Bermuda Commercial Bank yesterday said it had posted earnings during the six-month period ended March 31 of $1.51 million ? a 25 percent jump on the same period a year earlier.

The bank said its net income for this period was $310,000 higher than the $1.2 million in earnings it recorded during the same six months a year ago.

Assets also grew, with BCB reporting that by the end of the six-months they had $1.04 billion in contrast to the $836.73 million in assets held at the end of the last financial year, September 30, 2003.

BCB said that despite the lowest US dollar interest rate environment since the late 1950s, it had stuck with a business model focused on a highly liquid balance sheet while at the same time maintaining a low risk, fee income-driven profile.

Specifically, BCB said it had continued to invest customer deposits in the interbank market and money market funds cash and cash equivalents.

At the end of the period, these kinds of deposits represented 99.1 percent of the bank?s total assets compared to 99.5 percent a year ago and 99.3 percent at the end of last September.

Customer deposit balances also increased during the period to $990.84 million, up from $788.53 million one year ago.

The bank?s president and chief operating officer Timothy Ulrich said he was especially pleased with the strong growth in customer deposits, taking into consideration the impact of the low US dollar interest rate environment.

However, Mr. Ulrich added that significant fluctuations in deposit balances must be viewed as part of the bank?s normal business operations and were subject to client cash flow requirements.

He pointed out that the size of BCB?s balance sheet is strongly driven by changes in client activity over time.

While BCB?s investment policy creates what was called ?an extremely liquid, low risk balance sheet for its clients and shareholders? this was said to subject its net income to the vulnerability of interest rate changes.

During the period, net interest income fell by 9.3 percent, going down to $2.24 million from $2.47 million a year ago.

BCB?s statement said: ?The US Federal Reserve cut the Fed Funds Rate in November, 2002 by 0.5 percent and in June, 2003 by 0.25 percent, thereby resulting in a year-on-year decrease in interest earned by BCB on US dollar deposits, despite the higher average US dollar balances.?

Notwithstanding a decline in net interest income, total revenues increased for BCB from $5.07 million at March 31, 2003 to $5.16 million at March 31, 2004.

This was attributed to an increase in non-interest income ? primarily fees, commissions, and foreign exchange gains ? with there being a $2.92 million profit reported at March 31, 2004.

This represented an increase of $320,000, or 12.3 percent over the $2.6 million for this same area, a year ago.

The increase in fees and commissions stemmed from an increase in fee-based activity generated by clients using BCB?s traditional banking and custodial services as well as clients using online services, new business in the bank?s wholly-owned fund services subsidiary, (International Corporate Management of Bermuda Limited), and a reflection of the February, 2003 updated fee structure.

As the bank holds no investments other than cash and cash equivalents, no investment income was reported for the six months ended March 31, 2004 or 2003.

Total expenses during the period decreased from $3.87 million at March 31, 2003 to $3.65 million at March 31, 2004.

BCB said this could largely be attributed to a net recovery on mortgages within the Bank?s declining loan portfolio.

Excluding mortgage recoveries and reserves, total expenses remained relatively constant with a $12,000 increase recorded.

Chairman and chief executive officer John Deuss said the bank would maintain its six-month period dividend of $0.225 per share to be paid on May 26, 2004 to shareholders of record as of May 19, 2004.

Dominique Smith, a senior vice-president with the bank, advised that BCB had begun an additional, planned upgrade to its core banking application, slated for completion in the next quarter.

She said the upgrade will provide a more user-friendly staff interface, leading to greater efficiencies and improved client service.

Mrs. Smith added that the next eBanking upgrade, due out in the summer of 2004, would include global clearing functionality, improved client payroll processing facilities, online dual and tiered authorisation for e-Invest offerings, and further enhancements to back office functionalities.