Bermuda Commercial Bank posted a net loss of $1.47 million for the six months through the end of March, mostly attributable to low interest rates.

The bank swung to the loss from a net income of $680,000 in 2009.

The bank, in which Permanent Investments Ltd. (PIL) acquired First Curacao International Bank's (FCIB) controlling interest earlier this month, posted a diluted loss per share of 23 cents in 2010 compared with earnings of 11 cents per share one year ago. PIL will soon launch a tender offer for the bank's remaining shares at $9.88.

Net interest income for the period was $790,000 versus $3.37 million for the same period last year.

BCB said it has no credit portfolio and the majority of the bank's balance sheet is invested in cash and highly conservative money market funds. The yields on these products reduced significantly in line with reduced global and, in particular, US interest rates.

Despite this strategy ensuring maximum liquidity and minimal credit risk, it provides little to no return in the current interest rate environment. BCB added that it did not invest in the troubled derivative securities market and has had no write-downs or losses in its investment portfolio.

Elsewhere fee and other income increased by $140,000 to $1.66 million, driven primarily by gains on the sale of the bank's holding of Visa Inc. shares.

Total expenses for the six month period decreased by $300,000 or 7.1 percent from $4.21 million to $3.91 million. This decline resulted from a slightly lower headcount and a drop in performance-related employee compensation costs. Amortization costs also fell.

The continued uncertainty surrounding the BCB sale process contributed to the ongoing reduction in the bank's balance sheet. Total assets decreased from $423.35 million at September 30, 2009 to $370.31 million at March 31, 2010, a decrease of 12.5 percent. Total assets at March 31, 2009 were $435.36 million.

Despite the reduction in assets and the net loss for the period, BCB's capital position improved over the six months to March 31, 2010.

The bank's shareholder equity also increased to $75.27 million from $75.05 million at September 30, 2009. This increase resulted from $660,000 in unrealised gains on its small security portfolio and the exercise of 200,000 options by FCIB in December 2009.

As the bank's balance sheet consists predominantly of cash and other short-term investments, and with no direct exposure or losses due to the recent sub-prime crises, BCB's capital ratios remain significantly higher than industry standards and regulatory requirements.

Taking into consideration the net loss for the period and the pending tender offer, the board of directors has decided not to pay a semi-annual dividend at this time.