutions, has avoided making any staff redundancies to date."

Despite the unprecedented turmoil in the global financial markets since early 2008, the privately-held and Bermudian-owned bank reported its 10th year of consistent growth since receiving its banking licence.

Total assets grew by $4 million to $1.036 billion at January 31st, 2009, from $1.032 billion the year before, while customer deposits rose $5.7 million to $949.8 million, from $944.1 million at the previous year end. The loan portfolio increased by $7.3 million, or one percent, to $726.6 million at the end of January, versus $719.3 million a year earlier.

In light of the continuing global financial crisis, in June, Capital G's parent company injected $20 million into the bank to meet the requirements of the Bermuda Monetary Authority for all of the Island's banks to hold an additional capital buffer to withstand a severe economic downturn.

Gross revenues for the year before loan loss provisions reached $37.7 million, increasing $5.4 million or 16.7 percent from the 2008 level of $32.3 million, with the investment management business contributing $4.5 million of new revenues.

Operating expenses rose by $10.4 million or 40.8 percent, to $35.9 million for the year to January 31, 2009, from $25.5 million in 2008. This was mainly due to the additional core banking system costs and the assimilation of overhead costs of the investment management business.

This year saw the completion of the bank's acquisition of Capital G Investments Ltd. from its parent company, in order to complete the infrastructure needed to provide a full service platform of banking, trust and wealth management products for Capital G Bank customers.

"Capital G Bank, as the only 100 percent Bermuda-owned and focused bank, remains totally committed to the success of the Bermuda economy and the financial well-being of our clients and the families that make up Bermuda's community," said Mr. Kephart.

Mr. Kephart revealed that Capital G Bank had more than doubled its Giving Back donations programme in order to support charities whose resources and services have been even more in demand due to the challenging economy.

"I am confident that our simple philosophy, first-class products and dedicated staff will fuel our continued growth and deliver the most value to our clients," Mr. Kephart said.