CWB reports strong second quarter and year-to-date financial performance

    <<
    -------------------------------------------------------------------------
        Quarterly dividend increased to $0.14 per CWB common share, up 8%
                           over the prior quarter
             Quarterly dividend declared on CWB preferred shares
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Second Quarter 2011 Highlights (compared to the same period in the prior
    year)
    -------------------------------------------------------------------------

    -   Total loans surpassed the $11 billion milestone driven by strong loan
        growth of 3% in the quarter, 7% year-to-date and 14% over the past
        twelve months.

    -   Net income of $44.4 million, up 17% ($6.6 million), marked CWB's 92nd
        consecutive profitable quarter. Diluted earnings per common share of
        $0.53, an increase of 13%, included the year-to-date impact of
        7.2 million CWB common shares issued upon the exercise of warrants.
        Approximately 5.3 million of the 15.0 million warrants originally
        issued as part of the Bank's preferred unit offering in March 2009
        remained outstanding at quarter end.

    -   Total revenues (teb)(1) of $121.8 million, up 10% ($10.8 million).

    -   Tangible common equity to risk-weighted assets ratio(2) of 9.2%,
        Tier 1 capital ratio of 11.8% and a total capital ratio of 16.6%.

    -   On June 1, declared a quarterly dividend of $0.14 per CWB common
        share, an increase of 8% over the prior quarter and 27% over the
        quarterly dividend declared a year earlier.

    -   On April 26, completed a $250 million offering of senior deposit
        notes representing the Bank's first issue of floating rate senior
        debt in the capital markets.

    -   Significantly expanded CWB's existing branch in Medicine Hat, Alberta
        to offer full-service business and retail banking.

    (1) teb - taxable equivalent basis (see definition following the
        Financial Highlights table).
    (2) Tangible common equity to risk-weighted assets ratio (see definition
        following the Financial Highlights table).
    >>

EDMONTON, June 2, 2011 /CNW/ - Canadian Western Bank (TSX: CWB) today announced strong financial performance marking the Bank's 92nd consecutive profitable quarter, a period spanning 23 years. Second quarter net income of $44.4 million increased 17% compared to the same quarter last year while diluted earnings per common share increased 13% to $0.53. Quarterly total revenues (teb) of $121.8 million grew 10% as the positive impact of strong 14% year-over-year loan growth and an improved net interest margin offset lower other income. On a year-to-date basis, net earnings of $88.4 million, or $1.07 per diluted common share, increased 13% and 8% respectively, reflecting the combined positive impact of strong loan growth and a 21 basis point improvement in net interest margin (teb).

Second quarter net income for the banking and trust segment of $41.0 million was up 19% over a year earlier mainly driven by strong loan growth and an improved net interest margin. Banking and trust segment total revenues (teb) were up 10% to $114.2 million. Quarterly net income from the insurance segment was $3.5 million, up $0.1 million compared to a year earlier, as the positive impact of 6% growth in net earned premiums and higher interest income offset increased net claims expense.

"Our core focus on business banking with complementary diversification in other financial services continues to payoff for CWB shareholders, as demonstrated by our strong results through the second quarter and year-to-date," said Larry Pollock, President and CEO. "Solid economic activity coupled with our ongoing commitment to offer customers a best-in-class service experience underpins our optimism about new growth opportunities. We will continue to deploy resources in sectors we believe will grow faster than the economy as a whole; areas where we have demonstrated expertise and can build on our competitive advantages. Overall credit quality continued to improve and we expect this positive trend will be maintained as the economy strengthens further. In addition, our very strong position relative to both existing capital requirements and the new Basel III capital rules provide the Bank significant flexibility to utilize available capital for accretive opportunities that may arise."

    <<
    -------------------------------------------------------------------------
    Financial Highlights
    -------------------------------------------------------------------------
                              For the three months ended
    (unaudited)           -------------------------------------- Change from
    ($ thousands, except     April 30   January 31     April 30     April 30
     per share amounts)          2011         2011         2010         2010
    -------------------------------------------------------------------------
    Results of Operations
      Net interest income
       (teb - see below)  $    93,282  $    93,426  $    80,132           16%
      Less teb adjustment       2,385        2,744        2,662          (10)
    -------------------------------------------------------------------------
      Net interest income
       per financial
       statements              90,897       90,682       77,470           17
      Other income             28,506       28,421       30,840           (8)
      Total revenues (teb)    121,788      121,847      110,972           10
      Total revenues          119,403      119,103      108,310           10
      Net income               44,440       43,952       37,884           17
      Earnings per
       common share
        Basic(1)                 0.58         0.59         0.52           12
        Diluted(2)               0.53         0.54         0.47           13
        Diluted cash(3)          0.54         0.55         0.48           13
      Return on common
       shareholders'
       equity(4)                 16.3%        16.4%        16.3%        - bp
      Return on assets(6)        1.25         1.24         1.17            8
      Efficiency ratio
       (teb)(7)                  45.5         45.2         45.0           50
      Efficiency ratio           46.4         46.3         46.1           30
      Net interest margin
       (teb)(8)                  2.87         2.88         2.76           11
      Net interest margin        2.80         2.79         2.67           13
      Provision for credit
       losses as a
       percentage of
       average loans             0.19          0.23        0.23           (4)
    -------------------------------------------------------------------------
    Per Common Share
      Cash dividends      $      0.13  $      0.13  $      0.11           18%
      Book value                14.66        14.35        13.08           12
      Closing market value      30.31        29.64        23.99           26
      Common shares
       outstanding
       (thousands)             74,191       69,703       66,309           12
    -------------------------------------------------------------------------
    Balance Sheet and
     Off-Balance
      Sheet Summary
      Assets              $13,600,180  $12,946,217  $12,004,281           13%
      Loans                11,238,552   10,886,889    9,866,669           14
      Deposits             11,361,466   10,786,341   10,185,043           12
      Subordinated
       debentures             545,000      545,000      315,000           73
      Shareholders'
       equity               1,297,700    1,210,224    1,077,111           20
      Assets under
       administration       9,596,537    9,013,307    8,223,274           17
      Assets under
       management             827,486      804,486      779,721            6
    -------------------------------------------------------------------------
    Capital Adequacy(9)
      Tangible common
       equity to
       risk-weighted
       assets(10)                 9.2%         8.9 %        8.4%       80 bp
      Tier 1 ratio               11.8         11.6         11.4           40
      Total ratio                16.6         16.5         14.5          210
    -------------------------------------------------------------------------


    ------------------------------------------------------------
                          For the six months ended
    (unaudited)           ------------------------- Change from
    ($ thousands, except     April 30     April 30     April 30
     per share amounts)          2011         2010         2010
    ------------------------------------------------------------
    Results of Operations
      Net interest income
       (teb - see below)  $   186,708  $   154,438           21%
      Less teb adjustment       5,129        5,225           (2)
    ------------------------------------------------------------
      Net interest income
       per financial
       statements             181,579      149,213           22
      Other income             56,927       57,206            -
      Total revenues (teb)    243,635      211,644           15
      Total revenues          238,506      206,419           16
      Net income               88,392       77,919           13
      Earnings per
       common share
        Basic(1)                 1.17         1.08            8
        Diluted(2)               1.07         0.99            8
        Diluted cash(3)          1.09         1.00            9
      Return on common
       shareholders'
       equity(4)                 16.3%        17.1%    (80)bp(5)
      Return on assets(6)        1.24         1.21            3
      Efficiency ratio
       (teb)(7)                  45.4         42.6          280
      Efficiency ratio           46.3         43.7          260
      Net interest margin
       (teb)(8)                  2.87         2.66           21
      Net interest margin        2.79         2.57           22
      Provision for credit
       losses as a
       percentage of
       average loans             0.21         0.19            2
    ------------------------------------------------------------
    Per Common Share
      Cash dividends      $      0.26  $      0.22           18%
      Book value                14.66        13.08           12
      Closing market value      30.31        23.99           26
      Common shares
       outstanding
       (thousands)             74,191       66,309           12
    ------------------------------------------------------------
    Balance Sheet and
     Off-Balance
      Sheet Summary
      Assets
      Loans
      Deposits
      Subordinated
       debentures
      Shareholders'
       equity
      Assets under
       administration
      Assets under
       management
    ------------------------------------------------------------
    Capital Adequacy(9)
      Tangible common
       equity to
       risk-weighted
       assets(10)
      Tier 1 ratio
      Total ratio
    ------------------------------------------------------------

    (1)  Basic earnings per share is calculated as net income less preferred
         share dividends divided by the average number of common shares
         outstanding.
    (2)  Diluted earnings per share is calculated as net income less
         preferred share dividends divided by the average number of common
         shares outstanding adjusted for the dilutive effects of stock
         options and warrants.
    (3)  Diluted cash earnings per share is diluted earnings per common share
         excluding the after-tax amortization of acquisition-related
         intangible assets.
    (4)  Return on common shareholders' equity is calculated as annualized
         net income after preferred share dividends divided by average common
         shareholders' equity.
    (5)  bp - basis point change.
    (6)  Return on assets is calculated as annualized net income after
         preferred share dividends divided by average total assets.
    (7)  Efficiency ratio is calculated as non-interest expenses divided by
         total revenues.
    (8)  Net interest margin is calculated as annualized net interest income
         divided by average total assets.
    (9)  Capital adequacy is calculated in accordance with guidelines issued
         by the Office of the Superintendent of Financial Institutions Canada
         (OSFI).
    (10) Tangible common equity to risk-weighted assets is calculated as
         shareholders' equity less subsidiary goodwill divided by risk-
         weighted assets, calculated in accordance with guidelines issued by
         OSFI.
    >>

Taxable Equivalent Basis (teb)

Most banks analyze revenues on a taxable equivalent basis to permit uniform measurement and comparison of net interest income. Net interest income (as presented in the consolidated statement of income) includes tax-exempt income on certain securities. Since this income is not taxable, the rate of interest or dividends received is significantly lower than would apply to a loan or security of the same amount. The adjustment to taxable equivalent basis increases interest income and the provision for income taxes to what they would have been had the tax-exempt securities been taxed at the statutory rate. The taxable equivalent basis does not have a standardized meaning prescribed by GAAP and, therefore, may not be comparable to similar measures presented by other banks. Total revenues, net interest income and income taxes are discussed on a taxable equivalent basis throughout this quarterly report to shareholders.

Non-GAAP Measures

Taxable equivalent basis, diluted cash earnings per common share, return on common shareholders' equity, return on assets, efficiency ratio, net interest margin, provision for credit losses as a percentage of average loans and tangible common equity to risk-weighted assets do not have standardized meanings prescribed by generally accepted accounting principles (GAAP) and therefore may not be comparable to similar measures presented by other financial institutions.

    <<
    -------------------------------------------------------------------------
    Message to Shareholders
    -------------------------------------------------------------------------
    >>

Canadian Western Bank (CWB or the Bank) is pleased to report strong financial performance for its 92nd consecutive profitable quarter, a period spanning 23 years. Highlights in the quarter included surpassing $11 billion of total loans and $13 billion of total assets, as well as the successful completion of CWB's first issue of floating rate senior deposit notes in the capital markets.

Net income of $44.4 million was up 17% ($6.6 million) compared to the same quarter last year while diluted earnings per common share increased 13% ($0.06) to $0.53. Higher growth in net income compared to diluted earnings per share mainly reflects the impact on diluted earnings per share of 7.2 million additional CWB common shares issued upon the exercise of warrants and an increase in CWB's average share price. A higher average CWB share price negatively affects reported diluted earnings per common share due to required accounting treatment for warrants and outstanding stock options. Total revenues (teb) of $121.8 million increased 10% ($10.8 million) over a year earlier on the combined positive impact of strong 14% year-over-year loan growth and an 11 basis point improvement in net interest margin (teb) to 2.87%.

Compared to last quarter, net income increased 1% ($0.5 million) as the positive contribution from loan growth, increased investment income and a lower provision for credit losses offset the impact of three fewer revenue earning days. Diluted earnings per common share decreased 2% reflecting the issuance of common shares upon the exercise of warrants. On a year-to-date basis, net income of $88.4 million was up 13% compared to the same period last year while diluted earnings per common share increased 8% to $1.07.

The quarterly return on common shareholders' equity of 16.3% was unchanged from the same quarter last year as the benefit of higher net income was offset by an increase in the average balance of common shareholders' equity. Compared to the prior quarter, return on common shareholders' equity was down 10 basis points. Year-to-date return on common shareholders' equity of 16.3% was down 80 basis points compared to the same period last year reflecting the factors already noted, including the impact of additional CWB common shares issued upon the exercise of warrants. Second quarter return on assets of 1.25% was up eight basis points from a year earlier and one basis point compared to last quarter. Year-to-date return on assets increased three basis points to 1.24%.

Regulatory Capital

The Bank's Tier 1 and total capital ratios at April 30, 2011 remained very strong at 11.8% and 16.6%, respectively, compared to 11.4% and 14.5% a year earlier. The tangible common equity ratio, which represents the highest quality form of capital, was also very strong at 9.2%, up from 8.4% twelve months ago. The exercise of a significant number of warrants in the current fiscal year further augmented capital and provides additional flexibility to pursue opportunities that are accretive for CWB shareholders.

We have now completed our preliminary impact assessment regarding the transition to the new capital framework known as Basel III, which will begin in 2013 with transition allowances to 2019. Application of the expected 2019 Basel III rules against the Bank's financial position at April 30, 2011 confirms our previous view that CWB is already in compliance with the new minimum capital ratio requirements. The Bank's Basel III common equity Tier 1 ratio at the end of the second quarter is 8.6%, while the Tier 1 ratio is 9.5%; this compares to expected future regulatory minimums for these metrics of 7.0% and 8.5%, respectively (further details regarding Basel III are included in the Capital Management section of the management's discussion and analysis for the second quarter).

Dividends

On June 1, 2011, CWB's Board of Directors declared a cash dividend of $0.14 per common share, payable on June 30, 2011 to shareholders of record on June 16, 2011. This quarterly dividend represents an 8% increase over the previous quarter and is 27% higher than the quarterly dividend declared one year ago. The Board of Directors also declared a cash dividend of $0.453125 per Series 3 Preferred Share payable on July 31, 2011 to shareholders of record on July 21, 2011.

Loan Growth

Total loans of $11,239 million grew 3% ($352 million) in the quarter, 7% ($742 million) year-to-date and 14% ($1,372 million) over the last twelve months. Each lending sector showed positive growth in the quarter with the largest dollar contributions coming from real estate lending, general commercial, and personal loans and mortgages. Oil and gas production loans, which represent a comparatively smaller proportion of the total portfolio, showed the strongest quarterly growth measured in percentage terms. The level of loan growth compared to the same period last year reflects strong performance across all lending sectors, led by general commercial lending. Strong year-to-date loan growth combined with an overall positive outlook for economic growth in Western Canada positions the Bank well to surpass our fiscal 2011 growth target of 10%.

Credit Quality

Overall credit quality remained satisfactory and continued to show improvement. Gross impaired loans totaled $128.5 million at quarter end, compared to $132.4 million last quarter and $167.2 million a year earlier. While we expect that the dollar level of gross impaired loans will continue to fluctuate, this represents the fourth consecutive quarter of reductions since the peak level was reached in the second quarter of 2010. Although there was an increase of $3.0 million in the net new specific provision for credit losses compared to last quarter, the difference was entirely attributed to a single loan in the hospitality sector and is not reflective of the overall quality of the loan portfolio. Based on our assessment of the current environment, actual losses for fiscal 2011 are expected to remain at acceptable levels and should be within our 2011 target range for the provision for credit losses of 20 to 25 basis points of average loans.

Branch Deposit Growth

Deposits raised through our branch network and trust companies were up 3% in the quarter, 5% year-to-date and 12% over the past twelve months. The demand and notice component within branch-raised deposits, which include lower cost deposits, was up 8% from last quarter, 13% year-to-date and 14% compared to a year earlier. Growth compared to the prior year period reflects both business growth and the ongoing success of Canadian Western Trust Company in generating deposits through its fiduciary business. The achievement of further diversification and growth of our internal funding sources remains a priority to enhance our competitive position and support net interest margin. While they are not classified as branch deposits, the second quarter issuance of floating rate senior deposit notes to a group of institutional investors also diversifies the deposit base and provides an efficient source of funds to support the Bank's continued growth and development.

Net Interest Margin

Net interest margin (teb) of 2.87% improved from 2.76% in the second quarter last year mainly reflecting changes in interest rates and an improved liquidity mix, partially offset by increased interest expense from subordinated debentures issued in November 2010. Compared to the prior quarter, net interest margin (teb) decreased one basis point but remained above our 10-year average of approximately 2.55%. The main factor supporting net interest margin above the Bank's average historical level is the considerably higher yield earned on National Leasing's fixed rate assets. Ongoing competitive influences and other factors support our expectation that a meaningful improvement in margin over that achieved in the current period is unlikely. Based on our current interest rate sensitivity analysis, increases in the prime rate are expected to positively impact net interest income.

Outlook

CWB is reporting excellent second quarter and year-to-date results and we look forward to strong performance continuing for the balance of the year. We are on track to meet or surpass all of our 2011 minimum performance targets, which include objectives related to growth, profitability, credit quality and efficiency. Strong year-to-date loan growth was apparent across all lending sectors and we continue to see positive trends in both credit quality and the volume in our pipeline for new loans. One of our key objectives is to further improve the return on common shareholders' equity and initiatives are underway that we believe will positively impact this measure in the future. Another management priority is to maintain effective cost control while ensuring the Bank can deliver continued strong growth over the long term. We are very well positioned for the transition to the new Basel III capital standards beginning in 2013. This strong capital base both enhances our ability to manage through any unforeseen challenges that may arise and provides us with significant flexibility to capitalize on opportunities that add further value for CWB shareholders. Looking forward, we plan to continue to deliver on our 2011 strategic goal to "do what we do, only better".

We look forward to reporting our fiscal 2011 third quarter results on September 2, 2011.

    <<
    -------------------------------------------------------------------------
    Fiscal 2011 Second Quarter and Year-to-Date Results Conference Call

    CWB's second quarter and year-to-date results conference call is
    scheduled for Thursday, June 2, 2011 at 3:00 p.m. ET (1:00 p.m. MT). The
    Bank's executives will comment on financial results and respond to
    questions from analysts and institutional investors.

    The conference call may be accessed on a listen-only basis by dialing
    647-427-7450 or toll-free 1-888-231-8191. The call will also be webcast
    live on the Bank's website, www.cwbankgroup.com.

    A replay of the conference call will be available until June 16, 2011 by
    dialing 416-849-0833 (Toronto) or 1-800-642-1687 (toll-free) and entering
    passcode 65703491.
    -------------------------------------------------------------------------
    >>

About Canadian Western Bank Group

Canadian Western Bank offers a full range of business and personal banking services across the four western provinces and is the largest publicly traded Canadian bank headquartered in Western Canada. The Bank, along with its operating affiliates, National Leasing Group Inc., Canadian Western Trust Company, Valiant Trust Company, Canadian Direct Insurance Incorporated, Adroit Investment Management Ltd. and Canadian Western Financial Ltd., collectively offer a diversified range of financial services across Canada and are together known as the Canadian Western Bank Group. The common shares of Canadian Western Bank are listed on the Toronto Stock Exchange under the trading symbol "CWB". The Bank's Series 3 Preferred Shares and common share purchase warrants trade on the Toronto Stock Exchange under the trading symbols "CWB.PR.A" and "CWB.WT", respectively. Refer to www.cwbankgroup.com for additional information.

    <<
    -------------------------------------------------------------------------
    Management's Discussion and Analysis
    -------------------------------------------------------------------------
    >>

This management's discussion and analysis (MD&A) should be read in conjunction with Canadian Western Bank's (CWB or the Bank) unaudited interim consolidated financial statements for the period ended April 30, 2011, as well as the audited consolidated financial statements and MD&A for the year ended October 31, 2010, available on SEDAR at www.sedar.com and the Bank's website at www.cwbankgroup.com. Except where indicated below, the factors discussed and referred to in the MD&A for fiscal 2010 remain substantially unchanged.

Overview

CWB recorded strong second quarter results reflecting good financial performance from both business segments. Consolidated net income increased 17% ($6.6 million) over the same quarter last year to $44.4 million, while diluted earnings per common share of $0.53 ($0.58 basic) was up 13%. Lower percentage growth for diluted earnings per common share compared to net income mainly reflects the impact on diluted earnings per share of 7.2 million CWB common shares issued since December 2010 upon the exercise of warrants and a higher average CWB share price, partially offset by 2.5 million warrants purchased and canceled to date through the Bank's Normal Course Issuer Bids. A higher average CWB share price increases the reported dilution of outstanding warrants and stock options due to required accounting treatment. Warrants converted to date have added $101 million of tangible common equity, further augmenting the Bank's already strong capital base. The Bank is very well positioned for the transition to the new Basel III capital rules, which will begin in 2013, and management continues to evaluate strategies to deploy available capital for the benefit of CWB shareholders.

Banking and trust segment net income of $41.0 million increased 19% ($6.5 million) compared to the second quarter last year on 10% ($10.8 million) growth in total revenues to $114.2 million, on a taxable equivalent basis (teb - see definition following Financial Highlights table). This performance mainly reflects the positive impact from strong 14% loan growth, a 10 basis point improvement in net interest margin (teb) and a lower effective tax rate, partially offset by higher non-interest expenses and $1.8 million lower other income. The insurance segment, which includes the operations of Canadian Direct Insurance Incorporated (Canadian Direct or CDI), posted quarterly net income of $3.5 million, up $0.1 million from a year ago as the benefit of a 6% increase in net earned premiums and higher interest income was offset by an increase in net claims expense.

Compared to the previous quarter, consolidated net income was up $0.5 million as the positive contribution from loan growth, investment income and a lower provision for credit losses more than offset the impact of three fewer revenue earning days. Quarterly diluted earnings per common share decreased 2% ($0.01) reflecting additional CWB common shares issued upon the exercise of warrants. Consolidated year-to-date net income of $88.4 million increased 13% ($10.5 million) compared to the same period in 2010, while diluted earnings per common share was up 8% ($0.08) to $1.07 ($1.17 basic). Growth in year-to-date earnings compared to the same period last year reflects very strong growth in net interest income and includes the positive impact on performance metrics from the acquisition of National Leasing Group Inc. (National Leasing), effective February 1, 2010.

Second quarter return on common shareholders' equity of 16.3% was unchanged compared to a year earlier and down 10 basis points from the prior quarter as the benefit of net income growth was offset by an increase in the average balance of common shareholders' equity due to the exercise of warrants and net profits retained to support ongoing growth. On a year-to-date basis, return on common shareholders' equity was 16.3%, down from 17.1% in 2010. Quarterly return on assets was 1.25%, up from 1.17% last year and 1.24% in the previous quarter. Return on assets through the first six months was 1.24%, compared to 1.21% in the same period last year.

Total Revenues (teb)

Total revenues (teb), comprising both net interest income and other income, were $121.8 million for the quarter, up 10% ($10.8 million) compared to a year earlier as very strong growth in net interest income due to loan growth and margin improvement more than offset $2.3 million lower other income. Total revenues compared to last quarter were relatively unchanged despite three fewer revenue earning days. On a year-to-date basis, total revenues of $243.6 million increased 15% ($32.0 million) over the same period last year with a portion of the difference attributed to the second quarter 2010 acquisition of National Leasing. Loan growth and margin improvement contributed to a 21% ($32.3 million) increase in year-to-date net interest income while other income was $0.3 million lower.

Net Interest Income (teb)

Quarterly net interest income (teb) of $93.3 million grew 16% ($13.2 million) driven by 14% loan growth and an 11 basis point improvement in net interest margin to 2.87%. The improvement in net interest margin compared to the same quarter in 2010 mainly reflects changes in interest rates and an improved liquidity mix, partially offset by increased interest expense related to subordinated debentures issued in November 2010. Net interest income was down $0.1 million compared to the prior quarter as a higher return on interest-earning assets was offset by the impact of three fewer revenue earning days. On a year-to-date basis, net interest income of $186.7 million increased 21% ($32.3 million) reflecting loan growth and a 21 basis point improvement in net interest margin. The improvement in the year-to-date net interest margin reflects the factors already noted, in addition to the positive impact of National Leasing due to its much higher yields relative to the Bank's core lending business. Ongoing competitive influences and other factors suggest that a meaningful improvement in net interest margin over that achieved in the current period is unlikely. Based on the current asset and liability composition, increases in the prime lending interest rate would have a positive impact on net interest margin. However, management believes ongoing uncertainty about the strength and breadth of economic recovery in Canada and globally has reduced the likelihood of upward movements in the Canadian prime lending interest rate before the latter part of calendar 2011.

Note 12 to the unaudited interim consolidated financial statements summarizes the Bank's exposure to interest rate risk as at April 30, 2011. The estimated sensitivity of net interest income to a change in interest rates is presented in the table below. The amounts represent the estimated change in net interest income over the time periods shown resulting from a one-percentage point change in interest rates. The April 30, 2011 estimates are based on a number of assumptions and factors, which include:

    <<
    -   a constant structure in the interest sensitive asset and liability
        portfolios;
    -   floor levels for various deposit liabilities;
    -   interest rate changes affecting interest sensitive assets and
        liabilities by proportionally the same amount and applied at the
        appropriate re-pricing dates; and
    -   no early redemptions.

                                          April 30   January 31     April 30
    ($ thousands)                             2011         2011         2010
    -------------------------------------------------------------------------

    Impact of 1% increase
     in interest rates
      1 year                           $    12,311  $     8,894  $     1,132
    -------------------------------------------------------------------------
      1 year percentage
       change                                  3.7%         2.7%         0.4%
    -------------------------------------------------------------------------

    Impact of 1% decrease
     in interest rates
      1 year                           $   (16,111) $   (11,938) $     5,364
    -------------------------------------------------------------------------
      1 year percentage
       change                                 (4.8)%       (3.7)%        1.9%
    -------------------------------------------------------------------------
    >>

As at April 30, 2011, it is estimated that a one-percentage point increase in interest rates would increase net interest income by approximately 3.7% over the following twelve months; this compares to January 31, 2011 when it was estimated that a one-percentage point increase in interest rates would have increased net interest income by approximately 2.7% over the following twelve months.

It is estimated that a one-percentage point decrease in interest rates as at April 30, 2011, would decrease net interest income by approximately 4.8% over the following twelve months; this compares to January 31, 2011 when it was estimated that a one-percentage point decrease in interest rates would have decreased net interest income by approximately 3.7% over the following twelve months.

It is estimated that a one-percentage point increase in interest rates would decrease unrealized gains related to available-for-sale securities and reduce other comprehensive income by $8.1 million, net of tax (January 31, 2011 - $8.2 million); it is estimated that a one-percentage point decrease in all interest rates at April 30, 2011 would increase unrealized gains related to available-for-sale securities and increase other comprehensive income by a similar amount.

Management intends to continue to manage the asset liability structure and interest rate sensitivity within the Bank's established policies through pricing and product initiatives, as well as the use of interest rate swaps and other appropriate strategies.

Other Income

Second quarter other income of $28.5 million was down 8% ($2.3 million) from a year earlier as the positive impact of $1.2 million higher gains on sale of securities, combined with growth in trust and wealth management services, foreign exchange gains and retail services income, was more than offset by lower contributions in other areas. The level of gains on sale of securities this year were realized due to a repositioning of investments in common equities and preferred shares. Management's decision to sell certain preferred shares issued by financial institutions reflects forthcoming changes under the new regulatory capital framework known as Basel III which requires a deduction from regulatory capital of amounts over a certain threshold for this type of investment. Based on management's general expectations and the current level of unrealized gains in the securities portfolio ($24.8 million, unchanged from last quarter), it is possible that further gains will be realized through the remainder of the current fiscal year. The 'other' category within other income was down $1.9 million compared to the same quarter last year which included a $2.4 million positive change in fair value on National Leasing's interest rate swaps. A $0.9 million decline in securitization revenue reflects National Leasing's current strategy to maintain all new leases on balance sheet. Credit related fee income and net insurance revenues decreased by $1.0 million and $0.5 million, respectively. The decrease in net insurance revenues mainly reflects comparatively higher net claims expense in the current year.

Other income was relatively unchanged compared to the previous quarter as $1.1 million higher gains on sale of securities and growth in net insurance revenues, and trust and wealth management services was offset by a $1.3 million decline in credit related fee income, $0.5 million lower securitization revenue and the impact of three fewer revenue earning days. Other income year-to-date of $56.9 million was down $0.3 million as strong results across CWB's core banking and trust operations, including National Leasing's revenue contributions which commenced in the second quarter of 2010, was more than offset by a 14% ($1.6 million) decline in net insurance revenues and $1.0 million lower gains on sale of securities. Net insurance revenues were down as the positive impact of 6% growth in net earned premiums was more than offset by increased claims expense and a $1.2 million lower before tax profit from Canadian Direct's share of the Alberta auto risk sharing pools.

Credit Quality

Overall credit quality remained satisfactory and within expectations given increased economic activity and a generally positive outlook in key western Canadian markets. The dollar level of gross impaired loans decreased for the fourth consecutive quarter but remains above the Bank's historical average, reflecting the post-recessionary environment. Compared to both the previous quarter and a year earlier, the total number of accounts classified as impaired was also down.

    <<
                              For the three months ended
                          -------------------------------------- Change from
    (unaudited)              April 30   January 31     April 30     April 30
    ($ thousands)                2011         2011         2010         2010
    -------------------------------------------------------------------------

    Gross impaired loans,
     beginning of period  $   132,420  $   143,207  $   146,402         (10)%
      New formations           29,569       32,888       55,586         (47)
      Reductions, impaired
       accounts paid down
       or returned to
       performing status      (31,512)     (33,628)     (26,229)         20
      Write-offs               (1,940)     (10,047)      (8,530)        (77)
    -------------------------------------------------------------------------
    Total(1)              $   128,537  $   132,420  $   167,229         (23)%
    -------------------------------------------------------------------------

    Balance of the ten
     largest impaired
     accounts             $    62,287  $    63,909  $    97,307         (36)%
    Total number of
     accounts classified
     as impaired(3)               191          195          211          (9)
    Total number of
     accounts classified
     as impaired under
     $1 million(3)                162          169          182         (11)
    Gross impaired loans
     as a percentage of
     total loans(4)              1.14%        1.21%        1.68%  (54) bp(2)


    (1) Gross impaired loans includes foreclosed assets held for sale with a
        carrying value of $992 (January 31, 2010 - $1,591 and April 30, 2010
        - $695).
    (2) bp - basis point change.
    (3) Total number of accounts excludes National Leasing accounts.
    (4) Total loans do not include an allocation for credit losses or
        deferred revenue and premiums.
    >>

Gross impaired loans at April 30, 2011 were $128.5 million, compared to $132.4 million last quarter and $167.2 million a year earlier. The ten largest accounts classified as impaired, measured by dollars outstanding, represented approximately 48% of total gross impaired loans at quarter end, unchanged from the prior quarter and down from 58% a year earlier. New formations of impaired loans totaled $29.6 million, compared to $55.6 million in the second quarter last year.

The dollar level of gross impaired loans represented 1.14% of total loans at quarter end, compared to 1.21% last quarter and 1.68% one year ago. While there are positive signs, the current credit cycle continues to run its course and management expects the dollar level of gross impaired loans will fluctuate until the economic recovery strengthens further. The dollar level of gross impaired loans goes up and down as loans become impaired and are subsequently resolved and does not directly reflect the dollar value of expected write-offs given the tangible security held against the Bank's lending positions. The Bank establishes its current estimates of expected write-offs through detailed analyses of both the overall quality and ultimate marketability of the security held against impaired accounts. Actual credit losses are expected to remain within the Bank's historical range of acceptable levels.

The second quarter provision for credit losses measured against average loans of 19 basis points was slightly better than the Bank's fiscal 2011 target range of 20 to 25 basis points reflecting positive credit trends in National Leasing's portfolio and consistent expectations for credit quality in other areas. Compared to the Bank's lending portfolio, the nature of National Leasing's business leads to a higher provision for credit losses measured as a percentage of loans, particularly in less favourable credit environments. On a year-to-date basis, the provision for credit losses measured against average loans was 21 basis points. Based on the current environment and outlook, management believes the provision for credit losses will remain in the lower to mid-level of the fiscal 2011 target range.

The total allowance for credit losses (general and specific) represented 61% of gross impaired loans at quarter end, compared to 57% last quarter and 46% one year ago. The total allowance for credit losses was $78.8 million at April 30, 2011, compared to $75.0 million last quarter and $76.4 million a year earlier. The general allowance at April 30, 2011 was $56.9 million, down from $60.2 million last quarter and $58.0 million a year earlier. The general allowance as a percentage of risk-weighted loans was 58 basis points, down from 64 basis points last quarter and 66 basis points one year ago. The Bank's long-standing strategy with respect to managing the allowance for credit losses has been to maintain a relatively consistent provision to cover both identified and unidentified losses. The general allowance for credit losses represents an estimate of losses inherent in the portfolio that are not presently identifiable on an account-by-account basis and management expects that the level of the general allowance will fluctuate, as was the case in the current quarter, as specific losses are recognized and subsequently written-off. Results from ongoing stress testing of the portfolio substantiate the adequacy of the general allowance. Based on management's current assessment of credit quality and the secured nature of the loan portfolio, the 2011 provision for credit losses should be relatively consistent with expected losses for the year and result in an increase in the dollar level of the general allowance over the next two quarters.

Non-interest Expenses

Effective execution of CWB's strategic plan, which is focused on profitable growth over the long term, will continue to require increased investment in certain areas. Significant expenditures relate to additional staff complement as well as expanded premises and technology upgrades. Investment in these areas is an integral part of the Bank's commitment to maximize shareholder value and is expected to provide material benefits in future periods. In support of management's objective to enhance market presence, the Bank's existing branch in Medicine Hat, Alberta was significantly expanded to offer full-service business and retail banking. A new full-service banking branch is scheduled to open in Richmond, British Columbia (BC) in late 2011. Other new branch locations, including a second full-service branch in Winnipeg, Manitoba, are currently under consideration. Management's objective is to offer business and personal banking services through 50 CWB branches by 2015, which compares to the current branch count of 39. A key technology highlight is the ongoing roll-out of the Bank's new loan origination system, which management expects will be fully implemented across all CWB branches in the fourth quarter. Once implemented, the new system will provide considerable efficiencies as well as enhanced statistical tracking and portfolio management capabilities.

Second quarter non-interest expenses of $55.4 million were up 11% ($5.4 million) compared to last year. Total salary and benefit costs increased $2.7 million, other expenses were $1.8 million higher and premises and equipment expenses were up $1.2 million. The change in salary and benefit costs was driven by a combination of increased staff complement to support ongoing growth, annual salary increments and expense related to restricted share units. Premises and equipment expense includes the addition of two new full-service branches opened in the latter part of 2010 as well as ongoing expansion and upgrades to existing infrastructure and technology. The increase in other expenses was largely driven by marketing and business development costs related to enhancing brand awareness and higher community investment expense, partially offset by lower capital taxes.

Compared to the prior quarter, non-interest expenses increased $0.3 million as lower capital taxes largely offset the impact of higher expenses in marketing, business development, premises and other areas. Year-to-date non-interest expenses were 23% ($20.3 million) higher than the first six months of 2010; the comparative year-to-date period last year included only three months of expense for National Leasing, acquired February 1, 2010. Excluding National Leasing, year-to-date non-interest expenses increased 15% ($12.6 million) mainly reflecting increased staff complement, additional stock-based compensation charges, annual salary increases and a special bonus of $250 paid to every CWB Group employee for recognition of exceptional achievements in 2010. Year-to-date provincial capital taxes were higher compared to 2010 as the Bank's capital position surpassed the threshold to qualify for the lower rate in BC before the 2010 fiscal year end. Capital taxes for CWB were eliminated in BC effective April 2010 and in Manitoba beginning in fiscal 2011. Other changes are relatively consistent with the factors already discussed.

The second quarter efficiency ratio (teb), which measures non-interest expenses as a percentage of total revenues (teb), was 45.5%, compared to 45.0% last year and 45.2% in the previous quarter. The year-to-date efficiency ratio (teb) was 45.4%, compared to 42.6% in the prior year period as percentage growth in non-interest expenses exceeded growth in total revenues. One of management's key priorities is to maintain effective control of costs while ensuring the Bank is positioned to deliver continued strong growth over the long term. In consideration of expected revenue growth and planned expenditures, management believes the efficiency ratio will meet the 2011 target of 46% or better.

Income Taxes

The income tax rate (teb) for the first six months of 2011 was 27.2%, down 330 basis points from the same period one year ago, while the tax rate before the teb adjustment was 24.0%, or 310 basis points lower. The lower tax rate compared to the same period last year mainly reflects the 150 basis point decrease in the basic federal income tax rate and the 50 basis point reduction in the provincial income tax rate in BC, both effective January 1, 2011. Deemed dividends realized on the redemption of certain preferred shares held in the securities portfolio had a further positive impact on the tax rate in the second quarter and year-to-date.

Comprehensive Income

Comprehensive income is comprised of net income and other comprehensive income (OCI), all net of income taxes, and totaled $44.4 million for the second quarter, compared to $39.1 million in the previous quarter and $21.6 million in the same period last year. The significant increase in comprehensive income compared to the same quarter last year was driven by a 17% ($6.6 million) improvement in net income and a $16.2 million positive change in OCI related to favourable market value fluctuations in available-for-sale securities, partially offset by an increase in the amount of gains reclassified to other income when certain securities were sold. Year-to-date comprehensive income totaled $83.5 million, compared to $64.3 million last year. The increase reflects a 13% ($10.5 million) improvement in net income and $6.6 million increase in unrealized gains on available-for-sale securities.

While the combined dollar investment in preferred shares and common equities is relatively small in relation to total liquid assets, it increases the potential for comparatively larger fluctuations in OCI.

Balance Sheet

Total assets increased 5% ($654 million) in the quarter, 7% ($898 million) year-to-date and 13% ($1,596 million) in the past year to reach $13,600 million at April 30, 2011.

Cash and Securities

Cash, securities and securities purchased under resale agreements totaled $2,066 million at April 30, 2011, compared to $1,754 million last quarter and $1,827 million one year ago (refer to the Treasury Management section of this MD&A for additional details). Unrealized gains recorded on the balance sheet at April 30, 2011 were $24.8 million, unchanged from last quarter and up from $7.6 million a year earlier. The change in unrealized gains compared to 2010 was mainly attributed to increases in the market value of the Bank's investment in preferred shares and common equities. At April 30, 2011, unrealized gains in these investment portfolios totaled $21.8 million, up from $3.9 million a year earlier. The securities portfolio is primarily comprised of high quality debt instruments, preferred shares and common equities that are not held for trading purposes and, where applicable, are typically held until maturity. Fluctuations in value are generally attributed to changes in interest rates, movements in market credit spreads and shifts in the interest rate curve.

Realized gains on sale of securities in the second quarter were $5.3 million, compared to $4.2 million in the previous quarter and $4.1 million a year earlier. Year-to-date gains on sale of securities were $9.5 million, compared to $10.6 million in the same period of 2010. The majority of gains on sale of securities in the current year were attributed to the repositioning of common equities and preferred shares within the investment portfolio. Under Basel III, the Bank's investments in preferred shares of other financial institutions will require a deduction from regulatory capital for amounts over a certain threshold. Gains on sale of securities in prior periods mainly resulted from a steep interest rate curve and wide credit spreads that allowed the Bank to capitalize on specific investment strategies. Based on the level of unrealized gains and management's current intention to further reposition the securities portfolio, it is possible additional gains could be realized through the remainder of the current fiscal year.

Treasury Management

As the economic recovery has continued, the Bank's average liquidity has been reduced compared to the high levels maintained at the peak of the global financial crisis. Additionally, the Bank continues to refine its methodologies for measuring and monitoring liquidity risk. Use of dynamic scenario analysis has allowed for a reduction in the average level of liquid asset coverage while continuing to maintain prudent liquidity standards. Lower average liquidity has a positive impact on net interest margin. The higher level of liquidity held at the end of the second quarter compared to recent prior periods was mainly attributed to proceeds collected in the latter part of April from the $250 million issue of floating rate senior deposit notes and the exercise of a large number of warrants.

DBRS Limited maintains published credit ratings on the Bank's senior debt (deposits) and subordinated debentures of "A (low)" and "BBB (high)", respectively, both with a stable outlook. Credit ratings do not comment on market price or suitability of any financial instrument for a particular investor and are not recommendations to purchase, sell or hold securities. Ratings are subject to revision or withdrawal at any time by the rating organization. Management believes the ratings widen the base of clients and investors who can participate in CWB's deposit and debt offerings while also lowering the Bank's overall cost of capital. This benefit was further demonstrated in the second quarter with the Bank's successful issuance of floating rate senior deposit notes.

In addition to the Basel III rules text described in the Capital Management section of this MD&A, the Bank for International Settlements (BIS) finalized liquidity proposals initially described in its document entitled International Framework for Liquidity Risk Measurement, Standards and Monitoring. The results remain subject to significant transition and monitoring activities, and revisions are expected. It is still too early to tell how this transition will impact CWB. An observation period is currently underway and the BIS is expected to introduce a Liquidity Coverage Ratio (LCR) effective January 1, 2015. A Net Stable Funding Ratio (NSFR) is expected to be transitioned to a minimum standard by January 1, 2018.

Loans

Total loans of $11,239 million grew 3% ($352 million) in the quarter, 7% ($742 million) year-to-date and 14% ($1,372 million) in the past twelve months. Measured by geographic concentration, all provinces except Manitoba showed strong quarterly loan growth. Each lending sector also showed positive growth with the largest dollar contributions coming from real estate lending, general commercial, and personal loans and mortgages. Oil and gas production loans, which represent a comparatively smaller proportion of the total portfolio, showed the strongest quarterly performance measured in percentage terms. In the past six and twelve months, strong growth is apparent across all lending sectors, led by general commercial lending. Lending activity in each of the Bank's key western markets contributed to the strong year-to-date loan growth. National Leasing also continued to post strong double-digit growth. Looking forward, management remains optimistic about increased lending opportunities in the Bank's heavy equipment financing business, a lending portfolio that was significantly affected by the recessionary environment. Management also continues to believe Western Canada's resource-based economies are poised for a comparatively stronger recovery than the rest of Canada. While uncertainties remain regarding the strength of the economic recovery, as well as expectations for continued competitive pressures, CWB is well positioned to exceed its fiscal 2011 loan growth target of 10%.

Loans in the Bank's residential mortgage business, Optimum Mortgage (Optimum), increased 5% ($41 million) in the quarter, 11% ($86 million) year-to-date and 32% ($210 million) over the past twelve months to reach $882 million. Results in the quarter reflected growth in both uninsured mortgages and higher ratio insured mortgages. Uninsured mortgages continue to be secured via conventional residential first mortgages carrying a weighted average loan-to-value ratio at initiation of approximately 70%, and represented about 59% of Optimum's total portfolio at quarter end. Management remains committed to further developing this mortgage business as it continues to produce strong returns while maintaining an acceptable risk profile. While Optimum's portfolio is expected to provide an ongoing source of new business, the level of lending opportunities will likely moderate relative to the last twelve months reflecting overall slower growth in demand for residential mortgages.

Deposits

Total branch deposits, including those raised by trust services, were up 3% ($181 million) in the quarter, 5% ($333 million) year-to-date and 12% ($737 million) compared to a year earlier. The demand and notice component within branch deposits, which include lower cost deposits, was up 8% ($302 million) over last quarter, 13% ($466 million) year-to-date and 14% ($502 million) compared to the same time last year. Growth in demand and notice deposits supports management's objective to further enhance and diversify the Bank's funding sources and can also improve net interest margin.

Total deposits at quarter end were $11,361 million, up 5% ($575 million) from the previous quarter, 5% ($549 million) year-to-date and 12% ($1,176 million) over the past year. Total branch deposits represented 61% of total deposits at April 30, 2011, compared to 63% in the previous quarter and unchanged from one year earlier. Demand and notice deposits were 35% of total deposits, compared to 34% in both the previous quarter and a year earlier. Near the end of the second quarter, the Bank issued $250 million of floating rate senior deposit notes to institutional investors. Adding this source of new deposits, facilitated through the capital markets, further diversifies the deposit base and is an efficient source of funds to support CWB's ongoing growth and development.

Other Assets and Other Liabilities

Other assets at April 30, 2011 totaled $296 million, compared to $306 million last quarter and $311 million one year ago. Other liabilities at quarter end were $396 million, compared to $405 million the previous quarter and $427 million last year.

Off-Balance Sheet

Off-balance sheet items include assets under administration and assets under management. Total assets under administration, including both trust assets under administration and third-party leases under service agreements, totaled $9,597 million at April 30, 2011, compared to $9,013 million last quarter and $8,223 million one year ago. Assets under management held within Adroit Investment Management Ltd. were $827 million at quarter end, compared to $804 million last quarter and $780 million one year ago. The gross amount of securitized assets at quarter end attributed to National Leasing was $142 million, compared to $170 million last quarter and $276 million one year ago. Management expects to retain future leases underwritten by National Leasing on-balance sheet and the level of securitized assets will decrease as existing portfolios reach maturity. Other off-balance sheet items are comprised of standard industry credit instruments (guarantees, standby letters of credit and commitments to extend credit), and deposit instruments issued by the non-consolidated variable interest entity. CWB does not utilize, nor does it have exposure to, collateralized debt obligations or credit default swaps. For additional information regarding other off-balance sheet items refer to Notes 8, 15 and 21 of the audited consolidated financial statements on pages 87, 93 and 98 respectively in the Bank's 2010 Annual Report.

Capital Management

At April 30, 2011, CWB's total capital adequacy ratio, which measures regulatory capital as a percentage of risk-weighted assets, was 16.6%, up from 16.5% last quarter and 14.5% one year ago. The Tier 1 ratio was 11.8% at April 30, 2011, up from 11.6% last quarter and 11.4% a year earlier. Current minimums for the total and Tier 1 capital adequacy ratios of Canadian banks as set by the Office of the Superintendent of Financial Institutions Canada (OSFI) are 10% and 7%, respectively.

Compared to one year ago, the Bank's Tier 1 regulatory capital increased with the retention of earnings, net of dividends, and the issuance of 7.2 million additional CWB common shares at $14 per share upon the exercise of warrants (refer to Note 8 of the unaudited interim consolidated financial statements as well as the audited consolidated financial statements and MD&A for the year ended October 31, 2010 for further details), partially offset by warrant purchases under the Bank's Normal Course Issuer Bids. Total regulatory capital was impacted by the foregoing factors, as well as the November 2010 redemption of $70 million and issuance of $300 million of subordinated debentures and an increased deduction for the investment in CWB's insurance subsidiary. Further details regarding changes in CWB's regulatory capital and capital adequacy ratios compared to prior periods are included in the following table:

    <<
                                As at        As at        As at  Change from
    (unaudited)              April 30   January 31     April 30     April 30
    ($ millions)                 2011         2011         2010         2010
    -------------------------------------------------------------------------
    Regulatory Capital
      Tier 1 Capital
       before deductions  $     1,385  $     1,297  $     1,177  $       208
        Less: Goodwill            (38)         (38)         (37)          (1)
              Securitiza-
               tion
               (National
               Leasing)            (7)          (9)         (11)           4
    -------------------------------------------------------------------------
      Tier 1 Capital            1,340        1,250        1,129          211
    -------------------------------------------------------------------------
      Tier 2 Capital
       before deductions          615          618          380          235
        Less: Investment
               in
               insurance
               subsidiary         (75)         (71)         (64)         (11)
              Securitiza-
               tion
               (National
               Leasing)            (7)          (9)         (11)           4
    -------------------------------------------------------------------------
      Total Tier 2 Capital        533          538          305          228
    -------------------------------------------------------------------------
    Total Regulatory
     Capital              $     1,873  $     1,788  $     1,434  $       439
    -------------------------------------------------------------------------
    Risk Weighted Assets  $    11,313  $    10,818  $     9,883  $     1,430
    -------------------------------------------------------------------------
    Tier 1 capital
     adequacy ratio              11.8%        11.6%        11.4%     40 bp(1)
    Total capital
     adequacy ratio              16.6         16.5         14.5          210

    (1) bp - basis point change.
    >>

CWB expects to remain very well capitalized. Existing capital coupled with the retention of earnings and subordinated debentures issued in the first quarter should more than support capital requirements associated with expected organic asset growth. The Bank's strong capital ratios provide considerable flexibility and management continues to evaluate strategies to both optimize the existing capital structure and deploy capital for the long-term benefit of CWB shareholders.

Further information relating to the Bank's capital position is provided in Note 14 of the unaudited interim consolidated financial statements as well as the audited consolidated financial statements and MD&A for the year ended October 31, 2010.

Book value per common share at April 30, 2011 was $14.66 compared to $14.35 last quarter and $13.08 one year ago.

Common shareholders received a quarterly cash dividend of $0.13 per common share on March 31, 2011. On June 1, 2011, CWB's Board of Directors declared a cash dividend of $0.14 per common share, payable on June 30, 2011 to shareholders of record on June 16, 2011. This quarterly dividend represents an 8% increase over the previous quarter and is 27% higher than the quarterly dividend declared one year ago. The Board of Directors also declared a cash dividend of $0.453125 per Series 3 Preferred Share payable on July 31, 2011 to shareholders of record on July 21, 2011.

Basel III Capital Adequacy

In December 2010, the Basel Committee on Banking Supervision of the BIS (the Committee) published the Basel III rules text supporting more stringent global standards on capital adequacy and liquidity. In February 2011, OSFI confirmed its intent to implement the Basel III rules for Canadian banks and also issued guidance and advisories on its implementation plan for all Canadian financial institutions, including a draft advisory regarding the treatment of non-viability contingent capital (NVCC). OSFI's minimum requirements are expected to follow the Basel III transition plan outlined by the Committee, which include changes in the type of instruments that will qualify as regulatory capital in the future, as well as new minimum capital ratio requirements. Certain transitional rules will be implemented starting January 1, 2013 through January 1, 2019 to better enable banks to meet the new requirements while continuing to support economic growth by lending. The proposed transition rules provide flexibility to manage capital and further enhance the Bank's overall position relative to Basel III requirements. The relevant minimum capital ratio requirements expected to be implemented for Canadian banks effective in the first quarter of 2013 include a 7.0% common equity Tier 1 ratio, an 8.5% Tier 1 ratio and a 10.5% total capital ratio. Pro forma Basel III calculations for CWB confirm that the Bank already complies with the proposed new ratios owing to its very strong base of tangible common equity, as well as its relatively straightforward operations and composition of capital. Application of the 2019 Basel III standards to the Bank's financial position at April 30, 2011 results in an 8.6% common equity Tier 1 ratio, a 9.5% Tier 1 ratio and a 14.3% total capital ratio, all well above the minimum regulatory standards. The foregoing estimates are based on the Bank's current capital structure and composition of risk-weighted assets, and will change dependant upon management strategies, the composition of regulatory capital and financial performance in the future. Management will maintain its practice of prudent capital planning, which includes a comprehensive internal capital adequacy assessment process (ICAAP). The Bank expects to meet forthcoming regulatory capital requirements without a need to change business operations or raise additional common equity.

Changes in Accounting Policies

There were no new significant accounting policies adopted during the quarter for purposes of presenting the Bank's financial statements under Canadian Generally Accepted Accounting Principles (GAAP).

Future Accounting Changes

International Financial Reporting Standards

The CICA is transitioning Canadian GAAP for publicly accountable entities to International Financial Reporting Standards (IFRS). The Bank's consolidated financial statements will be prepared in accordance with IFRS for the fiscal year commencing November 1, 2011 and will include comparative information for the prior year, including an opening balance sheet as at November 1, 2010.

The Bank has a four phase project underway to identify and evaluate the impact of the transition to IFRS on the consolidated financial statements and develop a plan to complete the transition. The project plan includes the following phases - diagnostic, design and planning, solution development, and implementation. The Bank is currently working on the final implementation phase. Further information on the Bank's transition plan is provided on pages 65 to 67 of the 2010 Annual Report.

Based on the analysis completed to date, the most significant accounting policy differences on initial transition for the Bank due to adopting IFRS have been identified as follows:

    <<
    -   Derecognition - The Bank expects that National Leasing's securitized
        assets (totaling $142 million at April 30, 2011 and $199 million at
        October 31, 2010) will be reported on the balance sheet, which would
        increase loans and debt.

    -   Consolidation - Under IFRS, a variable interest entity (VIE) is
        consolidated by an entity if the entity is deemed to control it, as
        determined under the criteria within IFRS standards for Consolidated
        and Separate Financial Statements and Consolidation - Special Purpose
        Entities. As a result, Canadian Western Bank Capital Trust will be
        consolidated under IFRS, which will decrease deposits and increase
        debt by $105 million. For more information about this special purpose
        entity see Note 15 to the 2010 audited consolidated financial
        statements.

    -   Business Combinations - Under IFRS, contingent consideration related
        to a business combination is accounted for as a financial liability
        and fair valued at the time of the acquisition. An adjustment of the
        liability to current fair value is recorded through net income every
        period thereafter until settlement. Under Canadian GAAP, when the
        amount of contingent consideration cannot be reasonably estimated or
        the outcome of the contingency cannot be determined without
        reasonable doubt, the liability is not recognized until the
        contingency is resolved and consideration is issued or becomes
        issuable and, at such time, the consideration is recorded as an
        adjustment of goodwill. The Bank expects the contingent consideration
        related to the 2010 National Leasing acquisition will be fair valued
        and the initial adjustment is expected to increase liabilities and
        goodwill. Subsequent changes in estimated fair value from the
        acquisition date will be recognized in retained earnings at
        transition and net income thereafter. A draft methodology to
        calculate the fair value of the National Leasing contingent
        consideration is currently under review.

    -   Loan Loss Accounting - Although both existing Canadian GAAP and IFRS
        calculate loan losses using the incurred loss model, IFRS is more
        specific as to what qualifies as an "incurred event". Under IFRS,
        incurred losses require objective evidence of impairment, must have a
        reliably measurable effect on the present value of estimated cash
        flows and be supported by currently observable data. This difference
        is not expected to impact the calculation of the specific allowance
        for credit losses, but may impact the estimation of the general (or
        collective) allowance, which totaled $56.9 million at April 30, 2011
        and $59.6 million at October 31, 2010. The Bank continues to develop
        its methodology but has not yet concluded whether any adjustments
        will be required.

    -   IFRS 1 - IFRS 1: First Time Adoption of IFRS provides a framework for
        the transition to IFRS. Generally, retroactive application will be
        applied to the November 1, 2010 opening balance sheet for the
        comparative financial statements as though the Bank had always
        applied IFRS. However, IFRS 1 permits both mandatory exceptions to
        retroactive application and optional exemptions from other IFRS
        standards. The Bank has evaluated all optional exemptions under
        IFRS 1 with the most significant potential exemption relating to
        business combinations. The Bank expects to elect to apply IFRS 3 -
        Business Combinations retrospectively with the restatement of the
        February 2010 National Leasing acquisition. The most significant
        expected impact of restating the National Leasing acquisition relates
        to the contingent consideration as described above.
    >>

The International Accounting Standards Board continues to propose IFRS changes. The standards in effect at the transition date, the composition of CWB's consolidated balance sheet, future operating and economic environments, and various accounting policy choices yet to be finalized are some of the factors that could have significant impacts on the Bank's future financial statements. The impacts of transitioning to IFRS on the Bank's consolidated financial statements will be disclosed as they are finalized.

Controls and Procedures

There were no changes in the Bank's internal controls over financial reporting that occurred during the quarter ended April 30, 2011 that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.

Prior to its release, this quarterly report to shareholders was reviewed by the Audit Committee and, on the Audit Committee's recommendation, approved by the Board of Directors of Canadian Western Bank.

Updated Share Information

As at May 27, 2011, there were 74,202,649 common shares outstanding. Also outstanding were employee stock options, which are or will be exercisable for up to 3,458,687 common shares for maximum proceeds of $71.0 million. There were 5,257,228 warrants outstanding that are each exercisable until March 3, 2014 to purchase one common share of the Bank at a price of $14.00.

Dividend Reinvestment Plan

CWB common shares (TSX: CWB) and preferred shares (TSX: CWB.PR.A) are deemed eligible to participate in the Bank's dividend reinvestment plan (the "Plan"). The Plan provides holders of eligible shares of CWB the opportunity to direct cash dividends toward the purchase of CWB common shares. Further details for the Plan are available on the Bank's website at http://www.cwbankgroup.com /investor_relations/drip.htm. At the current time, for the purposes of the Plan, the Bank has elected to issue common shares from treasury at a 2% discount from the average market price (as defined in the Plan).

Normal Course Issuer Bid

On January 18, 2011, CWB received approval from the Toronto Stock Exchange for a Normal Course Issuer Bid (NCIB) to purchase, for cancellation, up to 1,029,108 of its warrants. The NCIB commenced January 20, 2011 and will expire January 19, 2012. From January 20 to April 30, 2011, the Bank purchased and cancelled 1,000,000 warrants at an average purchase price per warrant of $15.99. The aggregate amount required for the warrant purchases of $16.0 million was charged to retained earnings. Security holders may contact the Bank to obtain, without charge, a copy of the notice filed with the TSX. Additionally, a copy of the NCIB news release is available on the Bank's website and on SEDAR at www.sedar.com.

Summary of Quarterly Financial Information

    <<
                         2011                          2010
                  ------------------  ---------------------------------------
    ($ thousands)    Q2        Q1        Q4        Q3        Q2        Q1
    -------------------------------------------------------------------------
    Total revenues
    (teb)         $121,788  $121,847  $111,570  $111,045  $110,972  $100,672
    Total revenues 119,403   119,103   108,391   108,263   108,310    98,109
    Net income      44,440    43,952    39,107    46,595    37,884    40,035
    Earnings per
     common share
    Basic             0.58      0.59      0.53      0.64      0.52      0.57
    Diluted           0.53      0.54      0.48      0.59      0.47      0.52
    Diluted cash      0.54      0.55      0.49      0.60      0.48      0.52
    Total assets
     ($ millions)   13,600    12,946    12,702    12,110    12,004    11,642


                          2009
                  -------------------
    ($ thousands)    Q4        Q3
    ---------------------------------
    Total revenues
    (teb)         $ 90,099  $ 85,538
    Total revenues  87,702    83,349
    Net income      30,357    28,729
    Earnings per
     common share
    Basic             0.42      0.39
    Diluted           0.39      0.38
    Diluted cash      0.39      0.38
    Total assets
     ($ millions)   11,636    11,331
    >>

The financial results for each of the last eight quarters are summarized above. In general, CWB's performance reflects a relatively consistent trend although the second quarter contains three fewer revenue earning days.

The Bank's quarterly financial results are subject to some fluctuation due to its exposure to property and casualty insurance. Insurance operations, which are primarily reflected in other income (refer to Results by Business Segment - Insurance), are subject to seasonal weather conditions, cyclical patterns of the industry and natural catastrophes. Mandatory participation in the Alberta auto risk sharing pools can also result in unpredictable quarterly fluctuations. Quarterly results can also fluctuate due to the recognition of periodic income tax items, as was the case in the third quarter of 2010 when an income tax recovery and related interest receipt from certain prior period transactions increased net income by approximately $8.3 million.

Throughout fiscal 2009 the Bank's quarterly net interest income, reflected in total revenues (teb), was negatively impacted by compression of the net interest margin that mainly resulted from consecutive reductions in the prime lending interest rate, coupled with significantly higher deposit costs and other spin-off effects of the global financial crisis. In the first quarter of 2010, net interest margin recovered to more typical levels achieved before the onset of the global financial crisis.

The acquisition of National Leasing was effective February 1, 2010 and the results of its operations and financial position are consolidated as part of the Bank's overall financial performance beginning with the second quarter of 2010 (refer to Results by Business Segment - Banking and trust). The acquisition had a positive impact on all categories in the table above.

For additional details on variations between the prior quarters, refer to the summary of quarterly results section of the Bank's MD&A for the year ended October 31, 2010 and the individual quarterly reports to shareholders which are available on SEDAR at www.sedar.com and on CWB's website at www.cwbankgroup.com.

Results by Business Segment

CWB operates in two business segments: 1) banking and trust, and 2) insurance. Segmented information is also provided in Note 13 of the unaudited interim consolidated financial statements.

Banking and trust

Operations of the banking and trust segment comprise all business and retail banking services, including equipment leasing offered by National Leasing. The banking and trust segment also includes trust, wealth management and other financial services provided through Canadian Western Trust Company, Valiant Trust Company and Adroit Investment Management Ltd.

Net income of $41.0 million increased 19% ($6.5 million) compared to the same quarter last year based on 10% ($10.8 million) growth in total revenues (teb) to $114.2 million. Strong earnings were driven by 16% ($12.6 million) growth in net interest income, a lower effective tax rate (teb) and a $0.2 million reduction in the provision for credit losses, which more than offset 11% ($5.3 million) higher non-interest expenses and a 7% ($1.8 million) decline in other income. Higher net interest income was attributed to strong 14% loan growth and 10 basis point improvement in net interest margin mainly attributed to changes in interest rates and an improved liquidity mix, partially offset by increased interest expense related to subordinated debentures issued in November 2010. The lower provision for credit losses reflects improved credit performance within National Leasing's portfolio and consistent expectations for credit quality in other lending portfolios. Within other income, gains on the sale of securities realized through repositioning the Bank's investment in common equities and preferred shares partially offset declines in credit related fee income and certain other categories within other income that were unusually high in the second quarter last year due to the acquisition of National Leasing. Higher non-interest expense mainly resulted from increased salary and benefit costs and other expenses to support business growth. The efficiency ratio (teb), which measures non-interest expense as a percentage of total revenues (teb), was 45.9%, compared to 45.6% in the same quarter last year.

Net income was down 1% ($0.5 million) compared to the previous quarter as the combined impact of three fewer revenue earning days, lower other income and slightly higher non-interest expenses was offset by a reduction in the provision for credit losses attributed to National Leasing and a lower effective tax rate (teb). On a year-to-date basis, net income was up 16% ($11.1 million) mainly driven by loan growth, a 21 basis point improvement in net interest margin (teb) and the performance impact of National Leasing, effective February 1, 2010. Net interest income (teb) was up 21% ($31.6 million) over the same period in 2010 while other income increased 3% ($1.4 million). Increased non-interest expenses and the provision for credit losses partially offset the positive earnings impact of record total revenues. The year-to-date efficiency ratio (teb) was 45.5%, compared to 43.1% a year earlier.

    <<
                              For the three months ended
                          -------------------------------------- Change from
                             April 30   January 31     April 30     April 30
    ($ thousands)                2011         2011         2010         2010
    -------------------------------------------------------------------------
    Net interest income
     (teb)                $    91,017  $    91,596  $    78,436           16%
    Other income               23,188       23,802       24,951           (7)
    -------------------------------------------------------------------------
    Total revenues (teb)      114,205      115,398      103,387           10
    Provision for credit
     losses                     5,267        6,216        5,487           (4)
    Non-interest expenses      52,427       51,984       47,129           11
    Provision for income
     taxes (teb)               15,509       15,719       16,245           (5)
    Non-controlling
     interest in
     subsidiary                    50           60           41           22
    -------------------------------------------------------------------------
    Net income            $    40,952  $    41,419  $    34,485           19%
    -------------------------------------------------------------------------
    Efficiency ratio (teb)       45.9%        45.0%        45.6%        30 bp
    Efficiency ratio             46.8         46.0         46.7           10
    Net interest margin
     (teb)                       2.85         2.87         2.75           10
    Net interest margin          2.79         2.79         2.67           12
    Average loans
     ($ millions)(1)      $    11,103  $    10,620  $     9,714           14%
    Average assets
     ($ millions)(1)           13,084       12,655       11,688           12
    -------------------------------------------------------------------------


                          For the six months ended
                          ------------------------- Change from
                             April 30     April 30     April 30
    ($ thousands)                2011         2010         2010
    ------------------------------------------------------------
    Net interest income
     (teb)                $   182,613  $   151,055           21%
    Other income               46,990       45,567            3
    ------------------------------------------------------------
    Total revenues (teb)      229,603      196,622           17
    Provision for credit
     losses                    11,483        9,200           25
    Non-interest expenses     104,411       84,756           23
    Provision for income
     taxes (teb)               31,228       31,374            -
    Non-controlling
     interest in
     subsidiary                   110          117           (6)
    ------------------------------------------------------------
    Net income            $    82,371  $    71,175           16%
    ------------------------------------------------------------
    Efficiency ratio (teb)       45.5%        43.1%       240 bp
    Efficiency ratio             46.4         44.2          220
    Net interest margin
     (teb)                       2.86         2.65           21
    Net interest margin          2.79         2.56           23
    Average loans
     ($ millions)(1)      $    10,862  $     9,484           15%
    Average assets
     ($ millions)(1)           12,869       11,502           12
    ------------------------------------------------------------
    bp - basis point change.
    teb - taxable equivalent basis, see definition following Financial
    Highlights table.

    (1) Assets and loans are disclosed on an average daily balance basis.
    >>

Insurance

The insurance segment is comprised of the operations of Canadian Direct Insurance Incorporated (Canadian Direct or CDI), which provides auto, home and travel insurance to individuals in British Columbia and Alberta.

Canadian Direct reported quarterly net income of $3.5 million, up $0.1 million from a year ago as the positive impact of 6% growth in net earned premiums and higher net interest income was largely offset by an increase in net claims expense. Growth in net earned premiums reflected a 4% increase in policies outstanding and a higher average premium per policy in the home lines of business. The increase in claims expense from a year ago primarily reflected higher severity in the Alberta home product line and higher frequency in Alberta auto.

Net income was up $1.0 million compared to the prior quarter with the difference attributed to improved claims experience, increased net interest income and gains on sale of securities, partially offset by lower net earned premiums due to three fewer revenue earning days. The improved claims experience compared to the prior quarter was most notable in Alberta auto where net claims expense decreased due to lower frequency and severity.

Year-to-date net income of $6.0 million represented an 11% ($0.7 million) decrease from the same period in 2010. Absent the impact of Canadian Direct's share of the Alberta auto risk sharing pools (the Pools), net income increased by 1% ($0.1 million) reflecting a 7% increase in net earned premiums, partially offset by an unfavourable variance in claims expense. In the first quarter last year, the Pools' results were positively impacted by a $1.5 million decrease in unpaid claims reserves related to the Supreme Court's decision on Minor Injury Regulation.

The occurrence of extreme weather or catastrophic events could affect results going forward, but reinsurance protection and continued growth in net earned premiums should mitigate the potential financial impact.

    <<
                                For the three months ended
                          -------------------------------------- Change from
                             April 30   January 31     April 30     April 30
    ($ thousands)                2011         2011         2010         2010
    -------------------------------------------------------------------------
    Net interest income
     (teb)                $     2,265  $     1,830  $     1,696           34%
    -------------------------------------------------------------------------
    Other income (net)
      Net earned premiums      28,286       28,996       26,627            6
      Commissions and
       processing fees            479          465          546          (12)
      Net claims and
       adjustment expenses    (17,542)     (19,157)     (15,784)          11
      Policy acquisition
       costs                   (6,232)      (5,714)      (5,868)           6
    -------------------------------------------------------------------------
    Insurance revenues
     (net)                      4,991        4,590        5,521          (10)
    Gains on sale of
     securities                   327           29          368          (11)
    -------------------------------------------------------------------------
    Total revenues (net)
     (teb)                      7,583        6,449        7,585            -
    Non-interest expenses       2,981        3,144        2,831            5
    Provision for income
     taxes (teb)                1,114          772        1,355          (18)
    -------------------------------------------------------------------------
    Net income            $     3,488  $     2,533  $     3,399            3%
    -------------------------------------------------------------------------
    Policies outstanding
     (No.)                    187,744      185,926      180,289            4
    Gross written
     premiums             $    31,903  $    25,810  $    30,531            4
    Claims loss ratio(1)           62%          66%          59%       300 bp
    Expense ratio(2)               31           29           31            -
    Combined ratio(3)              93           95           90          300
    Alberta auto risk
     sharing pools impact
     on net income before
     tax                  $       513  $       397  $       221          132%
    Average total assets
     (millions)(4)                230          233          210           10


                          For the six months ended
                          ------------------------- Change from
                             April 30     April 30     April 30
    ($ thousands)                2011         2010         2010
    ------------------------------------------------------------
    Net interest income
     (teb)                $     4,095  $     3,383           21%
    ------------------------------------------------------------
    Other income (net)
      Net earned premiums      57,282       53,958            6
      Commissions and
       processing fees            944        1,164          (19)
      Net claims and
       adjustment expenses    (36,699)     (32,774)          12
      Policy acquisition
       costs                  (11,946)     (11,157)           7
    ------------------------------------------------------------
    Insurance revenues
     (net)                      9,581       11,191          (14)
    Gains on sale of
     securities                   356          448          (21)
    ------------------------------------------------------------
    Total revenues (net)
     (teb)                     14,032       15,022           (7)
    Non-interest expenses       6,125        5,452           12
    Provision for income
     taxes (teb)                1,886        2,826          (33)
    ------------------------------------------------------------
    Net income            $     6,021  $     6,744         (11)%
    ------------------------------------------------------------
    Policies outstanding
     (No.)                    187,744      180,289            4
    Gross written
     premiums             $    57,713  $    54,863            5
    Claims loss ratio(1)           64%          60%       400 bp
    Expense ratio(2)               30           29          100
    Combined ratio(3)              94           89          500
    Alberta auto risk
     sharing pools impact
     on net income before
     tax                  $       910  $     2,134         (57)%
    Average total assets
     (millions)(4)                232          212            9

    bp - basis point change.

    teb - taxable equivalent basis, see definition following Financial
    Highlights table.

    (1) Net claims and adjustment expenses as a percentage of net earned
        premiums.
    (2) Policy acquisition costs and non-interest expenses net of commissions
        and processing fees as a percentage of net earned premiums.
    (3) Sum of the claims loss and expense ratios.
    (4) Average total assets are disclosed on an average daily balance basis.
    >>

Fiscal 2011 Minimum Targets and Outlook

The minimum performance targets established for the 2011 fiscal year together with CWB's actual year-to-date performance are presented in the table below:

    <<
                                               ------------------------------
                                                       2011         2011
                                                     Minimum    Year-to-date
                                                     Targets   Performance(1)
    -------------------------------------------------------------------------
    Net income growth(2)                                6%           13%
    -------------------------------------------------------------------------
    Net income growth, before taxes (teb)(3)           10%            8%
    -------------------------------------------------------------------------
    Total revenue (teb) growth                         12%           15%
    -------------------------------------------------------------------------
    Loan growth                                        10%           14%
    -------------------------------------------------------------------------
    Provision for credit losses as a percentage
     of average loans                            0.20% - 0.25%      0.21%
    -------------------------------------------------------------------------
    Efficiency ratio (teb)                             46%          45.4%
    -------------------------------------------------------------------------
    Return on common equity(4)                         15%          16.3%
    -------------------------------------------------------------------------
    Return on assets(5)                               1.20%         1.24%
    -------------------------------------------------------------------------

    (1) 2011 year-to-date performance for earnings and revenue growth is the
        current year results over the same period in the prior year, loan
        growth is the increase over the past twelve months, and performance
        for ratio targets is the current year-to-date results annualized.
    (2) Net income, before preferred share dividends.
    (3) Net income before income taxes (teb), non-controlling interest in
        subsidiary and preferred share dividends.
    (4) Return on common equity calculated as annualized net income after
        preferred share dividends divided by average common shareholders'
        equity.
    (5) Return on assets calculated as annualized net income after preferred
        share dividends divided by average total assets.
    >>

Strong performance through the first six months has CWB positioned to surpass all of its fiscal 2011 minimum targets. Year-to-date loan growth compares favourably with management's initial expectations at the onset of the year and reflects stronger than expected economic activity. The Bank's focus on and expertise in servicing small to mid-sized commercial clients has further contributed to new lending opportunities. Economic fundamentals in Western Canada are expected to remain favourable relative to the rest of Canada and the volume in the pipeline for new loans is strong. Management's strategic focus will remain centered on "doing what we do, only better", and includes objectives to deploy available capital and enhance the return on common shareholders' equity. Each of the Bank's affiliates has excellent growth potential and will also benefit from an improved economic environment. The overall outlook for 2011 and beyond is positive.

This management's discussion and analysis is dated June 2, 2011.

Taxable Equivalent Basis (teb)

Most banks analyze revenue on a taxable equivalent basis to permit uniform measurement and comparison of net interest income. Net interest income (as presented in the consolidated statement of income) includes tax-exempt income on certain securities. Since this income is not taxable, the rate of interest or dividends received is significantly lower than would apply to a loan or security of the same amount. The adjustment to taxable equivalent basis increases interest income and the provision for income taxes to what they would have been had the tax-exempt securities been taxed at the statutory rate. The taxable equivalent basis does not have a standardized meaning prescribed by GAAP and, therefore, may not be comparable to similar measures presented by other banks. Total revenues, net interest income and income taxes are discussed on a taxable equivalent basis throughout this quarterly report to shareholders.

Non-GAAP Measures

Taxable equivalent basis, diluted cash earnings per common share, return on common shareholders' equity, return on assets, efficiency ratio, net interest margin, tangible common equity to risk-weighted assets, Tier 1 and total capital adequacy ratios, average balances, claims loss ratio, expense ratio and combined ratio do not have standardized meanings prescribed by generally accepted accounting principles (GAAP) and therefore may not be comparable to similar measures presented by other financial institutions. The non-GAAP measures used in this MD&A are calculated as follows:

    <<
    -   taxable equivalent basis - described above;
    -   diluted cash earnings per common share - diluted earnings per common
        share excluding the amortization of acquisition-related intangible
        assets;
    -   return on common shareholders' equity - net income less preferred
        share dividends divided by average shareholder's equity;
    -   return on assets - net income less preferred share dividends divided
        by average total assets;
    -   efficiency ratio - non-interest expenses divided by total revenues
        (net interest income plus other income);
    -   net interest margin - net interest income divided by average total
        assets;
    -   tangible common equity to risk-weighted assets - shareholders' equity
        less subsidiary goodwill divided by risk-weighted assets, calculated
        in accordance with guidelines issued by the Office of the
        Superintendent of Financial Institutions Canada (OSFI);
    -   Tier 1 and total capital adequacy ratios - in accordance with
        guidelines issued by OSFI;
    -   Basel III common equity Tier 1, Tier 1 and total capital ratios - in
        accordance with CWB's interpretation of the Basel III capital
        requirements and OSFI proposed guidance;
    -   average balances - average daily balances;
    -   claims loss ratio - net insurance claims and adjustment expenses as a
        percentage of net earned premiums;
    -   expense ratio - policy acquisition costs and non-interest expenses
        net of commissions and processing fees as a percentage of net earned
        premiums; and
    -   combined ratio - sum of the claims loss and expense ratios.
    >>

Forward-looking Statements

From time to time, Canadian Western Bank (the Bank) makes written and verbal forward-looking statements. Statements of this type are included in the Annual Report and reports to shareholders and may be included in filings with Canadian securities regulators or in other communications such as press releases and corporate presentations. Forward-looking statements include, but are not limited to, statements about the Bank's objectives and strategies, targeted and expected financial results and the outlook for the Bank's businesses or for the Canadian economy. Forward-looking statements are typically identified by the words "believe", "expect", "anticipate", "intend", "estimate", "may increase", "may impact" and other similar expressions, or future or conditional verbs such as "will", "should", "would" and "could."

By their very nature, forward-looking statements involve numerous assumptions. A variety of factors, many of which are beyond the Bank's control, may cause actual results to differ materially from the expectations expressed in the forward-looking statements. These factors include, but are not limited to, general business and economic conditions in Canada including the volatility and lack of liquidity in financial markets, fluctuations in interest rates and currency values, changes in monetary policy, changes in economic and political conditions, regulatory and legal developments, the level of competition in the Bank's markets, the occurrence of weather-related and other natural catastrophes, changes in accounting standards and policies, the accuracy of and completeness of information the Bank receives about customers and counterparties, the ability to attract and retain key personnel, the ability to complete and integrate acquisitions, reliance on third parties to provide components of the Bank's business infrastructure, changes in tax laws, technological developments, unexpected changes in consumer spending and saving habits, timely development and introduction of new products, and management's ability to anticipate and manage the risks associated with these factors. It is important to note that the preceding list is not exhaustive of possible factors.

These and other factors should be considered carefully and readers are cautioned not to place undue reliance on these forward-looking statements as a number of important factors could cause the Bank's actual results to differ materially from the expectations expressed in such forward looking statements. Unless required by securities law, the Bank does not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time by it or on its behalf.

Assumptions about the performance of the Canadian economy in 2011 and how it will affect CWB's businesses are material factors the Bank considers when setting its objectives. In setting minimum performance targets for fiscal 2011, management's assumptions included: moderate economic growth in Canada aided by positive relative performance in the four western provinces; relatively stable energy and other commodity prices; sound credit quality with actual losses remaining within the Bank's historical range of acceptable levels, including consideration for National Leasing; modest inflationary pressures and gradual increases in the prime lending interest rate beginning in early-to-mid calendar year 2011; and, a relatively stable net interest margin supported by a low deposit cost environment, favourable yields on both new lending facilities and renewed accounts, and relatively stable investment returns reflecting high quality assets held in the securities portfolio. At the end of the second quarter, management believes increased commodity prices and related inflationary pressures could negatively impact the global economic recovery. Ongoing economic uncertainties have also reduced the likelihood of upward movements in the Canadian prime lending interest rate before the latter part of calendar 2011.

    <<
    -------------------------------------------------------------------------
    Consolidated Statements of Income
    -------------------------------------------------------------------------
                                For the three months ended
    (unaudited)           -------------------------------------- Change from
    ($ thousands, except     April 30   January 31     April 30     April 30
     per share amounts)          2011         2011         2010         2010
    -------------------------------------------------------------------------
    Interest Income
      Loans               $   143,562  $   144,163  $   123,830           16%
      Securities               11,498        9,962        9,426           22
      Deposits with
       regulated financial
       institutions             1,063        1,379        1,443          (26)
    -------------------------------------------------------------------------
                              156,123      155,504      134,699           16
    -------------------------------------------------------------------------
    Interest Expense
      Deposits                 58,587       58,843       52,858           11
      Subordinated
       debentures               6,639        5,979        4,371           52
    -------------------------------------------------------------------------
                               65,226       64,822       57,229           14
    -------------------------------------------------------------------------
    Net Interest Income        90,897       90,682       77,470           17
    Provision for Credit
     Losses (Note 5)            5,267        6,216        5,487           (4)
    -------------------------------------------------------------------------
    Net Interest Income
     after Provision for
     Credit Losses             85,630       84,466       71,983           19
    -------------------------------------------------------------------------
    Other Income
      Credit related            7,534        8,813        8,496          (11)
      Insurance, net
       (Note 2)                 4,991        4,590        5,521          (10)
      Trust and wealth
       management
       services                 4,930        4,533        4,499           10
      Retail services           2,392        2,462        2,332            3
      Gains on sale of
       securities               5,297        4,237        4,072           30
      Securitization
       revenue                  1,022        1,514        1,911          (47)
      Foreign exchange
       gains                      919          836          676           36
      Other                     1,421        1,436        3,333          (57)
    -------------------------------------------------------------------------
                               28,506       28,421       30,840           (8)
    -------------------------------------------------------------------------
    Net Interest and
     Other Income             114,136      112,887      102,823           11
    -------------------------------------------------------------------------
    Non-Interest Expenses
      Salaries and
       employee benefits       35,394       35,641       32,681            8
      Premises and
       equipment                9,153        8,847        7,983           15
      Other expenses           10,701        9,609        8,901           20
      Provincial capital
       taxes                      160        1,031          395          (59)
    -------------------------------------------------------------------------
                               55,408       55,128       49,960           11
    -------------------------------------------------------------------------
    Net Income before
     Income Taxes and
     Non-Controlling
     Interest in
     Subsidiary                58,728       57,759       52,863           11
    Income Taxes               14,238       13,747       14,938           (5)
    -------------------------------------------------------------------------
                               44,490       44,012       37,925           17

    Non-Controlling
     Interest in
     Subsidiary                    50           60           41           22
    -------------------------------------------------------------------------
    Net Income            $    44,440  $    43,952  $    37,884           17%
    -------------------------------------------------------------------------

    Preferred share
     dividends (Note 8)   $     3,802  $     3,802  $     3,802            -%
    Net income available
     to common
     shareholders              40,638       40,150       34,082           19
    -------------------------------------------------------------------------
    Average number of
     common shares (in
     thousands)                70,527       68,151       66,144            7
    Average number of
     diluted common
     shares (in thousands)     76,514       75,032       72,670            5
    -------------------------------------------------------------------------
    Earnings Per Common
     Share
      Basic               $      0.58  $      0.59  $      0.52           12%
      Diluted                    0.53         0.54         0.47           13
    -------------------------------------------------------------------------


                          --------------------------------------
                          For the six months ended
    (unaudited)           ------------------------- Change from
    ($ thousands, except     April 30     April 30     April 30
     per share amounts)          2011         2010         2010
    ------------------------------------------------------------
    Interest Income
      Loans               $   287,725  $   240,671           20%
      Securities               21,460       20,364            5
      Deposits with
       regulated financial
       institutions             2,442        3,547          (31)
    ------------------------------------------------------------
                              311,627      264,582           18
    ------------------------------------------------------------
    Interest Expense
      Deposits                117,430      106,428           10
      Subordinated
       debentures              12,618        8,941           41
    ------------------------------------------------------------
                              130,048      115,369           13
    ------------------------------------------------------------
    Net Interest Income       181,579      149,213           22
    Provision for Credit
     Losses (Note 5)           11,483        9,200           25
    ------------------------------------------------------------
    Net Interest Income
     after Provision for
     Credit Losses            170,096      140,013           21
    ------------------------------------------------------------
    Other Income
      Credit related           16,347       15,774            4
      Insurance, net
       (Note 2)                 9,581       11,191          (14)
      Trust and wealth
       management
       services                 9,463        8,969            6
      Retail services           4,854        4,348           12
      Gains on sale of
       securities               9,534       10,569          (10)
      Securitization
       revenue                  2,536        1,911           33
      Foreign exchange
       gains                    1,755        1,111           58
      Other                     2,857        3,333          (14)
    ------------------------------------------------------------
                               56,927       57,206            -
    ------------------------------------------------------------
    Net Interest and
     Other Income             227,023      197,219           15
    ------------------------------------------------------------
    Non-Interest Expenses
      Salaries and
       employee benefits       71,035       59,071           20
      Premises and
       equipment               18,000       15,011           20
      Other expenses           20,310       15,421           32
      Provincial capital
       taxes                    1,191          705           69
    ------------------------------------------------------------
                              110,536       90,208           23
    ------------------------------------------------------------
    Net Income before
     Income Taxes and
     Non-Controlling
     Interest in
     Subsidiary               116,487      107,011            9
    Income Taxes               27,985       28,975           (3)
    ------------------------------------------------------------
                               88,502       78,036           13

    Non-Controlling
     Interest in
     Subsidiary                   110          117           (6)
    ------------------------------------------------------------
    Net Income            $    88,392     $ 77,919           13%
    ------------------------------------------------------------

    Preferred share
     dividends (Note 8)   $     7,604     $  7,604            -%
    Net income available
     to common
     shareholders              80,788       70,315           15
    ------------------------------------------------------------
    Average number of
     common shares (in
     thousands)                69,320       65,016            7
    Average number of
     diluted common
     shares (in thousands)     75,717       71,362            6
    ------------------------------------------------------------
    Earnings Per Common
     Share
      Basic               $      1.17  $      1.08            8%
      Diluted                    1.07         0.99            8
    ------------------------------------------------------------

    The accompanying notes are an integral part of the interim consolidated
    financial statements.



    -------------------------------------------------------------------------
    Consolidated Balance Sheets
    -------------------------------------------------------------------------

                                                                      Change
                       As at        As at        As at        As at     from
    (unaudited)     April 30   January 31   October 31     April 30 April 30
    ($ thousands)       2011         2011         2010         2010     2010
    -------------------------------------------------------------------------
    Assets
    Cash Resources
      Cash and
       non-
       interest
       bearing
       deposits
       with
       financial
       institut-
       ions      $     5,729  $    59,036  $     8,965  $    15,343     (63)%
      Interest
       bearing
       deposits
       with
       regulated
       financial
       institut-
       ions
       (Note 3)      252,081      219,953      168,998      188,705       34
      Cheques and
       other items
       in transit     11,018          941        9,981         633        nm
    -------------------------------------------------------------------------
                     268,828      279,930      187,944     204,681        31
    -------------------------------------------------------------------------
    Securities
     (Note 3)
      Issued or
       guaranteed
       by Canada     506,575      478,771      564,694      508,267        -
      Issued or
       guaranteed
       by a
       province
       or munici-
       pality        289,638      187,816       88,478      103,318      180
      Other
       securities    781,128      807,088      857,015      762,760        2
    -------------------------------------------------------------------------
                   1,577,341    1,473,675    1,510,187    1,374,345       15
    -------------------------------------------------------------------------
    Securities
     Purchased
     Under Resale
     Agreements      219,385            -      177,954      247,682      (11)
    -------------------------------------------------------------------------
    Loans (Notes 4
     and 6)
      Residential
       mortgages   2,833,163    2,667,045    2,479,957    2,292,578       24
      Other loans  8,484,160    8,294,891    8,095,148    7,650,477       11
    -------------------------------------------------------------------------
                  11,317,323   10,961,936   10,575,105    9,943,055       14
      Allowance
       for credit
       losses
       (Note 5)      (78,771)    (75,047)      (78,641)     (76,386)       3
    -------------------------------------------------------------------------
                  11,238,552  10,886,889    10,496,464    9,866,669       14
    -------------------------------------------------------------------------
    Other
      Property and
       equipment      67,282       66,830       65,978       57,859       16
      Goodwill        37,852       37,852       37,723       37,191        2
      Other
       intangible
       assets         40,553       42,027       43,420       45,618      (11)
      Insurance
       related        56,846       57,853       59,652       55,254        3
      Derivative
       related
       (Note 7)          459      130 134          231           99
      Other assets    93,082      101,031      122,235      114,751      (19)
    -------------------------------------------------------------------------
                     296,074      305,723      329,142      310,904       (5)
    -------------------------------------------------------------------------
    Total Assets $13,600,180 $ 12,946,217 $ 12,701,691 $ 12,004,281       13%
    -------------------------------------------------------------------------

    Liabilities
     and
     Shareholders'
     Equity
    Deposits
      Payable on
       demand    $   618,728  $   584,728  $   530,608  $   530,995       17%
      Payable
       after
       notice      3,377,816    3,110,008    2,999,599    2,963,594       14
      Payable on
       a fixed
       date        7,259,922    6,986,605    7,177,560    6,585,454       10
      Deposit from
       Canadian
       Western
       Bank
       Capital
       Trust         105,000      105,000      105,000      105,000        -
    -------------------------------------------------------------------------
                  11,361,466   10,786,341   10,812,767   10,185,043       12
    -------------------------------------------------------------------------
    Other
      Cheques and
       other
       items in
       transit        38,352       47,423       39,628       34,565       11
      Insurance
       related       140,739      143,010      149,396      135,482        4
      Derivative
       related
       (Note 7)          971          812          992          745       30
      Other
       liabilities   215,952      213,407      235,865      256,335      (16)
    -------------------------------------------------------------------------
                     396,014      404,652      425,881      427,127       (7)
    -------------------------------------------------------------------------
    Subordinated
     Debentures
      Conventional   545,000      545,000      315,000      315,000       73
    -------------------------------------------------------------------------
    Shareholders'
     Equity
      Preferred
       shares
       (Note 8)      209,750      209,750      209,750      209,750        -
      Common
       shares
       (Note 8)      387,740      323,340      279,352      274,223       41
      Contributed
       surplus        20,795       21,089       21,291       20,630        1
      Retained
       earnings      661,394      638,007      614,710      566,989       17
      Accumulated
       other
       comprehen-
       sive income    18,021       18,038       22,940        5,519      227
    -------------------------------------------------------------------------
                   1,297,700    1,210,224    1,148,043    1,077,111       20
    -------------------------------------------------------------------------
    Total
     Liabilities
     and
     Shareholders'
     Equity      $13,600,180  $12,946,217  $12,701,691  $12,004,281       13%
    -------------------------------------------------------------------------
    Contingent Liabilities and Commitments (Note 10)

    nm - not meaningful.

    The accompanying notes are an integral part of the interim consolidated
    financial statements.



    -------------------------------------------------------------------------
    Consolidated Statements of Changes in Shareholders' Equity
    -------------------------------------------------------------------------


                                                    For the six months ended
                                                    -------------------------
    (unaudited)                                        April 30     April 30
    ($ thousands)                                          2011         2010
    -------------------------------------------------------------------------
    Retained Earnings
    Balance at beginning of period                  $   614,710  $   511,784
      Net income                                         88,392       77,919
      Dividends - Preferred shares                       (7,604)      (7,604)
                - Common shares                         (18,119)     (14,307)
      Warrants purchased under normal
       course issuer bid (Note 8)                       (15,985)        (698)
      Issuance costs on common shares                         -         (105)
    -------------------------------------------------------------------------
    Balance at end of period                            661,394      566,989
    -------------------------------------------------------------------------
    Accumulated Other Comprehensive Income (Loss)
    Balance at beginning of period                       22,940       19,119
      Other comprehensive income (loss)                  (4,919)     (13,600)
    -------------------------------------------------------------------------
    Balance at end of period                             18,021        5,519
    -------------------------------------------------------------------------
    Total retained earnings and accumulated other
     comprehensive income                               679,415      572,508
    -------------------------------------------------------------------------
    Preferred Shares (Note 8)
    Balance at beginning and end of period              209,750      209,750
    -------------------------------------------------------------------------
    Common Shares (Note 8)
    Balance at beginning of period                      279,352      226,480
      Issued on exercise of warrants                    100,987          110
      Transferred from contributed surplus on
       exercise or exchange of options                    2,851        1,199
      Issued on exercise of options                       2,550        2,289
      Issued under dividend reinvestment plan             2,000        1,563
      Issued on acquisition                                   -       42,582
    -------------------------------------------------------------------------
    Balance at end of period                            387,740      274,223
    -------------------------------------------------------------------------
    Contributed Surplus
    Balance at beginning of period                       21,291       19,366
      Amortization of fair value of options               2,355        2,463
      Transferred to common shares on exercise or
       exchange of options                               (2,851)      (1,199)
    -------------------------------------------------------------------------
    Balance at end of period                             20,795       20,630
    -------------------------------------------------------------------------
    Total Shareholders' Equity                      $ 1,297,700  $ 1,077,111
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Consolidated Statements of Comprehensive Income
    -------------------------------------------------------------------------


                                For the three              For the six
                                 months ended              months ended
                          ------------------------- -------------------------
    (unaudited)              April 30     April 30     April 30     April 30
    ($ thousands)                2011         2010         2011         2010
    -------------------------------------------------------------------------
    Net Income            $    44,440  $    37,884  $    88,392  $    77,919
    -------------------------------------------------------------------------
    Other Comprehensive
     Income (Loss), net
     of tax
      Available-for-sale
       securities:
        Gains (losses) from
         change in fair
         value(1)               3,796      (13,251)       1,944       (4,617)
        Reclassification to
         other income(2)       (3,813)      (2,505)      (6,863)      (7,414)
    -------------------------------------------------------------------------
                                  (17)     (15,756)      (4,919)     (12,031)
    -------------------------------------------------------------------------
      Derivatives designated
       as cash flow hedges:
        Gains from change in
         fair value(3)              -           10            -           17
        Reclassification to
         net interest
         income(4)                  -         (518)           -       (1,586)
    -------------------------------------------------------------------------
                                    -         (508)           -       (1,569)
    -------------------------------------------------------------------------
                                  (17)     (16,264)      (4,919)     (13,600)
    -------------------------------------------------------------------------
    Comprehensive Income
     for the Period       $    44,423  $    21,620  $    83,473  $    64,319
    -------------------------------------------------------------------------

    (1) Net of income tax expense of $1,477 and $756 for the three and six
        months ended April 30, 2011, respectively (2010 - tax benefit of
        $5,679 and $1,965).
    (2) Net of income tax benefit of $1,484 and $2,671 for the three and six
        months ended April 30, 2011, respectively (2010 - $1,074 and $3,155).
    (3) Net of income tax expense of nil for the three and six months ended
        April 30, 2011 (2010 - tax expense of $4 and $7).
    (4) Net of income tax benefit of nil for the three and six months ended
        April 30, 2011 (2010 - tax benefit of $207 and $664).

    The accompanying notes are an integral part of the interim consolidated
    financial statements.



    -------------------------------------------------------------------------
    Consolidated Statements of Cash Flow
    -------------------------------------------------------------------------

                                For the three              For the six
                                 months ended              months ended
                          ------------------------- -------------------------
    (unaudited)              April 30     April 30     April 30     April 30
    ($ thousands)                2011         2010         2011         2010
    -------------------------------------------------------------------------
    Cash Flows from
     Operating Activities
      Net income          $    44,440  $    37,884  $    88,392  $    77,919
      Adjustments to
       determine net cash
       flows:
        Provision for
         credit losses          5,267        5,487       11,483        9,200
        Depreciation and
         amortization           4,410        3,823        8,854        6,202
        Amortization of
         fair value of
         employee stock
         options                1,066        1,257        2,355        2,463
        Future income
         taxes, net              (426)       1,992       (8,162)       2,032
        Gain on sale of
         securities, net       (5,297)      (4,072)      (9,534)     (10,569)
        Accrued interest
         receivable and
         payable, net          (1,771)         420       (9,457)     (12,305)
        Current income
         taxes payable, net    (2,747)          70         (144)     (14,004)
        Other items, net       20,151       47,413       33,394       54,637
    -------------------------------------------------------------------------
                               65,093       94,274      117,181      115,575
    -------------------------------------------------------------------------
    Cash Flows from
     Financing Activities
      Deposits, net           575,125      181,123      548,699      567,806
      Common shares issued
       (Note 8)                63,040        2,855      105,537        3,962
      Warrants purchased
       under normal course
       issuer bid (Note 8)     (8,182)        (665)     (15,985)        (698)
      Dividends               (12,871)     (11,076)     (25,723)     (21,911)
      Debentures issued             -            -      300,000            -
      Debentures redeemed           -            -      (70,000)     (60,000)
      Issuance costs on
       share capital                -         (105)           -         (105)
      Long-term debt repaid         -     (270,630)           -     (270,630)
      Securities sold under
       repurchase agreements,
       net                          -            -            -     (300,242)
    -------------------------------------------------------------------------
                              617,112      (98,498)     842,528      (81,818)
    -------------------------------------------------------------------------
    Cash Flows from Investing
     Activities
      Interest bearing
       deposits with regulated
       financial institutions,
       net                    (32,539)      76,253      (84,106)      76,375
      Securities,
       purchased           (1,525,256)    (648,359)  (2,630,598)  (2,029,349)
      Securities, sale
       proceeds               907,770      964,332    1,369,928    2,274,063
      Securities, matured     513,364      149,923    1,186,439      263,191
      Securities purchased
       under resale
       agreements, net       (219,385)    (227,682)     (41,431)    (247,682)
      Loans, net             (356,930)    (266,770)    (753,571)    (316,470)
      Property and equipment   (3,388)      (3,512)      (7,292)      (7,574)
      Business acquisition          -      (53,060)           -      (53,060)
    -------------------------------------------------------------------------
                             (716,364)      (8,875)    (960,631)     (40,506)
    -------------------------------------------------------------------------
    Change in Cash and
     Cash Equivalents         (34,159)     (13,099)        (922)      (6,749)
    Cash and Cash Equivalents
     at Beginning of Period    12,554       (5,490)     (20,683)     (11,840)
    -------------------------------------------------------------------------
    Cash and Cash
     Equivalents
     at End of Period*  $   (21,605) $   (18,589) $   (21,605) $   (18,589)
    -------------------------------------------------------------------------
    * Represented by:
        Cash and non-
         interest bearing
         deposits with
         financial
         institutions     $     5,729  $    15,343  $     5,729  $    15,343
        Cheques and other
         items in transit
         (included in Cash
         Resources)            11,018          633       11,018          633
        Cheques and other
         items in transit
         (included in
         Other Liabilities)   (38,352)     (34,565)     (38,352)     (34,565)
    -------------------------------------------------------------------------
    Cash and Cash
     Equivalents at End of
     Period               $   (21,605) $   (18,589) $   (21,605) $   (18,589)
    -------------------------------------------------------------------------

    Supplemental Disclosure
     of Cash Flow Information
      Amount of interest
       paid in the period $    64,939  $    60,027  $   139,861  $   138,394
      Amount of income
       taxes paid in the
       period                  17,419       12,877       36,500       40,948
    -------------------------------------------------------------------------

    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    -------------------------------------------------------------------------
    Notes to Interim Consolidated Financial Statements
    -------------------------------------------------------------------------

        (unaudited)
        ($ thousands, except per share amounts)

    1.  Summary of Significant Accounting Policies

        Basis of Presentation

        These unaudited interim consolidated financial statements have been
        prepared in accordance with Canadian generally accepted accounting
        principles (GAAP), including the accounting requirements of the
        Office of the Superintendent of Financial Institutions Canada (OSFI),
        using the same accounting policies as the audited consolidated
        financial statements for the year ended October 31, 2010. Under
        Canadian GAAP, additional disclosures are required in annual
        financial statements and accordingly, these unaudited interim
        consolidated financial statements should be read in conjunction with
        the audited consolidated financial statements for the year ended
        October 31, 2010 as set out on pages 76 to 110 of the Bank's 2010
        Annual Report.

    2.  Insurance Revenues, Net

        Insurance revenues, net, as reported in other income on the
        consolidated statement of income are presented net of net claims and
        adjustment expenses and policy acquisition costs.


                                      For the three           For the six
                                       months ended           months ended
                           --------------------------------------------------
                            April 30   January  April 30  April 30  April 30
                                2011   31 2011      2010      2011      2010
    -------------------------------------------------------------------------
    Net earned premiums     $ 28,286  $ 28,996  $ 26,627  $ 57,282  $ 53,958
    Commissions and
     processing fees             479       465       546       944     1,164
    Net claims and
     adjustment expenses     (17,542)  (19,157)  (15,784)  (36,699)  (32,774)
    Policy acquisition
     costs                    (6,232)   (5,714)   (5,868)  (11,946)  (11,157)
    -------------------------------------------------------------------------
    Total, net              $  4,991  $  4,590  $  5,521  $  9,581  $ 11,191
    -------------------------------------------------------------------------

    3.  Securities

        Net unrealized gains (losses) reflected on the balance sheet follow:

                                             As at        As at        As at
                                          April 30   January 31   October 31
                                              2011         2011         2010
    -------------------------------------------------------------------------
    Interest bearing deposits with
    regulated financial institutions   $       813  $     1,227  $     2,104
    Securities issued or guaranteed by
      Canada                                   179           22         (139)
      A province or municipality               567          535          723
    Other debt securities                    1,479        1,841        3,412
    Equity securities
      Preferred shares                       9,053        9,131       18,331
      Common shares                         12,693       12,049        7,669
    -------------------------------------------------------------------------
    Unrealized gains, net                 $ 24,784  $    24,805  $    32,100
    -------------------------------------------------------------------------

        The securities portfolio is primarily comprised of high quality debt
        instruments, preferred shares and common shares that are not held for
        trading purposes and, where applicable, are typically held until
        maturity. Fluctuations in value are generally attributed to changes
        in interest rates, market credit spreads and shifts in the interest
        rate curve. Unrealized losses are considered to be other than
        permanent in nature.

    4.  Loans

        The composition of the Bank's loan portfolio by geographic region and
        industry sector follow:

                   British              Saskat-
    ($ millions)  Columbia   Alberta    chewan  Manitoba     Other     Total
    -------------------------------------------------------------------------
    Loans to
     Individuals
      Residential
       mort-
       gages(2)   $  1,216  $  1,142  $    160  $     73  $    242  $  2,833
      Other loans       69       101        13         3         1       187
    -------------------------------------------------------------------------
                     1,285     1,243       173        76       243     3,020
    -------------------------------------------------------------------------
    Loans to
     Businesses
      Commercial       897     1,596       108        99       244     2,944
      Construction
       and real
       estate(3)     1,258     1,526       260        72       166     3,282
      Equipment
       financing       342       705       133        70       511     1,761
      Energy             -       310         -         -         -       310
    -------------------------------------------------------------------------
                     2,497     4,137       501       241       921     8,297
    -------------------------------------------------------------------------
    Total
     Loans(1)     $  3,782  $  5,380  $    674  $    317  $  1,164  $ 11,317
    -------------------------------------------------------------------------
    Composition
     Percentage
      April 30,
       2011           33 %      48 %       6 %       3 %      10 %     100 %
      January 31,
       2011           33 %      48 %       6 %       3 %      10 %     100 %
      October 31,
       2010           33 %      48 %       6 %       3 %      10 %     100 %


                  April 30   January   October
                      2011   31 2011   31 2010
                     Compo-    Compo-    Compo-
                    sition    sition    sition
                    Percen-   Percen-   Percen-
    ($ millions)      tage      tage      tage
    -------------------------------------------
    Loans to
     Individuals
      Residential
       mort-
       gages(2)       25 %      24 %      23 %
      Other loans      2         2         2
    -------------------------------------------
                      27        26        25
    -------------------------------------------
    Loans to
     Businesses
      Commercial      26        26        26
      Construction
       and real
       estate(3)      29        30        31
      Equipment
       financing      16        16        16
      Energy           2         2         2
    -------------------------------------------
                      73        74        75
    -------------------------------------------
    Total
     Loans(1)        100 %     100 %     100 %
    -------------------------------------------
    Composition
     Percentage
      April 30,
       2011
      January 31,
       2011
      October 31,
       2010

    (1) This table does not include an allocation for credit losses.
    (2) Includes single- and multi-unit residential mortgages and project
        (interim) mortgages on residential property.
    (3) Includes commercial term mortgages and project (interim)
        mortgages for non-residential property.

    5.  Allowance for Credit Losses

        The following table shows the changes in the allowance for credit
        losses:

                  For the three months ended    For the three months ended
                           April 30, 2011              January 31, 2011
                 ------------------------------------------------------------
                             General                       General
                           Allowance                     Allowance
                                 for                           for
                  Specific    Credit            Specific    Credit
                 Allowance    Losses     Total Allowance    Losses     Total
    -------------------------------------------------------------------------
    Balance at
     beginning of
     period       $ 14,862  $ 60,185  $ 75,047  $ 19,038  $ 59,603  $ 78,641
    Provision for
     credit losses   8,590    (3,323)    5,267     5,634       582     6,216
    Write-offs      (1,940)        -    (1,940)  (10,047)        -   (10,047)
    Recoveries         397         -       397       237         -       237
    -------------------------------------------------------------------------
    Balance at end
     of period    $ 21,909  $ 56,862  $ 78,771  $ 14,862  $ 60,185  $ 75,047
    -------------------------------------------------------------------------


                                                For the three months ended
                                                         April 30, 2010
                                               ------------------------------
                                                           General
                                                         Allowance
                                                               for
                                                Specific    Credit
                                               Allowance    Losses     Total
    -------------------------------------------------------------------------
    Balance at beginning of period              $ 13,531  $ 59,039  $ 72,570
    Allowance acquired                             2,596     4,172     6,768
    Provision for credit losses                   10,693    (5,206)    5,487
    Write-offs                                    (8,530)        -    (8,530)
    Recoveries                                        91         -        91
    -------------------------------------------------------------------------
    Balance at end of period                    $ 18,381  $ 58,005  $ 76,386
    -------------------------------------------------------------------------


                    For the six months ended       For the six months ended
                           April 30, 2011                April 30, 2010
                 ------------------------------------------------------------
                             General                       General
                           Allowance                     Allowance
                                 for                           for
                  Specific    Credit            Specific    Credit
                 Allowance    Losses     Total Allowance    Losses     Total
    -------------------------------------------------------------------------
    Balance at
     beginning of
     period       $ 19,038  $ 59,603  $ 78,641  $ 14,306  $ 61,153  $ 75,459
    Allowance
     acquired            -         -         -     2,596     4,172     6,768
    Provision for
     credit losses  14,224    (2,741)   11,483    16,520    (7,320)    9,200
    Write-offs     (11,987)        -   (11,987)  (15,135)        -   (15,135)
    Recoveries         634         -       634        94         -        94
    -------------------------------------------------------------------------
    Balance at end
     of period    $ 21,909  $ 56,862  $ 78,771  $ 18,381  $ 58,005  $ 76,386
    -------------------------------------------------------------------------

    6.  Impaired and Past Due Loans

        Outstanding gross loans and impaired loans, net of allowances for
        credit losses, by loan type, are as follows:

                                       As at April 30, 2011
                          ---------------------------------------------------
                                             Gross                       Net
                                Gross     Impaired     Specific     Impaired
                               Amount       Amount    Allowance        Loans
    -------------------------------------------------------------------------
    Consumer and personal $ 1,932,737     $ 25,039      $ 1,519     $ 23,520
    Real estate(1)          4,347,243       68,503        6,152       62,351
    Equipment financing     2,069,611       15,393        6,338        9,055
    Commercial              2,967,732       19,602        7,900       11,702
    -------------------------------------------------------------------------
    Total(2)             $ 11,317,323    $ 128,537     $ 21,909      106,628
    ----------------------------------------------------------------
    General allowance(3)                                             (56,862)
    -------------------------------------------------------------------------
    Net impaired loans
     after general
     allowance                                                      $ 49,766
    -------------------------------------------------------------------------


                                     As at January 31, 2011
                          ---------------------------------------------------
                                             Gross                       Net
                                Gross     Impaired     Specific     Impaired
                               Amount       Amount    Allowance        Loans
    -------------------------------------------------------------------------
    Consumer and personal $ 1,857,252     $ 26,919      $ 2,033     $ 24,886
    Real estate(1)          4,220,509       75,153        4,179       70,974
    Equipment financing     2,027,565       16,058        6,034       10,024
    Commercial              2,856,610       14,290        2,616       11,674
    -------------------------------------------------------------------------
    Total(2)             $ 10,961,936    $ 132,420     $ 14,862      117,558
    ----------------------------------------------------------------
    General allowance(3)                                             (60,185)
    -------------------------------------------------------------------------
    Net impaired loans
     after general
     allowance                                                      $ 57,373
    -------------------------------------------------------------------------


                                           As at October 31, 2010
                          ---------------------------------------------------
                                             Gross                       Net
                                Gross     Impaired     Specific     Impaired
                               Amount       Amount    Allowance        Loans
    -------------------------------------------------------------------------
    Consumer and personal $ 1,793,181     $ 24,534      $ 1,288     $ 23,246
    Real estate(1)          4,124,235       82,799        4,880       77,919
    Equipment financing     1,943,716       27,918       10,215       17,703
    Commercial              2,713,973        7,956        2,655        5,301
    -------------------------------------------------------------------------
    Total(2)             $ 10,575,105    $ 143,207     $ 19,038      124,169
    ----------------------------------------------------------------
    General allowance(3)                                             (59,603)
    -------------------------------------------------------------------------
    Net impaired loans after general allowance                      $ 64,566
    -------------------------------------------------------------------------

    (1) Multi-family residential mortgages are included in real estate loans.
    (2) Gross impaired loans include foreclosed assets with a carrying value
        of $992 (January 31, 2011 - $1,591 and October 31, 2010 - $867) which
        are held for sale.
    (3) The general allowance for credit risk is not allocated by loan type.

        Outstanding impaired loans, net of allowance for credit losses, by
        provincial location of security, are as follows:


                      As at April 30, 2011          As at January 31, 2011
                  -----------------------------------------------------------
                     Gross                 Net     Gross                 Net
                  Impaired  Specific  Impaired  Impaired  Specific  Impaired
                    Amount Allowance     Loans    Amount Allowance     Loans
    -------------------------------------------------------------------------
    Alberta       $ 79,532  $ 13,467  $ 66,065  $ 79,603  $  7,970  $ 71,633
    British
     Columbia       38,927     2,844    36,083    35,052     1,099    33,953
    Saskatchewan     2,977     1,194     1,783     2,149       760     1,389
    Manitoba         1,165       306       859       792       328       464
    Other            5,936     4,098     1,838    14,824     4,705    10,119
    -------------------------------------------------------------------------
    Total        $ 128,537  $ 21,909   106,628 $ 132,420  $ 14,862   117,558
    ----------------------------------         ---------------------
    General
     allowance(1)                      (56,862)                      (60,185)
    -------------------------------------------------------------------------
    Net impaired
     loans after
     general
     allowance                        $ 49,766                      $ 57,373
    -------------------------------------------------------------------------


                                                    As at October 31, 2010
                                                -----------------------------
                                                   Gross                 Net
                                                Impaired  Specific  Impaired
                                                  Amount Allowance     Loans
    -------------------------------------------------------------------------
    Alberta                                     $ 98,973  $ 14,515  $ 84,458
    British Columbia                              38,543     1,259    37,284
    Saskatchewan                                   2,109     1,114       995
    Manitoba                                         329       233        96
    Other                                          3,253     1,917     1,336
    -------------------------------------------------------------------------
    Total                                      $ 143,207  $ 19,038   124,169
    ---------------------------------------------------------------
    General allowance(1)                                             (59,603)
    -------------------------------------------------------------------------
    Net impaired loans after general allowance                      $ 64,566
    -------------------------------------------------------------------------

    (1) The general allowance for credit risk is not allocated by province.

        During the three and six months ended April 30, 2011, interest
        recognized as income on impaired loans totaled $554 and $1,026,
        respectively (2010 - $950 and $1,604).

        Gross impaired loans exclude certain past due loans where payment of
        interest or principal is contractually in arrears, which are not
        classified as impaired. Details of such past due loans that have not
        been included in the gross impaired amount are as follows:


                                           As at April 30, 2011
                            -------------------------------------------------
                              1 - 30   31 - 60   61 - 90 More than
                                days      days      days   90 days     Total
    -------------------------------------------------------------------------
    Residential mortgages   $ 15,696  $  1,440  $    582  $    365  $ 18,083
    Other loans               28,488     8,475     1,317         -    38,280
    -------------------------------------------------------------------------
                            $ 44,184  $  9,915  $  1,899  $    365  $ 56,363
    -------------------------------------------------------------------------

    Total as at
     January 31, 2011       $ 27,493  $ 27,591  $  2,282  $    190  $ 57,556
    -------------------------------------------------------------------------
    Total as at
     October 31, 2010       $ 23,639  $ 41,871  $  9,643  $      4  $ 75,157
    -------------------------------------------------------------------------

    7.  Derivative Financial Instruments

        The Bank may designate certain derivative financial instruments as
        either a hedge of the fair value of recognized assets or liabilities
        or firm commitments (fair value hedges), or a hedge of highly
        probable future cash flows attributable to a recognized asset or
        liability or a forecasted transaction (cash flow hedges). On an
        ongoing basis, the Bank assesses whether the derivatives that are
        used in hedging transactions are effective in offsetting changes in
        fair values or cash flows of the hedged items. If a hedging
        transaction becomes ineffective or if the derivative is not
        designated as a cash flow hedge, any subsequent change in the fair
        value of the hedging instrument is recognized in earnings. As at
        April 30, 2011, outstanding interest rate swaps include nil (2010 -
        $25,000) designated as cash flow hedges and $37,100 (2010 - $60,910)
        not designated as hedges.

        For the three and six months ended April 30, 2011, a net unrealized
        after tax gain of nil and nil respectively (2010 - $10 and $17) was
        recorded in other comprehensive income for changes in fair value of
        the effective portion of derivatives designated as cash flow hedges,
        and nil (2010 - nil) was recorded in other income for changes in fair
        value of the ineffective portion of derivatives classified as cash
        flow hedges. Amounts accumulated in other comprehensive income are
        reclassified to net income in the same period that interest on
        certain floating rate loans (i.e. the hedged items) affect income.
        For the three and six months ended April 30, 2011, no amounts (2010 -
        net gains of $518 and $1,586 respectively) were reclassified to net
        income. No amounts (2010 - net gain of $31 after tax) recorded in
        accumulated other comprehensive income as at April 30, 2011 are
        expected to be reclassified to net income in the next twelve months.

        The following table shows the notional value outstanding for
        derivative financial instruments and the related fair value:

                        As at April 30, 2011        As at January 31, 2011
                 ------------------------------------------------------------
                            Positive  Negative            Positive  Negative
                  Notional      Fair      Fair  Notional      Fair      Fair
                    Amount     Value     Value    Amount     Value     Value
    -------------------------------------------------------------------------
    Interest rate
     swaps not
     designated
     as
     hedges(1)    $ 37,100  $      -  $    579  $ 41,400  $      -  $    656
    Foreign
     exchange
     contracts(2)   17,851       459       392    33,549       127       152
    Equity
     contracts           -         -         -       500         3         -
    Embedded
     derivatives
     in equity-
     linked
     deposits            -         -         -       n/a         -         4
    Other
     forecasted
     transactions        -         -         -         -         -         -
    -------------------------------------------------------------------------
    Derivative
     related
     amounts                $    459  $    971            $    130  $    812
    -------------------------------------------------------------------------


                                                    As at October 31, 2010
                                               ------------------------------
                                                          Positive  Negative
                                                Notional      Fair      Fair
                                                  Amount     Value     Value
    -------------------------------------------------------------------------
    Interest rate swaps not designated as
     hedges                                     $ 47,550  $      -  $    930
    Foreign exchange contracts                    57,032       132        59
    Equity contracts                                 500         2         -
    Embedded derivatives in equity-linked
     deposits                                        n/a         -         3
    Other forecasted transactions                      -         -         -
    -------------------------------------------------------------------------
    Derivative related amounts                            $    134  $    992
    -------------------------------------------------------------------------

    (1) Interest rate swaps not designated as hedges outstanding at April 30,
        2011 mature between November 2012 and April 2014.
    (2) Foreign exchange contracts outstanding at April 30, 2011 mature
        between May 2011 and November 2012.

    n/a - not applicable.

    There were no forecasted transactions that failed to occur during the
    three and six months ended April 30, 2011.

    8.  Capital Stock

        Share Capital

                                          For the six months ended
                          ---------------------------------------------------
                                 April 30, 2011            April 30, 2010
                          ---------------------------------------------------
                            Number of                 Number of
                               Shares       Amount       Shares       Amount
    -------------------------------------------------------------------------
    Preferred Shares
     - Series 3
      Outstanding at
       beginning and end
       of period(1)         8,390,000  $   209,750    8,390,000  $   209,750
    -------------------------------------------------------------------------
    Common Shares
      Outstanding at
       beginning of
       period              66,641,362      279,352   63,903,460      226,480
      Issued on exercise
       of warrants          7,213,383      100,987        7,868          110
      Issued on exercise
       or exchange of
       options                268,423        2,550      262,801        2,289
      Issued under
       dividend
       reinvestment
       plan(2)                 67,494        2,000       69,922        1,563
      Transferred from
       contributed
       surplus on
       exercise or
       exchange of
       options                      -        2,851            -        1,199
      Issued on
       acquisition                  -            -    2,065,088       42,582
    -------------------------------------------------------------------------
      Outstanding at
       end of period       74,190,662      387,740   66,309,139      274,223
    -------------------------------------------------------------------------
    Share Capital                      $   597,490               $   483,973
    -------------------------------------------------------------------------

    (1) Holders of the Preferred Shares - Series 3 are entitled to receive
        non-cumulative quarterly fixed dividends for the initial five-year
        period ending April 30, 2014 of 7.25% per annum, payable quarterly,
        as and when declared. For further information on dividend rates after
        April 30, 2014, refer to Note 19 of the audited consolidated
        financial statements for the year ended October 31, 2010 (see page 95
        of the 2010 Annual Report).
    (2) For the periods noted above, shares were issued at a 2% discount from
        the average closing price of the five trading days preceding the
        dividend payment date.

        Warrants to Purchase Common Shares

        Each warrant is exercisable until March 3, 2014 at a price of $14.00
        to purchase one common share in the capital of the Bank.

                                                    For the six months ended
                                                   --------------------------
                                                       April 30     April 30
    Number of Warrants                                     2011         2010
    -------------------------------------------------------------------------
      Outstanding at beginning of period             13,471,611   14,964,356
      Purchased and cancelled                        (1,000,000)     (72,928)
      Exercised                                      (7,213,383)      (7,868)
    -------------------------------------------------------------------------
      Outstanding at end of period                    5,258,228   14,883,560
    -------------------------------------------------------------------------

        Normal Course Issuer Bid

        On January 18, 2011, the Bank received approval from the Toronto
        Stock Exchange for a Normal Course Issuer Bid (NCIB) to purchase and
        cancel up to 1,029,108 of its warrants. The NCIB commenced January
        20, 2011 and will expire January 19, 2012. For the three and six
        months ended April 30, 2011, the Bank purchased and cancelled 500,000
        and 1,000,000 warrants (2010 - 68,428 and 72,928) at an aggregate
        cost of $8,182 and $15,985 respectively (2010 - $665 and $698), which
        was charged to retained earnings.

    9.  Stock-Based Compensation

        Stock Options

                                            For the three months ended
                          ---------------------------------------------------
                                   April 30, 2011            April 30, 2010
                          ---------------------------------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                            Number of     Exercise    Number of     Exercise
                              Options        Price      Options        Price
    -------------------------------------------------------------------------
    Options
      Balance at beginning
       of period            3,817,005  $     20.68    4,667,731  $     18.98
      Exercised or
       exchanged             (318,599)       22.07     (397,800)       15.38
      Forfeited               (25,419)       22.24      (26,310)       20.21
    -------------------------------------------------------------------------
    Balance at end of
     period                 3,472,987  $     20.54    4,243,621  $     19.31
    -------------------------------------------------------------------------


                                            For the six months ended
                          ---------------------------------------------------
                                   April 30, 2011            April 30, 2010
                          ---------------------------------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                            Number of     Exercise    Number of     Exercise
                              Options        Price      Options        Price
    -------------------------------------------------------------------------
    Options
      Balance at beginning
       of period            3,834,433  $     19.93    4,394,605  $     18.65
      Granted                 358,865        29.42      358,291        22.09
      Exercised or
       exchanged             (680,249)       21.67     (453,300)       15.19
      Forfeited               (40,062)       22.51      (55,975)       18.98
    -------------------------------------------------------------------------
    Balance at end of
     period                 3,472,987  $     20.54    4,243,621  $     19.31
    -------------------------------------------------------------------------


        The terms of the share incentive plan allow the holders of vested
        options a cashless settlement alternative whereby the option holder
        can either (a) elect to receive shares by delivering cash to the Bank
        in the amount of the option exercise price or (b) elect to receive
        the number of shares equivalent to the excess of the market value of
        the shares under option over the exercise price. Of the 680,249
        options (2010 - 453,300) exercised or exchanged in the six months
        ended April 30, 2011, option holders exchanged the rights to 566,299
        options (2010 - 304,300) and received 154,473 shares (2010 - 113,801)
        in return under the cashless settlement alternative.

        For the six months ended April 30, 2011, salary expense of $2,355
        (2010 - $2,463) was recognized relating to the estimated fair value
        of options. The fair value of options granted was estimated using a
        binomial option pricing model with the following variables and
        assumptions: (i) risk-free interest rate of 2.2% (2010 - 2.6%), (ii)
        expected option life of 4.0 years (2010 - 4.0 years), (iii) expected
        volatility of 41% (2010 - 44%), and (iv) expected dividends of 1.8%
        (2010 - 2.0%). The weighted average fair value of options granted was
        estimated at $8.69 (2010 - $7.16) per share.

        Further details relating to stock options outstanding and exercisable
        at April 30, 2011 follow:

                                Options Outstanding      Options Exercisable
                          ---------------------------------------------------
                                      Weighted
                                       Average
                                     Remaining
                                      Contract- Weighted            Weighted
                                           ual   Average             Average
    Range of Exercise      Number of      Life  Exercise Number of  Exercise
    Prices                   Options    (years)    Price   Options     Price
    -------------------------------------------------------------------------
    $ 8.58 to $11.76         921,200       2.6  $  11.72         -  $      -
    $16.89 to $21.46         863,340       2.3     19.19   162,000     21.45
    $22.09 to $26.38       1,126,265       2.7     24.05   292,900     25.49
    $28.11 to $31.18         562,182       3.5     30.05   205,030     31.14
    -------------------------------------------------------------------------
    Total                  3,472,987       2.7  $  20.54   659,930  $  26.25
    -------------------------------------------------------------------------

        Restricted Share Units

        Under the Restricted Share Unit (RSU) plan, certain employees are
        eligible to receive an award in the form of RSUs. Each RSU entitles
        the holder to receive the cash equivalent of the market value of the
        Bank's common shares at the vesting date and an amount equivalent to
        the dividends paid on the common shares during the vesting period.
        RSUs vest on each anniversary of the grant in equal one-third
        installments over a vesting period of three years. Salary expense is
        recognized evenly over the vesting period, except where the employee
        is eligible to retire prior to the vesting date, in which case the
        expense is recognized between the grant date and the date the
        employee is eligible to retire.

        For the six months ended April 30, 2011, salary expense of $4,718
        (2010 - $1,670) was recognized related to RSUs. As at April 30, 2011,
        the liability for the RSUs held under this plan was $13,332 (2010 -
        $5,655). At the end of each period, the liability and salary expense
        are adjusted to reflect changes in the market value of the Bank's
        common shares. As at April 30, 2011, 474,387 RSUs were outstanding
        (2010 - 292,448).

        Deferred Share Units

        Under the Deferred Share Unit (DSU) plan, non-employee directors will
        receive at least 50% of their annual retainer in DSUs. The DSUs are
        not redeemable until the individual is no longer a director and must
        be redeemed for cash. Common share dividend equivalents accrue to the
        directors in the form of additional units. The expense related to the
        DSUs is recorded in the period the award is earned by the director.

        For the six months ended April 30, 2011, non-interest expense "other
        expenses" included $152 (2010 - $40) related to DSUs. As at April 30,
        2011, the liability for DSUs was $1,514 (2010 - $572). At the end of
        each period, the liability and expense are adjusted to reflect
        changes in the market value of the Bank's common shares. As at April
        30, 2011, 49,966 DSUs were outstanding (2010 - 23,838).

    10. Contingent Liabilities and Commitments

        Significant contingent liabilities and commitments, including
        guarantees provided to third parties, are discussed in Note 21 of the
        Bank's audited consolidated financial statements for the year ended
        October 31, 2010 (see page 98 of the 2010 Annual Report) and include:

                                             As at        As at        As at
                                          April 30   January 31   October 31
                                              2011         2011         2010
    -------------------------------------------------------------------------
    Guarantees and standby letters of
     credit
      Balance outstanding              $   260,522  $   266,827  $   261,438
    Business credit cards
      Total approved limit                  12,950       13,037       13,153
      Balance outstanding                    3,028        3,018        2,927
    -------------------------------------------------------------------------

        In the ordinary course of business, the Bank and its subsidiaries are
        party to legal proceedings. Based on current knowledge, management
        does not expect the outcome of any of these proceedings to have a
        material effect on the consolidated financial position or results of
        operations.


    11. Financial Instruments

        As a financial institution, most of the Bank's balance sheet is
        comprised of financial instruments and the majority of net income
        results from gains, losses, income and expenses related to the same.

        Financial instrument assets include cash resources, securities,
        securities purchased under resale agreements, loans and derivative
        financial instruments. Financial instrument liabilities include
        deposits, securities sold under repurchase agreements, derivative
        financial instruments and subordinated debentures.

        The use of financial instruments exposes the Bank to credit,
        liquidity and market risk. A discussion of how these and other risks
        are managed can be found in the 2010 consolidated annual financial
        statements.

        The value of financial assets recorded on the consolidated balance
        sheets at April 30, 2011 at fair value (cash, securities, securities
        purchased under resale agreements and derivatives) was determined
        using published market prices quoted in active markets for 87% (2010
        - 81%) of the portfolio and estimated using a valuation technique
        based on observable market data for 13% (2010 - 19%) of the
        portfolio. The value of liabilities recorded on the consolidated
        balance sheet at fair value (derivatives and securities sold under
        repurchase agreements) was determined using a valuation technique
        based on observable market data. There were no financial instruments
        measured using unobservable market data. Further information on how
        the fair value of financial instruments is determined is included in
        Note 30 of the October 31, 2010 audited financial statements
        beginning on page 105 in the 2010 Annual Report.

    12. Interest Rate Sensitivity

        The Bank's exposure to interest rate risk as a result of a difference
        or gap between the maturity or repricing behavior of interest
        sensitive assets and liabilities, including derivative financial
        instruments, is discussed in Note 29 of the audited consolidated
        financial statements for the year ended October 31, 2010 (see page
        104 of the 2010 Annual Report). The following table shows the gap
        position for selected time intervals.

        Asset Liability Gap Positions

                             Floating
                             Rate and                                  Total
                               Within       1 to 3     3 Months       Within
    ($ millions)              1 Month       Months    to 1 Year       1 Year
    -------------------------------------------------------------------------
    April 30, 2011
    Assets
    Cash resources and
     securities           $       530  $       403  $       305  $     1,238
    Loans                       5,118          620        1,197        6,935
    Other assets                    -            -            -            -
    Derivative financial
     instruments(1)                37            -            -           37
    -------------------------------------------------------------------------
    Total                       5,685        1,023        1,502        8,210
    -------------------------------------------------------------------------
    Liabilities and Equity
    Deposits                    4,506          681        2,481        7,668
    Other liabilities               3            6           28           37
    Debentures                      -            -          120          120
    Shareholders' equity            -            -            -            -
    Derivative financial
     instruments(1)                 -            2           13           15
    -------------------------------------------------------------------------
    Total                       4,509          689        2,642        7,840
    -------------------------------------------------------------------------
    Interest Rate
     Sensitive Gap        $     1,176  $       334  $    (1,140) $       370
    -------------------------------------------------------------------------
    Cumulative Gap        $     1,176  $     1,510  $       370  $       370
    -------------------------------------------------------------------------
    Cumulative Gap as a
     percentage of total
     assets                     8.6 %       11.1 %        2.7 %        2.7 %
    -------------------------------------------------------------------------

    January 31, 2011
    Cumulative gap        $       865  $       740  $       240  $       240
    -------------------------------------------------------------------------
    Cumulative gap as a
     Percentage of total
     assets                     6.6 %        5.7 %        1.8 %        1.8 %
    -------------------------------------------------------------------------

    October 31, 2010
    Cumulative gap        $     1,002  $       809  $       190  $       190
    -------------------------------------------------------------------------
    Cumulative gap as a
     percentage of total
     assets                     7.8 %        6.3 %        1.5 %        1.5 %
    -------------------------------------------------------------------------


                                                            Non-
                               1 Year    More than     interest
    ($ millions)           to 5 Years      5 Years    Sensitive        Total
    -------------------------------------------------------------------------
    April 30, 2011
    Assets
    Cash resources and
     securities           $       647  $       122  $       58  $      2,065
    Loans                       4,274           80         (50)       11,239
    Other assets                    -            -         296           296
    Derivative financial
     instruments(1)                 -            -          18            55
    -------------------------------------------------------------------------
    Total                       4,921          202         322        13,655
    -------------------------------------------------------------------------
    Liabilities and Equity
    Deposits                    3,602          105         (14)       11,361
    Other liabilities              32            7         320           396
    Debentures                    350           75           -           545
    Shareholders' equity            -            -       1,298         1,298
    Derivative financial
     instruments(1)                23            -          17            55
    -------------------------------------------------------------------------
    Total                       4,007          187       1,621        13,655
    -------------------------------------------------------------------------
    Interest Rate
     Sensitive Gap        $       914  $        15  $   (1,299) $          -
    -------------------------------------------------------------------------
    Cumulative Gap        $     1,284  $     1,299  $        -  $          -
    -------------------------------------------------------------------------
    Cumulative Gap as a
     percentage of total
     assets                     9.4 %        9.5 %           - %          - %
    -------------------------------------------------------------------------

    January 31, 2011
    Cumulative gap        $     1,119  $     1,163  $        -  $         -
    -------------------------------------------------------------------------
    Cumulative gap as a
     Percentage of total
     assets                     8.6 %        8.9 %          - %          - %
    -------------------------------------------------------------------------

    October 31, 2010
    Cumulative gap        $     1,085  $     1,130  $       -  $         -
    -------------------------------------------------------------------------
    Cumulative gap as a
     percentage of total
     assets                     8.5 %        8.8 %          - %          - %
    -------------------------------------------------------------------------

    (1) Derivative financial instruments are included in this table at the
        notional amount.
    (2) Accrued interest is excluded in calculating interest sensitive assets
        and liabilities.
    (3) Potential prepayments of fixed rate loans and early redemption of
        redeemable fixed term deposits have not been estimated. Redemptions
        of fixed term deposits where depositors have this option are not
        expected to be material. The majority of fixed rate loans, mortgages
        and leases are either closed or carry prepayment penalties.

        The effective, weighted average interest rates for each class of
        financial assets and liabilities are shown below:


              Floating
              Rate and           3 Months   Total   1 Year     More
    April 30,   Within   1 to 3      to 1  Within       to     than
     2011      1 Month   Months      Year  1 Year  5 Years  5 Years   Total
    -------------------------------------------------------------------------
    Total
     assets      3.9 %    2.8 %     4.8 %   3.9 %    5.4 %    5.3 %    4.5 %
    Total
     liabil-
     ities       1.1      1.9       2.6     1.7      3.1      5.8      2.2
    -------------------------------------------------------------------------
    Interest
     rate
     sensi-
     tive
     gap         2.8 %    0.9 %     2.2 %   2.2 %    2.3 %   (0.5) %   2.3 %
    -------------------------------------------------------------------------

    January
     31, 2011
    -------------------------------------------------------------------------
    Total
     assets      4.0 %    2.8 %     4.7 %   4.0 %    5.4 %    5.3 %    4.6 %
    Total
     liabil-
     ities       1.0      2.1       2.4     1.5      3.2      5.8      2.2
    -------------------------------------------------------------------------
    Interest
     rate
     sensitive
     gap         3.0 %    0.7 %     2.3 %   2.5 %    2.2 %   (0.5) %   2.4 %
    -------------------------------------------------------------------------

    October
     31, 2010
    -------------------------------------------------------------------------
    Total
     assets      3.9 %    2.8 %     4.9 %   4.0 %    5.5 %    5.2 %    4.6 %
    Total
    liabil-
    ities        1.2      2.0       2.6     1.7      3.2      5.8      2.3
    -------------------------------------------------------------------------
    Interest
     rate
     sensitive
     gap         2.7 %    0.8 %     2.3 %   2.3 %    2.3 %   (0.6) %   2.3 %
    -------------------------------------------------------------------------

        Based on the current interest rate gap position, it is estimated that
        a one-percentage point increase in all interest rates would increase
        net interest income by approximately 3.7% or $12,311 (October 31,
        2010 - 2.3% or $7,372) and decrease other comprehensive income $8,104
        (October 31, 2010 - $9,796) net of tax, respectively over the
        following twelve months. A one-percentage point decrease in all
        interest rates would decrease net interest income by approximately
        4.8% or $16,111 (October 31, 2010 - 1.5% or $4,703) and increase
        other comprehensive income $8,104 (October 31, 2010 - $9,796) net of
        tax.

    13. Segmented Information

        The Bank operates principally in two industry segments - banking and
        trust, and insurance. These two segments differ in products and
        services but are both based within Western Canada. The banking and
        trust segment provides comprehensive banking services, trust and
        wealth management services for individuals, businesses and
        institutional clients. The insurance segment provides home and auto
        insurance to individuals in British Columbia and Alberta.


                          Banking and Trust                Insurance
                  -----------------------------------------------------------
                         Three months ended            Three months ended
                  -----------------------------------------------------------
                  April 30   January  April 30  April 30   January  April 30
                      2011   31 2011      2010      2011   31 2011      2010
    -------------------------------------------------------------------------
    Net interest
     income
     (teb)(1)     $ 91,017  $ 91,596  $ 78,436  $  2,265  $  1,830  $  1,696
    Less teb
     adjustment      2,130     2,491     2,448       255       253       214
    -------------------------------------------------------------------------
    Net interest
     income per
     financial
     statements     88,887    89,105    75,988     2,010     1,577     1,482
    Other
     income(2)      23,188    23,802    24,951     5,318     4,619     5,889
    -------------------------------------------------------------------------
    Total
     revenues      112,075   112,907   100,939     7,328     6,196     7,371
    Provision for
     credit losses   5,267     6,216     5,487         -         -         -
    Non-interest
     expenses       52,427    51,984    47,129     2,981     3,144     2,831
    Provision for
     income taxes   13,379    13,228    13,797       859       519     1,141
    Non-controlling
     interest in
     subsidiary         50        60        41         -         -         -
    -------------------------------------------------------------------------
    Net income    $ 40,952  $ 41,419  $ 34,485  $  3,488  $  2,533  $  3,399
    -------------------------------------------------------------------------
    Total average
     assets ($
     millions)(3) $ 13,084  $ 12,655  $ 11,688  $    230  $    233  $    210
    -------------------------------------------------------------------------


                                                            Total
                                                -----------------------------
                                                      Three months ended
                                                -----------------------------
                                                April 30   January  April 30
                                                    2011   31 2011      2010
    -------------------------------------------------------------------------
    Net interest income (teb)(1)                $ 93,282  $ 93,426  $ 80,132
    Less teb adjustment                            2,385     2,744     2,662
    -------------------------------------------------------------------------
    Net interest income per financial
     statements                                   90,897    90,682    77,470
    Other income(2)                               28,506    28,421    30,840
    -------------------------------------------------------------------------
    Total revenues                               119,403   119,103   108,310
    Provision for credit losses                    5,267     6,216     5,487
    Non-interest expenses                         55,408    55,128    49,960
    Provision for income taxes                    14,238    13,747    14,938
    Non-controlling interest in subsidiary            50        60        41
    -------------------------------------------------------------------------
    Net income                                  $ 44,440  $ 43,952  $ 37,884
    -------------------------------------------------------------------------
    Total average assets ($ millions)(3)        $ 13,314  $ 12,888  $ 11,898
    -------------------------------------------------------------------------


                   Banking and Trust      Insurance              Total
                  -----------------------------------------------------------
                   Six months ended    Six months ended    Six months ended
                  -----------------------------------------------------------
                  April 30  April 30  April 30  April 30  April 30  April 30
                      2011      2010      2011      2010      2011      2010
    -------------------------------------------------------------------------
    Net interest
     income
     (teb)(1)     $182,613  $151,055  $  4,095  $  3,383  $186,708  $154,438
    Less teb
     adjustment      4,621     4,827       508       398     5,129     5,225
    -------------------------------------------------------------------------
    Net interest
     income per
     financial
     statements    177,992   146,228     3,587     2,985   181,579   149,213
    Other
     income(2)      46,990    45,567     9,937    11,639    56,927    57,206
    -------------------------------------------------------------------------
    Total
     revenues      224,982   191,795    13,524    14,624   238,506   206,419
    Provision for
     credit losses  11,483     9,200         -         -    11,483     9,200
    Non-interest
     expenses      104,411    84,756     6,125     5,452   110,536    90,208
    Provision for
     income taxes   26,607    26,547     1,378     2,428    27,985    28,975
    Non-controlling
     interest in
     subsidiary        110       117         -         -       110       117
    -------------------------------------------------------------------------
    Net income(4) $ 82,371  $ 71,175  $  6,021  $  6,744  $ 88,392  $ 77,919
    -------------------------------------------------------------------------
    Total average
     assets ($
     millions)(3) $ 12,869  $ 11,502  $    232  $    212  $ 13,101  $ 11,714
    -------------------------------------------------------------------------

    (1) Taxable Equivalent Basis (teb) - Most financial institutions analyze
        revenue on a taxable equivalent basis to permit uniform measurement
        and comparison of net interest income. Net interest income (as
        presented in the consolidated statement of income) includes tax-
        exempt income on certain securities. Since this income is not
        taxable, the rate of interest or dividends received is significantly
        lower than would apply to a loan or security of the same amount. The
        adjustment to taxable equivalent basis increases interest income and
        the provision for income taxes to what they would have been had the
        tax-exempt securities been taxed at the statutory rate. The taxable
        equivalent basis does not have a standardized meaning prescribed by
        generally accepted accounting principles and therefore may not be
        comparable to similar measures presented by other financial
        institutions.
    (2) Other income for the insurance segment is presented net of net
        claims, adjustment expenses and policy acquisition expenses and
        includes gains on sale of securities.
    (3) Assets are disclosed on an average daily balance basis as this
        measure is most relevant to a financial institution and is the
        measure reviewed by management.
    (4) The 2010 banking and trust segment contains the results of National
        Leasing Group Inc. from the acquisition date, February 1, 2010 to
        April 30, 2010.

    14. Capital Management

        Capital for Canadian financial institutions is currently managed and
        reported in accordance with a capital management framework specified
        by OSFI commonly called Basel II.

        Capital funds are managed in accordance with policies and plans that
        are regularly reviewed and approved by the Board of Directors and
        take into account forecasted capital needs and markets. The goal is
        to maintain adequate regulatory capital to be considered well
        capitalized, protect customer deposits and provide capacity for
        internally generated growth and strategic opportunities that do not
        otherwise require accessing the public capital markets, all while
        providing a satisfactory return for shareholders.

        Significant capital transactions in the current year include the
        first quarter redemption of $70,000 and issue of $300,000 of
        conventional subordinated debentures, which qualify as Tier 2
        regulatory capital. In addition, proceeds from the 2011 exercise of
        warrants by the holders increased Tier 1 regulatory capital by
        $101,000.

        Additional information about the Bank's capital management practices
        is provided in Note 32 to the fiscal 2010 audited financial
        statements beginning on page 107 of the 2010 Annual Report.

        Capital Structure and Regulatory Ratios

                                             As at        As at        As at
                                          April 30   January 31   October 31
                                              2011         2011         2010
    -------------------------------------------------------------------------
    Capital
      Tier 1                           $ 1,339,794  $ 1,250,346  $ 1,183,680
      Total                              1,872,627    1,788,076    1,496,529
    -------------------------------------------------------------------------
    Capital ratios
      Tier 1                                11.8 %       11.6 %       11.3 %
      Total                                 16.6         16.5         14.3
    Assets to capital multiple               7.3 x        7.3 x        8.5 x
    -------------------------------------------------------------------------

        During the three and six months ended April 30, 2011, the Bank
        complied with all internal and external capital requirements.

    15. Future Accounting Changes

        International Financial Reporting Standards

        The Canadian Institute of Chartered Accountants will transition
        Canadian GAAP for publicly accountable entities to International
        Financial Reporting Standards (IFRS). The Bank's consolidated
        financial statements will be prepared in accordance with IFRS for the
        fiscal year commencing November 1, 2011 and will include IFRS
        comparative information for the prior year.

        The Bank has a four phase project underway to identify and evaluate
        the impact of the transition to IFRS on the consolidated financial
        statements and develop a plan to complete the transition. The project
        plan includes the following phases - diagnostic, design and planning,
        solution development, and implementation. The Bank is currently
        working on the final implementation phase.

        The quantitative impact of the transition to IFRS on the Bank's
        consolidated financial statements for current standards has not yet
        been finalized. However, the differences identified include
        derecognition, the consolidation of variable interest entities,
        contingent consideration as a result of a business combination, and
        loan loss accounting. CWB continues to monitor the International
        Accounting Standards Board's proposed changes to standards during
        Canada's transition to IFRS. These proposed changes may have a
        significant impact on the Bank's implementation plan and future
        financial statements.

    -------------------------------------------------------------------------
    Shareholder Information
    -------------------------------------------------------------------------

    Head Office                       Transfer Agent and Registrar
    Canadian Western Bank & Trust     Valiant Trust Company
    Suite 3000, Canadian Western      Suite 310, 606 - 4th Street S.W.
    Bank Place                        Calgary, AB T2P 1T1
    10303 Jasper Avenue               Telephone: (403) 233-2801
    Edmonton, AB T5J 3X6              Fax: (403) 233-2857
    Telephone: (780) 423-8888         Website: www.valianttrust.com
    Fax: (780) 423-8897               E-mail: inquiries@valianttrust.com
    www.cwbankgroup.com

    Subsidiary Offices                Eligible Dividends Designation
    National Leasing Group Inc.       CWB designates all dividends for both
    1525 Buffalo Place                common and preferred shares paid to
    Winnipeg, MB  R3T 1L9             Canadian residents as "eligible
    Toll-free: 1-800-665-1326         dividends", as defined in the Income
    Toll-free fax: 1-866-408-0729     Tax Act (Canada), unless otherwise
    www.nationalleasing.com           noted.

    Canadian Western Trust Company    Dividend Reinvestment Plan
    Suite 600, 750 Cambie Street
    Vancouver, BC  V6B 0A2            CWB's dividend reinvestment
    Toll-free: 1-800-663-1124         plan allows common and
    Fax: (604) 669-6069               preferred shareholders to
    www.cwt.ca                        purchase additional common shares
                                      by reinvesting their cash
    Valiant Trust Company             dividend without incurring
    Suite 310, 606 - 4th Street S.W.  brokerage and commission fees.
    Calgary, AB  T2P 1T1              For information about
    Toll-free: 1-866-313-1872         participation in the plan,
    Fax: (403) 233-2857               please contact the Transfer Agent
    www.valianttrust.com              and Registrar or visit
                                      www.cwbankgroup.com.

    Canadian Direct Insurance         Investor Relations
    Incorporated                      For further financial
    Suite 600, 750 Cambie Street      information contact:
    Vancouver, BC  V6B 0A2            Investor & Public Relations
    Telephone: (604) 699-3678         Canadian Western Bank
    Fax: (604) 699-3851               Telephone: (780) 441-3770
    www.canadiandirect.com            Toll-free: 1-800-836-1886
                                      Fax: (780) 969-8326
                                      E-mail: InvestorRelations@cwbank.com

    Adroit Investment Management Ltd. Online Investor Information
    Suite 1250, Canadian Western      Additional investor information
    Bank Place                        including supplemental
    10303 Jasper Avenue               financial information and
    Edmonton, AB  T5J 3N6             corporate presentations are
    Telephone: (780) 429-3500         available on CWB's website at
    Fax: (780) 429-9680               www.cwbankgroup.com.
    www.adroitinvestments.ca

    Stock Exchange Listings           Quarterly Conference Call and Webcast
    The Toronto Stock Exchange        CWB's quarterly conference
    Common Shares: CWB                call and live audio webcast will
    Series 3 Preferred Shares:        take place on June 2, 2011
    CWB.PR.A                          at 3:00 p.m. ET (1:00 p.m. MT).
    Common Share Purchase Warrants:   The webcast will be archived
    CWB.WT                            on the Bank's website at
                                      www.cwbankgroup.com for sixty days. A
                                      replay of the conference call will be
                                      available until June 16, 2011
                                      by dialing (416) 849-0833 or
                                      toll-free (800) 642-1687
                                      and entering passcode 65703491.

    >>

SOURCE Canadian Western Bank

For further information: Larry M. Pollock, President and Chief Executive Officer, Canadian Western Bank, Phone: (780) 423-8888; Kirby Hill, CFA, Director, Investor and Public Relations, Canadian Western Bank, Phone: (780) 441-3770, E-mail: kirby.hill@cwbank.com

Profil de l'entreprise

Canadian Western Bank

Renseignements sur cet organisme


FORFAITS PERSONNALISÉS

Jetez un coup d’œil sur nos forfaits personnalisés ou créez le vôtre selon vos besoins de communication particuliers.

Commencez dès aujourd'hui .

ADHÉSION À CNW

Remplissez un formulaire d'adhésion à CNW ou communiquez avec nous au 1-877-269-7890.

RENSEIGNEZ-VOUS SUR LES SERVICES DE CNW

Demandez plus d'informations sur les produits et services de CNW ou communiquez avec nous au 1‑877-269-7890.