annual report 2009

1 GP | 9002 TROPER LAUNNA | KNAB LANOITAN TS1

Performance... Built On A Heritage Of Community And Care!

Annual Report

2009

1ST NATIONAL BANK | ANNUAL REPORT 2009 | PG 3

Performance... Built On A Heritage Of Community And Care!

Annual Report

2009

1st National Bank presents its 2010 Annual Report with the same commitment with which we were birthed so many years ago as the nation’s first true indigenous bank, performing since then and giving back to the national community in so many ways. We do so with pride and with the humility of knowing how much more still remains to be done.

Our theme for this report, PERFORMANCE...BUILT ON A HERITAGE OF COMMUNITY AND CARE!, speaks to our ongoing commitment to the very founding principles that have charted our course this past year and every one gone before and still to come. We reflect on the one-on-one commitment through the cover of our report with just some of the thousands of faces and places with which we have built relationships, coming together to form the essence of who we are as a corporate entity.

Our past year in many ways reflects this same consistent approach. In the area of

altruism, we continue to support many worthy causes, positively impacting on youth, sport, culture and national skills development. Our commitment to always seeking and making available the appropriate industry innovations saw us launching an array of technology tools to keep our customers at the leading edge of international convenience banking. But our local sensitivity and special relationship with our communities was also further deepened through our special banking hours and deep community-level relationships and support.

Our theme of performance and the rock of heritage on which it is based, resonates at the highest levels of the Bank and as an institution of development, we present this report as a virtual national document for all.

From the one-on-one personal relationships with each customer, to the surrounding community and national community, we perform to our utmost, to never fail to be first to offer our best to our country.

Vision Statement1st National Bank St. Lucia Limited is the first choice financial services provider and an outstanding corporate citizen, achieving excellent customer satisfaction and sustained financial growth.

Mission StatementTo contribute to national development by creating value for shareholders through the provision of financial services to local, regional and international individuals and corporate clients.

This will be achieved by creating value and satisfaction for our customers through excellent service driven by a highly skilled, empowered, visionary and inspired team using appropriatetechnology, supported by good corporate governance.

Core ValuesIntegrity • Professionalism • Confidentiality


ANNUAL REPORT 2009Contents

6 Notice of Meeting

7 Corporate Data

8 Financial Highlights

12 Board of Directors’ Report

16 Board of Directors

20 Managing Director’s Report

34 Management Team

38 Management Organization Chart

39 Auditor’s Report

40 Balance Sheet

41 Statement of Income

43 Statement of Changes in Equity

44 Statement of Cash Flows

45 Notes to the Financial Statements

Performance... Built On A Heritage Of Community And Care! | PG 6

Notice Of MeetingNotice is hereby given that the 72nd Annual Meeting of Shareholders of the 1st National Bank St. Lucia Limited will be held at the National Insurance Corporation Conference Room, Francis Compton Building, Waterfront, Castries, on !ursday, 29th April, 2010 at 5:00 p.m.

AGENDA

1. Tabling of Proxies2. To confirm the Minutes of the Annual Meeting of Shareholders of 30th April, 20093. Matters arising out of the Minutes4. To consider and adopt the 2009 Report of the Board of Directors5. To consider and adopt the Auditor’s Report to the Shareholders6. To consider and adopt the Audited Financial Statements for the year ended 31st December, 20097. To sanction a dividend of $0.40 cents per share as recommended by the Board of Directors8. To elect three Directors.

The Directors retiring by rotation and who are eligible for re-election are:-

NOTE: Nominations may be made either in writing or on the prescribed forms and must reach the Bank’s registered o!ce at least five (5) days before the day of holding the meeting.

9. To appoint and fix the remuneration of the Auditor.

NOTE: A Shareholder entitled to attend the meeting and vote may appoint a proxy to vote in his/her place. A person appointed by proxy need not be a shareholder. The

instrument appointing a proxy shall be in writing under the hand of the appointer or of his/her attorney duly authorized in writing, or if such appointer is a corporation, either

under its common seal or under the hand of an officer or authority so authorized. The instrument appointing a proxy and the power of attorney or other authority if any under which it is signed or a notarially certified copy of that power of authority shall be deposited at the registered office of THE COMPANY not less than forty eight hours before the time for holding the meeting at which the person named in the instrument proposes to vote and in default the instrument of proxy shall not be treated as valid.

NOTICE is also hereby given that the Share Transfer Book of the Bank will be closed from 16th April, 2010 to 29th April, 2010 both dates inclusive.

BY ORDER OF THE BOARDBeryl Carasco-AlleyneCorporate Secretary


Corporate DataHEAD OFFICEReduit, Gros Islet

P. O. Box 168,CastriesTel : (758) 455 7000Fax : (758) 453 1630

CASTRIES BRANCH#21 Bridge Street,

P. O. Box 168,CastriesTel : (758) 455 7000Fax : (758) 453 1630

SUB BRANCHJ.Q’s MallRodney Bay, Gros Islet

Tel : (758) 452 8882/3Fax: (758) 452 8884

SUB BRANCHMarina VillageMarigot Bay, CastriesTel: (758) 458 3744Fax: (758) 458 3638

SUB BRANCHCommercial StreetP.O. BOX 342Vieux FortTel : (758) 454 6213Fax : (758) 454 6137

BUREAU DE CHANGEGeorge F.L. Charles AirportVigie, CastriesTel : (758) 453 1683

Fax: (758) 451 8482

BUREAU DE CHANGESLASPA Ferry TerminalFaux a Chaux, CastriesTel : (758) 453 0041Fax: (758) 451 8482

SWIFT: LUOBLCLCEmail: [email protected]

Website : www.1stnationalbankonline.com

DIRECTORSCharmaine Gardner President

Cyril Matthew 1st Vice President

Ferrel V. Charles 2nd Vice President

Brenda Floissac-FlemingNigel Fulgence

Joseph Maxwell Christian Husbands Lionel James

Johnson CenacTedburt Theobalds

G. Carlton Glasgow Managing Director

SOLICITORSFloissac, Fleming & Associates

AUDITORPricewaterhouseCoopers

12%Increase in

Total Assetsover 2008

49.3%Cost

Efficiency

11%Increase in

Customer Depositsover 2008

12%Increase in


49.3%Cost

Efficiency

11%Increase in



Financial Highlights2009

$ ‘ 000

2008$ ‘ 000

2007

$ ‘ 000

2006

$ ‘ 000

2005

$ ‘ 000

OPERATING RESULTS

Interest income 30,587 29,681 25,403 24,015 18,332

Interest expense 11,883 10,763 9,046 7,303 6,342

Net interest income 18,704 18,918 16,357 16,712 11,990

Other income 4,866 4,056 5,646 4,468 3,479

Other operating expenses 11,622 10,515 9,028 8,157 7,039

After tax income 9,114 9,096 10,539 9,291 5,992

BALANCE SHEET DATA

Customer deposits 365,377 329,405 297,510 269,514 223,758

Common shareholder equity 7,971 7,971 7,971 6,877 5,599

Total shareholder equity 66,204 56,239 49,339 39,077 29,591

Total Assets 436,072 390,152 351,468 314,392 260,272

Common shares issued & paid (‘000) 5,000 5,000 5,000 4,635 4,209

PERFORMANCE

$ $ $ $ $

Dividends Declared 0.40 0.40 0.40 0.35 0.30

Earnings per share 1.82 1.82 2.17 2.10 1.47

Book Value 13.24 11.25 9.87 8.43 7.03

Return on Assets 2.09% 2.33% 3.00% 2.96% 2.30%

Return on Equity 13.77% 16.17% 21.36% 23.78% 20.25%

Net Interest Margin 4.29% 4.85% 4.65% 5.32% 4.61%

Productivity 49.3% 45.8% 41.0% 38.5% 45.5%

Average Employees 95 94 90 82 80

12%Increase in


49.3%Cost

Efficiency

11%Increase in


12%Increase in


49.3%Cost

Efficiency

11%Increase in




TOTAL ASSETS2008 = $390 million2009 = $436 million ^TARGET —> $425 million

CUSTOMER DEPOSITS2008 = $329 million2009 = $365 million ^TARGET —> $353 million

+ $46

+ $36TOTAL LOANS2008 = $248 million2009 = $281 million ^TARGET —> $262 million

+ $33Loans—Increase in Millions (net)

Assets—Increase in Millions

Deposits—Increase in Millions


CAPITAL ADEQUACY RATIOBANK – 21%

ECCU – 19%

COST EFFICIENCYBANK – 49.3%

INDUSTRY AVERAGE – 60%

TOTAL ASSETS2008 = $390 million2009 = $436 million ^TARGET —> $425 million

CUSTOMER DEPOSITS2008 = $329 million2009 = $365 million ^TARGET —> $353 million

TOTAL LOANS2008 = $248 million2009 = $281 million ^TARGET —> $262 million


Board of Directors’ Report


Due diligence, sound corporate governance and conservative banking practices are catch phrases that have become almost cliché in the halls of the 1st National Bank. These principles have enabled our Bank to survive the economic vicissitudes of the last twelve months and a most serious global recession. The Bank has maintained a profit after tax of $9.1 million and a 12% growth in the balance sheet position, in comparison to the previous financial year. Strict adherence to the historic 1st National Bank creed of sound financial banking principles, together with an inestimable amount of hard work by your Board, your Senior Management right through to staff members, has enabled us to reach this present position.

Underlying the balance sheet growth is the strategy to maintain a strong Tier 1 capital adequacy ratio of over 15% to foster shareholder and public confidence; we are gratified with the result of 21%. Moreover, the Bank’s overall condition has improved, a fact confirmed by the Eastern Caribbean Central Bank after their 2009 examination.

Book value per share has grown from $11.25 to $13.24 and the earnings per share are stable at $1.82. Customer service excellence is central to all our strategic

initiatives. Our recruitment process ensures that our human resources have the right aptitude and skill set, augmented by continuous training to drive service delivery. We remain focussed on the strategy to use appropriate modern information technology to deliver that level of service. Mobile banking, a new addition to our suite of products was well received, with new features to be added in 2010. Additionally, the Bank plans to introduce its own branded debit and credit cards to enhance accessibility of funds to customers.

Our plans to enhance our customers’ banking experience are progressing satisfactorily. These include:

• the commissioning of a new Sub - Branch to be located in Choc Bay during the second quarter of 2010,

• the construction of a three storey office building on #18 Bridge Street,

• the refurbishment of the main branch at #21 Bridge Street,

• the expansion of the Rodney Bay Sub - Branch.

Over the years, we have built a strong corporate social presence by the support of development projects focussing on youth, education, the arts and the environment. At the

recently held St. Lucia Business Awards, the Bank received three awards in recognition of the work done during 2009 in the areas of Corporate Social Responsibility, Innovation and Service Excellence. Indeed, some members of the Board of Directors, management and staff engage in philanthropic and voluntary work on behalf of the Bank.


GOVERNANCE

Good corporate governance remains a priority for the Board of Directors as it is central to the integrity of the Bank. The Corporate Governance Policy which is now complete, covers matters of responsibilities, powers and structure of the Board of Directors, terms of reference for each Board Committee, code of conduct for Directors and minimum requirements to meet fit and proper criteria to serve as a Director on the Board.

The composition of the Board of Directors remained unchanged during 2009. Directors’ contributions were candid, co-operative and meaningful, deriving from a wide range of experience and training in law, accounting, finance, educational administration, insurance, engineering, business and agriculture. During the year under review, Directors benefited from training in and exposure to banking related seminars and conferences relevant to enhancing their capacity to fulfil their corporate governance responsibilities as follows:

1. Members of the Audit Committee attended the third annual conference of the Caribbean Association of Audit Committee Members (CAACM) held in St. Lucia.

2. The Board of Directors attended a Balanced Scorecard Strategy review presented by Growth Facilitators

3. All Directors attended a seminar on Corporate Governance facilitated by Dr. Valda Henry of VF Inc.

4. Two Directors successfully completed the Director Education and Accreditation Program (DEAP) accredited with the Institute of Chartered Secretaries and Administrators of Canada.

5. One Director attended a meeting with the ECCB Monetary Council, ECCU Financial Secretaries and the Board of the Eastern Caribbean Central Bank, with specific reference to Economic and Financial Adjustments in the ECCU. This meeting was held in St. Kitts.

6. Two Directors attended the Annual General Meeting and Conference of the Caribbean Association of Indigenous Banks (CAIB) in Antigua.

DIVIDEND

The Board recommends maintaining a stable dividend payout of $0.40 per share, resulting in a dividend yield of 13%. This represents a total payout of $2 million and constitutes 22% of profit after tax. This dividend payout is compatible with internal policies and regulatory guidelines and takes into account our growth strategies, which include capital expenditure on our physical plant.

MEETINGS

The Board and its Committees met regularly, providing the necessary oversight of the strategic direction of the Bank. The relevant data on meetings for 2009 is illustrated in the table over leaf, with the exclusion of the Credit Risk Committee as agreed by shareholders. The Credit Risk Committee met four times in 2009, with 100% participation by four members; one member’s attendance was 75%. Special sub-committee meetings were held during 2009 to discuss matters pertinent to the property on #18 Bridge Street.

OUTLOOK

The announcement by the Governor of the Eastern Caribbean Central Bank of an eight point plan as a plausible response to the economic crisis is laudable. However, we anticipate that the implementation of point seven of that plan, being the amalgamation of indigenous commercial banks of the Eastern Caribbean Currency Union (ECCU), will be received with mixed feelings. In this light, it has been noted that our existing relationship with ECIC Holdings Ltd is a vehicle by which ties with other indigenous institutions can be deepened in the ECCU, without creating a new structure, thus retaining the identity of each indigenous institution.

The adoption of the Financial Services Regulatory Authority Act and Insurance Act will be a welcome step towards improved regulation and improved security of funds, be it in insurance, banking or non banking financial institutions. As the discussions ensue, we give the assurance that the Bank will adequately and expertly represent our interest, thereby ensuring safety of customer and shareholder funds.

ACKNOWLEDGEMENTS

Our measured responses to the financial crisis yielded a result better than could have been anticipated at this time last year and for this, we thank the staff for their consistent delivery of quality service for which we stand apart. We thank management for skillfully steering the Bank, our customers and shareholders for their unswerving support, our business partners and the public for their candid contributions and continued interest in the Bank.

We take this opportunity to extend our deepest condolences to Director Ferrel Charles on the passing of his wife, Mrs. Patricia Ellen Charles who was also a shareholder and an active and involved member of our community. At this juncture we offer our condolences to the families of those shareholders who have passed in 2009.

As we continue this most challenging journey, we take pride in the work we have done to chart the course to attain the goal of being the 1st choice financial services provider.

Dr. Charmaine Gardner President, on behalf of the Board of Directors


DIRECTORS BOARD FINANCE, PLANNING &

INVESTMENT HUMAN RESOURCE AUDIT CORPORATE

GOVERNANCE

No. of MeetingsActual

Attendance No. of MeetingsActual


Attendance No. of Meetings Actual


Attendance

Charmaine Gardner 11 11

Cyril Matthew 11 11 6 5

Ferrel Charles 11 10 7 6

Brenda Floissac-Fleming 11 9 3 3 2 2

Nigel Fulgence 11 10 3 2 6 4 2 2

Joseph Maxwell 11 11 7 7 3 3 6 5

Christian Husbands 11 11 7 6 3 3 2 2

Lionel James 11 11 7 6 2 2

Johnson Cenac 11 10

Tedburt Theobalds (Audit Committee member from September 2009) 11 10 6 3

G. Carlton Glasgow 11 11 7 6 3 3

Directors’ Attendance At Board And Committee MeetingsFor !e Year Ended December 31, 2009


DR. CHARMAINE GARDNER

Chairperson/ President

MR. CYRIL MATTHEW1st Vice President

MRS. BRENDA FLOISSAC-FLEMING

Member

MR. FERREL CHARLES2nd Vice President

MR. NIGEL FULGENCEMember

Board of Directors


MR. TEDBURT THEOBALDS

Member

MR. JOHNSON CENACMember

MR. G. CARLTON GLASGOW

Managing Director

MR. LIONEL JAMESMember

MR. CHRISTIAN HUSBANDS

Member

MR. JOSEPH MAXWELLMember

Board of Directors

We care that you have the timefor what you love, this is why

we have brought you the convenience of

Online & Mobile Phone Banking



Managing Director’s Report

In spite of these challenges, the Bank’s Balance Sheet grew appreciably by 12%

...to $436 million

I am pleased to present another satisfactory report for the Bank for the financial year ended 2009, despite the negative growth experienced by our Country during the year. This negative growth, driven by the global financial crisis has impacted on our loans and advances to customers portfolio to a fair degree, resulting in an increase in non performing assets. The current law on debt recovery continues to be a challenge, so too is competition on interest rates for loans and deposits, which in some instances creates imperfect market conditions and responses.

In spite of these challenges, the Bank’s Balance Sheet grew appreciably by 12% over the audited position for

2008 to $436 million. The profit before and after tax for 2009, is a modest $10.4 million and $9.1 million respectively.

This performance would not be possible without the continued focus on the Bank’s strategic initiatives, both planned and emergent. Our priority continues to be the development and engagement of our human resources as a

core competence to ensure tenacious risk management, high asset quality and excellent customer satisfaction. We endeavour to be prudent in our decision making, always placing safety of customer funds first.

During the year, the Bank’s Head Office was temporarily relocated in line with plans to address our space constraints. Alternative plans pursued to leverage our presence on Bridge Street did not materialize and consequently, the original strategy is at the advanced planning stage, which in the main will satisfy our need for additional space for at least another decade.

Efforts to grow the Bank and achieve excellent customer satisfaction were recognised at the Annual Business Awards Ceremony mounted by the St. Lucia Chamber of Commerce, Industry and Agriculture when the Bank captured three awards, one each for innovation, corporate social responsibility and service excellence. We pledge to maintain this level of excellence and commitment.

TOTAL INCOME

$’000


Risk ManagementThe Bank manages its exposure to risk based on its policies and in accordance with laws and regulations. Generally, traditional methods of risk management are employed in the management of the Bank’s assets. The Board, through its committees is also involved in the management of risk by approving adjustments to policies and monitoring performance against them.

OutlookIt is anticipated that the economic conditions prevalent in 2009 will continue to impact our operations in the short to medium term. Growth of gross domestic product for St. Lucia is expected to be slow but negative for 2010. We anticipate that there will be need to finance and support the recovery efforts and we stand ready to do our part and to encourage rational behaviour to realise this effort.

The forecast for the tourism industry is very positive and was used to support our budget which is optimistic in its thrust. Government efforts to sustain the economy via fiscal policies have been endorsed by the International Monetary Fund and one such measure, the implementation of a Value Added Tax, appears to have received the approval of the public at large.

We foresee increased competition in a relatively stable market space and our response will include maintaining awareness of our brand and greater focus on our operational strategies to reduce risk, particularly credit risk. We are mindful of the ongoing challenges and will continue to monitor these challenges to ensure that the Bank remains on the path of value creation.

Customer ServiceIn the interest of achieving excellent customer satisfaction and enhancing customer access to their accounts, the Bank embarked on a number of projects. However, cognizant of the global recession, a conscious decision was taken to implement projects that would greatly enhance the Bank’s image, customer service and efficiency during the course of 2009 and beyond.

Our MoBanking product was presented at a successful media launch, attended by customers, Board members and Staff. This product was a collaboration of five other indigenous banks in the Eastern Caribbean Currency Union, spearheaded by ECIC Holdings Ltd. Customers are able to access their accounts via their cell phone to make enquiries on their accounts, view account transaction histories, receive alerts when deposits, including salaries, are paid into their accounts, and pay utility bills. This is enabled via access to the Bank’s core system with cell phones utilizing SMS texting or any cell phone with a web browser.

This product was historic for the Bank as we were first to market with such an innovative product in St. Lucia. We are happy to report that all product features are functional and customers have expressed their overall satisfaction.

The Bank implemented a new product called E-Alerts, for which customers could sign up to be remotely notified of transfers to and from their accounts by text messages or email. This eliminates the need to post advices to customers, thereby saving postage, stationery, and time spent in writing out advices, and mailing or delivering them by hand.

Dividend cheque printing was implemented which automated production of the dividend cheques quickly and efficiently. The operation has additional security features which eliminate human error, thereby reducing costs.

The Credit Card Payments Manager software initiative went live whereby customers’ credit card payments made island-wide are immediately uploaded, updating their payments to their credit card accounts held at The Caribbean Credit Card Corporation (4C’s) in St. Kitts.

The Bank’s Card Services system was upgraded and made ready for the International Debit Card Project which will be completed by May 2010. Additionally, ATM card-reader anti-tamper devices were installed on all ATMs. The devices are designed to prevent fraudsters from setting traps to capture customers’ ATM cards.

The telephone system was upgraded with the installation of Voice over Internet Protocol (VoIP) digital telephone system. This enables Branches to be interconnected by telephone extensions and improves the ease with which customer service is managed at the same time resulting in cost savings for each operating unit and the Bank on the whole.

The Bank continues to be guided by its mission statement by providing appropriate cutting


edge technology for use by customers. The results of a customer survey recently completed by the University of the West Indies will indicate the impact of our past initiatives as well as inform our future strategies.

Human ResourcesDuring the year under review, Human Resource development and management remained focused on the learning and growth perspective of the Bank’s key strategic objectives.

Consequently, emphasis was placed on:-

• Cultivating an ethic of inspirational leadership throughout the institution;• Developing highly competent, empowered and committed employees;• Providing relevant skills and resources to facilitate staff efficiency; and• Creating a professional working environment.

In 2009 the Bank made significant progress towards achieving those objectives through implementation of the following initiatives:-

I. Continuous staff training bank-wide;

II. Employee empowerment and motivation;

III. Upgrading of the working environment;

IV. Planning a revised Performance Management System (PMS);

V. Provision of the requisite resources to carry out the job.

I. Continuous staff training bank-wide with emphasis on:

• Building leadership capacity• Corporate governance• Customer care and service• Management of credit risk• Credit appraisal techniques• Corporate treasury/cash management• Enhancing expertise in information technology • IT controls audit skills• Communication and sales skills• Strengthening of technical competencies• Entry level employment skills• Orientation to new products and services• Information security governance• Anti-money Laundering policies and procedures• Assistance to staff enrolled in professional banking programmes• Assistance to staff engaged in professional self-development

ii. Employee empowerment and motivation through:

• The promotion of six employees from within the Bank’s Supervisory grades to facilitate smooth internal succession as necessary;

• The granting of staff annual performance increases in line with industry standards;

• Special recognition of employees at the Bank’s annual awards function;• Acknowledgement of the overall contribution of all eligible staff by way of their

participation in the Bank’s profit sharing plan.

III. Upgrading of the working environment:

The creation of a more spacious and healthy working environment is undoubtedly conducive to the proper functioning, comfort and satisfaction of the Bank’s staff. Indeed, the 2008 staff survey highlighted the need to expedite this.

In 2009 the Bank accomplished the initial phase of the process aimed at alleviating the existing space constraints within some of the Bank’s business units and refurbishing as necessary.

In the second quarter of 2009, the Bank’s Head office was relocated from above the Castries Branch to premises at Reduit, Gros- Islet. This temporary move was effected to facilitate the refurbishment of the Bank’s Bridge Street offices during 2010, as well as generate increased office space in the interim.

Plans for the extension of the Rodney Bay Sub Branch were also advanced in 2009 in keeping with the level of business at that unit and the evident need to improve the working environment. The Vieux- Fort Branch was also repainted.

IV. Planning a revised Performance Management System (PMS):

• all management personnel participated in the PMS redesigning process which is linked to the Bank’s existing Balanced Scorecard Strategy and Corporate objectives

• the PMS is structured towards greater emphasis on setting employee action plans and targets, competency assessment, coaching and performance measurement;

• the PMS more specifically enables individual performance in order to achieve organizational excellence;

• the PMS also incorporates some of the key outcomes of the staff satisfaction survey conducted in 2008.


The implementation component of the Performance Management System throughout the Bank is planned for early 2010.

V. Provision of the requisite resources to carry out the job

During the year under review much emphasis was placed on enhancing the technological resources available to staff in carrying out their functions.

The positive impact on staff productivity and efficiency was enabled by the automated dividend cheque printing facility; the customer account E-Alert; the Bank’s updated telephone system; and the MoBanking product, all of which were introduced in 2009.

Additionally, the improved Performance Management System (PMS) mandates that Managers and Supervisors document the tool requirement for each position within their department/Unit. This is expected to be effected as part of the full implementation of the PMS in 2010.

Corporate Social ResponsibilityFor over seventy one (71) years, the Bank’s commitment to the community has been a key component of our heritage and culture. During the financial year ended 2009, the Bank distinguished itself through consistent and well assigned financial support for initiatives proposed by various persons and organizations. It is this dedication to the community that earned the Bank the coveted national award for Corporate Social Responsibility for its work in the following areas:

• Educational Development• Financial Education and Empowerment• Social Transformation• Community Outreach Programs• Cultural Development and Preservation• Sporting Activities• Environmental Projects

Educational Development

In the area of education, the Bank continues to make financing available to students who wish to pursue higher education through its comprehensive and attractive Scholarship Program. During 2009, another young St. Lucian shareholder (Donavan Foster) was assisted with his university education when the Bank awarded him a two year scholarship to complete studies in Economics and Law. We are proud to advise that the Bank currently employs two former scholarship holders who have done well in their field. Additionally, student loans are available to all persons wishing to pursue tertiary education in various courses particularly those on the Government’s priority list.

Every year, selected employees make time to counsel students of the Sir Arthur Lewis Community College on aspects of banking and ethics in the workplace. Additionally, mock job interviews were conducted with final year students to prepare them for the job market, an activity that was well received.

We at the Bank are not only interested in ensuring that opportunities are created for educational advancement

but are also concerned about the learning environment for students. We provided and installed two air conditioning units at the resource centre of the Mon Repos Combined School, thereby protecting sensitive equipment like computers and creating an enabling environment where students and teachers can work in comfort.

The Clendon Mason Secondary School was also a recipient of the Bank’s support in the field of Agriculture. The Bank ensured that the schools kitchen garden received the attention that was needed for a successful harvest. It is interesting to note that the school donated part of its harvested crops to the home for the elderly in the Village of Dennery.

The Jacmel Combined School also benefited from the Bank’s generosity when a small state-of-the-art document centre was donated to the school to assist with printing and photocopying.


The Centre for Adolescent Renewal and Education (CARE) is another institution that continues to receive assistance from the Bank in terms of technical and financial support. We believe that every individual deserves an opportunity to excel and thus the work of the Centre in providing an important educational alternative for adolescents who dropped out of the formal education system is worthy of our support.

Financial Education And Empowerment

1st National Bank has used an integrated communication strategy to enhance financial literacy. Through its flagship television program 1st National Bank Notes, the Bank sought to educate its customers and the general public on a wide range of financial topics including, budgeting, savings and investments, loans and value added tax. Our staff continues to counsel customers during their service delivery. We intend to broaden the scope of activities taking our educational drive to the communities which we serve.

Social Transformation

Our responsibility to collectively influence thinking and consciousness within our society is evident from the projects and initiatives that we consider deserving of our support. These include our support to:

1. The St. Lucia Crisis Centre. This organization received funding from the Bank to expand its awareness programs.

2. The Ministry of Gender Relations in its quest to end gender based violence.

3. The importance and recognition of women in society. Twelve excellent young women from St. Lucia in various professions were highlighted for their sterling contribution to society in our 2009 calendar with the theme “Our

Young Women Of Tomorrow… Today”, Applauding The Pursuit Of Excellence. The information provided in the calendar is used in many schools and libraries across the island to inspire and inculcate values in young women from all walks of life.

4. The Caribbean Youth Festival. The Bank seeks to foster positive change in the lives of our youth and we recognized potential in the festival that combines local and regional talent to spread positive messages through music and song. The proceeds go towards the sustainability of a youth development clinic in Vieux Fort as well as to the Centre for Adolescent Renewal and Education (CARE), an institution the Bank has supported directly over the years.

5. The Community Action Programme for Safety (C.A.P.S.). This organization received financial support to further promote its objective to reduce opportunities for crime and promote positive conflict resolution.

6. Act Now Generation. This is a program targeted at young persons in conflict with the law. The program is administered by the District Courts in collaboration with the Probation Department. 1st National Bank is aware of the challenges faced by our youth both here and abroad. It is because of this awareness that the Bank sponsored the collaborative effort of Act Now Generation of Barbados and St. Lucia in the staging of a theatrical production entitled “The Land, the People, the Light” in recognition of St. Lucia’s 30th Independence Anniversary Celebrations.

7. The St. Lucia National Principals Association hosted principals from the region for the Principals Conference. The conference came to a close with a cultural and food presentation evening that saw the Bank once again in support of this activity staged by the region’s foremost educators.


Community OutreachThe Bank’s community outreach program is very well structured and aligned to the Bank’s strategic goals. We ensure that the Bank lives up to its responsibility as a Community Bank and reinvests appropriately in the community. During the year, the Bank embarked on establishing a number of covenants with various key organizations and institutions in St. Lucia, in an effort to augment the sustainability of their community programs and philanthropic work. Some of the beneficiaries of this corporate gesture of goodwill are:

1. !e St. Lucia Blind Welfare Association, for their Kids in Sight program.

2. !e National Community Foundation, to support their mandate in various areas like education, youth at risk, health, that benefit thousands annually.

3. !e Marian and the St. Lucy’s Homes for the elderly.

4. !e St. Lucia Sickle Cell Association, in the provision of equipment and vaccines.

5. !e Cluny Foundation, for educational development.

6. Centre for Adolescent Renewal and Education, to assist with youth development.

7. Catholic Television Broadcasting Service, in the provision of spiritual enlightenment.

The Bank also partners with organizations which conduct summer programs for underprivileged children, be it in the field of sports, arts and crafts, education, culture, drama, dance, music and poetry. The Bank is there at every step, investing its time and money to ensure that the benefits to be derived in terms of discipline, team work, self confidence, esprit de corps would result in more functional and productive citizens for St. Lucia.

Arts And Cultural DevelopmentIn 2009 the Bank was again proud to be associated with the University of the West Indies Open Campus in securing and preserving the works and artefacts of renowned St. Lucian Playwright Roderick Walcott. This gesture of support by the Bank paves the way for many generations of local, regional and international students to fulfil research requirements into the Literary Arts.

Fond d’or Jazz, one of the main activities of the Fond d’or

Foundation, was in danger of being cancelled but for the increased sponsorship from the Bank. We understood the economic benefits to be derived from staging this unique cultural event and we support their work to maintain and preserve the historical artefacts and the environment.

Carnival is considered to be St. Lucia’s premier annual cultural festival. The Bank contributed financially to many carnival related events including steel pan, costume bands and calypso. The St. Joseph’s Convent Steel Orchestra received some financial support to travel to Trinidad and Tobago to experience first hand that country’s panorama. The Rituals Carnival Band, Dame Pearlette Louisy Primary School kiddies’ Carnival Band and the St. Aloysius Roman Catholic Boys Primary School Calypso competition were recipients


of financial support from the Bank. Furthermore, the Bank made a monetary contribution to the Police in support of their calypso competition, which brings the police and the community together.

The Bank continues its support for the Helen Folk dancers in its quest to preserve our rich dance heritage. The group has staged many dance theatres and workshops to ensure that this part of St. Lucian culture remains alive and passed on to future generations. Another dance group, the Silver Shadows Performing Arts Academy benefitted from our generous donation to assist in the production of “Break Out”, a performance of creative original dance pieces choreographed by St. Lucian Barry George and performed by the young St. Lucian dancers from the Academy. The Show was performed over three days to an appreciative local audience.

Sporting Activities

The Bank recognizes the value of sports and sporting related activities in promoting functional communities, team building, discipline, healthy living, friendly rivalry and competition and co-operation. Some of the beneficiaries of Bank funds were as follows:

1. !e 13 and Under Track and Field Championship. For the sixteenth consecutive year, the Bank was proud to be the sole sponsor of the 1st National Bank 13 and Under Track and Field Championship co-ordinated by the St. Lucia Athletics Association. These games contributed to the development of young well rounded athletes who have gone on to secure athletic scholarships.

2. !e St. Lucia National Netball Association, to ensure St. Lucia’s participation in the OECS Netball Tournament.

3. St. Lucia Volleyball Association, to assist with the team’s representation of St. Lucia.

4. !e OECS Beach Volleyball Tournament.

5. St. Lucia Amateur Swimming Association, for hosting of the National Secondary Schools Swim Championship.

6. Many schools benefited from the Bank’s corporate generosity in hosting their annual school sports meet as well as their sports camp in the summer.

The Ministry of Social Transformation, Youth and Sports continues to recognize the Bank for its outstanding contribution to Sports in St. Lucia.


Environment

We strive to make a difference in our communities and the Bank staff teamed up with personnel from the Ministry of Agriculture and residents of the Dennery Valley to reforest the river banks, to save our rivers and create awareness and appreciation of our environment. The Bank donated 1,500 trees to this worthwhile project.

Shareholder informationThe number of shares issued and fully paid remained at 4,999,966. However, a total of 63,508 shares was transferred in the course of 2009 and the total number of Shareholder accounts on record stood at 1,337. As required by the Banking Act No. 34 of 2006, no individual shareholder owned more than 20% of the Bank’s total shareholding.

During 2009, the automatic cheque payment system for dividends was implemented. This process, which is expected to be fully functional for the timely payment of dividend cheques in 2010 will significantly improve the production and accuracy of dividend payments made by cheque. That notwithstanding, we continue to encourage shareholders to utilize accounts held with the Bank for deposit of their dividend since this is still the most efficient

and expeditious process for dividend payment. The office of the Corporate Secretary stands ready to assist in this regard.

For the information of shareholders, the chart below illustrates the current status of the dates of election and re-election of Directors:-

ROTATION OF DIRECTORS IN ACCORDANCE WITH SECTION 4 OF BY-LAW NO. 1

NAME YEAR OF ELECTION

YEAR OFRE!ELECTION

CHARMAINE GARDNER 1990 2007

CYRIL MATTHEW 1998 2007

FERREL CHARLES 1980 2009

BRENDA FLOISSAC-FLEMING 1993 2007

NIGEL FULGENCE 2000 2009

JOSEPH MAXWELL 2001 2008

CHRISTIAN HUSBANDS 2003 2009

LIONEL JAMES 2007

JOHNSON CENAC 2008

TEDBURT THEOBALDS 2008

Prime Minister The Honorable Stephenson King presents the award for

Innovation to Managing Director Mr. G. Carlton Glasgow.

You can judgea people’s bank by how it cares

for it’s young and elderly.This is why we’re

heavily invested in both.



ManagementTeam

01020304

0201 03 04 05 06 07

G. CARLTON GLASGOWManaging Director

AUREA LAFEUILLEEFinance Manager

JOSEPH FEDEEOperations Manager

DENISE HOLDEN-PIERREManager, Internal Audit

BERYL CARASCO-ALLEYNEHuman Resource Manager/Corporate Secretary

ROBERT FEVRIERManager, Projects & Services

CLARETTE AUGUSTE-TAYLORManager Lendings

05

0607


ManagementTeam

08091011

08 09 10 11 12 13 14

VALERY MARSHALL-ST. OMERAssistant Manager, Operations

SYLVIA ALCEEManager, Rodney Bay Sub Branch

PATRICIA HOWELLAssistant Manager, Lendings

PETER FLOISSACAssistant Manager, Recoveries

NAOMI PROMESSE-EDWARDManager, Vieux Fort Sub Branch

BEVERLEY ANN GREENEAssistant Manager, Finance

MANSLEY JULIUSAssistant Manager, Accounting

121314

Our People,though often unseenmake the things You

See and Enjoy...Happen



Sta! of various Business Units.


Management Organization Chart

BOARD OF DIRECTORS

Manager Lendings

AssistantManager,Lendings

AssistantManager,

Recoveries

AssistantManager,

Operations

AssistantManager,Finance

AssistantManager,

Accounting

Sub Branch Managers,Rodney Bay, Vieux Fort and Officer in Charge, Marigot

Bay Sub Branch

Operations Manager Finance Manager Manager Internal Audit

Human Resource Manager/

Corporate Secretary

Manager, Projects and Services

MANAGING DIRECTOR


Independent Auditor’s ReportMarch 30th 2010

To the Shareholders of1st National Bank St. Lucia Limited

Report on the Financial Statements

We have audited the accompanying !nancial statements of 1st National Bank St. Lucia Limited (the Bank) which comprise the balance sheet as of December 31st 2009 and the statement of income, statement of comprehensive income, statement of changes in equity and statement of cash "ows for the year then ended, and a summary of signi!cant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these !nancial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of !nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these !nancial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the !nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the !nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the !nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the !nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the !nancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the accompanying !nancial statements present fairly, in all material respects, the !nancial position of the Bank as of December 31st 2009 and the results of its operations and its cash "ows for the year then ended in accordance with International Financial Reporting Standards.

Chartered Accountants

PriceWaterhouseCoopers Pointe Seraphine P.O.Box 195 Castries St. Lucia, West Indies Telephone (758) 456-2600 Facsimile (758) 452-1061

PricewaterhouseCoopers refers to the East Caribbean !rm of PricewaterhouseCoopers and the other member !rms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. A full listing of the partners of the East Caribbean !rm is available on request at the above address.


Balance Sheet | As of December 31, 2009 | (expressed in Eastern Caribbean dollars)

Note 2009$

2008$

Assets

Cash and balances with Central Bank 5 29,307,645 29,208,566Due from other banks 6 5,976,620 5,088,351Treasury bills 7 16,832,105 17,910,470Loans and advances to financial institutions 8 47,965,561 38,642,361Loans and advances to customers 9 280,947,796 248,470,227Investment securities:

- available-for-sale 11 12,285,162 12,789,462- held-to-maturity 11 22,556,356 22,171,742

Income tax recoverable 1,731,068 1,018,873Property, plant and equipment 12 15,331,161 12,474,455Other assets 13 2,920,830 2,347,028Deferred income tax asset 17 218,194 30,846

Total assets 436,072,498 390,152,381

Liabilities

Due to customers 14 365,377,016 329,404,588Other liabilities 15 3,832,385 3,769,600Retirement benefit obligations 16 659,000 739,000

Total liabilities 369,868,401 333,913,188

Equity

Capital and reserves attributable to the Bank’s equity holdersShare capital 18 7,971,454 7,971,454Retained earnings 44,700,869 37,539,794Other reserves 13,531,774 10,727,945

Total equity 66,204,097 56,239,193

Total liabilities and equity 436,072,498 390,152,381

Approved by the Board of Directors on March 17, 2010

___________________________________ Director _______________________________ Director


Statement of Income | For the year ended December 31, 2009 | (expressed in Eastern Caribbean dollars)

Note 2009$

2008$

Interest and similar income 20 30,587,169 29,680,766

Interest expense and similar charges 20 (11,883,032) (10,762,836)

Net interest income 18,704,137 18,917,930

Other operating income 21 4,866,109 4,056,350

Operating income 23,570,246 22,974,280

Other operating expenses 22 (11,621,901) (10,514,717)

Impairment losses on loans and advances 10 (1,577,771) (1,248,031)

Profit before income tax 10,370,574 11,211,532

Income tax expense 25 (1,256,102) (2,115,966)

Profit for the year 9,114,472 9,095,566

Earnings per share for profit attributable to the equity holders of the Bank during the year

(expressed in EC$ per share)

- basic and diluted 26 1.82 1.82


Statement of Comprehensive Income | For the year ended December 31, 2009 | (expressed in Eastern Caribbean dollars)

2009$

2008$

Profit for the year 9,114,472 9,095,566

Other comprehensive income

Gains on revaluation of land and buildings 2,723,259 –

Fair value gains/(losses) on available-for-sale financial assetsUnrealised net gains/(losses) arising during the year 56,812 (195,279)Net reclassification adjustments for realised net gains 70,347 –

Net fair value gains/(losses) on available-for-sale financial assets 127,159 (195,279)

Total other comprehensive income/(loss) for the year 2,850,418 (195,279)

Total comprehensive income for the year 11,964,890 8,900,287


Statement of Changes in Equity | For the year ended December 31, 2009 | (expressed in Eastern Caribbean dollars)

ShareCapital

$

StatutoryReserve

$

Revaluation Reserve

$

Revaluation Reserve –

available-for-sale

$

RetainedEarnings

$

TotalEquity

$

Balance at January 1, 2008 7,971,454 7,971,454 2,285,636 689,040 30,421,308 49,338,892

Profit for the year – – – – 9,095,566 9,095,566

Fair value losses on available-for-sale financial assets – – – (195,279) – (195,279)

Total comprehensive income – – – (195,279) 9,095,566 8,900,287

Dividends relating to 2007 – – – – (1,999,986) (1,999,986)

Transfer to retained earnings – – (22,906) – 22,906 –

Balance at December 31, 2008 7,971,454 7,971,454 2,262,730 493,761 37,539,794 56,239,193

Balance at January 1, 2009 7,971,454 7,971,454 2,262,730 493,761 37,539,794 56,239,193

Profit for the year – – – – 9,114,472 9,114,472

Gains on revaluation of land and buildings – – 2,723,259 – – 2,723,259

Fair value gains on available-for- sale financial assets – – – 127,159 – 127,159

Total comprehensive income – – 2,723,259 127,159 9,114,472 11,964,890

Dividends relating to 2008 – – – – (1,999,986) (1,999,986)

Transfer to retained earnings – – (46,589) – 46,589 –

Balance at December 31, 2009 7,971,454 7,971,454 4,939,400 620,920 44,700,869 66,204,097


Statement of Cash Flows | For the year ended December 31, 2009 | (expressed in Eastern Caribbean dollars)

Note 2009$

2008$

Cash flows from operating activitiesProfit before income tax 10,370,574 11,211,532Adjustments for:

Depreciation 12 1,068,207 834,094Impairment losses on loans and advances 10 1,577,771 1,248,031Retirement benefit obligations (80,000) 12,000Dividend income 21 (81,630) (50,810)Interest and similar income 20 (30,587,169) (29,680,766)Interest expense and similar charges 20 11,883,032 10,762,836

Cash flow before changes in operating assets and liabilities (5,849,215) (5,663,083)

Increase in mandatory reserve deposits with Central Bank (2,248,860) (4,770,570)Increase in loans and advances to financial institutions (9,181,709) (6,625,331)Increase in loans and advances to customers (33,161,734) (24,653,415)(Increase)/decrease in other assets (573,802) 310,337Increase in due to customers 35,577,951 32,010,267Increase/(decrease) in other liabilities 11,143 (160,608)

Cash used in operations (15,426,226) (9,552,403)

Interest and similar income received 29,578,936 28,268,360Interest expense and similar charges paid (11,488,555) (10,878,289)Income taxes paid (2,155,645) (2,874,199)

Net cash generated from operating activities 508,510 4,963,469

Cash flows from investing activitiesProceeds from sale/(purchase) of treasury bills, net 1,058,366 (2,380,738)Purchase of investment securities (24,610,805) (45,007,984)Proceeds from sale of investment securities 24,850,785 39,782,072Dividends received 81,630 50,810Purchase of property, plant and equipment (1,201,654) (1,625,366)

Net cash generated from/(used in) investing activities 178,322 (9,181,206)

Cash flows from financing activitiesDividends paid on ordinary shares (1,948,344) (1,962,483)

Net decrease in cash and cash equivalents (1,261,512) (6,180,220)

Cash and cash equivalents, beginning of year 14,853,347 21,033,567

Cash and cash equivalents, end of year 28 13,591,835 14,853,347


Notes to Financial Statements | December 31, 2009 | (expressed in Eastern Caribbean dollars)




Maximum exposure2009

$2008

$Due from other banks 5,976,620 5,088,351Treasury bills 16,832,105 17,910,470Loans and advances to financial institutions 47,965,561 38,642,361Loans and advances to customers:! Overdraft 13,918,905 11,557,424! Demand loans 126,920,339 113,270,801! Promissory notes 11,254,777 8,418,705! Mortgages 128,853,775 115,223,297Investments securities:! available for sale 8,607,692 9,431,682! held to maturity 22,556,356 22,171,742Other assets 1,909,761 1,839,745

Credit risk exposures relating to off-balance sheet items are as follows:Financial Guarantees 4,199,510 3,707,216Loan commitments and other credit related liabilities 24,695,113 25,371,125

At December 31 413,690,514 372,632,919



2009

$

2008

$

Loans and advances to customers

Neither past due nor impaired 174,530,840 150,515,962

Past due but not impaired 85,436,909 79,527,603

Impaired 34,142,461 32,657,984

Gross 294,110,210 262,701,549

Less: allowance for impairment (Notes 9 and 10) (13,162,414) (14,231,322)

Net 280,947,796 248,470,227

Loans and advances to financial institutions

Neither past due nor impaired (Note 8) 47,965,561 38,642,361




Overdrafts

$

Demand loans

$

Promissory notes

$

Mortgages

$

Total Loans and advances to customers

$December 31, 2009


Grades1. Pass 11,943,628 72,543,430 4,839,336 82,329,564 171,655,9582. Special mention 1,194,480 502,893 – 1,177,509 2,874,8823. Sub-standard – – – – –4. Doubtful – – – – –5. Loss – – – – –

Total 13,138,108 73,046,323 4,839,336 83,507,073 174,530,840

December 31, 2008


Grades1. Pass 9,547,239 61,480,754 5,325,447 70,038,928 146,392,3682. Special mention 1,737,367 1,238,413 – 1,147,814 4,123,5943. Sub-standard – – – – –4. Doubtful – – – – –5. Loss – – – – –

Total 11,284,606 62,719,167 5,325,447 71,186,742 150,515,962



Demand loans

$

Promissory notes

$

Mortgages

$

Total Loans and advances to customers

$December 31, 2009Past due up to 30 days 19,285,778 1,262,506 18,673,121 39,221,405Past due 30-60 days 5,647,423 276,873 5,650,967 11,575,263Past due 60-90 days 6,693,489 156,288 3,615,381 10,465,158Past due over 90 days 10,780,431 691,268 12,703,384 24,175,083

Total 42,407,121 2,386,935 40,642,853 85,436,909

Fair value of collateral 71,023,322 8,458,726 100,217,108 179,699,156

December 31, 2008Past due up to 30 days 20,424,112 1,107,753 18,557,205 40,089,070Past due 30-60 days 8,850,958 458,878 3,197,194 12,507,030Past due 60-90 days 2,675,937 317,023 3,834,521 6,827,481Past due over 90 days 8,097,336 731,009 11,275,677 20,104,022

Total 40,048,343 2,614,663 36,864,597 79,527,603

Fair value of collateral 64,595,029 6,948,529 79,223,069 150,766,627

2009$

2008$

Individually impaired loansGrades:1. Pass 663,964 2,146,4632. Special mention 2,576 439,4473. Sub-standard 16,397,033 12,568,0584. Doubtful 9,907,686 9,943,4395. Loss 7,171,202 7,560,577Total 34,142,461 32,657,984

Fair value of collateral 62,708,004 58,550,849




Investment securities

Treasury bills

$

Available-for-sale

$

Held-to-maturity

$

Total

$

AA- to AA+ – 1,532,055 4,007,005 5,539,060

A- to A+ – – 2,041,205 2,041,205

Lower than A- – – – –

Unrated 16,832,105 7,075,637 16,508,146 40,415,888

Total 16,832,105 8,607,692 22,556,356 47,996,153



Financial institutions

$

Manufacturing

$

Tourism

$

Government

$

Professional and other services

$

Personal

$

Other

industries

$

Total

$

Treasury bills – – – 16,832,105 – – – 16,832,105

Loans and advances to financial institutions 47,965,561 – – – – – – 47,965,561

Loans and advances to customers:

- Overdraft – 479,981 1,084 – 4,333,498 4,266,220 4,846,630 13,927,413

- Demand loans – 4,111,118 3,287,270 1,572,721 13,247,585 56,775,895 56,613,735 135,608,324

- Promissory notes – 10,845 61,299 – 35,820 9,054,161 3,422,921 12,585,046

- Mortgages – 296,278 2,115,371 – 6,988,523 102,709,721 19,879,534 131,989,427

Investment securities:

- available-for-sale 7,628,258 – – – – – 4,656,904 12,285,162

- held-to-maturity 10,902,788 – – 11,550,080 – – 103,488 22,556,356

Other assets 958,267 – – – – – 951,494 1,909,761

As at December 31, 2009 67,454,874 4,898,222 5,465,024 29,954,906 24,605,426 172,805,997 90,474,706 395,659,155

As at December 31, 2008 55,708,177 4,251,979 4,146,340 31,369,462 30,291,301 153,727,088 76,560,982 356,055,329

ECD CAD EURO USD GBP TTD BD TOTAL

As at December 31, 2009

AssetsCash and balances with Central Bank 28,420,137 59,487 236,457 458,930 64,940 – 67,694 29,307,645Due from other banks 2,104,008 156,398 213,903 2,261,256 1,182,590 15,734 42,731 5,976,620Treasury bills 16,832,105 – – – – – – 16,832,105Loans and advances to financial institutions 47,965,561 – – – – – – 47,965,561Loans and advances to customers 280,947,796 – – – – – – 280,947,796

Investment securities- available-for-sale 9,685,224 – – 2,599,938 – – – 12,285,162- held-to-maturity 22,556,356 – – – – – – 22,556,356Other assets 1,909,761 – – – – – – 1,909,761

Total financial assets 410,420,948 215,885 450,360 5,320,124 1,247,530 15,734 110,425 417,781,006

LiabilitiesDue to customers 363,920,948 – 2,577 1,453,491 – – – 365,377,016Other liabilities 3,832,385 – – – – – – 3,832,385

Total financial liabilities 367,753,333 – 2,577 1,453,491 – – – 369,209,401

Net on-balance sheet positions 42,667,615 215,885 447,783 3,866,633 1,247,530 15,734 110,425 48,571,605

Credit commitments 28,894,623 – – – – – – 28,894,623

As at December 31, 2008Total financial assets 365,153,690 165,493 1,255,352 8,146,849 964,682 198,617 236,241 376,120,924Total financial liabilities 331,856,979 – 2,516 1,314,693 – – – 333,174,188

Net on-balance sheet positions 33,296,711 165,493 1,252,836 6,832,156 964,682 198,617 236,241 42,946,736

Credit commitments 29,078,341 – – – – – – 29,078,341




Up to1 month

$

1-3 months

$

3-12 months

$

1-5 years

$

Over 5 years

$

Total

$


Liabilities

Due to customers 234,017,911 43,514,407 84,622,554 5,885,395 – 368,040,267

Other liabilities 3,832,385 – – – – 3,832,385

Total liabilities(Contractual maturitydates) 237,850,296 43,514,407 84,622,554 5,885,395 – 371,872,652

Assets held for managing liquidity risk (contractual maturity dates) 49,757,710 45,699,912 56,249,216 67,280,190 210,586,870 429,573,898


Liabilities

Due to customers 222,635,987 36,206,105 70,534,136 2,293,200 – 331,669,428

Other liabilities 3,769,600 – – – – 3,769,600

Total liabilities

(Contractual maturity

dates) 226,405,587 36,206,105 70,534,136 2,293,200 – 335,439,028

Assets held for managing liquidity risk

(contractual maturity dates)56,610,722 47,978,074 50,799,145 59,953,932 176,236,167 391,578,040



1 year$

1-5 years$

Over 5 years$

Total$


Loan commitments 22,638,843 2,048,273 7,997 24,695,113Guarantees, acceptances and other financial facilities 207,262 3,879,590 112,658 4,199,510

Total 22,846,105 5,927,863 120,655 28,894,623


Loan commitments 15,965,251 9,400,678 5,196 25,371,125

Guarantees, acceptances and other financial facilities 3,707,216 – – 3,707,216

Total 19,672,467 9,400,678 5,196 29,078,341




Carrying value Fair value

2009$

2008$

2009$

2008$

Financial assets

Loans and advances to financial institutions 47,965,561 38,642,361 47,965,561 38,642,361Loans and advances to customers: 280,947,796 248,470,227 286,801,939 250,853,265! Overdraft 13,918,905 11,557,424 13,872,273 11,454,871

! Demand loans126,920,339 113,270,801 130,848,499 116,203,033

! Promissory notes11,254,777 8,418,705 8,288,869 9,050,392

! Mortgages128,853,775 115,223,297 133,792,298 114,144,969

Investment securities

! Held to maturity 22,556,356 22,171,742 22,247,917 22,171,136

Financial liabilities

Due to customers: 365,377,016 329,404,588 363,421,316 327,293,210! Time deposits 143,041,123 120,722,596 141,085,423 118,611,218! Savings accounts 187,915,027 173,451,589 187,915,027 173,451,589

! Demand accounts 34,420,866 35,230,403 34,420,866 35,230,403



December 31, 2009 Level 1$

Level 2$

Level 3$

Total$

Available-for-sale financial assets

- Investment securities - debt – 5,538,959 3,068,733 8,607,692

- Investment securities - equity – 969,310 – 969,310

Total assets– 6,508,269 3,068,733 9,577,002

Available-for-salefinancial assets

Debt securities$

At January 1, 2009 4,427,490

Settlements (1,358,757)Transfer into or out of Level 3 –

At December 31, 2009 3,068,733




Reflected in equity

Favourable changes

$

Unfavourable changes

$

At December 31, 2009

Available-for-sale financial assets 77,894 18,864



2009$

2008$

Tier 1 capital

Share capital 7,971,454 7,971,454

Statutory reserve 7,971,454 7,971,454

Retained earnings 44,700,869 37,539,794

Total qualifying Tier 1 capital 60,643,777 53,482,702

Tier 2 capital

Revaluation reserve – available-for-sale investments 620,920 493,761

Revaluation reserve – property, plant and equipment 4,939,400 2,262,730

Total qualifying Tier 2 capital 5,560,320 2,756,491

Total regulatory capital 66,204,097 56,239,193

Risk-weighted assets:

On-balance sheet 279,719,643 279,562,292

Off-balance sheet 5,778,925 5,815,668

Total risk-weighted assets 285,498,568 285,377,960

Capital adequacy ratio 21% 19%

Basel ratio 23% 20%



2009$

2008$

Cash in hand 6,659,391 7,991,839Balances with Central Bank other than mandatory reserve deposits 955,824 1,773,157

Included in cash and cash equivalents (Note 28) 7,615,215 9,764,996

Mandatory reserve deposits with Central Bank 21,692,430 19,443,570

29,307,645 29,208,566

2009$

2008$

Items in the course of collection from other banks 1,411,193 566,838

Placements with other banks 4,565,427 4,521,513

Included in cash and cash equivalents (Note 28) 5,976,620 5,088,351

2009$

2008$

Treasury bills 16,832,105 17,910,470




2009$

2008$

Overdraft 13,927,413 11,566,613Demand loans 135,608,324 122,976,186Promissory notes 12,585,046 9,878,217Mortgages 131,989,427 118,280,533

294,110,210 262,701,549

Less provision for impairment of loans and advances (Note 10) (13,162,414) (14,231,322)

280,947,796 248,470,227

Current 20,168,920 23,519,169Non-current 260,778,876 224,951,058

280,947,796 248,470,227



Overdraft

$

Demand loans

$

Promissory notes

$

Mortgage

$

Total

$

Balance at January 1, 2009 9,189 9,705,385 1,459,512 3,057,236 14,231,322Provision for loan impairment (681) 879,742 (44,535) 743,245 1,577,771Loans written off during the year – (1,897,142) (84,708) (664,829) (2,646,679)

At December 31, 2009 8,508 8,687,985 1,330,269 3,135,652 13,162,414

Balance at January 1, 2008 15,847 7,933,289 955,695 4,158,071 13,062,902Provision for loan impairment – 1,789,642 525,379 (1,066,990) 1,248,031Loans written off during the year (6,658) (17,546) (21,562) (33,845) (79,611)

At December 31, 2008 9,189 9,705,385 1,459,512 3,057,236 14,231,322

2009$

2008$

Available-for-saleEquity securities- Listed 969,310 912,500- Unlisted 2,708,160 2,445,280Debt securities:- Listed 5,538,959 5,004,192- Unlisted 3,068,733 4,427,490

Total securities: available-for-sale 12,285,162 12,789,462

Held-to-maturityDebt securities - at amortised cost:- Listed 10,253,291 10,078,086- Unlisted 12,303,065 12,093,656

Total securities: held-to-maturity 22,556,356 22,171,742


34,841,518 31,603,424




Available for sale

$

Held to maturity

$

At January 1, 2009 12,789,462 22,171,742

Additions 2,009,708 23,160,649

Disposals (sale and redemption) (2,570,820) (22,776,035)

Gains from changes in fair value 56,812 –

At December 31, 2009 12,285,162 22,556,356

At January 1, 2008 10,625,141 19,276,037

Additions 7,490,432 37,546,945

Disposals (sale and redemption) (5,130,832) (34,651,240)

Losses from changes in fair value (195,279) –

At December 31, 2008 12,789,462 22,171,742



Land and Building

$

Furnitureand Fixtures

$

Equipment

$

MotorVehicles

$

Total

$December 31, 2007

Cost or valuation 10,771,211 1,248,533 8,624,359 186,920 20,831,023Accumulated depreciation (1,882,179) (842,842) (6,357,562) (65,257) (9,147,840)

Net book amount 8,889,032 405,691 2,266,797 121,663 11,683,183

Year ended December 31, 2008

Opening net book amount 8,889,032 405,691 2,266,797 121,663 11,683,183Additions in the year 24,510 40,258 1,560,598 – 1,625,366Depreciation charge (Note 22) (156,244) (43,363) (610,155) (24,332) (834,094)

Closing net book amount 8,757,298 402,586 3,217,240 97,331 12,474,455


Cost or valuation 10,795,721 1,288,791 10,184,957 186,920 22,456,389Accumulated depreciation (2,038,423) (886,205) (6,967,717) (89,589) (9,981,934)

Net book amount 8,757,298 402,586 3,217,240 97,331 12,474,455

Year ended December 31, 2009

Opening net book amount 8,757,298 402,586 3,217,240 97,331 12,474,455Revaluation 2,723,259 – – – 2,723,259Additions in the year 398,934 55,475 747,245 – 1,201,654Depreciation charge (Note 22) (242,112) (43,418) (763,211) (19,466) (1,068,207)

Closing net book amount 11,637,379 414,643 3,201,274 77,865 15,331,161


Cost or valuation 12,083,652 1,344,266 10,932,202 186,920 24,547,040Accumulated depreciation (446,273) (929,623) (7,730,928) (109,055) (9,215,879)

Net book amount 11,637,379 414,643 3,201,274 77,865 15,331,161




2009$

2008$

Cost 8,044,398 8,044,398Accumulated depreciation based on historical cost (1,709,253) (1,608,309)

Depreciated historical cost 6,335,145 6,436,089

2009$

2008$

Time deposits 143,041,123 120,722,596Savings accounts 187,915,027 173,451,589Demand amounts 34,420,866 35,230,403

365,377,016 329,404,588


365,377,016 329,404,588

2009$

2008$

Accounts receivable 1,909,761 1,839,745Inventories of stationery and supplies 174,051 156,800Prepayments 837,018 350,483

2,920,830 2,347,028



2009$

2008$

Manager’s cheques outstanding 773,237 1,242,654Accounts payable and accrued expenses 2,680,038 2,199,478Dividends payable on ordinary shares 379,110 327,468

3,832,385 3,769,600

2009$

2008$

Present value of funded obligations 2,704,000 2,378,000

Fair value of plan assets (2,961,000) (2,613,000)

(257,000) (235,000)

Unrecognised actuarial loss 916,000 974,000

Liability in the balance sheet 659,000 739,000

2009$

2008$

At beginning of year 2,378,000 2,536,000Current service cost 123,000 139,000Interest cost 166,000 152,000Members’ contributions 41,000 36,000Actuarial loss/(gain) 13,000 (468,000)Benefits paid (17,000) (17,000)

At end of year 2,704,000 2,378,000




2009$

2008$

At beginning of year 2,613,000 2,253,000Expected return on plan assets 188,000 139,000Actuarial gain 3,000 75,000Bank’s contributions 133,000 127,000Members’ contributions 41,000 36,000Benefits paid (17,000) (17,000)

At end of year 2,961,000 2,613,000

2009$

2008$

Current service cost 123,000 139,000Interest cost 166,000 152,000Net actuarial gains recognised in the year (188,000) (13,000)Expected return on plan assets (48,000) (139,000)

Total included in staff costs (Note 24) 53,000 139,000

2009$

2008$

At beginning of year 739,000 727,000Pension expense 53,000 139,000Contributions paid (133,000) (127,000)

At end of year 659,000 739,000

2009%

2008%

Discount rate 7 7Expected return on plan assets 7 7Future salary increases 5.5 5.5Future pension increases – –



2009%

2008%

Debt securities 86 86Others 14 14

100 100

2009$

2008$

2007$

2006$

2005$

Defined benefit obligation 2,704,000 2,378,000 2,536,000 2,219,000 2,063,000Fair value of plan assets (2,961,000) (2,613,000) (2,253,000) (1,993,000) (1,788,000)

(Surplus)/deficit in the plan (257,000) (235,000) 283,000 226,000 275,000

Experience adjustment on plan liabilities 13,000 (43,000) 29,000 (87,000) (129,000)Experience adjustment on plan assets 3,000 75,000 (11,000) (21,000) (51,000)

2009$

2008$

At beginning of year (30,846) (165,691)Statement of income (recovery)/charge for the year (Note 25) (187,348) 134,845

Deferred tax asset at end of year (218,194) (30,846)




2009$

2008$

Accelerated capital allowances (68,312) (102,820)Retirement defined obligation (659,000) –

(727,312) (102,820)

Deferred tax asset at income tax rate of 30% (218,194) (30,846)

No. of Shares

2009$

No. of Shares

2008$

Authorized:

5,000,000 ordinary shares

At beginning and end of year 4,999,966 7,971,454 4,999,966 7,971,454



2009$

2008$

Interest and similar incomeLoans and advances 24,805,756 24,427,048Deposits with banks 10,429 66,603Investment securities 5,770,984 5,187,115

30,587,169 29,680,766

Interest expense and similar chargesTime deposits 5,841,078 5,229,080Savings deposits 6,003,044 5,487,550Demand deposits 38,910 46,206

11,883,032 10,762,836

Net interest income 18,704,137 18,917,930

2009$

2008$

Foreign exchange 2,552,754 1,747,447Commission income 1,678,946 1,531,602Fees income 356,705 306,491Rental income 140,000 420,000Dividend income 81,630 50,810Gain on investment securities 56,074 –

4,866,109 4,056,350

2009$

2008$

Staff costs (Note 24) 5,172,593 5,218,223Administrative expenses (Note 23) 4,930,604 4,247,674Depreciation (Note 12) 1,068,207 834,094Operating lease rental 450,497 214,726

11,621,901 10,514,717




2009$

2008$

Advertising 947,426 452,002Other operating expenses 702,357 651,888Postage, telephone and telexes 693,762 634,408Audit and professional fees 553,559 546,506Equipment expenses 426,701 291,304Utilities 369,748 438,276Security expenses 306,795 348,847Directors’ fees and expenses 269,408 138,712Insurance 214,437 192,143Repairs and maintenance 143,772 261,589Stationery 139,744 137,484Bank licence 120,000 120,000Rates and taxes 35,125 15,625Legal fees 7,770 18,890

Total administrative expenses 4,930,604 4,247,674

2009$

2008$

Salaries and wages 4,020,234 3,774,844Other employee benefits 570,378 634,953Profit sharing 363,266 511,717Social security costs 165,715 157,709Pension costs (Note 16) 53,000 139,000

5,172,593 5,218,223



2009$

2008$

Current tax 1,443,450 1,861,115Tax under accrued in prior years – 120,006Deferred tax (Note 17) (187,348) 134,845

1,256,102 2,115,966

2009$

2008$

Profit before income tax 10,370,574 11,211,532

Tax calculated at the statutory tax rate of 30% 3,111,172 3,363,460Tax effect of exempt income (1,727,011) (1,411,583)Tax effect of expenses not deductible for tax purposes 69,641 44,083Tax under accrued in prior years – 120,006Deferred tax under accrued in the prior year (197,700) –

1,256,102 2,115,966




2009$

2008$

Cash and balances with Central Bank (Note 5) 7,615,215 9,764,996Due from other banks (Note 6) 5,976,620 5,088,351

13,591,835 14,853,347

2009$

2008$

Loans outstanding at beginning of year 2,992,329 3,112,842Net loans issued/(repaid) for the year 45,496 (120,513)

Loans outstanding at end of year 3,037,825 2,992,329

Interest income earned 252,829 237,312

Deposits from Directors and other key management personnel

2009$

2008$

Deposits at beginning of year 709,978 920,046Net deposits received/(repaid) during the year 1,514,651 (210,068)

Deposits outstanding at end of year 2,224,629 709,978

Interest expense on deposits 30,753 23,201



2009$

2008$

Loan commitments 24,695,113 25,371,125Guarantees and standby letters of credit 3,992,248 3,707,216Acceptances 11,832 –Documentary and commercial letters of credit 195,430 –

28,894,623 29,078,341

2009$

2008$

Salaries and other short-term benefits 837,268 744,228

Post and other employment benefits 146,573 159,396

983,841 903,624

1st National Bank St. Lucia LimitedP.O. Box 168#21 Bridge StreetCastriesSt. Lucia Tel: +758 455 7000Fax: + 758 453 1630Email: manager@1st nationalbankslu.comWebsite: www.1stnationalbankonline.com

1st National BankAnnual Report

2009

14 GP | 9002 TROPER LAUNNA | KNAB LANOITAN TS1

1st National Bank St. Lucia LimitedP.O. Box 168#21 Bridge StreetCastriesSt. Lucia Tel: +758 455 7000Fax: + 758 453 1630Email: manager@1st nationalbankslu.comWebsite: www.1stnationalbankonline.com

1st National BankAnnual Report

2009

annual report 2009

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