Pacific & Western Credit Corp. announces results for its fourth quarter ended
October 31, 2009
FOURTH QUARTER SUMMARY
(three months ended
- Prior to recording general provisions for credit losses totalling $3.1 million in the quarter, net income was approximately $168,000 or $0.01 per share ($0.01 diluted). For the year ended October 31, 2009, prior to recording general provisions for credit losses totaling $3.2 million, net income (loss) was ($7.6 million) or ($0.57) per share (($0.57) diluted). - Net income (loss) for the quarter ended October 31, 2009 was ($2.1 million) or ($0.15) per share (($0.15) diluted), after recording general provisions for credit losses, compared to ($15.8 million) or ($1.16) per share (($1.16) diluted) for the same period last year. - For the year ended October 31, 2009, net income (loss) was ($9.9 million) or ($0.74) per share (($0.74) diluted) after recording general provisions for credit losses, compared to ($20.1 million) or ($1.49) per share (($1.49) diluted) for the same period a year ago. - Net interest income (teb) for the quarter increased to $4.8 million from $220,000 in the previous quarter and from $1.8 million for the same period a year ago. Net interest income (teb) for the year was $7.6 million compared to $11.4 million a year ago. - Credit quality remains strong with gross impaired loans decreasing to $6.4 million at October 31, 2009 from $11.3 million at the end of the previous quarter.
PRESIDENT'S COMMENTS
During this quarter we completed the roll-over of the majority of our higher priced GICs. Last year, to guard against a possible prolonged liquidity crisis, we had issued a large number of one year GICs while the prevailing interest rates were much higher than they are today. As a result of the roll-over of these deposits, we are now saving approximately
Throughout the year we continued to expand our deposit broker network by adding 11 more deposit brokers. We now have 115 brokers located across
We are starting the new fiscal year in very good shape. We have a record high level of regulatory capital, considerable capacity for growth, a very low cost of funds and a relatively trouble free loan and lease portfolio. The liquidity crisis has reduced competition and increased profit margins significantly. The opportunity for growth in profitability of our specialized bank has never been better.
FINANCIAL HIGHLIGHTS (unaudited) for the three months ended for the year ended ----------------------------------------------- ------------------------- ($ thousands, except Oct 31 Oct 31 Oct 31 Oct 31 per share amounts) 2009 2008 2009 2008 ----------------------------------------------- ------------------------- Results of operations (teb) Net interest income per financial statements $ 4,085 $ 1,115 $ 4,850 $ 8,555 Teb adjustment 667 675 2,734 2,859 Net interest income 4,752 1,790 7,584 11,414 Spread 1.24% 0.49% 0.52% 0.77% Provision for credit losses 3,183 2,502 3,449 2,815 Net interest income (loss) after provision for credit losses 1,569 (712) 4,135 8,599 Impairment writedowns - (11,341) - (15,044) Other income 1,887 129 1,449 312 Total revenue 3,456 (11,924) 5,584 (6,133) Non-interest expenses 4,405 3,280 14,967 14,025 Net income (loss) (2,057) (15,809) (9,895) (20,089) Earnings (loss) per common share: Basic $ (0.15) $ (1.16) $ (0.74) $ (1.49) Diluted $ (0.15) $ (1.16) $ (0.74) $ (1.49) Efficiency ratio 66% n/m n/m n/m Return on average common shareholders' equity -53.55% -223.39% -59.41% -54.87% Return on average total assets -0.54% -4.31% -0.68% -1.35% Gross impaired loans to total assets 0.45% 0.52% 0.45% 0.52% Provision for credit losses as a % of average loans 0.33% 0.24% 0.34% 0.27% Number of full time equivalent staff 55 57 55 57 ----------------------------------------------- ------------------------- Balance Sheet Summary Cash and securities $ 448,144 $ 370,993 $ 448,144 $ 370,993 Total loans 929,831 1,110,807 929,831 1,110,807 Average loans 962,817 1,029,702 1,020,319 1,044,267 Total assets 1,411,725 1,512,467 1,411,725 1,512,467 Average assets 1,517,920 1,471,431 1,462,096 1,485,562 Deposits 1,217,136 1,389,455 1,217,136 1,389,455 Notes payable 77,933 70,405 77,933 70,405 Shareholders' equity 17,471 24,131 17,471 24,131 ----------------------------------------------- ------------------------- Capital ratios (Based on the subsidiary Pacific & Western Bank of Canada) Total regulatory capital $ 128,632 $ 100,705 $ 128,632 $ 100,705 Risk weighted assets 929,099 907,151 929,099 907,151 Assets-to-capital ratio 11.20 15.35 11.20 15.35 Tier 1 risk-based capital ratio 9.38% 8.90% 9.38% 8.90% Total risk-based capital ratio 13.84% 11.10% 13.84% 11.10% ----------------------------------------------- -------------------------
Non-GAAP measures:
Like most banks, Pacific & Western Credit Corp. (the "Corporation") through its wholly-owned subsidiary Pacific & Western Bank of
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
This management's discussion and analysis (MD&A) of operations and financial condition for the fourth quarter of fiscal 2009 should be read in conjunction with the unaudited interim consolidated financial statements for the period ended
Overview
Net income (loss) for the quarter ending
For the fourth quarter, net interest income (teb) increased to
At
Total Revenue (teb)
Total revenue (teb), which is comprised of net interest income after the provision for credit losses and other income (charges), was
Net Interest Income
Net interest income (teb) increased to
The improvement in the current quarter's net interest income and spread from the previous quarter and from the same period a year ago was due primarily to an increase in interest income from securities and a decrease in the Corporation's cost of deposits. Interest expense on deposits decreased in the current quarter as a result of a large amount of deposits which matured in the period being replaced by deposits with lower interest rates. The maturing deposits were booked a year ago when interest rates on deposits had risen significantly.
The decrease in spread for the year compared to last year was due primarily to the rapid decline in interest rates earlier in the year associated with our interest earning assets that was not equalled by a similar decline in the interest rates on our deposits. The large majority of our deposits are fixed term deposits versus demand deposits and therefore interest rates on our deposits reset more slowly than on our interest earning assets. This situation was rectified during the year as we were able to reprice our floating rate loans and replace the high interest rate deposits in the fourth quarter as noted above. Additional factors in the reduced spread were additional liquidity held during the year due to market conditions and increased interest expense on account of the new Series C and short term notes payable issued during the year.
Non-Interest Expenses
Non-interest expenses for the quarter were
Income Taxes
The Corporation's statutory federal and provincial income tax rate is approximately 32% compared to 33% last year with the difference due to reductions in future years' rates which were substantively enacted in the previous year. However, the Corporation's effective rate was impacted by non-taxable dividend income earned on preferred shares in our securities portfolio and the tax benefit on losses in the parent company not being recorded for accounting purposes. In addition during the fourth quarter the effective income tax rate was negatively impacted when the Corporation recorded in the income tax provision an adjustment of
At
As noted, a significant portion of the future income tax asset relates to income tax losses in the Bank caused primarily by declines in the market value of preferred shares, being primarily those of Canadian banks and insurance companies and operating losses of the Bank over the last two years. The ultimate realization of the future income tax asset cannot be determined with certainty, however management is of the opinion that it is more likely than not that the Bank will be able to realize the future income tax asset in future years. The realization of the future income tax asset is dependent upon the Bank being able to generate taxable income sufficient to offset these income tax losses. The ability to generate sufficient taxable income may be dependent upon the Bank generating income from operations or on converting non-taxable income sources to taxable income sources during the carry-forward period. It is also dependent upon the market value of the preferred shares recovering in value as they are carried at market value for income tax purposes with mark-to-market adjustments being added to or deducted from taxable income. At
Balance Sheet
Total assets at
Cash and Securities
Cash and securities, which are held for liquidity management purposes and to earn investment income, totalled
Included in corporate debt is an investment in a collateral debt obligation (CDO) with an amortized cost of
At
The Corporation's holdings of equity securities, consisting primarily of major Canadian banks and insurance companies' preferred shares, are subject to market fluctuations and at
Mortgages and Loans
Mortgages and loans totalled
Credit Quality
Gross impaired loans at the end of the year totalled
Specific provisions for credit losses for the year totalled
Other Assets
Other assets totalled
Deposits and Other Liabilities
Deposits are used as a primary source of financing growth in assets and are raised entirely through a well established and well diversified deposit broker network across
A second source of financing growth in assets and a source of liquidity is the use of margin lines and securities sold under repurchase agreements. From time to time, the Corporation uses these sources of short term financing when the cost of borrowing is less than the interest rates that would have to be paid on new deposits. At the end of the year, the Corporation had approximately
Notes Payable
Notes payable, net of issue costs, totalled
Preferred Share Liabilities
On
As the Class B Preferred Shares can be redeemed by the Corporation in 2019 for approximately
Liquidity
Pacific & Western Credit Corp., on a non-consolidated basis, is dependant upon the Bank to provide funding for the obligations of the parent company which total approximately
Shareholders' Equity
On
At the end of the year, shareholders' equity was
Common shares outstanding at the end of the year totalled 13,680,412 compared to 13,642,452 a year ago with the change due to common shares issued as part of the dividends on the Class B Preferred Shares. Outstanding common share options totalled 859,033 at the end of the year compared to 1,077,110 a year ago with the decrease due to the expiration of common share options. Our book value per common share at the end of the year was
At
Updated Share Information
At
Capital Management
Total regulatory capital in the Corporation's principal subsidiary, the Bank, was
The Bank's total risk-based capital ratio, which is the ratio of regulatory capital to risk-weighted assets, was 13.84% at the end of the year compared to 11.10% a year ago. The Bank's Tier 1 risk-based capital ratio, which is the ratio of Tier 1 capital to risk-weighted assets, was 9.38% at the end of the year compared to 8.90% a year ago. The Bank's assets-to-capital ratio was 11.20 at the end of the year compared to 15.35 a year ago. See note 9 to the interim consolidated financial statements for more information regarding capital management.
For a period of time during the quarter ended
Summary of Quarterly Results
(thousands of dollars except per share amounts) 2009 ----------------------------- ------------------------------------------- Q4 Q3 Q2 Q1 Results of operations: Total interest income per financial statements $ 21,783 $ 19,476 $ 19,338 $ 18,401 Teb adjustment 667 621 701 745 Total interest income 22,450 20,097 20,039 19,146 Yield on assets (%) 5.87% 4.97% 5.38% 5.09% Interest expense 17,698 19,877 18,560 18,013 Cost of funds (%) 4.63% 4.92% 4.98% 4.79% Net interest income 4,752 220 1,479 1,133 Net interest margin (%) 1.24% 0.05% 0.40% 0.30% Provision for credit losses 3,183 148 8 110 Impairment writedowns - - - - Other income (charges) 1,887 507 (275) (670) Total revenue 3,456 579 1,196 353 Non-interest expenses 4,405 3,816 3,328 3,418 Income (loss) before income taxes (949) (3,237) (2,132) (3,065) Income tax provision (recovery) 1,108 (268) 47 (375) Net income (loss) (2,057) (2,969) (2,179) (2,690) Earnings (loss) per share - basic $ (0.15) $ (0.22) $ (0.16) $ (0.20) - diluted $ (0.15) $ (0.22) $ (0.16) $ (0.20) (thousands of dollars except per share amounts) 2008 ----------------------------- ------------------------------------------- Q4 Q3 Q2 Q1 Results of operations: Total interest income per financial statements $ 17,702 $ 16,022 $ 18,105 $ 20,377 Teb adjustment 675 679 659 844 Total interest income 18,377 16,701 18,764 21,221 Yield on assets (%) 5.01% 4.79% 5.39% 5.71% Interest expense 16,587 15,078 15,820 16,165 Cost of funds (%) 4.52% 4.33% 4.54% 4.35% Net interest income 1,790 1,623 2,944 5,056 Net interest margin (%) 0.49% 0.46% 0.85% 1.36% Provision for credit losses 2,502 242 64 8 Impairment writedowns (11,341) (3,703) - - Other income (charges) 129 139 130 (86) Total revenue (11,924) (2,183) 3,010 4,962 Non-interest expenses 3,280 3,523 3,441 3,781 Income (loss) before income taxes (15,204) (5,706) (431) 1,181 Income tax provision (recovery) 605 (1,491) 170 645 Net income (loss) (15,809) (4,215) (601) 536 Earnings (loss) per share - basic $ (1.16) $ (0.31) $ (0.05) $ 0.03 - diluted $ (1.16) $ (0.31) $ (0.05) $ 0.03
The financial results for each of the last eight quarters are summarized above. Total interest income increased in the fourth quarter of 2009 as the Corporation was able to redeploy excess liquid assets into higher yielding and high quality corporate bonds resulting in an increase in interest income from securities. Interest income increased over the past three quarters as a result of an increase in interest income on loans as the Corporation was able to reprice its floating rate loans during the year to take into consideration increases in its costs of funds. The improvement in net interest income in the fourth quarter was a result of the above factors as well as a decrease in interest expense on deposits when high interest rate deposits booked last year matured and were replaced by deposits with lower interest rates.
The provision for credit losses increased during the fourth quarter of 2009 primarily as a result of an increase of
Other income (charges) during the past year included mark-to-market adjustments on interest rate swap contracts entered into for interest rate risk management purposes. These amounts were positive adjustments in the third and fourth quarters as a result of changes in interest rates on bankers' acceptances on which the interest on swap agreements are based and the impact of interest rate contracts unwound during the periods. In addition, other income (charges) in the fourth quarter included a gain of
Non-interest expenses in the third and fourth quarters increased primarily in the categories of salaries and benefits and general and administrative expenses. Salaries and benefits increased in the last quarter as a result of the hiring of additional staff and annual salary adjustments. General and administrative expenses increased in the last two quarters of 2009 due to volume related expenses and higher amounts for capital taxes, consulting and professional fees.
The provision (recovery) for income taxes increased in the fourth quarter of 2009 due primarily to a negative adjustment of
Significant Accounting Policies
Significant accounting policies are detailed on pages 56 to 60 of the Corporation's 2008 Annual Report.
Future Change in Accounting Policies
The CICA has announced that public companies will be required to converge Canadian Generally Accepted Accounting Principles with International Financial Reporting Standards (IFRS). For the Corporation, this will take with its fiscal period commencing
The Corporation is carrying out a project to identify and evaluate the impact of the transition to IFRS on its consolidated financial statements and develop a plan to complete the transition. This plan includes the following phases; diagnostics, design and planning, implementation and training. The impact of the transition to IFRS on the Corporation's financial statements is not yet determinable.
Risk Management
The risk management policies and procedures of the Corporation are provided in its annual MD&A for the year ended
Controls and Procedures
During the most recent interim period, there have been no changes in the Corporation's policies and procedures and other processes that comprise its internal control over financial reporting, that have materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.
Dated:
Forward-Looking Statements
The statements in this management's discussion and analysis that relate to the future are forward-looking statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, many of which are out of our control. Risks exist that predictions, forecasts, projections and other forward-looking statements will not be achieved. Readers are cautioned not to place undue reliance on these forward-looking statements as a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, the strength of the Canadian economy in general and the strength of the local economies within
The foregoing list of important factors is not exhaustive. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The forward-looking information contained in the management's discussion and analysis is presented to assist our shareholders in understanding our financial position and may not be appropriate for any other purposes. Except as required by securities law, we do not undertake to update any forward-looking statement that is contained in this management's discussion and analysis or made from time to time by the Corporation or on its behalf.
PACIFIC & WESTERN CREDIT CORP. Consolidated Balance Sheet (thousands of dollars) October 31 October 31 2009 2008 ------------ ------------ Assets Cash resources $ 172,297 $ 207,831 Securities 275,847 163,162 Mortgages and loans 929,831 1,110,807 Other assets 33,750 30,667 ------------ ------------ $ 1,411,725 $ 1,512,467 ------------ ------------ ------------ ------------ Liabilities and Shareholders' Equity Deposits $ 1,217,136 $ 1,389,455 Notes payable 77,933 70,405 Other liabilities 71,293 28,476 ------------ ------------ 1,366,362 1,488,336 ------------ ------------ Preferred share liabilities 27,892 - Shareholders' equity Share capital 40,226 39,387 Retained earnings (deficit) (6,454) 3,796 Accumulated other comprehensive income (loss) (16,301) (19,052) ------------ ------------ 17,471 24,131 ------------ ------------ $ 1,411,725 $ 1,512,467 ------------ ------------ ------------ ------------ PACIFIC & WESTERN CREDIT CORP. Consolidated Statement of Operations (thousands of dollars) for the three months ended for the year ended ------------------------- ------------------------- October 31 October 31 October 31 October 31 2009 2008 2009 2008 ------------------------- ------------------------- (unaudited) (unaudited) (unaudited) (unaudited) Interest income Interest income on loans $ 13,285 $ 13,582 $ 56,083 $ 53,490 Interest and income from securities 8,123 3,225 21,255 15,285 Loan fee income 375 895 1,660 3,431 ------------------------- ------------------------- 21,783 17,702 78,998 72,206 Interest expense Deposits and other 14,720 14,973 64,708 59,005 Notes payable 2,430 1,614 8,892 4,646 Preferred share liabilities 548 - 548 - ------------------------- ------------------------- 17,698 16,587 74,148 63,651 ------------------------- ------------------------- Net interest income 4,085 1,115 4,850 8,555 Provision for credit losses 3,183 2,502 3,449 2,815 ------------------------- ------------------------- Net interest income (loss) after provision for credit losses 902 (1,387) 1,401 5,740 Impairment writedown on securities - (11,341) - (15,044) Other income 1,887 129 1,449 312 ------------------------- ------------------------- 2,789 (12,599) 2,850 (8,992) ------------------------- ------------------------- Non-interest expenses Salaries and benefits 1,858 1,552 6,942 7,598 General and administrative 2,030 1,228 5,936 4,475 Premises and equipment 517 500 2,089 1,952 ------------------------- ------------------------- 4,405 3,280 14,967 14,025 ------------------------- ------------------------- Loss before income taxes (1,616) (15,879) (12,117) (23,017) Income tax provision (recovery) 441 (70) (2,222) (2,928) ------------------------- ------------------------- Net loss $ (2,057) $ (15,809) $ (9,895) $ (20,089) ------------------------- ------------------------- ------------------------- ------------------------- Basic loss per share $ (0.15) $ (1.16) $ (0.74) $ (1.49) ------------------------- ------------------------- ------------------------- ------------------------- Diluted loss per share $ (0.15) $ (1.16) $ (0.74) $ (1.49) ------------------------- ------------------------- ------------------------- ------------------------- Weighted average number of common shares 13,656,000 13,643,000 13,646,000 13,633,000 ------------------------- ------------------------- ------------------------- ------------------------- PACIFIC & WESTERN CREDIT CORP. Consolidated Statement of Comprehensive Income (Loss) (thousands of dollars) for the three months ended for the year ended ------------------------- ------------------------- October 31 October 31 October 31 October 31 2009 2008 2009 2008 ------------------------- ------------------------- (unaudited) (unaudited) (unaudited) (unaudited) Net loss $ (2,057) $ (15,809) $ (9,895) $ (20,089) Other comprehensive income (loss), net of tax: Net unrealized gains (losses) on assets held as available- for-sale(1) (2,345) (4,960) 1,767 (11,866) Amount transferred to net loss for hedges(2) - 27 - 190 Amount transferred to net loss for available-for-sale assets(3) 377 89 984 (38) Amount transferred to net loss for impairment writedown on available-for- sale assets(4) - 4,782 - (797) ------------------------- ------------------------- Other comprehensive income (loss) (1,968) (62) 2,751 (12,511) ------------------------- ------------------------- Total comprehensive income (loss) $ (4,025) $ (15,871) $ (7,144) $ (32,600) ------------------------- ------------------------- (1) Net of income tax benefit (expense) for the three months of $958 (2008-$470) and year of ($721) (2008-$5,085) (2) Net of income tax benefit (expense) for the three months of $nil (2008-($21)) and year of $nil (2008-($104)) (3) Net of income tax benefit (expense) for the three months of ($157) (2008-($37)) and year of ($413) (2008-$26) (4) Net of income tax benefit (expense) for the three months of $nil (2008-($362)) and year of $nil (2008 - $21) PACIFIC & WESTERN CREDIT CORP. Consolidated Statement of Changes in Shareholders' Equity (thousands of dollars) for the three months ended for the year ended ------------------------- ------------------------- October 31 October 31 October 31 October 31 2009 2008 2009 2008 ------------------------- ------------------------- (unaudited) (unaudited) (unaudited) (unaudited) Common shares Balance, beginning of period $ 35,663 $ 35,704 $ 35,663 $ 35,743 Shares issued - - - 288 Shares repurchased - (41) - (368) Issued on payment of Class B preferred share dividend 154 - 154 - ------------------------- ------------------------- Balance, end of period $ 35,817 $ 35,663 $ 35,817 $ 35,663 ------------------------- ------------------------- Class A preferred shares Balance, beginning of period $ 3,545 $ 3,545 $ 3,545 $ 3,545 Converted during the year (2,484) - (2,484) - ------------------------- ------------------------- Balance, end of period $ 1,061 $ 3,545 $ 1,061 $ 3,545 ------------------------- ------------------------- Class B preferred shares Balance, beginning of period $ - $ - $ - $ - Shares issued, net of costs 3,022 - 3,022 - ------------------------- ------------------------- Balance, end of period $ 3,022 $ - $ 3,022 $ - ------------------------- ------------------------- Contributed surplus Balance, beginning of period $ 298 $ 83 $ 179 $ 182 Fair value of stock option transactions (note 6) 28 96 147 622 Repurchase of shares - - - (625) ------------------------- ------------------------- Balance, end of period $ 326 $ 179 $ 326 $ 179 ------------------------- ------------------------- Retained earnings (deficit) Balance, beginning of period $ (4,282) $ 19,605 $ 3,796 $ 24,125 Net loss (2,057) (15,809) (9,895) (20,089) Dividends on preferred shares (115) - (355) (240) ------------------------- ------------------------- Balance, end of period $ (6,454) $ 3,796 $ (6,454) $ 3,796 ------------------------- ------------------------- Accumulated other comprehensive income (loss), net of taxes Balance, beginning of period $ (14,333) $ (18,990) $ (19,052) $ (6,541) Other comprehensive income (loss) (1,968) (62) 2,751 (12,511) ------------------------- ------------------------- Balance, end of period $ (16,301) $ (19,052) $ (16,301) $ (19,052) ------------------------- ------------------------- Total shareholders' equity $ 17,471 $ 24,131 $ 17,471 $ 24,131 ------------------------- ------------------------- ------------------------- ------------------------- PACIFIC & WESTERN CREDIT CORP. Consolidated Statement of Cash Flows (thousands of dollars) for the three months ended for the year ended ------------------------- ------------------------- October 31 October 31 October 31 October 31 2009 2008 2009 2008 ------------------------- ------------------------- (unaudited) (unaudited) (unaudited) (unaudited) Cash provided by (used in): Operations: Net loss $ (2,057) $ (15,809) $ (9,895) $ (20,089) Items not involving cash: Provision for credit losses 3,183 2,501 3,449 2,815 Impairment writedown on other assets - 11,341 - 11,341 Stock-based compensation (note 6) 28 96 147 622 Future income tax provision (recovery) 441 (70) (2,222) (2,928) Gain on sale of available-for-sale securities (4,648) (3) (9,970) (676) Gain on real estate held for sale (626) - (626) - Impairment writedown on securities - - - 3,703 Interest expense on Class B Preferred Shares 154 - 154 - Change in derivative financial instruments (1,823) - (296) 197 Change in other assets and liabilities (3,765) (12,224) (5,565) (30,467) ------------------------- ------------------------- (9,113) (14,168) (24,824) (35,482) ------------------------- ------------------------- Investing: Purchase of securities (119,137) (530,753) (975,356) (1,780,775) Proceeds from sale and maturity of securities 231,055 586,839 876,806 1,935,703 Mortgages and loans 60,426 (155,267) 178,043 (115,316) ------------------------- ------------------------- 172,344 (99,181) 79,493 39,612 ------------------------- ------------------------- Financing: Deposits (245,352) 215,723 (172,319) 106,699 Notes payable (7,647) - 35,893 34,443 Short term financings 46,578 (119,740) 46,578 (49,917) Proceeds of common shares issued - - - 288 Shares repurchased - (40) - (993) Dividends paid (115) - (355) (240) ------------------------- ------------------------- (206,536) 95,943 (90,203) 90,280 ------------------------- ------------------------- Increase (decrease) in cash resources (43,305) (17,406) (35,534) 94,410 Cash resources, beginning of period 215,602 225,237 207,831 113,421 ------------------------- ------------------------- Cash resources, end of period $ 172,297 $ 207,831 $ 172,297 $ 207,831 ------------------------- ------------------------- ------------------------- ------------------------- Supplementary cash flow information: Interest paid during the period $ 33,677 $ 21,758 $ 77,598 $ 65,425 Income taxes paid during the period $ - $ - $ - $ 68
PACIFIC & WESTERN CREDIT CORP.
Notes to the interim consolidated financial statements (unaudited)
For the year ended
1. Basis of presentation
The interim consolidated financial statements of Pacific & Western Credit Corp. (the Corporation) should be read in conjunction with the Corporation's consolidated financial statements for the year ended
The risk management policies and procedures of the Corporation relating to credit, liquidity, and market risk are included on pages 38 - 41 in the 2008 annual report and are an integral part of the Interim Consolidated Financial Statements.
2. Securities
The Corporation's cash and securities are comprised of cash, federal government treasury bills, federal and provincial government bonds, government insured mortgage-backed securities, corporate bonds and corporate preferred shares. The Corporation does not have any direct exposure to asset-backed commercial paper in its treasury portfolio.
Included in cash and securities at
3. Allowance for credit losses
for the three months ended --------------------------------------------------- October 31 October 31 2009 2008 --------------------------------------------------- General Specific Total Total (thousands of dollars) allowance allowance allowance allowance ------------------------------------------------------------------------- Balance, beginning of the period $ 5,267 $ 1,041 $ 6,308 $ 3,298 Provision for credit losses 3,134 49 3,183 2,502 Recoveries - 43 43 - ------------------------------------------------------------------------- Balance, end of period $ 8,401 $ 1,133 $ 9,534 $ 5,800 ------------------------------------------------------------------------- for the year ended --------------------------------------------------- October 31 October 31 2009 2008 --------------------------------------------------- General Specific Total Total (thousands of dollars) allowance allowance allowance allowance ------------------------------------------------------------------------- Balance, beginning of the period $ 5,212 $ 830 $ 6,042 $ 3,206 Provision for credit losses 3,189 260 3,449 2,815 Recoveries - 43 43 21 ------------------------------------------------------------------------- Balance, end of period $ 8,401 $ 1,133 $ 9,534 $ 6,042 -------------------------------------------------------------------------
Gross impaired loans at
4. Notes payable
At
5. Preferred share liabilities
On
6. Shareholders' equity
a. Share capital and contributed surplus:
Employee Stock Options ------------------------- Weighted- Common average shares exercise outstanding Number price ------------------------------------------------------------------------- Outstanding, October 31, 2008 13,642,452 1,077,110 $ 9.02 Granted - 50,000 5.00 Issued pursuant to Class B Preferred Share dividend 37,960 - - Exercised - - - Expired - (268,077) 9.33 Repurchased - - - ------------------------------------------------------------------------- Outstanding, end of period 13,680,412 859,033 $ 8.69 -------------------------------------------------------------------------
In addition, at
During the year ended
On
On
b. Accumulated other comprehensive income (loss):
The balance in accumulated other comprehensive income (loss), net of income taxes, consists of:
October 31 October 31 (thousands of dollars) 2009 2008 ------------------------------------------------------------------------- Net unrealized losses on assets held as available-for-sale $ (16,301) $ (19,052) ------------------------------------------------------------------------- Balance, end of period $ (16,301) $ (19,052) -------------------------------------------------------------------------
Net of income tax benefit of
7. Derivative instruments
At
8. Commitments and contingencies
The amount of credit related commitments represents the maximum amount of additional credit that the Corporation could be obligated to extend. Under certain circumstances, the Corporation may cancel loan commitments at its option. The amount with respect to the letters of credit are not necessarily indicative of credit risk as many of these arrangements are contracted for a limited period of usually less than one year and will expire or terminate without being drawn upon.
(thousands of dollars) ----------------------------------------------- Loan commitments $ 109,378 Letters of credit 30,133 ----------------------------------------------- $ 139,511 -----------------------------------------------
In the ordinary course of business, the Corporation and its subsidiaries are party to claims or possible claims against it. Management of the Corporation believes that the resolution of any outstanding claims will not be material to the financial position of the Corporation.
In the ordinary course of business, cash and securities are pledged against liabilities and off-balance sheet items. Details of assets pledged are as follows:
October 31 October 31 (thousands of dollars) 2009 2008 ------------------------------------------------------------------------- Collateral related to derivative contracts $ 14,271 $ 15,867 Collateral related to letters of credit 2,940 2,907 Obligations related to securities sold under repurchase agreements 46,578 - ------------------------------------------------------------------------- $ 63,789 $ 18,774 -------------------------------------------------------------------------
9. Capital Management
a. Overview:
The Corporation's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The impact of the level of capital on shareholders' return is also important and the Corporation recognizes the need to maintain a balance between the higher returns that might be possible with greater leverage and the advantages and security afforded by a sound capital position.
The Corporation's primary subsidiary is Pacific & Western Bank of
Capital is 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 consumer deposits and provide capacity for internally generated growth and strategic opportunities that do not otherwise require accessing the public capital markets, all the while providing a satisfactory return for shareholders. The Bank's regulatory capital is comprised of share capital, retained earnings and unrealized gains (losses) on available-for-sale equity securities (Tier 1 capital) and subordinated notes (Tier 2 capital).
The Bank monitors its capital adequacy and related capital ratios on a daily basis and has policies setting internal maximum and minimum amounts for its capital ratios. These capital ratios consist of the assets-to capital multiple and the risk-based capital ratios.
b. Assets-to-Capital Multiple:
The Bank's growth in total assets is limited by a permitted assets-to-capital multiple which is prescribed by OSFI and is defined as the ratio of the total assets of the Bank to its regulatory capital. The Bank's assets-to-capital multiple is calculated as follows:
October 31 October 31 (thousands of dollars) 2009 2008 ------------------------------------------------------------------------- Total assets (on and off-balance sheet) $ 1,441,012 $ 1,545,437 ------------------------------------------------------------------------- Capital Common shares $ 95,365 $ 87,365 Retained earnings 4,588 8,513 Unrealized loss on available-for-sale equity securities (12,821) (15,173) Subordinated debentures 41,500 20,000 ------------------------------------------------------------------------- Total regulatory capital $ 128,632 $ 100,705 ------------------------------------------------------------------------- Assets-to-capital ratio 11.20 15.35 -------------------------------------------------------------------------
For a period of time during the first quarter ended
c. Risk-Based Capital Ratios:
OSFI requires banks to measure capital adequacy in accordance with guidelines for determining risk-adjusted capital and risk-weighted assets including off-balance sheet credit instruments. Based on the deemed credit risk for each type of asset, a weighting of 0% to 150% is assigned to determine the risk-based capital ratio. OSFI requires banks to maintain a minimum total risk-based capital ratio of 10% and a Tier 1 risk-based capital ratio in excess of 7%.
In
The Bank's risk-based capital ratios are as follows, using the guidelines under
October 31 October 31 2009 2008 ------------------------------------------------------------------------- Notional/ Risk Notional/ Risk Drawn Weighted Drawn Weighted (thousands of dollars) Amount Balance Amount Balance ------------------------------------------------------------------------- Balance sheet assets $ 1,410,659 $ 848,686 $ 1,513,456 $ 809,747 Off-balance sheet assets 402,639 63,477 459,977 57,706 Charge for operational risk 16,936 39,698 ------------------------------------------------------------------------- Total risk-weighted assets $ 929,099 $ 907,151 ------------------------------------------------------------------------- Regulatory capital 128,632 100,705 ------------------------------------------------------------------------- Total risk-based capital ratio 13.84% 11.10% ------------------------------------------------------------------------- Tier 1 risk-based capital ratio 9.38% 8.90% -------------------------------------------------------------------------
10. Subsidiary company information:
The following table presents summary financial information of the Bank:
October 31 October 31 (thousands of dollars) 2009 2008 ------------------------------------------------------------ ------------ Cash resources $ 170,650 $ 207,095 Securities 275,847 163,162 Mortgages and loans 929,831 1,110,807 Other assets 34,331 32,392 ------------ ------------ $ 1,410,659 $ 1,513,456 ------------ ------------ ------------ ------------ Deposits $ 1,217,136 $ 1,389,455 Subordinated dntes payable 39,946 19,969 Other liabilities 69,925 27,206 ------------ ------------ 1,327,007 1,436,630 ------------ ------------ Share capital 95,365 87,365 Retained earnings 4,588 8,513 Accumulated other comprehensive income (loss) (16,301) (19,052) ------------ ------------ Shareholders equity 83,652 76,826 ------------ ------------ $ 1,410,659 $ 1,513,456 ------------ ------------ ------------ ------------ for the year ended ------------------------- October 31 October 31 (thousands of dollars) 2009 2008 ------------------------------------------------------------ ------------ Interest income $ 78,984 $ 72,176 Interest expense 68,502 61,556 ------------ ------------ Net interest income 10,482 10,620 Provision for credit losses 3,449 2,836 ------------ ------------ Net interest income after provision for credit losses 7,033 7,784 Other income (charges) 1,449 (14,769) ------------ ------------ Net interest income and other income (charges) 8,482 (6,985) Non-interest expense 14,630 12,794 ------------ ------------ Income (loss) before income taxes (6,148) (19,779) Income taxes (2,223) (4,838) ------------ ------------ Net income (loss) $ (3,925) $ (14,941) ------------ ------------ ------------ ------------
11. Comparative figures
Certain comparative figures have been reclassified to conform to the current period's presentation.
Pacific & Western Bank of
Pacific & Western Bank of
On behalf of the Board of Directors: David R. Taylor, President & C.E.O.
To receive company news releases, please contact: Carla McPhee at [email protected], (519) 675-4204
For further information: Director, Investor Relations: Wade MacBain, (800) 244-1509, [email protected]; Public Relations & Media: Tel Matrundola, Vice-President, (416) 203-0882, [email protected]; Visit our website at: http://www.pwbank.com
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