CWB Reports Solid Third Quarter Financial Results Marking 81 Consecutive Profitable Quarters



    
    Strong loan growth of 3% in the quarter and 10% year-to-date

    Record total revenues despite the significant impact of ongoing margin
    compression

    Quarterly dividend of $0.11 per common share declared
    

    EDMONTON, Sept. 4 /CNW/ - Canadian Western Bank (CWB on TSX) today
announced solid third quarter results highlighted by record total revenues and
year-to-date double-digit loan growth. Quarterly net income of $26.3 million
and diluted earnings per share of $0.41 increased 10% and 11% respectively
over the same quarter last year. Results reflect continued strong loan growth
of 3% in the quarter and 15% over the past twelve months, partially offset by
a significantly lower net interest margin. Net interest margin continued to be
constrained by increased deposit costs related to ongoing market disruptions,
a lower prime lending rate and higher liquidity levels maintained in response
to events in financial markets. Year-to-date net income was up 16% over the
prior year to $77.5 million while diluted earnings per share grew 15% to
$1.20.

    
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    Third Quarter Highlights:
    (three months ended July 31, 2008 compared with three months ended
    July 31, 2007 unless otherwise noted)
    -------------------------------------------------------------------------
      -  Net income of $26.3 million, up 10%, marking the Bank's 81st
         consecutive profitable quarter.
      -  Diluted earnings per share of $0.41, up 11%.
      -  Loan growth of 3% in the quarter and 10% year-to-date continued the
         trend of double-digit loan growth for nineteen consecutive fiscal
         years.
      -  Record total revenues (teb(1)) of $76.4 million increased 8%,
         despite
         the significant impact of sustained pressure on net interest margin.
      -  Total loans surpassed $8 billion.
      -  Approved plans to proceed with three new full-service branches
         (Surrey, Kamloops and Saskatoon) in addition to other future branch
         locations previously confirmed (Leduc, Sherwood Park and Airdrie).

    (1) Taxable equivalent basis. See definition following Financial
        Highlights table.
    -------------------------------------------------------------------------
    

    On September 3, 2008, CWB's Board of Directors declared a cash dividend
of $0.11 per common share, payable on October 2, 2008 to shareholders of
record on September 18, 2008. This quarterly dividend is unchanged from the
previous quarter and is 22% higher than the quarterly dividend declared one
year ago.
    Both operating segments performed well in the third quarter. Banking and
trust earnings of $23.8 million were up 9% over the same period last year with
continued strong loan growth and fee income more than offsetting the impact of
a significantly lower net interest margin. Third quarter net income from
insurance operations of $2.5 million represented a 13% increase compared to
one-year ago. On a year-to-date basis, banking and trust earnings of $71.3
million were up 16% over the same time last year, while net income from
insurance operations was up 20% to $6.2 million.
    "Our solid third quarter and year-to-date results further confirm CWB's
strong market position and sound risk profile in what continued to be a very
challenging environment for the entire financial sector, both in Canada and
globally," said Larry Pollock, President and CEO. "While we are not immune to
ongoing turmoil in financial and credit markets, as evidenced by our
compressed net interest margin, we are still on track to post another
impressive year of high quality earnings and double-digit loan growth."
    "Overall economic conditions in our markets remain good, credit quality
is strong and we are still seeing a solid pipeline of new high quality lending
opportunities. With many of our competitors' still dealing with multiple
market challenges, we are looking to capitalize on new opportunities that may
result from these events. We also remain active in evaluating potential
acquisitions and stand ready to pursue them if they meet our parameters of
being both accretive and a good fit with our overall strategic objectives,"
added Pollock.


    
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    Financial Highlights
    -------------------------------------------------------------------------

                                 For the three months ended           Change
    (unaudited)           -----------------------------------------     from
    ($ thousands, except      July 31     April 30      July 31      July 31
     per share amounts)          2008         2008         2007         2007
    -------------------------------------------------------------------------
    Results of Operations
      Net interest
       income (teb
       - see below)       $    57,290  $    55,659  $    54,888            4%
      Less teb adjustment       1,442        1,352        1,423            1
    -------------------------------------------------------------------------
      Net interest income
       per financial
       statements              55,848       54,307       53,465            4
      Other income             19,085       18,095       15,777           21
      Total revenues (teb)     76,375       73,754       70,665            8
      Total revenues           74,933       72,402       69,242            8
      Net income               26,327       25,302       24,033           10
      Earnings per common
       share
        Basic                    0.42         0.40         0.39            8
        Diluted                  0.41         0.39         0.37           11
      Return on
       shareholders'
       equity(1)                 16.0%        16.1%        17.1%  (110) bp(2)
      Return on assets(3)        1.03         1.04         1.14          (11)
      Efficiency ratio(4)
       (teb)                     45.2         45.4         43.6          160
      Efficiency ratio           46.1         46.2         44.5          160
      Net interest margin
       (teb)(5)                  2.25         2.28         2.59          (34)
      Net interest margin        2.19         2.22         2.53          (34)
      Provision for
       credit losses as a
       percentage of
       average loans             0.15         0.15         0.15            -
    -------------------------------------------------------------------------
    Per Common Share
      Cash dividends      $      0.11  $      0.10  $      0.09           22%
      Book value                10.47        10.22         9.05           16
      Closing market value      25.00        24.83        27.87          (10)
      Common shares
       outstanding
       (thousands)             63,342       63,234       62,549            1
    -------------------------------------------------------------------------
    Balance Sheet and
     Off-Balance Sheet
     Summary
      Assets              $10,056,644  $10,038,214  $ 8,881,114           13%
      Loans                 8,168,748    7,942,636    7,090,632           15
      Deposits              8,686,336    8,679,024    7,656,542           13
      Subordinated
       debentures             410,000      390,000      390,000            5
      Shareholders'
       equity                 663,401      646,215      565,887           17
      Assets under
       administration       4,498,545    4,498,560    4,049,310           11
    -------------------------------------------------------------------------
    Capital Adequacy(6)
      Tangible common
       equity to risk-
       weighted assets(7)         8.0%         7.9%         7.6%       40 bp
      Tier 1 ratio                9.2          9.3          9.0           20
      Total ratio                14.0         14.0         13.6           40
    -------------------------------------------------------------------------


                          For the nine months ended      Change
    (unaudited)           -------------------------        from
    ($ thousands, except      July 31      July 31      July 31
     per share amounts)          2008         2007         2007
    ------------------------------------------------------------
    Results of Operations
      Net interest
       income (teb
       - see below)       $   169,995  $   154,664           10%
      Less teb adjustment       4,131        3,914            6
    ------------------------------------------------------------
      Net interest income
       per financial
       statements             165,864      150,750           10
      Other income             54,803       44,457           23
      Total revenues (teb)    224,798      199,121           13
      Total revenues          220,667      195,207           13
      Net income               77,534       66,710           16
      Earnings per common
       share
        Basic                    1.23         1.07           15
        Diluted                  1.20         1.04           15
      Return on
       shareholders'
       equity(1)                 16.3%        16.5%     (20) bp
      Return on assets(3)        1.05         1.13           (8)
      Efficiency ratio(4)
       (teb)                     44.4         44.8          (40)
      Efficiency ratio           45.2         45.7          (50)
      Net interest margin
       (teb)(5)                  2.29         2.63          (34)
      Net interest margin        2.24         2.56          (32)
      Provision for
       credit losses as a
       percentage of
       average loans             0.15         0.16           (1)
    ------------------------------------------------------------
    Per Common Share
      Cash dividends      $      0.31  $      0.25           24%
      Book value                10.47         9.05           16
      Closing market value      25.00        27.87          (10)
      Common shares
       outstanding
       (thousands)             63,342       62,549            1
    ------------------------------------------------------------
    Balance Sheet and
     Off-Balance Sheet
     Summary
      Assets
      Loans
      Deposits
      Subordinated
       debentures
      Shareholders'
       equity
      Assets under
       administration
    ------------------------------------------------------------
    Capital Adequacy(6)
      Tangible common
       equity to risk-
       weighted assets(7)
      Tier 1 ratio
      Total ratio
    ------------------------------------------------------------

    (1) Return on shareholders' equity is calculated as annualized net income
        divided by average shareholders' equity.
    (2) bp - basis point change.
    (3) Return on assets is calculated as annualized net income divided by
        average total assets.
    (4) Efficiency ratio is calculated as non-interest expenses divided by
        total revenues.
    (5) Net interest margin is calculated as annualized net interest income
        divided by average total assets.
    (6) Capital adequacy is calculated in accordance with guidelines issued
        by the Office of the Superintendent of Financial Institutions Canada
        (OSFI). As of November 1, 2007 (as described in Note 16 to the
        interim consolidated financial statements), OSFI adopted a new
        capital management framework called Basel II and capital is now
        managed and reported in accordance with those requirements. Prior
        year ratios have been calculated using the previous framework.
    (7) 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 financial institutions analyse 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.

    Non-GAAP Measures

    Taxable equivalent basis, return on shareholders' equity, return on
    assets, efficiency ratio, net interest margin 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.


    
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    Message to Shareholders
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    Canadian Western Bank (CWB or the Bank) is pleased to report another
quarter of solid financial performance in a difficult operating environment
for the financial sector as a whole. Highlights included a continued trend for
our 19th consecutive fiscal year of double-digit loan growth which pushed
total loans to more than $8 billion. Record total revenues (teb), despite a
significantly compressed net interest margin,  was an additional highlight in
a period that marked the Bank's 81st consecutive profitable quarter.
    Quarterly net income of $26.3 million, or $0.41 per diluted share,
increased 10% and 11% respectively over last year on 8% growth in total
revenues (teb). Compared to the previous quarter, net income and diluted
earnings per share were up 4% and 5% respectively reflecting two additional
revenue earning days in the third quarter, solid loan growth and strong fee
income, partially offset by higher non-interest expenses and continued
pressure on net interest margin. On a year-to-date basis, net income increased
16% over the same period last year to $77.5 million while diluted earnings per
share grew 15% to $1.20.
    Third quarter return on equity (ROE) of 16.0% was down 110 basis points
compared to the same quarter last year, while year-to-date ROE was down 20
basis points to 16.3%. Lower profitablity ratios are primarily attributed to a
constrained net interest margin, which continued to be impacted by the fallout
in global financial makets. CWB has no direct exposure to any troubled asset
backed commercial paper, collateralized debt obligations, U.S. subprime
mortgages or monoline insurers.

    Share Price Performance

    CWB shares ended the third quarter at $25.00, compared to $27.87 a year
earlier. Including reinvested dividends, the total return for shareholders
over the one-year holding period ended July 31, 2008 was negative 9%. This
compares to the total return for the S&P/TSX financials index of negative 10%
over the same one-year period.

    Dividends

    On September 3, 2008, CWB's Board of Directors declared a cash dividend
of $0.11 per common share, payable on October 2, 2008 to shareholders of
record on September 18, 2008. This quarterly dividend is unchanged from the
previous quarter and is 22% higher than the quarterly dividend declared one
year ago.

    Loan Growth

    Ongoing strong loan growth of 3% in the quarter, 10% year-to-date and 15%
over the past year substantiate CWB's ongoing strategy to increase market
presence, particularly in view of moderating economic growth in key markets.
Lending activity in British Columbia continued to show the strongest
performance in both the quarter and the year. Loan growth in Alberta slowed
compared to the record levels achieved in 2007, but is expected to remain
strong in most sectors. Saskatchewan posted good quarterly results and we are
optimistic about ongoing opportunities to expand the Bank's presence in this
province. We will maintain our focus on high quality underwriting and expect
strong loan growth will continue for the remainder of the year.
    Our alternative mortgage business, Optimum Mortgage (Optimum), showed
good results with total loans growing 8% in the quarter and 15% year-to-date
to reach $432 million. Optimum continues to provide excellent returns and we
remain comfortable with its overall risk profile. We recently confirmed plans
for a pilot expansion into the Ontario marketplace and we anticipate
underwriting residential mortgages in targeted regions before the end of
fiscal 2008.

    Credit Quality

    Overall credit quality remained strong and within expectations. Some
clients continued to be impacted by softness in certain sectors, particularly
those related to the forestry industry. The natural gas services industry has
improved compared to a year earlier, but is subject to fluctuations correlated
with resource prices and drilling activity. Moderated residential sales
activity in Western Canada has impacted the real estate lending sector to some
extent, but impaired loans in this area mainly reflect isolated circumstances
related to a few specific accounts. The quarterly provision for credit losses
of $3.0 million increased in line with the fiscal 2008 performance target of
15 basis points of average loans. Credit quality is expected to remain strong
and the Bank is well positioned to manage future credit events.

    Branch Deposit Growth

    Deposits raised through our branch network and Canadian Western Trust
Company increased 5% in the quarter and 16% in the past twelve months. The
demand and notice component within branch-raised deposits was down 1% in the
quarter, but up 22% over the last year. Further expansion of CWB's deposit
base remains a key strategic priority and we have made marked progress
increasing awareness of the Bank's financial products and services, partially
due to the success of our high-interest Summit Savings(R) account. In the
fourth quarter, we also plan to introduce an Internet-based bank named
Canadian Direct Financial(R). A high-interest savings account and term
deposits will be directly offered to potential customers who are not served by
our branch network, and/or those who prefer to utilize the Internet to meet
their banking needs.

    Net Interest Margin

    A constrained net interest margin mainly due to increased deposit costs
related to ongoing disruptions in financial markets, consecutive reductions in
the prime lending rate and higher liquidity levels continued to have a
significant impact on the Bank's total revenues and overall profitability.
Third quarter net interest margin (teb) was 2.25%, down three basis points
from the previous quarter and 34 basis points compared to one year ago. Total
deposit costs eased to some extent in the latter part of July, but overall
pressures on net interest margin are expected to continue until spreads return
to more normal levels and market pricing of loans better reflects risk
differentials. Reductions in the prime lending rate will generally have a
moderate negative influence on net interest margin because the Bank's loan
portfolio reprices more quickly than its deposit liabilities; the opposite
positive effect occurs on net interest margin when interest rates rise.

    Trust Services

    Trust services continued to perform well making valuable contributions to
both diversification and earnings growth. Valiant Trust Company made further
strides in the development of its recently opened share transfer services
office in Toronto and has continued to provide consistent results despite a
reduction in overall capital markets activity compared to last year. Canadian
Western Trust Company successfully completed the conversion of its improved
web services platform and many clients have provided positive feedback on its
enhanced service capabilities.

    Insurance

    Canadian Direct Insurance Incorporated (CDI) reported solid third quarter
performance with net income of $2.5 million. Customer utilization of CDI's
Internet-based technology platform continued to surpass expectations, as
online sales accounted for nearly half of all new auto policies sold in the
quarter. Offering electronic delivery of CDI's products and services is an
important part of our overall strategy and ongoing development of this
technological advantage will remain a key priority.

    Outlook

    CWB extended its history of solid financial performance amidst continued
disruptions in global financial markets that have caused challenges for the
entire financial sector. While a compressed net interest margin has
significantly affected our year-to-date results, particularly as it relates to
total revenue (teb) growth and profitability measures, solid earnings growth
was maintained across both business segments. We remained in close range of
our 2008 performance targets through July 31, 2008. However, the significant
impact on total revenue (teb) growth from sustained margin pressures, combined
with exceptional comparative results recorded in the fourth quarter of 2007
that included an income tax benefit of $2.9 million, make the achievement of
2008 total revenue (teb) and profitability growth targets doubtful.
Notwithstanding these increased challenges and moderated economic activity in
some areas, our overall outlook remains positive in respect to both credit
quality and economic fundamentals in Western Canada. We are well positioned to
increase market presence throughout all of our target markets and remain
confident that our proven strategies will continue to build sustainable value
for clients and shareholders.

    We look forward to reporting our fourth quarter and fiscal 2008 results
on December 4, 2008.

    Q3 Results Conference Call
    CWB's third quarter results conference call is scheduled for Thursday,
September 4, 2008 at 3:30 p.m. ET (1:30 p.m. MT). The Bank's executives will
comment on third quarter results and respond to questions from analysts and
pre-qualified investors.    The conference may be accessed on a listen-only
basis by dialing 416-644-3418 or toll-free 1-800-732-9307. The call will also
be webcast live on the Bank's website, www.cwbankgroup.com. The webcast will
be archived on the website for 60 days.  A replay of the conference call will
be available until September 18, 2008 by dialing 416-640-1917 (Toronto) or
1-877-289-8525 (toll-free) and entering passcode 21260804, followed by the
pound sign.

    About Canadian Western Bank
    Canadian Western Bank offers highly personalized service through 35
branch locations and is the largest publicly traded Schedule I chartered bank
headquartered in and regionally focused on Western Canada. The Bank, with
total balance sheet assets of more than $10.0 billion and assets under
administration of $4.5 billion, specializes in mid-market commercial lending
and offers a full range of retail services. Trust services to independent
financial advisors, corporations, income trusts and individuals are provided
through the Bank's wholly owned subsidiaries, Canadian Western Trust Company
and Valiant Trust Company. Canadian Direct Insurance Incorporated is a wholly
owned subsidiary providing personal auto and home insurance to customers in BC
and Alberta. The common shares of Canadian Western Bank are listed on the
Toronto Stock Exchange under the trading symbol 'CWB'. Refer to
www.cwbankgroup.com for additional information.


    
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    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 July 31, 2008, as well
as the audited consolidated financial statements and MD&A for the year ended
October 31, 2007, available on SEDAR at www.sedar.com and on the Bank's
website at www.cwbankgroup.com. Except as discussed below, the factors
discussed and referred to in the MD&A for fiscal 2007 remain substantially
unchanged.

    Overview

    CWB posted solid third quarter results on record total revenues (teb)
reflecting good performance from both business segments. Third quarter
earnings from banking and trust operations of $23.8 million increased 9% ($2.0
million) over last year driven by strong 15% loan growth and a 23% increase in
other income, partially offset by a significantly lower net interest margin.
Canadian Direct Insurance Incorporated earned $2.5 million representing 13%
growth over the same quarter last year. Consolidated third quarter net income
increased 10% to $26.3 million, representing $0.41 ($0.42 basic) per diluted
share.
    Consolidated net income increased 4% ($1.0 million) compared to last
quarter reflecting two additional revenue earning days in the third quarter,
ongoing loan growth and strong other income, partially offset by higher
non-interest expenses and a slightly lower net interest margin. Quarterly
other income was up 5% ($1.0 million) over the prior period with strong growth
in core business streams more than offsetting $1.2 million lower gains on
securities sales. Year-to-date net income and diluted earnings per share
increased 16% and 15% to reach $77.5 million and $1.20 respectively.
    Third quarter return on equity was 16.0%, compared to 17.1% last year.
Year-to-date return on equity was 16.3%, compared to 16.5% in 2007. Third
quarter return on assets was 1.03%, down from 1.14% a year earlier.
Year-to-date return on assets of 1.05% represented an eight basis point
decline compared to one year ago. Both profitability ratios have been
negatively impacted by constrained growth in total revenues due to a
significantly lower net interest margin, partially offset by strong growth in
both loans and other income.

    Total Revenues (teb)

    Total revenues (teb), comprised of net interest income and other income,
were a record $76.4 million representing an 8% ($5.7 million) increase over
the same quarter last year. Higher revenues were driven by strong loan growth
and 21% ($3.3 million) growth in other income, offset by a significantly lower
net interest margin. Total revenues (teb) increased 4% ($2.6 million) compared
to the previous quarter reflecting two additional days in the third quarter,
continued loan growth and a $1.0 million increase in other income, partially
offset by a slightly lower net interest margin. Year-to-date total revenues
increased 13% ($25.7 million) over 2007 reflecting strong loan growth and a
23% ($10.3 million) increase in other income, offset by a significantly lower
net interest margin.

    Net Interest Income (teb)

    Quarterly net interest income (teb) of $57.3 million increased 4% ($2.4
million) over the same period last year driven by strong loan growth, largely
offset by a 34 basis point decline in net interest margin (teb) to 2.25%. Net
interest margin was mainly affected by increased deposit costs related to
ongoing disruptions in financial markets, consecutive reductions in the prime
lending rate and the Bank's higher liquidity levels held in response to
elevated market uncertainties. Reductions in the prime interest rate
negatively impacts net interest margin because short-term deposits do not
reprice as quickly as prime-based loans.
    Net interest income increased 3% ($1.6 million) compared to the previous
quarter reflecting two additional days and 3% loan growth, partially offset by
a three basis point decline in net interest margin. The reduction in net
interest margin compared to the prior quarter was mainly attributed to the
same reasons noted above, partially offset by higher loan prepayment fees and
somewhat lower liquidity levels. Year-to-date net interest income of $170.0
million increased 10% over 2007 driven by strong loan growth and one
additional day this year due to the leap year, offset by a 34 basis point
decrease in net interest margin (teb) to 2.29%.
    Note 14 to the unaudited interim consolidated financial statements
provides a summary of the Bank's exposure to interest rate risk as at July 31,
2008. Interest rate risk or sensitivity is defined as the impact on net
interest income, both current and future, resulting from a change in market
interest rates. Based on the interest rate gap position at July 31, 2008, it
is estimated that a one-percentage point increase in all interest rates would
increase net interest income by approximately 0.7% over the following twelve
months. This compares to April 30, 2008, when a one-percentage point increase
in all interest rates would have increased net interest income by
approximately 2.3% over the following twelve months. The opposite effect
occurs when all interest rates decrease. The Bank's overall strategy remains
relatively neutral with respect to taking specific positions on interest rate
risk.

    Other Income

    Other income of $19.1 million was up 21% ($3.3 million) over the same
quarter last year reflecting solid growth across all areas, including a 25%
($1.6 million) increase in credit related fee income. Gains on securities
sales were $0.8 million, compared to nil last year, with the increase
resulting from transactions mainly related to favourable pricing observed on
certain short-term government debt investments. Third quarter net insurance
revenues increased 14% ($0.6 million) compared to a year earlier, while trust
services and retail services fee income were up 8% ($0.3 million) and 4% ($0.1
million) respectively.
    Other income was up 5% ($1.0 million) compared to the previous quarter
reflecting 20% ($1.3 million) higher credit related fee income, 14% ($0.6
million) growth in net insurance revenues and a 15% ($0.4 million) increase in
trust services fee income, partially offset by $1.2 million lower gains on the
sale of securities. Year-to-date other income of $54.8 million was 23% ($10.3
million) higher than the same period last year with the increase again
reflecting improvements across all areas. Credit related fee income increased
$4.3 million (25%) while combined gains on securities sales, foreign exchange
and other were up $3.4 million in the aggregate. Year-to-date net insurance
revenues increased 16% ($1.7 million) while trust services and retail services
fee income were up $0.7 million and $0.3 million respectively.

    Credit Quality

    Credit quality remained strong and within expectations due to a
combination of long-established disciplined credit underwriting and overall
solid economic fundamentals in Western Canada. Measured as a percentage of
average loans, the provision for credit losses of 15 basis points remained
unchanged from both the previous quarter and one year ago. The dollar
provision in the third quarter of $3.0 million represented a modest increase
from last quarter and was up from $2.6 million a year earlier with the
increase reflecting ongoing portfolio growth. Annual provisions are expected
to remain in line with the Bank's target of 15 basis points of average loans.
    Gross impaired loans at July 31, 2008 were $47.5 million, compared with
$43.0 million last quarter and $15.1 million a year earlier. As a percentage
of total loans, gross impaired loans remain low by historical measures and
mainly reflect slower economic activity in some sectors, including accounts
that continue to be impacted by softness in the forestry industry. While
impaired loans in the real estate sector partially reflect moderated
residential sales activity in Western Canada, the dollar majority represent a
few isolated accounts that are not considered to be the result of any systemic
industry issues. Gross impaired loans represented 58 basis points of total
loans at quarter end, compared to 54 basis points last quarter and 21 basis
points one year ago. At the end of fiscal 2007, the ten year average for gross
impaired loans measured against total loans was 86 basis points, with a high
of 169 basis points in 1999 and a low of 18 basis points in 2006. The average
net new specific provisions for credit losses over the same ten year period
noted above were 13 basis points of average loans (including fiscal 2006 where
recoveries exceeded losses). The dollar level of gross impaired loans is
expected to fluctuate within an acceptable range as loans become impaired and
are subsequently resolved. Overall credit quality is expected to remain
strong.
    The total allowance for credit losses (general and specific) represented
147% of gross impaired loans at July 31, 2008, compared to 156% last quarter
and 402% one year ago. The general allowance as a percentage of risk-weighted
loans was 81 basis points, compared to 79 basis points in the previous quarter
and 82 basis points a year earlier.

    Non-interest Expenses

    Non-interest expenses of $34.5 million increased 12% ($3.7 million) over
the same quarter last year and 3% ($1.1 million) over the prior quarter.
Year-to-date non-interest expenses were also up 12% ($10.6 million). Executing
CWB's strategic focus on people, processes, infrastructure and business
enhancement has prompted increased spending, as these initiatives are
necessary to provide a stronger growth platform and significant benefit in
future periods. Higher non-interest expenses compared to last year mainly
reflect salary and benefit costs related to increased staff complement and
annual salary increments, as well as premises and other expenses to facilitate
business growth. Compared to the prior quarter, increased non-interest
expenses primarily resulted from salary costs, including higher stock-based
compensation charges, as well as employee recruitment and other expenses.
    The third quarter efficiency ratio (teb), which measures non-interest
expenses as a percentage of total revenues (teb), was 45.2%, compared to 43.6%
last year and 45.4% in the previous quarter. A constrained net interest margin
combined with higher non-interest expenses were the main factors contributing
to the deterioration in this measure from the previous year. Compared to the
prior quarter, the efficiency ratio was positively impacted by continued
revenue growth, including the contribution of two additional days in the third
quarter, largely offset by higher non-interest expenses and a slightly lower
net interest margin. The year-to-date efficiency ratio (teb) of 44.4%
represented a 40 basis point improvement over the same period last year and
was 60 basis points better than the Bank's fiscal 2008 target of 45.0%.

    Income Taxes

    The income tax rate (teb) for the first nine months of 2008 was 33.3%,
down 150 basis points from one year ago, while the tax rate before the teb
adjustment was 30.8% or 140 basis points lower than last year. Lower tax rates
mainly reflect reductions in federal corporate income tax rates, partially
offset by $1.0 million of additional tax expense taken in the first quarter
due to the related write-down of future tax assets. Effective July 1, 2008,
the corporate provincial income tax rates in British Columbia (BC),
Saskatchewan and Manitoba each decreased 100 basis points to 11%, 12% and 13%
respectively. On April 1, 2008, CWB's capital tax rate in BC decreased to
0.67%, down from 1.0%, and will be eliminated completely by April 1, 2010. In
fiscal 2007, CWB paid capital taxes to BC totaling $1.7 million.

    Comprehensive Income

    Comprehensive income is composed of net income and other comprehensive
income (OCI), and totaled $22.4 million for the third quarter, compared to
$19.9 million in the same period last year. As previously noted, net income
increased 10% ($2.3 million) over one year ago. CWB's OCI includes unrealized
gains and losses on available-for-sale cash and securities and derivative
instruments designated as cash flow hedges, all net of tax. Third quarter OCI
included a loss of $3.9 million, compared to a loss of $4.1 million a year
earlier. Changes in OCI primarily reflect market value fluctuations related to
changes in interest rates and shifts in the interest rate curve, partially
offset by higher realized gains on sale of securities reclassified to other
income and higher amounts reclassified to net interest income related to
derivatives designated as cash flow hedges.

    Balance Sheet

    Total assets at July 31, 2008 of $10,057 million were up modestly
compared to the prior quarter, as quarterly loan growth was primarily funded
with existing liquidity initially built up in response to disruptions in
global financial markets which commenced in August 2007. Compared to one year
ago, total assets were up 13% ($1,176 million) reflecting strong loan growth.

    Cash and Securities

    Cash, securities and securities purchased under resale agreements totaled
$1,725 million at July 31, 2008, compared to $1,935 million last quarter and
$1,633 million one year ago. As previously noted, higher liquidity levels have
been maintained since August 2007 in response to disruptions and related
uncertainties in financial markets. Although this strategy has had a negative
impact on net interest margin, it reflects the Bank's conservative risk
tolerance. Third quarter liquidity was reduced somewhat compared to recent
prior periods, however, management will monitor this position with particular
attention until disruptions in financial markets subside.
    The unrealized loss recorded on the balance sheet at July 31, 2008 was
$5.1 million, compared to an unrealized gain of $0.2 million last quarter and
an unrealized loss of $13.3 million one year ago. The cash and securities
portfolio is mainly comprised of high quality debt instruments that are not
held for trading purposes and are typically held until maturity. Fluctuations
in fair value are generally attributed to changes in interest rates and shifts
in the interest rate curve. Realized gains on sale of securities were $0.8
million, compared to $2.0 million in the previous quarter. Realized gains on
sale of securities in the third quarter 2007 were negligible. The Bank has no
direct exposure to any troubled asset backed commercial paper, collateralized
debt obligations, U.S. subprime lending or monoline insurers.

    Loans

    Total loans grew 3% ($226 million) in the quarter, 10% ($763 million)
year-to-date and 15% ($1,078 million) in the past twelve months to reach
$8,169 million at July 31, 2008. Very strong lending activity in BC provided
the greatest dollar and percentage growth contributions in both the quarter
and on a year-to-date basis. Overall loans sourced in Alberta have slowed
compared to the very high level of activity observed a year earlier, but the
outlook remains strong in most sectors. Overall lending activity in
Saskatchewan showed good momentum compared to the prior quarter, while growth
in Manitoba was relatively flat. Measured by lending sector, the best
quarterly performance was in real estate lending, while the general commercial
and personal lending sectors also showed strong results. Year-to-date
performance in the equipment financing sector continued to be impacted by
challenges related to softness in the forestry and natural gas industries. The
outlook for natural gas and related services has improved, but is subject to
fluctuations correlated with resource prices and drilling activity. In view of
a generally positive economic outlook for Western Canada, strong demand for
loans is expected to continue across most sectors.
    The Bank's alternative mortgage business, Optimum Mortgage (Optimum),
showed good performance with total loans growing 8% in the quarter, 15%
year-to-date and 21% over the past twelve months to reach $432 million. Total
deal activity increased compared to the previous three quarters and the
overall outlook remains favourable. A pilot geographic expansion for Optimum
into the Ontario marketplace was recently confirmed and the underwriting of
residential mortgages in certain targeted regions is expected to commence
before the end of fiscal 2008. While moderated residential sales activity has
lengthened the required timeframe to resolve some delinquent loans, there are
still plenty of opportunities to produce strong returns in this business while
maintaining a solid risk profile. Optimum's loan book is entirely comprised of
conventional residential first mortgages carrying a weighted average
underwritten loan-to-value ratio at initiation of approximately 70%. The vast
majority of these mortgages carry a fixed interest rate with the principal
amortized over 25 years or less.

    Deposits

    Total branch deposits increased 5% in the quarter and 16% in the past
year. The demand and notice component within branch deposits was down 1%
compared to last quarter, but up 22% over the past twelve months. CWB's
high-interest Summit Savings(R) account launched in July 2007 continued to
promote increased brand awareness and was the primary source of growth in
demand and notice deposits over the past year. Reflecting the Bank's
commercial focus, a significant portion of the year-over-year growth in total
branch deposits also includes larger relationship-based commercial and
wholesale balances that can be subject to greater fluctuation. Disruptions in
financial markets and related competitive influences have led to significantly
increased costs for both branch-generated deposits and those raised through
the deposit broker network. While improved conditions in financial and credit
markets should help stabilize and/or lower deposit costs over time, it is
difficult to predict when this will occur in view of ongoing market turmoil.
    Total deposits at July 31, 2008 were $8,686 million, unchanged from the
previous quarter and up 13% ($1,030 million) over the past year. Total branch
deposits measured as a percentage of total deposits were 68% at quarter end,
up from 64% in the previous quarter and 67% one year ago. Compared to prior
periods, the increase in branch-raised deposits as a percentage of total
deposits reflects strong growth in internal funding sources combined with
reduced liquidity sourced from the deposit broker network. Demand and notice
deposits measured as a percentage of total deposits was unchanged from the
previous quarter at 29%, up from 27% the same time last year.

    Other Assets and Other Liabilities

    Other assets at July 31, 2008 totaled $163 million, compared to $161
million last quarter and $157 million one year ago. Other liabilities at
quarter end were $297 million, compared to $323 million the previous quarter
and $269 million last year.

    Off-Balance Sheet

    Off-balance sheet items include trust assets under administration, which
totaled $4,499 million at July 31, 2008, unchanged from the prior quarter and
up from $4,049 million one year ago. Other off-balance sheet items are
composed of standard industry credit instruments (guarantees, standby letters
of credit and commitments to extend credit), and the non-consolidated variable
interest entity. For additional information regarding other off-balance sheet
items refer to Notes 13 and 19 to the audited consolidated financial
statements on pages 71 and 74 respectively in the Bank's 2007 Annual Report.

    Capital Management

    Effective November 1, 2007, the Office of the Superintendent of Financial
Institutions (OSFI) required Canadian financial institutions to manage and
report regulatory capital in accordance with a new capital management
framework, commonly called Basel II. Basel II introduced several significant
changes to the risk-weighting of assets and the calculation of regulatory
capital. The Bank has implemented the standardized approach to calculating
risk-weighted assets for both credit and operational risk. Changes for CWB
under Basel II include a reclassification into lower risk-weight categories
for residential mortgages and loans to small-to-medium sized enterprises, as
well as a new capital requirement related to operational risk.
    Basel II had a modest positive impact on the overall required level of
regulatory capital for CWB. New procedures and system enhancements were
developed to conform to the new framework including the formalization of
internal capital adequacy assessment processes.
    Under Basel II at July 31, 2008, CWB's total capital adequacy ratio,
which measures regulatory capital as a percentage of risk-weighted assets, was
unchanged from the previous quarter at 14.0%. The total capital adequacy ratio
at July 2007 under the previous OSFI framework was 13.6%. The Tier 1 ratio at
the end of the third quarter under Basel II was 9.2%, compared to 9.3% last
quarter. The Tier 1 ratio at the same time last year under the previous
framework was 9.0%. The lower Tier 1 ratio compared to the previous quarter
reflects robust asset growth. Compared to the same quarter last year, CWB's
regulatory capital increased with the retention of earnings, the placement of
$50 million of subordinated debentures in June 2008 and a higher general
allowance for credit losses, partially offset by the redemption of $30 million
of subordinated debentures in July 2008. The improved Tier 1 capital ratio
compared to July 31, 2007 mainly reflects a combination of increased capital
from earnings and a modest positive impact from the adoption of Basel II.
    $50 million of "Series C" subordinated debentures were issued in the
third quarter under a short-form base shelf prospectus filed with the
securities commission or equivalent regulatory authority in each of the
provinces and territories of Canada. The debentures have a fixed interest rate
of 5.95% until June 27, 2013, and a rate thereafter fixed quarterly at the
90-day Bankers' Acceptance rate plus 302 basis points until maturity on June
27, 2018. On July 8, 2008, an issue of previously outstanding subordinated
debentures in the amount of $30 million was redeemed by the Bank at face
value. The placement of the Series C debentures was consistent with
management's objective to maintain a strong and efficient capital structure to
support continued high quality asset growth, while providing flexibility in
considering accretive growth opportunities and future dividend increases.
    Further information relating to the Bank's capital position is provided
in Note 16 to the quarterly financial statements as well as the audited
consolidated financial statements and MD&A for the year ended October 31,
2007.
    Book value per common share at July 31, 2008 was $10.47 compared to
$10.22 last quarter and $9.05 one year ago.
    Common shareholders received a quarterly cash dividend of $0.11 per
common share on July 3, 2008. On September 3, 2008, the Board of Directors
declared a quarterly cash dividend of $0.11 per common share payable on
October 2, 2008 to shareholders of record on September 18, 2008. This
quarterly dividend represents a 22% increase over the quarterly dividend
declared one year ago.

    Accounting Policy Changes

    Significant accounting policies are detailed in the notes to the Bank's
October 31, 2007 audited consolidated financial statements. Effective November
1, 2007, the Bank adopted new accounting standards issued by the Canadian
Institute of Chartered Accountants (CICA): Financial Instruments - Disclosure
and Presentation and Capital Disclosures. As a result of adopting these
standards, new or enhanced disclosure has been provided. Refer to Note 2 to
the unaudited interim consolidated financial statements for further details.

    Controls and Procedures

    There were no changes in the Bank's internal controls over financial
reporting that occurred during the quarter ended July 31, 2008 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, consistent with prior
quarters.

    Updated Share Information

    As at August 31, 2008, there were 63,418,574 common shares outstanding.
Also outstanding were employee stock options, which are or will be exercisable
for up to 5,543,972 common shares for maximum proceeds of $109.2 million.

    
    Summary of Quarterly Financial Information

                                                             2008
                                                -----------------------------
    ($ thousands)                                   Q3        Q2        Q1
    -------------------------------------------------------------------------
    Total revenues (teb)                        $ 76,375  $ 73,754  $ 74,669
    Total revenues                                74,933    72,402    73,332
    Net income                                    26,327    25,302    25,905
    Earnings per common
     share
      Basic                                         0.42      0.40      0.41
      Diluted                                       0.41      0.39      0.40
    Total assets
     ($ millions)                                 10,057    10,038     9,865
    -------------------------------------------------------------------------


                                              2007                     2006
                            --------------------------------------- ---------
    ($ thousands)               Q4        Q3        Q2        Q1        Q4
    -------------------------------------------------------------------------
    Total revenues (teb)    $ 74,359  $ 70,665  $ 66,804  $ 61,652  $ 59,565
    Total revenues            72,863    69,242    65,477    60,488    58,371
    Net income                29,572    24,033    22,219    20,458    21,209
    Earnings per common
     share
      Basic                     0.47      0.39      0.36      0.33      0.34
      Diluted                   0.46      0.37      0.35      0.32      0.33
    Total assets
     ($ millions)              9,525     8,881     8,022     7,565     7,268
    -------------------------------------------------------------------------
    

    The financial results for each of the last eight quarters are summarized
above. In general, CWB's performance reflects a consistent growth trend
although the second quarter contains three fewer revenue-earning days, or two
fewer days in a leap year such as 2008.
    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. Net income in the first quarter of 2008 included $1.0
million ($0.01 per diluted share) of tax expense resulting from the write-down
of future tax assets to reflect lower future federal corporate income tax
rates. Net income in the fourth quarters of 2007 and 2006 included the
recognition of previously unrecorded tax benefits related to certain prior
period transactions of $2.9 million ($0.04 per diluted share) and $2.0 million
($0.03 per diluted share) respectively.
    For details on variations between the prior quarters see the summary of
quarterly results section of the Bank's MD&A for the year ended October 31,
2007 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. The
2007 Annual Report and audited consolidated financial statements for the year
ended October 31, 2007 are available on both SEDAR and the Bank's website.

    Results by Business Segment

    CWB operates in two business segments: 1) banking and trust, and 2)
insurance. Segmented information is also provided in Note 15 of the unaudited
interim consolidated financial statements.

    Banking and Trust

    Operations of the banking and trust segment include commercial and retail
banking services, as well as personal and corporate trust services provided
through CWB's wholly owned subsidiaries, Canadian Western Trust Company (CWT)
and Valiant Trust Company (Valiant).
    Net income of $23.8 million was up 9% ($2.0 million) over the same
quarter last year benefiting from 15% loan growth and a 23% ($2.7 million)
increase in other income, significantly offset by a 35 basis point decline in
net interest margin (teb) to 2.23%. Third quarter credit related fee income
grew 25% ($1.6 million) over 2007 while gains on securities sales, foreign
exchange and other were up $0.8 million. Trust services revenues were $0.4
million higher than last year while retail services fee income was up $0.1
million. The significant reduction in net interest margin (teb) compared to a
year earlier resulted from a combination of increased deposit costs related to
financial market disruptions, decreases in the prime lending rate and higher
liquidity levels. The quarterly efficiency ratio (teb), which measures
non-interest expense as a percentage of total revenues (teb), was 45.7%,
compared to 44.0% one year ago. The deterioration in the efficiency ratio
(teb) reflects constrained growth in net interest income attributable to the
significantly lower net interest margin (teb) and a 12% increase in
non-interest expenses mainly resulting from continued business growth and
investment in future development initiatives, partially offset by continued
loan growth and very strong other income. Total branch-raised deposits grew
16% over the past year while the demand and notice component of branch-raised
deposits was up 22%. A considerable portion of growth in demand and notice
deposits over the past year was due to the ongoing success of CWB's
high-interest savings account branded Summit Savings(R).
    Quarterly earnings increased 3% ($0.8 million) over the previous period
with strong fee-based income, two additional days and continued loan growth
more than offsetting the impact of $1.2 million lower gains on securities
sales, a slightly reduced net interest margin (teb) and higher non-interest
expenses. Increased non-interest expenses primarily resulted from salary
costs, including higher stock-based compensation charges, as well as employee
recruitment and other expenses.
    Year-to-date net income of $71.3 million increased 16% ($9.8 million)
over the same period in 2007 reflecting strong loan growth and a 26% ($8.7
million) increase in other income, partially offset by a 35 basis point
decline in net interest margin (teb). Other income benefited from improved
performance across all areas including a 25% ($4.3 million) increase in credit
related fee income and gains on securities sales, foreign exchange and other,
which were up $3.4 million in the aggregate. On a year-to-date basis, growth
in total revenues continued to exceed higher non-interest expenses leading to
a 30 basis point improvement in the efficiency ratio (teb) to 44.5%.

    
                                 For the three months ended           Change
                          -----------------------------------------     from
                              July 31     April 30      July 31      July 31
    ($ thousands)                2008         2008         2007         2007
    -------------------------------------------------------------------------
    Net interest income
     (teb)                $    55,877  $    54,325  $    53,533            4%
    Other income               14,415       13,948       11,685           23
    -------------------------------------------------------------------------
    Total revenues (teb)       70,292       68,273       65,218            8
    Provision for credit
     losses                     3,038        2,962        2,550           19
    Non-interest expenses      32,124       31,207       28,688           12
    Provision for income
     taxes (teb)               11,306       11,031       12,164           (7)
    -------------------------------------------------------------------------
    Net income            $    23,824  $    23,073  $    21,816            9%
    -------------------------------------------------------------------------
    Efficiency ratio (teb)       45.7%        45.7%        44.0%      170 bp
    Efficiency ratio             46.6         46.6         44.9          170
    Net interest margin
     (teb)                       2.23         2.26         2.58          (35)
    Net interest margin          2.18         2.21         2.52          (34)
    Average loans
     (millions)(1)        $     7,981  $     7,798  $     6,774           18%
    Average assets
     (millions)                 9,927        9,730        8,227           21
    -------------------------------------------------------------------------


                          For the nine months ended      Change
                          -------------------------        from
                              July 31      July 31      July 31
    ($ thousands)                2008         2007         2007
    ------------------------------------------------------------
    Net interest income
     (teb)                $   165,844  $   151,204           10%
    Other income               42,758       34,054           26
    ------------------------------------------------------------
    Total revenues (teb)      208,602      185,258           13
    Provision for credit
     losses                     8,813        7,650           15
    Non-interest expenses      92,835       82,995           12
    Provision for income
     taxes (teb)               35,617       33,053            8
    ------------------------------------------------------------
    Net income            $    71,337  $    61,560           16%
    ------------------------------------------------------------
    Efficiency ratio (teb)       44.5%        44.8%     (30) bp
    Efficiency ratio             45.3         45.7          (40)
    Net interest margin
     (teb)                       2.28         2.63          (35)
    Net interest margin          2.23         2.56          (33)
    Average loans
     (millions)(1)        $     7,775  $     6,361           22%
    Average assets
     (millions)                 9,695        7,700           26
    ------------------------------------------------------------

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

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

    Insurance

    The insurance segment is comprised of the operations of CWB's wholly
owned subsidiary, Canadian Direct Insurance Incorporated (Canadian Direct or
CDI), which provides auto and home insurance to individuals in BC and Alberta.
    Canadian Direct's third quarter net income of $2.5 million represented a
13% ($0.3 million) increase over last year mainly resulting from improved
claims experience. Absent the impact of the Alberta auto risk sharing pools
(the Pools), third quarter net earned premiums were up 3% over the prior year.
Profitability improved in all lines of business except BC Home and policy
growth remained solid in both Alberta lines of business. The expense ratio of
29% represented a 100 basis point increase over the same quarter last year
mainly reflecting the impact of lower net earned premium growth. The Insurance
Corporation of British Columbia implemented a reduction of 3% on its optional
insurance product effective July 1, 2008. CDI responded to this challenge by
offering further discounts on its BC auto product line, particularly for
Internet purchases.
    Net income was up $0.3 million compared to the previous quarter mainly
reflecting lower claims experience, evidenced by a 200 basis point improvement
in the loss ratio, partially offset by a 100 basis point increase in the
expense ratio. Year-to-date net income of $6.2 million represented a 20% ($1.0
million) increase over the same period last year due to continued business
growth, improved loss experience and higher net interest income (teb),
partially offset by a $0.6 million lower pre-tax contribution from the Pools.
    On July 31, 2008, the Alberta Insurance Rate Board approved a rate
increase for basic coverage on private passenger vehicles under the Auto
Insurance Premium Regulation. The order will permit insurers to increase rates
on mandatory insurance on new and renewal business of up to 5% effective
November 1, 2008.

    
                                 For the three months ended           Change
                          -----------------------------------------     from
                              July 31     April 30      July 31      July 31
    ($ thousands)                2008         2008         2007         2007
    -------------------------------------------------------------------------
    Net interest income
     (teb)                $     1,413  $     1,334  $     1,355            4%
    -------------------------------------------------------------------------
    Other income (net)
      Net earned premiums      25,030       23,737       24,988            -
      Commissions and
       processing fees            734          738          733            -
      Net claims and
       adjustment expenses    (15,612)     (15,135)     (16,097)          (3)
      Policy acquisition
       costs                   (5,466)      (5,212)      (5,531)          (1)
    -------------------------------------------------------------------------
    Insurance revenue
     (net)                      4,686        4,128        4,093           14
    Losses (gains) on sale
     of securities                (16)          19           (1)          nm
    -------------------------------------------------------------------------
    Total revenues (net)
     (teb)                      6,083        5,481        5,447           12
    Non-interest expenses       2,406        2,246        2,139           12
    Provision for income
     taxes (teb)                1,174        1,006        1,091            8
    -------------------------------------------------------------------------
    Net income            $     2,503  $     2,229  $     2,217           13%
    -------------------------------------------------------------------------
    Policies outstanding
     (No.)                    167,150      166,093      163,875            2
    Gross written
     premiums             $    30,020  $    26,642  $    29,992            -
    Claims loss ratio(1)           62%          64%          64%    (200) bp
    Expense ratio(2)               29           28           28          100
    Combined ratio(3)              91           92           92         (100)
    Alberta auto risk
     sharing pools impact
     on net income before
     tax                  $       (30) $        (3) $      (101)        (70)%
    Average total assets
     (millions)                   185          180          166           11
    -------------------------------------------------------------------------


                          For the nine months ended      Change
                          -------------------------        from
                              July 31      July 31      July 31
    ($ thousands)                2008         2007         2007
    ------------------------------------------------------------
    Net interest income
     (teb)                $     4,151  $     3,460           20%
    ------------------------------------------------------------
    Other income (net)
      Net earned premiums      73,066       70,742            3
      Commissions and
       processing fees          2,134        2,008            6
      Net claims and
       adjustment expenses    (47,816)     (47,495)           1
      Policy acquisition
       costs                  (15,361)     (14,911)           3
    ------------------------------------------------------------
    Insurance revenue
     (net)                     12,023       10,344           16
    Losses (gains) on sale
     of securities                 22           59          (63)
    ------------------------------------------------------------
    Total revenues (net)
     (teb)                     16,196       13,863           17
    Non-interest expenses       6,972        6,177           13
    Provision for income
     taxes (teb)                3,027        2,536           19
    ------------------------------------------------------------
    Net income            $     6,197  $     5,150           20%
    ------------------------------------------------------------
    Policies outstanding
     (No.)                    167,150      163,875            2
    Gross written
     premiums             $    78,278  $    77,743            1
    Claims loss ratio(1)           65%          67%    (200) bp
    Expense ratio(2)               28           27          100
    Combined ratio(3)              93           94         (100)
    Alberta auto risk
     sharing pools impact
     on net income before
     tax                  $        87  $       721         (88)%
    Average total assets
     (millions)                   181          161           12
    ------------------------------------------------------------

    bp  - basis point change.
    teb - taxable equivalent basis, see definition following Financial
          Highlights table.
    nm -  not meaningful.

    (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.


    Fiscal 2008 Targets & Outlook

    The performance targets established for the 2008 fiscal year are presented
in the table below together with CWB's actual performance.

                                                     ------------------------
                                                       2008       2008 YTD
                                                      Target   Performance(1)
    -------------------------------------------------------------------------
    Net income growth                                     15%             16%
    -------------------------------------------------------------------------
    Total revenue (teb) growth                            17%             13%
    -------------------------------------------------------------------------
    Loan growth                                           15%             15%
    -------------------------------------------------------------------------
    Provision for credit losses as a percentage
     of average loans                                   0.15%           0.15%
    -------------------------------------------------------------------------
    Efficiency ratio (teb)                                45%           44.4%
    -------------------------------------------------------------------------
    Return on equity                                      17%           16.3%
    -------------------------------------------------------------------------
    Return on assets                                    1.10%           1.05%
    -------------------------------------------------------------------------

    (1) 2008 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.
    

    Management's assumptions in setting performance targets for fiscal 2008
included: economic growth in Western Canada that would outperform the rest of
the country, but moderate compared to the previous two years; relatively flat
interest rates and a stable core inflation environment; and a lower net
interest margin (associated with increased deposit costs and the Bank's higher
liquidity levels maintained in response to disruptions in financial markets),
largely offset by higher credit spreads and a corresponding increase in loan
yields once financial markets normalized. In the first quarter expectations
were updated to reflect a declining interest rate environment in Canada. Over
the course of the second and third quarters, it became clear that persistent
liquidity and pricing pressures in financial markets were having a more
significant and long-term impact on net interest margin than initially
anticipated.
    CWB is within close range of most performance targets through the first
nine months of 2008. However, the significant impact on total revenue (teb)
growth from ongoing margin compression combined with an exceptionally strong
fourth quarter of 2007 that included an income tax benefit of $2.9 million,
make it likely the Bank will fall short of several 2008 targets, the most
notable being net income and total revenue (teb) growth. Although net interest
margin is expected to return to more normal historic levels as disruptions in
financial markets subside, a specific recovery timeframe cannot yet be
reasonably estimated in view of ongoing market turmoil and associated spin-off
effects.
    The benefits of CWB's strategies for sustained, responsible growth
remained clearly evident this quarter. While the Bank has been dealing with
compressed net interest margins, solid third quarter and year-to-date results
substantiate CWB's strong market position and risk profile. Economic
fundamentals in Western Canada are expected to remain sound despite the marked
slowdown in the U.S and Eastern Canada. Management will monitor the potential
impacts of new economic developments closely. Notwithstanding increased
challenges in some sectors, there is still a good pipeline of new high quality
lending opportunities. CWB will maintain its focus on secured loans and will
not compromise asset quality to increase volume. Credit quality is expected to
remain strong and the Bank is well positioned to manage future credit events.
    There are ample opportunities to further increase market presence and CWB
recently confirmed plans for three new full-service branches to complement
existing infrastructure initiatives. These include future additional branches
in Surrey, BC, and Saskatoon, Saskatchewan, as well a full-service branch to
replace the existing equipment lending office in Kamloops, BC. A full-service
branch in Leduc, Alberta (AB) is scheduled to open in the fourth quarter of
2008. Other future branch locations previously confirmed include Sherwood
Park, AB and Airdrie, AB. Further development of trust, insurance and other
complementary businesses also remains a key strategy and supports objectives
to increase CWB's proportion of non-interest income to total revenues over
time. If the right strategic opportunity arises, the Bank will also look to
support its diversification objectives via acquisition.
    This management's discussion and analysis is dated September 4, 2008.

    Taxable Equivalent Basis (teb)

    Most financial institutions analyse 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.

    Non-GAAP Measures

    Taxable equivalent basis, return on 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;
    -   return on shareholders' equity - net income divided by average
        shareholder's equity;
    -   return on assets - net income 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). As of
        November 1, 2007 (as described in Note 16 to the interim consolidated
        financial statements), OSFI adopted a new capital management
        framework called Basel II and capital is now managed and reported in
        accordance with those requirements. Prior year ratios have been
        calculated using the previous framework;
    -   Tier 1 and total capital adequacy ratios - in accordance with
        guidelines issued by OSFI. As of November 1, 2007 (as described in
        Note 16 to the interim consolidated financial statements), OSFI
        changed their methodology and capital is now managed and reported in
        accordance with the requirements of Basel II. Prior year ratios have
        not been restated.
    -   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, fluctuations in interest rates and currency values, changes in
monetary policy, changes in economic and political conditions, legislative and
regulatory developments, the level of competition in the Bank's markets, the
occurrence of weather related and other natural catastrophes, 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. 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. The Bank does not undertake,
unless required by securities law, to update any forward-looking statement,
whether written or verbal, that may be made from time to time by it or on its
behalf.

    
    -------------------------------------------------------------------------
    Consolidated Statement of Income
    -------------------------------------------------------------------------

                                 For the three months ended           Change
    (unaudited)           -----------------------------------------     from
    ($ thousands, except      July 31     April 30      July 31      July 31
     per share amounts           2008         2008         2007         2007
    -------------------------------------------------------------------------
    Interest Income
      Loans               $   120,455  $   121,593  $   113,748            6%
      Securities               13,058       13,862       11,712           11
      Deposits with
       regulated financial
       institutions             4,490        4,543        3,618           24
    -------------------------------------------------------------------------
                              138,003      139,998      129,078            7
    -------------------------------------------------------------------------
    Interest Expense
      Deposits                 76,506       80,325       70,124            9
      Subordinated
       debentures               5,649        5,366        5,489            3
    -------------------------------------------------------------------------
                               82,155       85,691       75,613            9
    -------------------------------------------------------------------------
    Net Interest Income        55,848       54,307       53,465            4
    Provision for Credit
     Losses                     3,038        2,962        2,550           19
    -------------------------------------------------------------------------
    Net Interest Income
     after Provision for
     Credit Losses             52,810       51,345       50,915            4
    -------------------------------------------------------------------------
    Other Income
      Credit related            7,876        6,587        6,277           25
      Insurance, net
       (Note 3)                 4,686        4,128        4,093           14
      Trust services            3,385        2,952        3,132            8
      Retail services           1,906        1,861        1,826            4
      Gains on sale of
       securities                 765        1,998           10           nm
      Foreign exchange gains      467          435          371           26
      Other                         -          134           68           nm
    -------------------------------------------------------------------------
                               19,085       18,095       15,777           21
    -------------------------------------------------------------------------
    Net Interest and
     Other Income              71,895       69,440       66,692            8
    -------------------------------------------------------------------------
    Non-interest Expenses
      Salaries and employee
       benefits                22,508       21,674       19,466           16
      Premises and equipment    5,454        5,503        5,167            6
      Other expenses            6,021        5,847        5,628            7
      Provincial capital
       taxes                      547          429          566           (3)
    -------------------------------------------------------------------------
                               34,530       33,453       30,827           12
    -------------------------------------------------------------------------
    Net Income Before
     Provision for Income
     Taxes                     37,365       35,987       35,865            4
    Provision for
     Income Taxes              11,038       10,685       11,832           (7)
    -------------------------------------------------------------------------
    Net Income            $    26,327  $    25,302  $    24,033           10%
    -------------------------------------------------------------------------

    Weighted average
     common shares
     outstanding           63,279,303   63,183,486   62,413,781            1%

    Earnings per
     Common Share
      Basic               $      0.42  $      0.40  $      0.39            8%
      Diluted                    0.41         0.39         0.37           11
    -------------------------------------------------------------------------


                          For the nine months ended      Change
    (unaudited)           -------------------------        from
    ($ thousands, except      July 31      July 31      July 31
     per share amounts           2008         2007         2007
    ------------------------------------------------------------
    Interest Income
      Loans               $   368,799  $   315,823           17%
      Securities               42,111       31,894           32
      Deposits with
       regulated financial
       institutions            13,990        9,672           45
    ------------------------------------------------------------
                              424,900      357,389           19
    ------------------------------------------------------------
    Interest Expense
      Deposits                242,538      194,284           25
      Subordinated
       debentures              16,498       12,355           34
    ------------------------------------------------------------
                              259,036      206,639           25
    ------------------------------------------------------------
    Net Interest Income       165,864      150,750           10
    Provision for Credit
     Losses                     8,813        7,650           15
    ------------------------------------------------------------
    Net Interest Income
     after Provision for
     Credit Losses            157,051      143,100           10
    ------------------------------------------------------------
    Other Income
      Credit related           21,772       17,477           25
      Insurance, net
       (Note 3)                12,023       10,344           16
      Trust services            9,901        9,210            8
      Retail services           5,726        5,453            5
      Gains on sale of
       securities               3,777          431           nm
      Foreign exchange gains    1,286        1,334           (4)
      Other                       318          208           53
    ------------------------------------------------------------
                               54,803       44,457           23
    ------------------------------------------------------------
    Net Interest and
     Other Income             211,854      187,557           13
    ------------------------------------------------------------
    Non-interest Expenses
      Salaries and employee
       benefits                64,799       56,511           15
      Premises and equipment   16,339       14,852           10
      Other expenses           17,124       16,013            7
      Provincial capital
       taxes                    1,545        1,796          (14)
    ------------------------------------------------------------
                               99,807       89,172           12
    ------------------------------------------------------------
    Net Income Before
     Provision for Income
     Taxes                    112,047       98,385           14
    Provision for
     Income Taxes              34,513       31,675            9
    ------------------------------------------------------------
    Net Income            $    77,534  $    66,710           16%
    ------------------------------------------------------------

    Weighted average
     common shares
     outstanding           63,145,663   62,240,603            1%

    Earnings per
     Common Share
      Basic               $      1.23  $      1.07           15%
      Diluted                    1.20         1.04           15
    ------------------------------------------------------------

    nm - not meaningful.

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



    -------------------------------------------------------------------------
    Consolidated Balance Sheet
    -------------------------------------------------------------------------
                                                                      Change
                       As at        As at        As at        As at     from
    (unaudited)      July 31     April 30   October 31      July 31  July 31
    ($ thousands)       2008         2008         2007         2007     2007
    -------------------------------------------------------------------------
    Assets
    Cash Resources
      Cash and
       non-
       interest
       bearing
       deposits
       with
       financial
       institu-
       tions     $    23,903  $    31,039  $     6,446  $    10,760      122%
    Interest
     bearing
     deposits with
     regulated
     financial
     institutions
     (Note 4)        409,882      476,585      405,122      312,513       31
      Cheques and
       other items
       in transit      2,172        6,065        1,122          729      198
    -------------------------------------------------------------------------
                     435,957      513,689      412,690      324,002       35
    -------------------------------------------------------------------------
    Securities
     (Note 4)
      Issued or
       guaranteed
       by Canada     313,986      331,272      630,396      414,433      (24)
      Issued or
       guaranteed
       by a
       province or
       municipality  473,414      443,775      251,418      285,559       66
      Other
       securities    492,706      490,945      459,812      553,021      (11)
    -------------------------------------------------------------------------
                   1,280,106    1,265,992    1,341,626    1,253,013        2
    -------------------------------------------------------------------------
    Securities
     Purchased
     Under Resale
     Agreements        9,001      155,148      206,925       56,425      (84)
    -------------------------------------------------------------------------
    Loans (Notes 5
     and 7)
      Residential
       mortgages   1,974,285    1,959,048    1,780,442    1,654,906       19
      Other loans  6,264,472    6,050,679    5,688,160    5,496,505       14
    -------------------------------------------------------------------------
                   8,238,757    8,009,727    7,468,602    7,151,411       15
      Allowance
       for credit
       losses
       (Note 6)      (70,009)     (67,091)     (63,022)     (60,779)      15
    -------------------------------------------------------------------------
                   8,168,748    7,942,636    7,405,580    7,090,632       15
    -------------------------------------------------------------------------
    Other
      Land,
       buildings
       and
       equipment      26,258       25,795       25,736       24,443        7
      Goodwill         6,933        6,933        6,933        6,933        -
      Other
       intangible
       assets          2,274        2,410        2,681        2,817      (19)
      Insurance
       related        53,514       52,656       51,744       55,027       (3)
      Derivative
       related
       (Note 8)        3,529        3,966        1,496          843      319
      Other assets    70,324       68,989       69,629       66,979        5
    -------------------------------------------------------------------------
                     162,832      160,749      158,219      157,042        4
    -------------------------------------------------------------------------
    Total
     Assets      $10,056,644  $10,038,214  $ 9,525,040  $ 8,881,114       13%
    -------------------------------------------------------------------------

    Liabilities
     and
     Shareholders'
     Equity
    Deposits
      Payable on
       demand    $   366,725  $   373,692  $   376,488  $   398,885      (8)%
      Payable
       after
       notice      2,096,550    2,123,327    1,843,799    1,628,043       29
      Payable on
       a fixed
       date        6,118,061    6,077,005    5,931,631    5,524,614       11
      Deposit from
       Canadian
       Western
       Bank
       Capital
       Trust         105,000      105,000      105,000      105,000        -
    -------------------------------------------------------------------------
                   8,686,336    8,679,024    8,256,918    7,656,542       13
    -------------------------------------------------------------------------
    Other
      Cheques and
       other items
       in transit     27,045       34,550       22,177       33,379      (19)
      Insurance
       related       131,504      127,337      124,480      124,095        6
      Derivative
       related
       (Note 8)          285          846        1,307        2,109      (86)
      Securities
       purchased
       under
       reverse
       resale
       agreements          -       19,896            -            -        -
      Other
       liabilities   138,073      140,346      134,665      109,102       27
    -------------------------------------------------------------------------
                     296,907      322,975      282,629      268,685       11
    -------------------------------------------------------------------------
    Subordinated
     Debentures
      Conventional
       (Note 9)      410,000      390,000      390,000      390,000        5
    -------------------------------------------------------------------------
    Shareholders'
     Equity
      Retained
       earnings      430,697      411,329      372,739      348,817       23
      Accumulated
       other
       comprehensive
       income (loss)  (1,308)       2,597       (5,931)      (9,608)     (86)
      Capital stock
       (Note 10)     221,103      220,634      219,004      217,589        2
      Contributed
       surplus        12,909       11,655        9,681        9,089       42
    -------------------------------------------------------------------------
                     663,401      646,215      595,493      565,887       17
    -------------------------------------------------------------------------
    Total
     Liabilities
     and Share-
     holders'
     Equity      $10,056,644  $10,038,214  $ 9,525,040  $ 8,881,114       13%
    -------------------------------------------------------------------------
    Contingent
     Liabilities
     and
     Commitments
     (Note 11)

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



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

                                                   For the nine months ended
                                                   --------------------------
    (unaudited)                                         July 31      July 31
    ($ thousands)                                          2008         2007
    -------------------------------------------------------------------------
    Retained Earnings
    Balance at beginning of period                  $   372,739  $   297,675
      Net income                                         77,534       66,710
      Dividends                                         (19,576)     (15,568)
    -------------------------------------------------------------------------
    Balance at end of period                            430,697      348,817
    -------------------------------------------------------------------------
    Accumulated Other Comprehensive Income (Loss)
    Balance at beginning of period                       (5,931)      (1,494)
      Other comprehensive income (loss)                   4,623       (8,114)
    -------------------------------------------------------------------------
    Balance at end of period                             (1,308)      (9,608)
    -------------------------------------------------------------------------
    Total retained earnings and accumulated other
     comprehensive income (loss)                        429,389      339,209
    -------------------------------------------------------------------------
    Capital Stock (Note 10)
    Balance at beginning of period                      219,004      215,349
      Issued on exercise of employee stock options        1,086        1,525
      Transferred from contributed surplus on
       exercise or exchange of options                    1,013          715
    -------------------------------------------------------------------------
    Balance at end of period                            221,103      217,589
    -------------------------------------------------------------------------
    Contributed Surplus
    Balance at beginning of period                        9,681        6,340
      Amortization of fair value of employee
       stock options                                      4,241        3,464
      Transferred to capital stock on exercise or
       exchange of options                               (1,013)        (715)
    -------------------------------------------------------------------------
    Balance at end of period                             12,909        9,089
    -------------------------------------------------------------------------
    Total Shareholders' Equity                      $   663,401  $   565,887
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    Consolidated Statement of Comprehensive Income
    -------------------------------------------------------------------------

                                For the three              For the nine
                                 months ended              months ended
                          ------------------------- -------------------------
    (unaudited)               July 31      July 31      July 31      July 31
    ($ thousands)                2008         2007         2008         2007
    -------------------------------------------------------------------------
    Net Income            $    26,327  $    24,033  $    77,534  $    66,710
    -------------------------------------------------------------------------
    Other Comprehensive
     Income (Loss), net
     of tax
      Available-for-sale
       securities:
        Gains (losses)
         from change in
         fair value(1)         (2,906)      (4,085)       5,523       (8,837)
        Reclassification
         to other income(2)      (600)           7       (2,634)         290
    -------------------------------------------------------------------------
                               (3,506)      (4,078)       2,889       (8,547)
    -------------------------------------------------------------------------
      Derivatives
       designated as cash
       flow hedges:
        Gains (losses) from
         change in fair
         value(3)                 566         (423)       3,904         (809)
        Reclassification
         to net interest
         income(4)               (965)         375       (1,232)       1,242
        Reclassification
         to other
         liabilities for
         derivatives
         terminated prior
         to maturity(5)             -            -         (938)           -
    -------------------------------------------------------------------------
                                 (399)         (48)       1,734          433
    -------------------------------------------------------------------------
                               (3,905)      (4,126)       4,623       (8,114)
    -------------------------------------------------------------------------
    Comprehensive Income
     for the Period       $    22,422  $    19,907  $    82,157  $    58,596
    -------------------------------------------------------------------------

    (1) Net of income tax expense of $2,394 for the nine months ended
        July 31, 2008 (2007 - tax benefit of $4,313).
    (2) Net of income tax benefit of $1,142 for the nine months ended
        July 31, 2008 (2007 - tax expense $141).
    (3) Net of income tax expense of $1,714 for the nine months ended
        July 31, 2008 (2007 - tax benefit $395).
    (4) Net of income tax benefit of $534 for the nine months ended July 31,
        2008 (2007 - tax expense $606).
    (5) Net of income tax benefit of $429 for the nine months ended July 31,
        2008 (2007 - nil).

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



    -------------------------------------------------------------------------
    Consolidated Statement of Cash Flow
    -------------------------------------------------------------------------

                                For the three              For the nine
                                 months ended              months ended
                          ------------------------- -------------------------
    (unaudited)               July 31      July 31      July 31      July 31
    ($ thousands)                2008         2007         2008         2007
    -------------------------------------------------------------------------
    Cash Flows from
     Operating Activities
      Net income          $    26,327  $    24,033  $    77,534  $    66,710
      Adjustments to
       determine net
       cash flows
        Provision for
         credit losses          3,038        2,550        8,813        7,650
        Depreciation and
         amortization           1,761        1,584        5,116        4,411
        Amortization of
         fair value of
         employee stock
         options                1,537        1,178        4,241        3,464
        Future income
         taxes, net               372        2,376          899        2,594
        Gain on sale of
         securities, net         (765)         (10)      (3,777)        (431)
        Accrued interest
         receivable and
         payable, net          (3,274)      (3,256)       6,326        1,604
        Current income
         taxes payable, net       816          396       (1,068)        (287)
        Other items, net        4,087        3,644       (4,963)      (6,274)
    -------------------------------------------------------------------------
                               33,899       32,495       93,121       79,441
    -------------------------------------------------------------------------
    Cash Flows from
     Financing Activities
      Deposits, net             7,312      858,059      429,418    1,365,575
      Debentures issued        50,000            -       50,000      195,000
      Debentures redeemed     (30,000)      (3,126)     (30,000)      (3,126)
      Common shares issued        186          721        1,086        1,525
      Dividends                (6,959)      (5,623)     (19,576)     (15,568)
    -------------------------------------------------------------------------
                               20,539      850,031      430,928    1,543,406
    -------------------------------------------------------------------------
    Cash Flows from
     Investing Activities
      Interest bearing
       deposits with
       regulated financial
       institutions, net       65,595      (78,867)      (2,950)      36,455
      Securities, purchased  (658,402)    (893,170)  (2,057,270)  (2,035,649)
      Securities, sale
       proceeds               187,183      151,868      936,939      581,935
      Securities, matured     452,649      482,338    1,192,159    1,080,422
      Securities matured
       (purchased) under
       resale agreements,
       net                    126,251      (76,068)     197,924      (47,425)
      Loans, net             (229,150)    (525,584)    (771,981)  (1,316,445)
      Land, buildings
       and equipment           (2,088)      (1,994)      (5,231)      (4,249)
    -------------------------------------------------------------------------
                              (57,962)    (941,477)    (510,410)  (1,704,956)
    -------------------------------------------------------------------------
    Change in Cash and
     Cash Equivalents          (3,524)     (58,951)      13,639      (82,109)
    Cash and Cash
     Equivalents at
     Beginning of Period        2,554       37,061      (14,609)      60,219
    -------------------------------------------------------------------------
    Cash and Cash
     Equivalents at End
     of Period(*)         $      (970) $   (21,890) $      (970) $   (21,890)
    -------------------------------------------------------------------------
    (*) Represented by:
        Cash and
         non-interest
         bearing deposits
         with financial
         institutions     $    23,903  $    10,760  $    23,903  $    10,760
        Cheques and other
         items in transit
         (included in Cash
         Resources)             2,172          729        2,172          729
        Cheques and other
         items in transit
         (included in Other
         Liabilities)         (27,045)     (33,379)     (27,045)     (33,379)
    -------------------------------------------------------------------------
    Cash and Cash
     Equivalents at End
     of Period            $      (970) $   (21,890) $      (970) $   (21,890)
    -------------------------------------------------------------------------

    Supplemental
     Disclosure of Cash
     Flow Information
      Amount of interest
       paid in the period $    87,589  $    73,000  $   254,032  $   197,640
      Amount of income
       taxes paid in the
       period                   9,850       11,436       34,682       29,368
    -------------------------------------------------------------------------

    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.  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, 2007, except as
        described in Note 2. 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, 2007 as set out on pages 57 to 82 of the
        Bank's 2007 Annual Report.

    2.  Change in Accounting Policies

        Effective November 1, 2007, the Bank adopted new accounting standards
        issued by the Canadian Institute of Chartered Accountants (CICA):
        Financial Instruments - Disclosure and Presentation and Capital
        Disclosures. The new standards require additional disclosure
        regarding financial instruments and capital management practices. As
        a result of adopting these standards, new or enhanced disclosure is
        provided in Note 4 Securities, Note 5 Loans, Note 6 Allowance for
        Credit Losses, Note 7 Impaired and Past Due Loans, Note 13 Financial
        Instruments, Note 14 Interest Rate Sensitivity and Note 16 Capital
        Management.

    3.  Insurance Revenues, Net

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



                                                             For the nine
                           For the three months ended        months ended
                        -----------------------------------------------------
                         July 31   April 30    July 31    July 31    July 31
                            2008       2008       2007       2008       2007
        ---------------------------------------------------------------------
        Net earned
         premiums       $ 25,030   $ 23,737   $ 24,988   $ 73,066   $ 70,742
        Commissions
         and processing
         fees                734        738        733      2,134      2,008
        Net claims and
         adjustment
         expenses        (15,612)   (15,135)   (16,097)   (47,816)   (47,495)
        Policy
         acquisition
         costs            (5,466)    (5,212)    (5,531)   (15,361)   (14,911)
        ---------------------------------------------------------------------
        Total, net      $  4,686   $  4,128   $  4,093   $ 12,023  $  10,344
        ---------------------------------------------------------------------

    4.  Securities

        Securities are accounted for at settlement date. Net unrealized gains
        (losses) reflected on the balance sheet follow.

                                                 As at      As at      As at
                                               July 31   April 30    July 31
                                                  2008       2008       2007
        ---------------------------------------------------------------------
        Interest bearing deposits with
         regulated financial institutions     $    736   $  1,849   $ (1,633)
        Securities
          Issued or guaranteed by Canada           297      1,106     (1,055)
          Issued or guaranteed by a
           province or municipality                494      1,827       (747)
          Other securities                      (6,675)    (4,600)    (9,873)
        ---------------------------------------------------------------------
        Unrealized gains (losses), net        $ (5,148)  $    182   $(13,308)
        ---------------------------------------------------------------------

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

    5.  Loans

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

                             British              Saskat-
        ($ millions)        Columbia   Alberta    chewan  Manitoba     Other
        ---------------------------------------------------------------------
        Loans to Individuals
          Residential
           mortgages(2)      $   968   $   821   $    86   $    54   $    42
          Other loans            108       196        25         4         1
        ---------------------------------------------------------------------
                               1,076     1,017       111        58        43
        ---------------------------------------------------------------------
        Loans to Businesses
          Commercial             680     1,086        72        71       156
          Construction and
           real estate(3)        891     1,248        75        59       111
          Equipment financing    340       825        41        13        28
          Energy                  19       219         -         -         -
        ---------------------------------------------------------------------
                               1,930     3,378       188       143       295
        ---------------------------------------------------------------------
        Total Loans(1)       $ 3,006   $ 4,395   $   299   $   201   $   338
        ---------------------------------------------------------------------
        Composition
         Percentage
          July 31, 2008           37%       53%        4%        2%        4%
          April 30, 2008          36%       55%        4%        2%        3%
          October 31, 2007        35%       55%        4%        3%        3%
        ---------------------------------------------------------------------


                                          July     April   October
                                            31        30        31
                                          2008      2008      2007
                                       Composi-  Composi-  Composi-
                                          tion      tion      tion
                                       Percent-  Percent-  Percent-
        ($ millions)           Total       age       age       age
        -----------------------------------------------------------
        Loans to Individuals
          Residential
           mortgages(2)      $ 1,971        24%       24%       24%
          Other loans            334         4         4         3
        -----------------------------------------------------------
                               2,305        28        28        27
        -----------------------------------------------------------
        Loans to Businesses
          Commercial           2,065        25        25        25
          Construction and
           real estate(3)      2,384        29        27        25
          Equipment financing  1,247        15        16        18
          Energy                 238         3         4         5
        -----------------------------------------------------------
                               5,934        72        72        73
        -----------------------------------------------------------
        Total Loans(1)       $ 8,239       100%      100%      100%
        -----------------------------------------------------------
        Composition
         Percentage
          July 31, 2008          100%
          April 30, 2008         100%
          October 31, 2007       100%
        -----------------------------------------------------------

        (1) This table does not include an allocation for credit losses or
            deferred revenue and premiums.
        (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.


    6.  Allowance for Credit Losses

        The following table shows the changes in the allowance for credit
        losses.
                                              For the three months ended
                                                     July 31, 2008
                                          -----------------------------------
                                                         General
                                                       Allowance
                                            Specific  for Credit
                                           Allowance      Losses       Total
        ---------------------------------------------------------------------
        Balance at beginning of period     $  10,787   $  56,304   $  67,091
        Provision for credit losses              117       2,921       3,038
        Write-offs                              (133)          -        (133)
        Recoveries                                13           -          13
        ---------------------------------------------------------------------
        Balance at end of period           $  10,784   $  59,225   $  70,009
        ---------------------------------------------------------------------


                                              For the three months ended
                                                    April 30, 2008
                                          -----------------------------------
                                                         General
                                                       Allowance
                                            Specific  for Credit
                                           Allowance      Losses       Total
        ---------------------------------------------------------------------
        Balance at beginning of period     $   9,248   $  55,940   $  65,188
        Provision for credit losses            2,598         364       2,962
        Write-offs                            (1,065)          -      (1,065)
        Recoveries                                 6           -           6
        ---------------------------------------------------------------------
        Balance at end of period           $  10,787   $  56,304   $  67,091
        ---------------------------------------------------------------------



                                              For the three months ended
                                                     July 31, 2007
                                          -----------------------------------
                                                         General
                                                       Allowance
                                            Specific  for Credit
                                           Allowance      Losses       Total
        ---------------------------------------------------------------------
        Balance at beginning of period     $   4,878   $  53,435   $  58,313
        Provision for credit losses              903       1,647       2,550
        Write-offs                               (98)          -         (98)
        Recoveries                                14           -          14
        ---------------------------------------------------------------------
        Balance at end of period           $   5,697   $  55,082   $  60,779
        ---------------------------------------------------------------------



                                               For the nine months ended
                                                     July 31, 2008
                                          -----------------------------------
                                                         General
                                                       Allowance
                                            Specific  for Credit
                                           Allowance      Losses       Total
        ---------------------------------------------------------------------
        Balance at beginning of period     $   7,414   $  55,608   $  63,022
        Provision for credit losses            5,196       3,617       8,813
        Write-offs                            (1,872)          -      (1,872)
        Recoveries                                46           -          46
        ---------------------------------------------------------------------
        Balance at end of period           $  10,784   $  59,225   $  70,009
        ---------------------------------------------------------------------


                                               For the nine months ended
                                                     July 31, 2007
                                          -----------------------------------
                                                         General
                                                       Allowance
                                            Specific  for Credit
                                           Allowance      Losses       Total
        ---------------------------------------------------------------------
        Balance at beginning of period     $   5,484   $  48,037   $  53,521
        Provision for credit losses              605       7,045       7,650
        Write-offs                              (470)          -        (470)
        Recoveries                                78           -          78
        ---------------------------------------------------------------------
        Balance at end of period           $   5,697   $  55,082   $  60,779
        ---------------------------------------------------------------------

    7.  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 July 31, 2008
                              -----------------------------------------------
                                               Gross                     Net
                                   Gross    Impaired    Specific    Impaired
                                  Amount      Amount   Allowance       Loans
        ---------------------------------------------------------------------
        Consumer and
         personal             $1,236,399  $   10,051  $      261  $    9,790
        Real estate(1)         3,401,919      15,507         929      14,578
        Industrial             1,484,165      15,304       4,355      10,949
        Commercial             2,116,274       6,677       5,239       1,438
        ---------------------------------------------------------------------
        Total                 $8,238,757  $   47,539  $   10,784      36,755
        ---------------------------------------------------------
        General allowance(2)                                         (59,225)
        ---------------------------------------------------------------------
        Net impaired loans after
         general allowance                                        $  (22,470)
        ---------------------------------------------------------------------


                                             As at April 30, 2008
                              -----------------------------------------------
                                               Gross                     Net
                                   Gross    Impaired    Specific    Impaired
                                  Amount      Amount   Allowance       Loans
        ---------------------------------------------------------------------
        Consumer and
         personal             $1,159,586  $    6,417  $      283  $    6,134
        Real estate(1)         3,232,475      11,223         920      10,303
        Industrial             1,580,911      14,972       3,948      11,024
        Commercial             2,036,755      10,406       5,636       4,770
        ---------------------------------------------------------------------
        Total                 $8,009,727  $   43,018  $   10,787      32,231
        ---------------------------------------------------------
        General allowance(2)                                         (56,304)
        ---------------------------------------------------------------------
        Net impaired loans after
         general allowance                                        $  (24,073)
        ---------------------------------------------------------------------


                                             As at July 31, 2007
                              -----------------------------------------------
                                               Gross                     Net
                                   Gross    Impaired    Specific    Impaired
                                  Amount      Amount   Allowance       Loans
        ---------------------------------------------------------------------
        Consumer and
         personal             $1,004,010  $    4,080  $      320  $    3,760
        Real estate(1)         2,667,179         563         352         211
        Industrial             1,608,257       6,370       1,418       4,952
        Commercial             1,871,965       4,092       3,607         485
        ---------------------------------------------------------------------
        Total                 $7,151,411  $   15,105  $    5,697       9,408
        ---------------------------------------------------------
        General allowance(2)                                         (55,082)
        ---------------------------------------------------------------------
        Net impaired loans after
         general allowance                                        $  (45,674)
        ---------------------------------------------------------------------

        (1) Multi-family residential mortgages are included in real estate
            loans.
        (2) 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 July 31, 2008
                                            ---------------------------------
                                                   Gross                 Net
                                                Impaired  Specific  Impaired
                                                  Amount Allowance     Loans
        ---------------------------------------------------------------------
        Alberta                                 $ 15,238  $  7,575  $  7,663
        British Columbia                          29,725     2,014    27,711
        Saskatchewan                               2,099       807     1,292
        Manitoba                                     477       388        89
        ---------------------------------------------------------------------
        Total                                   $ 47,539  $ 10,784    36,755
        -----------------------------------------------------------
        General allowance(1)                                         (59,225)
        ---------------------------------------------------------------------
        Net impaired loans after
         general allowance                                          $(22,470)
        ---------------------------------------------------------------------


                                                      As at April 30, 2008
                                            ---------------------------------
                                                   Gross                 Net
                                                Impaired  Specific  Impaired
                                                  Amount Allowance     Loans
        ---------------------------------------------------------------------
        Alberta                                 $ 18,586  $  8,071  $ 10,515
        British Columbia                          21,757     1,778    19,979
        Saskatchewan                               2,167       499     1,668
        Manitoba                                     508       439        69
        ---------------------------------------------------------------------
        Total                                   $ 43,018  $ 10,787    32,231
        -----------------------------------------------------------
        General allowance(1)                                         (56,304)
        ---------------------------------------------------------------------
        Net impaired loans after
         general allowance                                          $(24,073)
        ---------------------------------------------------------------------



                                                      As at July 31, 2007
                                            ---------------------------------
                                                   Gross                 Net
                                                Impaired  Specific  Impaired
                                                  Amount Allowance     Loans
        ---------------------------------------------------------------------
        Alberta                                 $  7,690  $  3,287  $  4,403
        British Columbia                           4,115       891     3,224
        Saskatchewan                               3,203     1,519     1,684
        Manitoba                                      97         -        97
        ---------------------------------------------------------------------
        Total                                   $ 15,105  $  5,697     9,408
        -----------------------------------------------------------
        General allowance(1)                                         (55,082)
        ---------------------------------------------------------------------
        Net impaired loans after general allowance                  $(45,674)
        ---------------------------------------------------------------------

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

        During the quarter and for the nine months ended July 31, 2008,
        interest recognized as income on impaired loans totaled $126 and $304
        respectively (2007 - $74 and $166).

        Gross impaired loans exclude certain past due loans which are loans
        where payment of interest or principal is contractually in arrears
        but 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
                                                        July 31, 2008
        ---------------------------------------------------------------------
                                                  1 - 30   31 - 60   61 - 90
                                                    days      days      days
        ---------------------------------------------------------------------
        Residential mortgages                   $  6,264  $  2,067  $  7,977
        Other loans                               11,911     8,833     1,122
        ---------------------------------------------------------------------
                                                $ 18,175  $ 10,900  $  9,099
        ---------------------------------------------------------------------

                                                             As at
                                                        April 30, 2008
        ---------------------------------------------------------------------
                                               More than
                                                 90 days     Total     Total
        ---------------------------------------------------------------------

        Residential mortgages                   $      -  $ 16,308  $ 21,990
        Other loans                                    -    21,866    17,840
        ---------------------------------------------------------------------
                                                $      -  $ 38,174  $ 39,830
        ---------------------------------------------------------------------

        Certain process changes were required to compile the above
        information and comparative figures prior to the second quarter are
        not available.

    8.  Derivative Financial Instruments

        For the quarter and nine months ended July 31, 2008, a net unrealized
        after tax gain of $566 and $3,904 respectively (2007 - $423 and $809
        after tax loss) was recorded in other comprehensive income for
        changes in fair value of the effective portion of derivatives
        designated as cash flow hedges, and $nil (2007 - $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 quarter and nine months ended July 31,
        2008, a net gain after tax of $965 and $1,232 respectively (2007 -
        $375 and $1,242 net loss after tax) was reclassified to net income. A
        net gain of $348 (2007 - $799 net loss) before tax recorded in
        accumulated other comprehensive income (loss) as at July 31, 2008 is
        expected to be reclassified to net income in the next 12 months and
        will offset variable cash flows from floating rate loans.

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


                                                     As at July 31, 2008
                                              -------------------------------
                                                          Positive  Negative
                                                Notional      Fair      Fair
                                                  Amount     Value     Value
        ---------------------------------------------------------------------
        Interest rate swaps designated as cash
         flow hedges(1)                         $663,000  $  2,965  $     30
        Equity contracts(2)                        4,400       178         -
        Foreign exchange contracts(3)             48,757       386         -
        Embedded derivatives in equity-linked
         deposits(2)                                 n/a         -       255
        Other forecasted transactions                  -         -         -
        ---------------------------------------------------------------------
        Derivative related amounts                        $  3,529  $    285
        ---------------------------------------------------------------------


                                                     As at April 30, 2008
                                              -------------------------------
                                                          Positive  Negative
                                                Notional      Fair      Fair
                                                  Amount     Value     Value
        ---------------------------------------------------------------------
        Interest rate swaps designated as cash
         flow hedges(1)                         $693,000  $  3,632  $     74
        Equity contracts(2)                        4,400       320         -
        Foreign exchange contracts(3)             71,299        14       456
        Embedded derivatives in equity-linked
         deposits(2)                                 n/a         -       316
        Other forecasted transactions                  -         -         -
        ---------------------------------------------------------------------
        Derivative related amounts                        $  3,966  $    846
        ---------------------------------------------------------------------


                                                     As at July 31, 2007
                                              -------------------------------
                                                          Positive  Negative
                                                Notional      Fair      Fair
                                                  Amount     Value     Value
        ---------------------------------------------------------------------
        Interest rate swaps designated as cash
         flow hedges                            $663,000  $    219  $  1,302
        Equity contracts                           6,000       612         -
        Foreign exchange contracts                 5,344        12        65
        Embedded derivatives in equity-linked
         deposits                                    n/a         -       742
        Other forecasted transactions                  -         -         -
        ---------------------------------------------------------------------
        Derivative related amounts                        $    843  $  2,109
        ---------------------------------------------------------------------

        (1) Interest rate swaps outstanding at July 31, 2008 mature between
            August 2008 and January 2013.
        (2) Equity contracts and equity-linked deposits outstanding at July
            31, 2008 mature between February 2009 and March 2011.
        (3) Foreign exchange contracts outstanding at July 31, 2008 mature
            between August 2008 and October 2008.

        n/a - not applicable.


        There were no forecasted transactions that failed to occur during the
        quarter and nine months ended July 31, 2008.

    9.  Subordinated Debentures

        On June 27, 2008, the Bank issued $50,000 of Series C Debentures. The
        Series C Debentures have a fixed interest rate of 5.95% until June
        27, 2013. Thereafter, the rate will be fixed quarterly at the
        Canadian dollar CDOR 90-day Bankers' Acceptance rate plus 302 basis
        points until maturity on June 27, 2018. On July 8, 2008, conventional
        subordinated debentures in the amount of $30,000 were redeemed by the
        Bank at face value.

    10. Capital Stock and Share Incentive Plan

        Capital Stock                   For the three months ended
                            -------------------------------------------------
                                 July 31, 2008             July 31, 2007
        ---------------------------------------------------------------------
                            Number of                 Number of
                               Shares       Amount       Shares       Amount
        ---------------------------------------------------------------------
        Common Shares
          Outstanding at
           beginning of
           period          63,234,450  $   220,634   62,295,058  $   216,579
          Issued on
           exercise or
           exchange of
           options            107,499          186      253,862          721
          Transferred from
           contributed
           surplus on
           exercise or
           exchange of
           options                  -          283            -          289
        ---------------------------------------------------------------------
        Outstanding at
         end of period     63,341,949  $   221,103   62,548,920  $   217,589
        ---------------------------------------------------------------------


                                         For the nine months ended
                            -------------------------------------------------
                                 July 31, 2008             July 31, 2007
        ---------------------------------------------------------------------
                            Number of                 Number of
                               Shares       Amount       Shares       Amount
        ---------------------------------------------------------------------
        Common Shares
          Outstanding at
           beginning of
           period          62,836,189  $   219,004   61,936,260  $   215,349
          Issued on
           exercise or
           exchange of
           options            505,760        1,086      612,660        1,525
          Transferred from
           contributed
           surplus on
           exercise or
           exchange of
           options                  -        1,013            -          715
        ---------------------------------------------------------------------
        Outstanding at
         end of period    63,341,949   $   221,103   62,548,920  $   217,589
        ---------------------------------------------------------------------



        Employee Stock
        Options                        For the three months ended
                            -------------------------------------------------
                                 July 31, 2008             July 31, 2007
        ---------------------------------------------------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                            Number of     Exercise    Number of     Exercise
                              Options        Price      Options        Price
        ---------------------------------------------------------------------
        Options
          Balance at
           beginning of
           period           4,941,242  $     19.50    5,277,000  $     15.20
          Granted             614,900        26.10      365,400        26.38
          Exercised or
           exchanged         (156,450)        8.89     (307,250)        7.15
          Forfeited           (39,850)       25.08      (30,000)       20.45
        ---------------------------------------------------------------------
        Balance at end
         of period          5,359,842  $     20.53    5,305,150  $     16.41
        ---------------------------------------------------------------------



                                        For the nine months ended
                            -------------------------------------------------
                                 July 31, 2008             July 31, 2007
        ---------------------------------------------------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                            Number of     Exercise    Number of     Exercise
                              Options        Price      Options        Price
        ---------------------------------------------------------------------
        Options
          Balance at
           beginning of
           period           4,911,277  $     16.96    5,030,040  $     13.07
          Granted           1,216,242        28.57    1,108,500        25.46
          Exercised or
           exchanged         (685,977)        8.90     (755,390)        7.09
          Forfeited           (81,700)       23.73      (78,000)       20.25
        ---------------------------------------------------------------------
        Balance at end
         of period          5,359,842  $     20.53    5,305,150  $     16.41
        ---------------------------------------------------------------------
        Exercisable at
         end of period      1,263,100  $     10.68    1,133,550  $      8.49
        ---------------------------------------------------------------------

        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 685,977
        options (2007 - 755,390) exercised or exchanged in the nine months
        ended July 31, 2008, option holders exchanged the rights to 558,527
        options (2007 - 532,940) and received 378,310 shares (2007 - 389,708)
        in return under the cashless settlement alternative.

        In the nine months ended July 31, 2008, salary expense of $4,241
        (2007 - ($3,464) was recognized relating to the estimated fair value
        of options granted since November 1, 2002. 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
        3.8% (2007 - 4.2%), (ii) expected option life of 4.0 years (2007 -
        4.0 years), (iii) expected volatility of 23% (2007 - 19%), and (iv)
        expected dividends of 1.3% (2007 - 1.3%). The weighted average fair
        value of options granted was estimated at $5.88 (2007 - $4.94) per
        share.

    11. Contingent Liabilities and Commitments

        Significant contingent liabilities and commitments, including
        guarantees provided to third parties, are discussed in Note 19 of the
        Bank's audited consolidated financial statements for the year ended
        October 31, 2007 (see pages 74 to 75 of the 2007 Annual Report) and
        include:

                                           As at         As at         As at
                                         July 31      April 30       July 31
                                            2008          2008          2007
        ---------------------------------------------------------------------
        Guarantees and standby
         letters of credit
          Balance outstanding        $   235,369   $   231,837   $   190,550
        Business credit cards
          Total approved limit            11,261        11,169         8,709
          Balance outstanding              2,748         2,326         1,995
        ---------------------------------------------------------------------

        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.

    12. Trust Assets Under Administration

        Trust assets under administration represent assets held for personal
        and corporate trust clients, administered by subsidiaries, and are
        kept separate from the subsidiaries' own assets. Trust assets under
        administration are not reflected in the consolidated balance sheet
        and relate to the banking and trust segment.

                                           As at         As at         As at
                                         July 31      April 30       July 31
                                            2008          2008          2007
        ---------------------------------------------------------------------
        Trust assets under
         administration              $ 4,498,545   $ 4,498,560   $ 4,049,310
        ---------------------------------------------------------------------

    13. 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 purchased under reverse resale 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 Risk Management section of the 2007
        Annual Report beginning on page 51. The value of financial assets
        recorded on the balance sheet at July 31, 2008 at fair value (cash,
        securities, securities purchased under resale agreements and
        derivatives) was determined using published market prices quoted in
        active markets for 97% of the portfolio and estimated using a
        valuation technique based on observable market data for 3% of the
        portfolio. The value of liabilities recorded on the consolidated
        balance sheet at fair value (derivatives) was determined for the
        entire portfolio using a valuation technique based on observable
        market data. Further information on how the fair value of financial
        instruments is determined is included in the Financial Instruments
        Measured at Fair Value discussion in the Critical Accounting
        Estimates section of the 2007 Annual Report beginning on page 49 as
        well as Note 27 of the October 31, 2007 audited financial statements
        beginning on page 80 in the 2007 Annual Report.

        Income and expenses are classified as to source, either securities or
        loans for income, and deposits or subordinated debentures for
        expense. Gains on the sale of securities, net, are shown separately
        in other income.

    14. 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 26 of the audited consolidated
        financial statements for the year ended October 31, 2007 (see page 78
        of the 2007 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
        ---------------------------------------------------------------------
        July 31, 2008
        Assets
        Cash resources and
         securities                $    155   $    152   $    330   $    637
        Loans                         4,540        449        747      5,736
        Other assets                      -          -          -          -
        Derivative financial
         instruments(1)                  15         30        230        275
        ---------------------------------------------------------------------
        Total                         4,710        631      1,307      6,648
        ---------------------------------------------------------------------
        Liabilities and Equity
        Deposits                      3,783        825      1,573      6,181
        Other liabilities                 3          6         25         34
        Debentures                        -         35          -         35
        Shareholders' equity              -          -          -          -
        Derivative financial
         instruments(1)                 667          -          -        667
        ---------------------------------------------------------------------
        Total                      $  4,453   $    866   $  1,598   $  6,917
        ---------------------------------------------------------------------
        Interest Rate Sensitive
         Gap                       $    257   $   (235)  $   (291)  $   (269)
        ---------------------------------------------------------------------
        Cumulative Gap             $    257   $     22   $   (269)  $   (269)
        ---------------------------------------------------------------------
        Cumulative Gap as a
         percentage of total
         assets                        2.4%       0.2%     (2.5)%     (2.5)%
        ---------------------------------------------------------------------

        April 30, 2008
        Assets                     $  4,857   $    803   $  1,255   $  6,915
        Liabilities and equity        4,481        745      1,590      6,816
        ---------------------------------------------------------------------
        Interest rate sensitive
         gap                       $    376   $     58   $   (335)  $     99
        ---------------------------------------------------------------------
        Cumulative gap             $    376   $    434   $     99   $     99
        ---------------------------------------------------------------------
        Cumulative gap as a
         percentage of total
         assets                        3.5%       4.0%       0.9%       0.9%
        ---------------------------------------------------------------------

        July 31, 2007
        Cumulative gap             $    (43)  $     (1)  $    133   $    133
        ---------------------------------------------------------------------
        Cumulative gap as a
         percentage of total assets  (0.0)%     (0.0)%       1.4%       1.4%
        ---------------------------------------------------------------------



                                     1 Year       More       Non-
                                         to       than   interest
                                    5 Years    5 Years  Sensitive      Total
        ---------------------------------------------------------------------
        July 31, 2008
        Assets
        Cash resources and
         securities                $    976   $     70   $     33   $  1,716
        Loans                         2,431         79        (68)     8,178
        Other assets                      -          -        163        163
        Derivative financial
         instruments(1)                 392          -          -        667
        ---------------------------------------------------------------------
        Total                         3,799        149        128     10,724
        ---------------------------------------------------------------------
        Liabilities and Equity
        Deposits                      2,411        105        (11)     8,686
        Other liabilities                33          9        222        298
        Debentures                      300         75          -        410
        Shareholders' equity              -          -        663        663
        Derivative financial
         instruments(1)                   -          -          -        667
        ---------------------------------------------------------------------
        Total                      $  2,744   $    189   $    874   $ 10,724
        ---------------------------------------------------------------------
        Interest Rate Sensitive
         Gap                       $  1,055   $    (40)  $   (746)  $      -
        ---------------------------------------------------------------------
        Cumulative Gap             $    786   $    746   $      -   $      -
        ---------------------------------------------------------------------
        Cumulative Gap as a
         percentage of total
         assets                        7.3%       7.0%         -%         -%
        ---------------------------------------------------------------------

        April 30, 2008
        Assets                     $  3,586   $    102   $    132   $ 10,735
        Liabilities and equity        2,871        189        859     10,735
        ---------------------------------------------------------------------
        Interest rate sensitive
         gap                       $    715   $    (87)  $   (727)  $      -
        ---------------------------------------------------------------------
        Cumulative gap             $    814   $    727   $      -   $      -
        ---------------------------------------------------------------------
        Cumulative gap as a
         percentage of total
         assets                        7.6%       6.8%         -%         -%
        ---------------------------------------------------------------------

        July 31, 2007
        Cumulative gap             $    662   $    654   $      -   $      -
        ---------------------------------------------------------------------
        Cumulative gap as a
         percentage of total assets    6.9%       6.8%         -%         -%
        ---------------------------------------------------------------------
        (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 liability are shown below:

        July 31, 2008
        ---------------------------------------------------------------------
                     Floating               3
                     Rate and          Months   Total  1 Year    More
                       Within  1 to 3      to  Within      to    than
                      1 Month  Months  1 Year  1 Year 5 Years 5 Years  Total
        ---------------------------------------------------------------------
        Total assets     5.4%    4.3%    5.3%    5.3%    5.4%    6.1%   5.3%
        Total
         liabilities      2.6     3.8     4.1     3.1     4.2     5.7    3.4
        ---------------------------------------------------------------------
        Interest rate
         sensitive gap   2.8%    0.5%    1.2%    2.2%    1.2%    0.4%   1.9%
        ---------------------------------------------------------------------

        April 30, 2008
        ---------------------------------------------------------------------
        Total assets     5.4%    4.6%    5.3%    5.3%    5.6%    5.3%   5.4%
        Total
         liabilities      2.8     3.9     4.1     3.2     4.3     5.8    3.6
        ---------------------------------------------------------------------
        Interest rate
         sensitive gap   2.6%    0.7%    1.2%    2.1%    1.3%  (0.5)%   1.8%
        ---------------------------------------------------------------------

        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 0.7% (April 30, 2008 - 2.3%)
        over the following twelve months. A one-percentage point decrease in
        all interest rates would decrease net interest income by a similar
        amount.

    15. 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 within the same geographic region. The banking
        and trust segment provides services to personal clients and small to
        medium-sized commercial business clients primarily in Western Canada.
        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
                    ---------------------------------------------------------
                    July 31  April 30   July 31  July 31  April 30   July 31
                       2008      2008      2007     2008      2008      2007
        ---------------------------------------------------------------------
        Net interest
         income
         (teb)(1)  $ 55,877  $ 54,325  $ 53,533  $ 1,413  $  1,334  $  1,355
        Less teb
         adjustment   1,326     1,252     1,324      116       100        99
        ---------------------------------------------------------------------
        Net interest
         income per
         financial
         statements  54,551    53,073    52,209    1,297     1,234     1,256
        Other
         income(2)   14,415    13,948    11,685    4,670     4,147     4,092
        ---------------------------------------------------------------------
        Total
         revenues    68,966    67,021    63,894    5,967     5,381     5,348
        Provision
         for credit
         losses       3,038     2,962     2,550        -         -         -
        Non-interest
         expenses    32,124    31,207    28,688    2,406     2,246     2,139
        Provision
         for income
         taxes        9,980     9,779    10,840    1,058       906       992
        ---------------------------------------------------------------------
        Net income $ 23,824  $ 23,073  $ 21,816  $ 2,503  $  2,229  $  2,217
        ---------------------------------------------------------------------
        Total
         average
         assets
         ($ mill-
         ions)(3)  $  9,927  $  9,730  $  8,227  $   185  $    180  $    166
        ---------------------------------------------------------------------

                                                            Total
                                                 ----------------------------
                                                      Three months ended
                                                 ----------------------------
                                                 July 31  April 30   July 31
                                                    2008      2008      2007
        ---------------------------------------------------------------------
        Net interest income (teb)(1)             $57,290  $ 55,659  $ 54,888
        Less teb adjustment                        1,442     1,352     1,423
        ---------------------------------------------------------------------
        Net interest income per financial
         statements                               55,848    54,307    53,465
        Other income                              19,085    18,095    15,777
        ---------------------------------------------------------------------
        Total revenues                            74,933    72,402    69,242
        Provision for credit losses                3,038     2,962     2,550
        Non-interest expenses                     34,530    33,453    30,827
        Provision for income taxes                11,038    10,685    11,832
        ---------------------------------------------------------------------
        Net income                               $26,327  $ 25,302  $ 24,033
        ---------------------------------------------------------------------
        Total average assets ($ millions)(3)     $10,112  $  9,910  $  8,393
        ---------------------------------------------------------------------


                    Banking and Trust      Insurance             Total
        ---------------------------------------------------------------------
                    Nine months ended  Nine months ended   Nine months ended
        ---------------------------------------------------------------------
                    July 31   July 31   July 31  July 31   July 31   July 31
                       2008      2007      2008     2007      2008      2007
        ---------------------------------------------------------------------
        Net interest
         income
         (teb)(1)  $165,844  $151,204  $  4,151  $ 3,460  $169,995  $154,664
        Less teb
         adjustment   3,816     3,640       315      274     4,131     3,914
        ---------------------------------------------------------------------
        Net interest
         income per
         financial
         statements 162,028   147,564     3,836    3,186   165,864   150,750
        Other
         income(2)   42,758    34,054    12,045   10,403    54,803    44,457
        ---------------------------------------------------------------------
        Total
         revenues   204,786   181,618    15,881   13,589   220,667   195,207
        Provision
         for credit
         losses       8,813     7,650         -        -     8,813     7,650
        Non-interest
         expenses    92,835    82,995     6,972    6,177    99,807    89,172
        Provision
         for income
         taxes       31,801    29,413     2,712    2,262    34,513    31,675
        ---------------------------------------------------------------------
        Net income $ 71,337  $ 61,560  $  6,197  $ 5,150  $ 77,534  $ 66,710
        ---------------------------------------------------------------------
        Total
         average
         assets
         ($ mill-
         ions)(3)  $  9,695  $  7,700  $    181  $   161  $  9,876  $  7,861
        ---------------------------------------------------------------------

        (1) Taxable Equivalent Basis (teb) - Most financial institutions
            analyse 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.

    16. Capital Management

        Effective November 1, 2007, OSFI adopted a new capital management
        framework called Basel II for Canadian financial institutions and
        capital is now managed and reported in accordance with those
        requirements. Basel II introduced some significant changes to the
        risk-weighting of assets and calculation of regulatory capital. The
        Bank has implemented the standardized approach to calculating risk-
        weighted assets for both credit and operational risk. Changes for the
        Bank under Basel II include a reclassification into lower risk-weight
        categories for residential mortgages and loans to small-to-medium
        sized enterprises and a new capital requirement related to
        operational risk.

        Basel II has not had a significant impact on the Bank's overall
        required level of regulatory capital as compared to OSFI's previous
        methodology. New procedures and system enhancements have been
        developed to conform to the new framework including the formalization
        of CWB's internal capital adequacy assessment process.

        Under the Basel II standardized approach to credit risk and OSFI's
        previous framework, banks are required to measure capital adequacy in
        accordance with instructions for determining risk-adjusted capital
        and risk-weighted assets, including off-balance sheet commitments.
        Based on the deemed credit risk of each type of asset, a weighting of
        0% to 150% under Basel II (0% to 100% under the previous framework)
        is assigned. The ratio of regulatory capital to risk-weighted assets
        is calculated and compared to OSFI's standards for Canadian financial
        institutions. Off-balance sheet assets, such as the notional amount
        of derivatives and some credit commitments, are included in the
        calculation of risk-weighted assets and both the credit risk
        equivalent and the risk-weight calculations are prescribed by OSFI.
        As Canadian Direct Insurance Incorporated (CDI) is subject to
        separate OSFI capital requirements specific to insurance companies,
        the Bank's investment in CDI is deducted from capital and CDI's
        assets are excluded from the calculation of risk-weighted assets.

        Regulatory guidelines require banks to maintain a minimum ratio of
        capital to risk-weighted assets and off-balance sheet items of 8%, of
        which 4% must be core capital (Tier 1) and the remainder
        supplementary capital (Tier 2). However, OSFI has established that
        Canadian banks need to maintain a minimum total capital adequacy
        ratio of 10% with a Tier 1 ratio of not less than 7%. CWB's Tier 1
        capital is primarily comprised of common shareholders' equity and
        innovative capital (to a maximum of 15% of net Tier 1 capital) while
        Tier 2 capital includes subordinated debentures (to a maximum amount
        of 50% of net Tier 1 capital) and the inclusion of the general
        allowance for credit losses to a maximum of 125 basis points of
        risk-weighted assets (87.5 basis points under the previous
        framework).

        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.

        Additional information about the Bank's capital management practices
        is provided in the 2007 Annual Report beginning on page 41.


        Capital Structure and Regulatory Ratios(1)

                                           As at         As at         As at
                                         July 31      April 30       July 31
                                            2008          2008          2007
        ---------------------------------------------------------------------
        Capital
          Tier 1                     $   760,597   $   739,724   $   669,961
          Total                        1,149,434     1,117,667     1,014,743
        ---------------------------------------------------------------------
        Capital ratios
          Tier 1                            9.2%          9.3%          9.0%
          Total                             14.0          14.0          13.6
        Assets to capital multiple          8.8x          9.1x          8.8x
        ---------------------------------------------------------------------

        (1) Regulatory capital and capital ratios are calculated in
            accordance with the requirements of OSFI. As described above, as
            of November 1, 2007, OSFI changed the framework and capital is
            now managed and reported in accordance with the requirements of
            Basel II. Prior year figures have been calculated using the
            previous framework.

        During the quarter and for the nine months ended July 31, 2008, the
        Bank complied with all internal and external capital requirements.

    17. Comparative Figures

        Certain comparative figures have been reclassified to conform to the
        current period's presentation.

    18. Future Accounting Changes

        International Financial Reporting Standards

        The CICA 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.
        The impact of the transition to IFRS on the Bank's consolidated
        financial statements is not yet determinable.

    Head Office                       Transfer Agent and Registrar

    Canadian Western Bank & Trust     Valiant Trust Company
    Suite 2300, 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
    Website: www.cwbankgroup.com
                                      Dividends
    Subsidiary Offices
                                      Cash dividends paid to Canadian
    Canadian Western Trust Company    residents are "eligible dividends"
    Suite 600, 750 Cambie Street      as defined in the Income Tax Act.
    Vancouver, BC V6B 0A2
    Toll-free: 1-800-663-1124
    Fax: (604) 669-6069               Investor Relations
    Website: www.cwt.ca
                                      For further financial information
    Canadian Direct Insurance         contact:
     Incorporated                     Kirby Hill, CFA
    Suite 600, 750 Cambie Street      Assistant Vice President, Investor and
    Vancouver, BC V6B 0A2              Public Relations
    Telephone: (604) 699-3678         Canadian Western Bank
    Fax: (604) 699-3851               Telephone: (780) 441-3770
    Website: www.canadiandirect.com   Toll-free: 1-800-836-1886
                                      Fax: (780) 423-8899
    Valiant Trust Company             E-mail:
    Suite 310, 606 - 4th Street S.W.  InvestorRelations@cwbankgroup.com
    Calgary, AB T2P 1T1
    Toll-free: 1-866-313-1872         Online Investor Information
    Fax: (403) 233-2857
    Website: www.valianttrust.com     Additional investor information
                                      including supplemental financial
    Stock Exchange Listing            information and a corporate
                                      presentation is available on CWB's
    The Toronto Stock Exchange        website at www.cwbankgroup.com.
    Share Symbol: CWB
                                      Quarterly Conference Call and Webcast

                                      CWB's quarterly conference call and
                                      live audio webcast will take place on
                                      September 4, 2008 at 3:30 p.m. ET. The
                                      webcast will be archived on the Bank's
                                      website at www.cwbankgroup.com for
                                      sixty days. A replay of the conference
                                      call will be available until September
                                      18, 2008 by dialing (416) 640-1917 or
                                      toll free (877) 289-8525 and entering
                                      passcode 21260804, followed by the
                                      pound sign.
    





For further information:

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

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Canadian Western Bank

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