FirstCaribbean International Bank (Bahamas) Limited

Management’s Discussion and AnalysisFinancial HighlightsB$(000) 2009 2008 2007 2006Net Income 78,637 83,904 109,860 100,700Earnings per share (cents) 65.4 69.8 91.4 83.8Total assets 3,762,672 4,137,990 4,668,455 4,423,961Total equity 707,181 645,812 643,332 596,738Return on assets* 2.0% 1.9% 2.4% 2.6%Return on tangible equity* 16.7% 18.2% 25.2% 26.0%Ratio of operating expenses to revenues 42.2% 37.5% 31.8% 38.3%Dividends per share (cents) 35 45 47 55Dividend pay-out ratio 54% 64% 51% 66%Dividend coverage ratio (times) 1.87 1.55 1.94 1.52*Based on four quarters rolling averagesOverviewThe Bank has delivered relatively strong results, with netincome of $78.6 million compared to $83.9 million in 2008,a 6% decline. As in the previous year, falling internationalinterest rates had a dampening impact on net interest income,as well as lower volumes. Operating income exceeded theprior year by $9.3 million or 58% primarily due to gainson the sale of investment securities and a decline in markto-marketlosses. The increase in operating expenses wasprimarily due to employee-related costs and other generalexpenses. The Bank, however, benefited from a $4.8 millionimprovement in loan loss expense year over year.Review of Consolidated Statementof IncomeNet interest income and marginNet interest income (NII) represents interest earned on loans,securities and deposits with other banks, less interest paidon deposits from customers, banks and other borrowings.Net Income($ thousands)100,700109,640NII for the year decreased by $12.7 million or 8%, from$155.6 million last year to $142.9 million in 2009. Interestincome declined by $46.6 million or 18%; partially offsetby the decline in interest expenses of $33.9 million or 31%.The decline in interest income was driven primarily by loaninterest due to lower productive loan volumes and yields;trading securities interest due to the full disposition of theportfolio during the year; and cash placements interest dueto lower average volumes and yields. The decline in interestexpenses was driven primarily by deposit interest expensedue to lower fixed deposit volumes and rates; partially offsetby increases in other borrowed funds due to higher interestexpenses on derivatives.Other operating incomeOther operating income increased by $9.3 million or 58%,from the previous year. There were gains from investmentsecurities in the current year versus losses in the prior yearresulting in an Net increase Interest Income in operating income of $9.0 million.($ thousands)Net Interest Income($ thousands)154,072147,160155,577142,89383,90478,637102006 2007 2008 20092006200720082009