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‘Record Result by CBS Canterbury”

9 NOVEMBER 2007

‘Record Result by CBS Canterbury”

CBS Canterbury reports significant business growth that has resulted in a 50.1% increase in pre-tax net operating surplus for the six months ended 30 September 2007.

”The pre-tax net operating surplus (prior to a special preference dividend) for the period is $1,792,316 which compares with $1,194,218 the same period last year and $2,464,061 achieved for the full year ended 31 March 2007,” said CBS Canterbury chairman Mr Graham Kennedy.

“This is an excellent result by any measure and equates to an annualised 34 cents per share after tax earnings for the period (prior to special preference dividend), compared to 24 cents for the full year to 31 March 2007, and was achieved on the society’s increased ordinary capital.”

“The result can be attributed to the solid support for the building society from the community in which we operate. Advances are up strongly in the period to $292,155,568, compared with $272,609,452 a year earlier and $270,764,641 at 31 March 2007.”

“That increased lending activity has contributed to a lift in total assets to $351,830,681 ($346,282,347 last year).”

“The board is very comfortable with the quality of the lending book represented by advances and, with no arrears at 30 September, there was no need for any doubtful debt provisioning.”

The current lending profile is residential lending at 53.7%, commercial lending 42.4% and farming related lending 3.9%.

Mr Kennedy said the interest rate market remains “extremely competitive and directors do not expect any change in the near future from the higher level of rates now prevailing while the Reserve Bank continues to promote a tight anti-inflation monetary policy.”

TRADING

Gross contribution from activities is 13.4% ahead of last year at $4,322,634 ($3,812,872).

Finance charges including interest paid on deposits made with CBS Canterbury totalled $11,982,676 ($12,904,158).

“In essence, this means we have performed well, with a bigger lending book lent at improved margins.”

The successful amalgamation with SMC Building Society completed in 2006, and tighter controls, has resulted in recognisable cost savings during the period.

SHARE CAPITAL

During the period CBS Canterbury received shareholder approval for the redemption of the Society’s preference share capital at $1 per preference share and made a non-renounceable 1 for 10 rights issue of ordinary shares to replace that capital. The proposal arose out of the need to comply from 1 April 2007 with the new NZ IFRS accounting rule that effectively treats preference capital as a financial liability as distinct from equity capital.

The number of ordinary shares on issue rose accordingly to 7,347,838 as at 30 September 2007 from 6,546,260 as at 31 March 2007, as a result of this issue.

DIVIDEND

In association with the preference share redemption, the Society paid a fully imputed final dividend of 41 cents per preference share including a 37 cent special bonus dividend.

A fully imputed interim dividend of 8 cents per ordinary share will subsequently be paid on 30 November 2007.

NZ-IFRS ADJUSTMENT

“It is a requirement of NZ- IFRS that we state the special bonus dividend on preference shares as a special finance charge taken above the line in our income statement. Under previous accounting rules such a charge would have been reflected in movements in equity rather than income statement.”

“The payment of this one-off special bonus dividend of $1,110,000 has the effect of adjusting our net operating surplus to a net surplus before tax of $682,316 ($1,194,218). After tax of $596,278 ($405,024) has been deducted, the adjusted net surplus is $86,038 ($789,194).

AFTER TAX RESULT

“Our actual after tax trading result for the six months is $1,196,038 (prior to special preference dividend), which is $406,844 or 51.55% ahead of the corresponding period last year.”

“CBS Canterbury maintains a strong financial position with end of period equity standing at $28.67m, up 19.1% on the same period of 2006.”

Total assets stand at $351.83m ($346.28m) and total liabilities at $323.16m ($322.21m), leaving net assets at $28.67m ($24.07m).

OUTLOOK

The directors of CBS Canterbury forecast that margins will come under pressure in the second six months as the cost of funds rises, but that the financial results for the full year ended 31 March 2008 will be significantly higher than in 2007.

They also look forward to successful shareholder meetings in December to approve the Loan & Building-CBS Canterbury merger proposal. Documentation related to the merger proposal will be mailed to shareholders shortly. The directors see the merger proposal as a positive step in the growth of a Canterbury-focused banking services business.

ENDS


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