Bermuda Commercial Bank has bounced back to an annual profit and will pay its first dividend in two years.

BCB posted net profit of $1.18 million for the year ended September 30, rebounding from a loss of $0.38 million last year. The BCB board has approved a dividend of ten cents per share, payable on November 30.

It was a second-half turnaround for BCB, which made a loss of nearly $1.5 million in the first six months of the fiscal year. In a statement released this morning, BCB chairman Michael Collier said the bank had returned to profit in the second half of the year, largely as a result of investing its own capital in a portfolio of international bonds.

BCB sold a controlling interest to Permanent Investments Ltd. in April this year. Permanent built up its stake to 78 percent through a tender offer to shareholders the following month. "Upon the successful sale of the bank to the new investor group in April 2010, the new board set in place broader investment guidelines incorporating a diversified mandate," Mr. Collier said.

"This broader mandate has been successfully implemented by management and is generating a stronger return on investment assets in the current environment of low interest rates."

The bank also realised $3.89 million in gains on the sale of some of its investments.

These gains offset the reduction in interest income on the remainder of the bank's assets, primarily cash and money market funds, which reduced in line with global interest rates, BCB said.

BCB last paid a dividend in 2008 and the bank said yesterday its board intends to adopt a "progressive policy" on dividends, and introduce a dividend reinvestment plan for those shareholders who would prefer to receive their dividends in shares rather than paid in cash.

The bank's stock continues to trade below book value of $10.87 per share on the Bermuda Stock Exchange, where its last trading price, as of yesterday, was $9.75.

BCB, which avoided the problematic investments linked to mortgages that plunged many banks around the world into trouble during the financial crisis, said its balance sheet remained highly liquid with 73 percent of its assets in cash or cash products.

The bank remains very strongly capitalised and has a tier 1 capital adequacy ratio, which measures a bank's liquidity and stability, of 26.6 percent at year end. That is far in excess of regulatory requirements and more than twice the Bank of International Settlements' industry target of 12 percent.

"We anticipate a slight reduction in the bank's capital adequacy ratio as we gradually expand our investment programme and the board has set a target tier 1 ratio of 20 percent for the bank's capital adequacy ratio for the next 12 months," Mr. Collier added.

BCB has launched a series of longer-term deposit products, backed by a revitalised marketing campaign, as it seeks to broaden and lengthen its deposits base.

Total assets of the bank at September 30, 2010 were $409.66 million, having dropped from $423.35 million a year earlier. However, assets increased by $39.35 million during the second half of the fiscal year.

BCB posted net interest income for the year fell to $3.76 million during the year through September, compared to $4.9 million last year.

Shareholders' equity as of September 30 was almost unchanged from last year at $74.95 million, compared to $75.05 million a year earlier.