Bermuda Commercial Bank said yesterday it expects to announce a merger or sale of the bank within the next two months.

BCB, which has been drawn into controversy after it was revealed that 47 percent shareholder First Curacao International Bank was being investigated in connection with a tax evasion scheme, saw potential buyer Butterfield Bank drop its interest earlier this month.

Announcing its annual results, the bank said yesterday: “Several months ago the board of directors decided that a merger or outright sale to a larger financial institution was desirable to further the Bank’s growth.

“The subsequent issues concerning the Bank’s largest shareholder, First Curacao International Bank, have served to reinforce this strategic decision. Discussions are underway with a number of interested parties which, it is expected, will result in a conclusion within the next two months.”

BCB said its net income for the year ending September 30 had increased from $5.17 million to $8.38 million at September 30, 2006, an increase of $3.21 million or 62.1 percent.

Diluted earnings per share increased to $1.67 per share compared to $1.04 per share one year ago. “Strict cost discipline” across all departments resulted in the Bank’s efficiency ratio improving considerably to 52.9 percent, from 63.4 percent at September 30, 2005.

The bank said it was increasing its half-yearly dividend to $0.40 per share and announced a special dividend of $0.25 per share both to be paid on December 14, 2006, to shareholders of record as of December 6, 2006.

“Based on the recent Bermuda Stock Exchange bid price of $8.00 for the Bank’s common stock this semiannual dividend of $0.40 along with the $0.30 dividend paid in May 2006, generates an annualized yield of 8.75 percent to the Bank’s shareholders,” the bank said.

Chief operating officer Dominique Smith said: “After an eventful couple of months it is very pleasing to announce such solid results.

“The main driver of the Bank’s profitability continues to be the consistent strength of BCB’s deposit taking business. For the year ended September 30, 2006 net interest income increased by 40.9 percent to $11.6 million from $8.23 million at September 30, 2005.”

“Due to the Bank’s strong income growth, performance ratios have improved considerably. Return on equity was 15.30 percent for the year compared to 10.39 percent for the prior year while return on assets increased to 1.27 percent from 0.72 percent.”

“BCB’s experienced management team and qualified staff are totally committed to the Bank and to providing excellent customer service. The Bank has no debt. Our balance sheet is highly liquid with cash and cash equivalents making up over 99 percent of total assets.”

BCB’s shares last traded at $9 on November 9.