Expansionary Year for CBS

NZX/MEDIA STATEMENT

14 JUNE 2007

Expansionary Year for CBS

CBS Canterbury completed an intensely competitive twelve months ended 31 March 2007 with an enlarged business, increased revenue and profitability and a stronger balance sheet, the chairman Mr Graham Kennedy said today.

The highlight of the year was the successful mid-2006 merger of the former Ashburton Building Society and SMC Building Society, resulting in the creation of Canterbury Building Society (‘CBS Canterbury’).

“With competition constraining lending margins, the removal of cost duplication had added importance for the enlarged building society,” said Mr Kennedy. “Costs of completing the amalgamation have, however, been higher than expected.”

Revenue from ordinary activities increased by 30.6% from $22.77m to $29.74m. However, the direct costs of funds increased by 31.6% from $16.52m to $21.74m reflecting the increased size of CBS and market competition.

“Interest paid to our depositors reached $21.73m, up from $16.51m,” said Mr Kennedy. “The size of our lending operations has increased with total lending 19% higher at $271.28m compared to $227.90m last year.”

Operating surplus was $7.99m ($6.25m). However, expenses rose from $3.69m to $5.24m, leaving net surplus before tax at $2.75m compared with $2.56m. Taxation required $903,644 ($869,917).

The after tax surplus for the year increased by 9.5% from $1.69m in 2006 to $1.85m.

A final dividend of 7.5 cents per share on ordinary shares and 4 cents per share on preference shares, was paid on 30 March 2007. Both payments were fully imputed. Total dividends amounted to 15 cents per share on ordinary share capital and 8 cents per share on preference share capital.

Total assets have increased from $295.80m to $349.07m. Current assets stand at $69.07m compared with $59.92m and non-current assets at $270.40m ($227.07m). Total liabilities increased from $273.68m to $321.31m. Total equity rose from $22.11m to $27.76m

“The Society has an excellent lending book with no impaired assets or loans causing concern,” said Mr Kennedy. CBS’s primary emphasis remains on first mortgage residential mortgage lending. This has increased in aggregate by 29% to $151.81m, this rise largely reflecting the consolidation of SMC’s business activities. Commercial lending stands at $107.44m and farm related lending at $11.86m.

Mr Kennedy acknowledged the services of two retiring directors, Mr Paul Rhodes having completed 24 years of service as an SMC director and one year on the CBS board, and Nicky Wagner, who has resigned following several years of valuable contribution to focus fully on her work as a Member of Parliament.

CBS Canterbury intends to call special meetings in early July for the purposes of placing before ordinary and preference shareholders proposed changes to the capital structure. The proposed redemption of the building society’s preference shares and their replacement by new ordinary shares is driven by the treatment of preference capital as a financial liability rather than equity under a new NZIAS accounting rule.

Mr Kennedy said CBS Canterbury has a growth strategy aimed at ensuring that a strong regional banking alternative to overseas-owned trading banks is maintained in the longer term.

Later in the year, following a mutually satisfactory due diligence process, CBS Canterbury will seek shareholder support for a merger with Loan and Building Society.

He said that in the current year, CBS Canterbury expects a continuation of very competitive conditions, particularly in respect to funding with the progressive introduction of KiwiSaver from next month. “CBS Canterbury has a strong new profile that builds on a tradition of reliability as a community-focused provider of banking services and an excellent future in a strong Canterbury regional economy.”

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NOTE: CBS Canterbury has operated as a building society throughout 132 year history. The Society has issued capital of 6,546,260 ordinary shares and 3,000,000 preference shares. CBS Canterbury is listed on the NZAX market under the ticker code ‘CBS’.

ENDS

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