Pacific & Western Credit Corp. announces results for its second quarter ended April 30, 2009



    LONDON, ON, June 4 /CNW/ -

    
    SECOND QUARTER SUMMARY
    (three months ended April 30, 2009, compared to three months ended
    April 30, 2008, unless otherwise noted)

    -   During the quarter, the Corporation was successful in issuing
        additional Series C notes, resulting in cash of $10 million being
        invested in its subsidiary Pacific & Western Bank of Canada (the
        "Bank"). In addition, during the quarter the Bank issued $20 million
        in subordinated notes to a third party, further increasing its
        capital position.
    -   At April 30, 2009, total regulatory capital of the Bank increased by
        35% to $121.8 million from $89.9 million a year ago and from $94.1
        million at the end of the previous quarter.
    -   Loans and leases increased to $1.0 billion from $990 million a year
        ago.
    -   Credit quality remains strong with a ratio of gross impaired loans to
        total assets of 0.49% compared to 0.53% at the end of the previous
        quarter and which is considerably better than that of the industry.
    -   Net income (loss) for the quarter was ($2.2 million) or ($0.16) per
        share (($0.16) diluted) compared to ($601,000) or ($0.05) per share
        ($0.05 diluted) for the same period last year. For the six months
        ended April 30, 2009, net income (loss) was ($4.9 million) or ($0.37)
        per share (($0.37) diluted) compared to ($65,000) or ($0.01) per
        share (($0.01) diluted) for the same period a year ago.
    -   Total revenue (teb) for the quarter improved to $1.2 million from
        $311,000 for the previous quarter.
    -   Non-interest expenses were $3.3 million for the quarter compared to
        $3.4 million a year ago. For the six months ended April 30, 2009,
        non-interest expenses were $6.7 million compared to $7.2 million for
        the same period a year ago.
    

    PRESIDENT'S COMMENTS

    This quarter we were successful in further increasing our Bank's
regulatory capital, so that its capital ratios now compare quite favourably
with the industry and it has considerable capacity for growth. The opportunity
for growth in our target markets has never been better, competition has
significantly reduced primarily on account of foreign banks reducing their
activities in Canada or leaving all together. Net interest margins in our
target markets are at historic highs. The Bank's liquidity levels are high and
are increasing as we continue to purchase high quality corporate debt that is
eligible for margining under the Bank of Canada's Standing Liquidity Facility.
We plan to continue purchasing corporate debt as long as the risk return
relationship remains favourable.
    Our net interest income and spread, although showing some improvement
this quarter continued to suffer from the rapid decline in interest rates
associated with our assets that was not equaled by the decline in interest
rates associated with our deposits. The large majority of our deposits are
GICs with fixed terms which means there is always a lag between the resetting
of our assets' interest rates and our deposits' interest rates. A majority of
our deposits will reset during the summer months, which will result in a
significant widening of our spread and increase in our net interest income to
historical levels. Our Bank is well capitalized, very liquid and ideally
positioned to take advantage of the unprecedented opportunities that exist in
its target markets.


    
    FINANCIAL HIGHLIGHTS
    (unaudited)                       for the                for the
                                three months ended       six months ended
    ------------------------------------------------- -----------------------
    ($ thousands, except per    April 30    April 30    April 30    April 30
     share amounts)                 2009        2008        2009        2008
    ------------------------------------------------- -----------------------

    Results of operations (teb)
      Net interest income per
       financial statements    $     778   $   2,285   $   1,166   $   6,497
      Teb adjustment                 701         659       1,446       1,504
      Net interest income          1,479       2,944       2,612       8,001
      Spread                       0.40%       0.85%       0.34%       1.15%
      Provision for credit
       losses                          8          64         118          72
      Net interest income
       after provision for
       credit losses               1,471       2,880       2,494       7,929
      Other income (charges)        (275)        130        (945)         44
      Total revenue                1,196       3,010       1,549       7,973
      Non-interest expenses        3,328       3,441       6,746       7,222
      Net income (loss)           (2,179)       (601)     (4,869)        (65)
      Earnings (loss) per
       common share:
        Basic                  $   (0.16)  $   (0.05)  $   (0.37)  $   (0.01)
        Diluted                $   (0.16)  $   (0.05)  $   (0.37)  $   (0.01)
      Efficiency ratio               n/m   $    1.12         n/m   $    0.90
      Return on average common
       shareholders' equity      -70.97%      -5.82%     -60.40%      -0.76%
      Return on average total
       assets                     -0.58%      -0.17%      -0.63%      -0.01%
      Gross impaired loans to
       total assets                0.49%       0.10%       0.49%       0.10%
      Provision for credit
       losses as a % of
       average loans               0.00%       0.01%       0.01%       0.01%
      Number of full time
       equivalent staff               54          58          54          58
    ------------------------------------------------- -----------------------

    Balance Sheet Summary
      Cash and securities      $ 507,359   $ 309,816   $ 507,359   $ 309,816
      Total loans              1,044,556     989,714   1,044,556     989,714
      Average loans            1,080,045     982,636   1,077,682     983,721
      Total assets             1,583,321   1,334,269   1,583,321   1,334,269
      Average assets           1,527,884   1,412,476   1,547,894   1,396,463
      Deposits                 1,417,663   1,214,123   1,417,663   1,214,123
      Notes payable              103,647      40,805     103,647      40,805
      Shareholders' equity        16,271      47,499      16,271      47,499
    ------------------------------------------------- -----------------------

    Capital ratios
    (Based on the subsidiary
     Pacific & Western Bank
     of Canada)
      Total regulatory
       capital                 $ 121,845   $  89,927   $ 121,845   $  89,927
      Risk weighted assets       951,515     833,103     951,515     833,103
      Assets-to-capital ratio      13.21       15.21       13.21       15.21
      Tier 1 risk-based
       capital ratio               8.60%       8.39%       8.60%       8.39%
      Total risk-based capital
       ratio                      12.81%      10.79%      12.81%      10.79%
    ------------------------------------------------- -----------------------
    

    Non-GAAP measures:

    Like most banks, Pacific & Western Credit Corp. (the "Corporation")
through its wholly-owned subsidiary Pacific & Western Bank of Canada (the
"Bank") analyzes revenue on a taxable equivalent basis (teb) to permit uniform
measurement and comparison of net interest income. Net interest income
includes tax-exempt income on certain securities. Since this income is not
taxable, the rate of interest or dividends received is lower than would apply
to a loan or taxable security of the same amount. The taxable equivalent basis
includes an adjustment that increases interest income and the provision for
income taxes by the same amount that adjusts the income on the tax-exempt
securities to what income would have been had it been taxed at the statutory
rate.

    
    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 second quarter of fiscal 2009 should be read in
conjunction with the unaudited interim consolidated financial statements for
the period ended April 30, 2009, included herein, and the audited consolidated
financial statements and MD&A for the year ended October 31, 2008, which are
available on SEDAR at www.sedar.com. Except as discussed below, all other
factors discussed and referred to in the MD&A for the year ended October 31,
2008, remain substantially unchanged.

    Overview

    Net income (loss) for the quarter was ($2.2 million) or ($0.16) per share
(($0.16) diluted) compared to ($601,000) or ($0.05) per share ($0.05 diluted)
for the same period a year ago. On a year-to-date basis, net income (loss) was
($4.9 million) or ($0.37) per share (($0.37) diluted) compared to ($65,000) or
($0.01) per share ($0.01 diluted) for the same period a year ago. Net income
(loss) was impacted by a decrease in net interest income which was $1.5
million for the quarter compared to $1.1 million for the previous quarter and
$2.9 million for the same period a year ago. On a year-to-date basis, net
interest income (teb) was $2.6 million compared to $8.0 million for the same
period a year ago. The decrease in net interest income from a year ago was due
primarily to a compression of spreads caused by a rapid decline in interest
rates associated with our interest earning assets that was not equalled by a
similar decline in the interest rates on our deposits. Despite the compression
of spreads, the Corporation has maintained its focus on low risk lending and
investing opportunities and does not have any direct exposure to the North
American subprime lending market or to asset-backed commercial paper.
    At April 30, 2009, total assets were $1.6 billion compared to $1.3
billion a year ago and $1.5 billion at the end of the previous quarter.
Lending assets were $1.0 billion at the end of the quarter compared to $990
million a year ago and $1.1 billion at the end of the previous quarter. Credit
quality remains strong with a ratio of gross impaired loans as a percentage of
assets of 0.49% at the end of the quarter compared to 0.53% at the end of the
previous quarter.

    Total Revenue (teb)

    Total revenue (teb), which is comprised of net interest income after the
provision for credit losses and other income (charges), was $1.2 million for
the quarter compared to $311,000 for the previous quarter and $3.0 million a
year ago. On a year-to-date basis, total revenue (teb) was $1.6 million
compared to $8.0 million a year ago. The decrease in total revenue from a year
ago was due primarily to a decrease in net interest income and charges
totalling $786,000 included in other income (charges) recorded in the current
year relating to a mark-to-market adjustments on interest rate swap contracts
that had been entered into for interest risk management purposes.

    Net Interest Income

    Net interest income (teb) increased to $1.5 million for the quarter
compared to $1.1 million for the previous quarter and $2.9 million a year ago.
On a year-to-date basis, net interest income (teb) was $2.6 million compared
to $8.0 million for the same period a year ago. Net interest margin or spread
(teb), which is net interest income as a percentage of average assets,
increased to 0.40% for the quarter compared to 0.29% for the previous quarter
and 0.85% a year ago. On a year-to-date basis, spread (teb) was 0.34% compared
to 1.15% for the same period a year ago. As discussed above, the decrease in
spread from a year ago was due primarily to a rapid decline in interest rates
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 reset more slowly than on our assets.

    Non-Interest Expenses

    Non-interest expenses for the quarter were $3.3 million compared to $3.4
million a year ago and for the six month period ending April 30, 2009 were
$6.7 million compared to $7.2 million for the same period a year ago. The
decrease in non-interest expenses was primarily in salaries and benefits
resulting from reductions in staff and a reduction in the costs of employee
benefits, including lower amounts for stock-based compensation. While there
were some increases in volume related general and administrative expenses,
these were offset by targeted reductions in discretionary spending.

    Income Taxes

    The Corporation's statutory federal and provincial income tax rate is
approximately 32% compared to 34% last year with the difference due to rate
reductions 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. These
items resulted in an effective tax rate of 23% and an income tax recovery of
$654,000 for the quarter and an effective tax rate of 27% and an income tax
recovery of $1.8 million for the six months ended April 30, 2009.
    At April 30, 2009, the Corporation had a future income tax asset of
approximately $13.8 million which is primarily a result of income tax losses
in the Bank from the current and previous periods, the benefit of which was
recorded at the time. This amount compares to $13.9 million at the end of the
previous quarter and $7.0 million a year ago. The income tax loss
carryforwards in the Bank are scheduled to expire beginning in 2027 if
unutilized. A significant portion of the future tax asset relates to declines
in the market value of preferred shares, being primarily those of Canadian
banks and insurance companies. 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 Corporation 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 increasing
regulatory capital to facilitate growth in its lending portfolio, 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. As discussed below, at April 30, 2009, these preferred
shares traded at a value approximately $25.3 million below their amortized
cost, improving from a value of $27.3 million below their amortized cost at
January 31, 2009.

    Balance Sheet

    Total assets at April 30, 2009, were $1.6 billion compared to $1.5
billion at the end of previous quarter and $1.3 billion a year ago. The
increase from a year ago was in cash and securities which increased to $507
million from $310 million and in lending assets which grew to $1.0 billion
from $990 million a year ago.

    Cash and Securities

    Cash and securities, which are held for liquidity management purposes and
to earn investment income, totalled $507 million compared to $310 million a
year ago with the increase due to higher liquidity levels being maintained as
a result of current market conditions. Securities typically consist of
Government of Canada treasury bills and bonds and corporate debt and preferred
shares. Included in corporate debt is an investment in a collateral debt
obligation (CDO) with an amortized cost of $5.6 million and a fair value based
on external valuation models of $785,000 compared to a fair value of $571,000
at the end of the previous quarter. During 2008, the Corporation reclassified
the CDO from the available-for-sale category to held-to-maturity. This
reclassification was based on the view that carrying the investment at
amortized cost was more appropriate given the lack of verifiable inputs for
the valuation model being used to determine fair value and the Corporation's
intention to hold the investment to maturity. This CDO was arranged by a major
Canadian bank and is secured by corporate credits.
    The Corporation does not own any asset-backed commercial paper and
therefore is not exposed to any direct losses from this type of security as a
result of market instabilities.
    At April 30, 2009, the net unrealized loss in our securities portfolio
was $23.9 million compared to a net unrealized loss of $27.7 million at the
end of the previous quarter and $17.7 million a year ago. These amounts are
recorded net of income taxes in Accumulated Other Comprehensive Income (Loss).
The decrease in the net unrealized loss from the end of the previous quarter
is related primarily to increases in the market value of the Corporation's
investments in the preferred shares of major Canadian banks and insurance
companies. With the exception of the value of the CDO, the fair values of all
securities are based on market values as virtually all of the securities we
own are publicly traded.
    Market conditions over the past year have resulted in declines in the
market value of equity securities held by the Corporation for investment
purposes. These equity securities, consisting primarily of major Canadian
banks and insurance companies' preferred shares, are subject to market
fluctuations and at April 30, 2009, traded at a value approximately $25.3
million below their amortized cost compared to $27.3 million at the end of the
previous quarter and $13.7 million a year ago. The Corporation intends to hold
these securities until a recovery in value is achieved. The preferred shares
have provisions that will allow the issuer to redeem at various dates
commencing over the years 2010 to 2013; however, there is no promise or legal
requirement for the issuers to redeem these shares on those dates. Further
recovery in their market values is dependent upon future market conditions and
the ultimate future redemption of the shares by the issuers. Management is of
the opinion that it is likely that these preferred shares will be redeemed by
the issuers at their redemption dates.
    The Corporation is currently redeploying some of its holdings of excess
cash into high quality and highly liquid corporate debt in order to earn
higher amounts of investment income while still maintaining high credit
quality in the securities portfolio.

    Mortgages and Loans

    Lending assets grew to $1.0 billion at the end of the quarter from $990
million a year ago with the growth primarily in public sector loans and
commercial mortgages. As noted above, the Corporation has maintained its focus
on low risk lending and investing opportunities, continuing to focus on
providing financing to public sector entities, high quality corporate
borrowers and purchasing insured residential mortgage pools. New lending in
the quarter totalled $101 million compared to $90 million for the same period
a year ago and on a year-to-date basis was $294 million compared to $136
million for the same period a year ago. Loan repayments for the current
quarter totalled $195 million and for the year-to-date totalled $383 million.
The repayments included the sale of insured mortgage pools which were sold
primarily for liquidity and capital management purposes.

    Other Assets

    Other assets totalled $31.4 million at the end of the quarter compared to
$34.7 million a year ago. Included in other assets is the Corporation's
investment in DA which is accounted for as an available-for-sale asset and
carried at market value and the future income tax asset referred to
previously. At April 30, 2009, the investment in DA had a carrying value of
$2.0 million compared to $10.7 million a year ago with the change due to a
decrease in the investment's market value. During 2008, the Corporation had
recorded an impairment charge of $11.3 million against this investment as a
result of the length of time the shares of DA had been trading below the
Corporation's amortized cost as well as the significance of the decline in
value below the Corporation's amortized cost.

    Deposits and Financing

    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 Canada. Deposits at the end of the quarter were $1.42
billion compared to $1.21 billion a year ago and consist primarily of
guaranteed investment certificates. Of these amounts, $38.5 million or
approximately 3% of total deposits was in the form of demand deposits at the
end of the quarter compared to $12.1 million or approximately 1% of total
deposits a year ago, with the remaining deposits having fixed terms.
    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 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 quarter, there were no amounts outstanding
related to margin lines or securities sold under repurchase agreements.

    Notes Payable

    Notes payable, net of issue costs, totalled $103.7 million at April 30,
2009 compared to $73.3 million at the end of the previous quarter and $40.8
million a year ago with the increase due to new notes being issued. Net
proceeds from the issuance of additional notes payable were used primarily to
increase the level of regulatory capital in the Bank and for working capital
purposes in the parent company. At April 30, 2009 notes payable consist of
Series C Notes totalling $64.0 million which mature in 2018, Series A Notes
totalling $11.5 million which mature in 2010 and short term notes totalling
$11.6 million which mature during the remainder of 2009. The Corporation
currently has signed subscription agreements for the issuance of additional
Series C notes that are sufficient to repay the notes maturing during the
remainder of 2009. Notes payable bear interest at rates ranging from 7.0% to
9.25% per annum. In addition, as described below, the Corporation has
subordinated notes of the Bank totalling $20 million owing to a third party.
These subordinated notes bear interest at 11% and mature in 2019.
    At April 30, 2009, with the increase in the notes issued by Pacific &
Western Credit Corp. during the year, a difference of approximately $67
million currently exists between subordinated notes of the Bank owned by
Pacific & Western Credit Corp. and the notes payable it has issued to outside
parties. This has resulted in a deficiency in cash flows and net interest
income in Pacific & Western Credit Corp. on a non-consolidated basis.
Management plans to reduce this difference by the parent company issuing
equity with the proceeds being invested in a combination of equity and
interest earning subordinated debt of the Bank.

    Shareholders' Equity

    At the end of the quarter, shareholders' equity was $16.3 million
compared to $47.5 million a year ago with the decrease due primarily to the
net loss incurred over the past year, the change in Accumulated Other
Comprehensive Income (Loss), and common shares repurchased and cancelled under
the Normal Course Issuer Bid. Accumulated Other Comprehensive Income (Loss) at
April 30, 2009 was ($21.9 million) compared to ($15.5 million) a year ago with
the change due primarily to the decrease in the market value of preferred
shares owned by the Corporation in his securities portfolio.
    Common shares outstanding at the end of the quarter totalled 13,642,452
compared to 13,598,052 a year ago with the change due to the exercise of
common share options offset by shares repurchased for cancellation.
Outstanding common share options totalled 895,401 at the end of the quarter
compared to 1,165,477 a year ago. Our book value per common share at the end
of the quarter was $0.93 compared to $3.23 a year ago.
    In July 2008, the Corporation announced that it had filed a Notice of
Intention to make a Normal Course Issuer Bid, pursuant to which the
Corporation may purchase for cancellation up to 500,000 of its common shares.
The Bid commenced on July 22, 2008 and will terminate on July 21, 2009. The
price that the Corporation pays for any common shares is the market price at
the time of purchase. To April 30, 2009, the Corporation has repurchased for
cancellation under this bid 7,300 common shares for a total cost of $36,500.
It is anticipated that the Corporation will not make any further purchases
pursuant to this bid.

    Credit Quality

    Gross impaired loans at the end of the quarter totalled $7.8 million or
0.49% of total assets compared to $7.8 million or 0.53% of total assets at the
end of the previous quarter and $1.4 million or 0.10% of total assets a year
ago. The increase in impaired loans from a year ago was due mainly to the
foreclosure in the quarter of property, primarily a hospital facility, which
secured a loan that had become impaired.

    Updated Share Information

    At June 3, 2009, there was no change in the number of common shares
outstanding since April 30, 2009. At the same date, there were 821,067 stock
options outstanding with the change since April 30, 2009 due to stock options
that expired.

    Capital Management

    Total regulatory capital in the Corporation's principal subsidiary, the
Bank, was $121.8 million at the end of the quarter compared to $94.1 million
at the end of the previous quarter and $89.9 million a year ago. The increase
in total regulatory capital from the previous quarter and from a year ago was
due primarily to additional capital invested in the Bank offset by changes in
the market value of preferred shares of Canadian banks and insurance companies
which the Bank holds in its securities portfolio. Regulatory capital includes
the after tax effect of unrealized gains and losses of available-for-sale
equity securities owned by the Bank.
    The Bank's total risk-based capital ratio, which is the ratio of
regulatory capital to risk-weighted assets, was 12.81% at April 30, 2009
compared to 10.54% at the end of the previous quarter and 10.79% 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 8.60% at April 30, 2009 compared to 8.30%
at the end of the previous quarter and 8.39% a year ago. The Bank's
assets-to-capital ratio was 13.21 at the end of the quarter year compared to
15.98 at the end of the previous quarter and 15.21 a year ago. See note 8 to
the interim consolidated financial statements for more information regarding
capital management.
    For a period of time during the previous quarter ended January 31, 2009,
the Bank estimated that it had, on a temporary basis, exceeded by a minor
amount, the assets-to-capital multiple established by OSFI. This exception
took place primarily as a result of a rapid decline in the market value of
preferred shares held in the Bank's securities portfolio which are primarily
those of major Canadian banks and insurance companies. This decline took place
as a result of market volatility versus any credit impairment in the issuers
of the securities. In January 2009, the Bank's adherence to this requirement
was re-established and has been adhered to since that date.


    
    Summary of Quarterly Results

    (thousands of
     dollars except
     per share
     amounts)             2009                          2008
    ------------- ------------------- ---------------------------------------
                      Q2        Q1        Q4        Q3        Q2        Q1
    Results of
     operations:
    Total interest
     income per
     financial
     statements   $ 19,338  $ 18,401  $ 17,702  $ 16,022  $ 18,105  $ 20,377
    Teb adjustment     701       703       675       679       659       844
    Total interest
     income         20,039    19,104    18,377    16,701    18,764    21,221
    Yield on
     assets (%)      5.38%     5.08%     5.01%     4.79%     5.39%     5.71%
    Interest
     expense        18,560    18,013    16,587    15,078    15,820    16,165
    Cost of
     funds (%)       4.98%     4.79%     4.52%     4.33%     4.54%     4.35%
    Net interest
     income          1,479     1,091     1,790     1,623     2,944     5,056
    Net interest
     margin (%)      0.40%     0.29%     0.49%     0.46%     0.85%     1.36%
    Provision for
     credit losses       8       110     2,502       242        64         8
    Impairment
     writedowns          -         -   (11,341)   (3,703)        -         -
    Other income
     (charges)        (275)     (670)      129       139       130       (86)
    Total revenue    1,196       311   (11,924)   (2,183)    3,010     4,962
    Non-interest
     expenses        3,328     3,418     3,280     3,523     3,441     3,781
    Income (loss)
     before income
     taxes          (2,132)   (3,107)  (15,204)   (5,706)     (431)    1,181
    Income tax
     provision
     (recovery)        (47)     (417)      605    (1,491)      170       645
    Net income
     (loss)         (2,179)   (2,690)  (15,809)   (4,215)     (601)      536
    Earnings (loss)
     per share
      -basic      $  (0.16) $  (0.20) $  (1.16) $  (0.31) $  (0.05) $   0.03
      -diluted    $  (0.16) $  (0.20) $  (1.16) $  (0.31) $  (0.05) $   0.03


    (thousands of
     dollars except
     per share
     amounts)             2007
    ------------- -------------------
                      Q4        Q3
    Results of
     operations:
    Total interest
     income per
     financial
     statements   $ 18,795  $ 16,978
    Teb adjustment     715       559
    Total interest
     income         19,510    17,537
    Yield on
     assets (%)      5.77%     5.37%
    Interest
     expense        15,018    13,757
    Cost of
     funds (%)       4.44%     4.21%
    Net interest
     income          4,492     3,780
    Net interest
     margin (%)      1.33%     1.16%
    Provision for
     credit losses     198       142
    Impairment
     writedowns          -         -
    Other income
     (charges)         114       260
    Total revenue    4,408     3,898
    Non-interest
     expenses        3,049     3,643
    Income (loss)
     before income
     taxes           1,359       255
    Income tax
     provision
     (recovery)        721       128
    Net income
     (loss)            638       127
    Earnings (loss)
     per share
      -basic      $   0.04  $   0.01
      -diluted    $   0.04  $      -
    

    Net interest income (teb) and spread (teb) for the second quarter
improved to $1.5 million and 0.40% respectively from the quarter ended January
31, 2009. This improvement was a result of an increase in total assets which
saw cash and securities increase from $325 million to $507 million and a
redeployment of low yielding securities into higher yielding securities that
began during the quarter. Net interest income and spread have been less than
the levels of previous quarters however as a result of a compression of
spreads as discussed earlier. In addition, net interest income has remained
lower than last year due to higher levels of liquid assets held as a
contingency against potential market disruptions.
    Other income (charges) in the current and previous quarters include
charges totalling $83,000 and $703,000 respectively relating to mark-to-market
adjustments on interest rate swap contracts entered into for interest rate
risk management purposes.
    Non-interest expenses in the current quarter continue to decrease from
previous quarters primarily due to reductions in staff and a reduction in
employee benefits including lower amounts for stock-based compensation. While
there were some increases in volume related general and administrative
expenses, these were offset by targeted reductions in discretionary spending.
    The provision (recovery) for income taxes increased in the fourth quarter
primarily due to a valuation allowance of $2.7 million being recorded against
the future income tax asset in the parent company Pacific & Western Credit
Corp. The provision (recovery) for income taxes in the first and second
quarters of 2009 are more reflective of the Corporation's statutory income tax
rate of 32%, adjusted by factors including non-taxable dividend income earned
on preferred shares in the Bank's securities portfolio and the tax benefit on
losses in the parent company not being recorded for accounting purposes.

    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 November 1, 2011. The Corporation has commenced a
review of the new standards however the impact of IFRS convergence on the
Corporation's consolidated 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 October 31, 2008, and are found
on pages 38 to 41 of the Corporation's 2008 Annual Report.

    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: June 3, 2009

    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 Canada in which we
conduct operations; the effects of changes in monetary and fiscal policy,
including changes in interest rate policies of the Bank of Canada; the effects
of competition in the markets in which we operate; inflation; capital market
fluctuations; the timely development and introduction of new products in
receptive markets; the impact of changes in the laws and regulations
regulating financial services; changes in tax laws; technological changes;
unexpected judicial or regulatory proceedings; unexpected changes in consumer
spending and savings habits; and our anticipation of and success in managing
the risks implicated by the foregoing. For a detailed discussion of certain
key factors that may affect our future results, please see page 42 of our 2008
Annual Report.
    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)

                                         April 30    October 31    April 30
                                           2009         2008         2008
                                      ------------- ------------ ------------
                                        (unaudited)               (unaudited)

    Assets
    Cash resources                     $   231,098  $   207,831  $   160,847
    Securities                             276,261      163,162      148,969
    Mortgages and loans                  1,044,556    1,110,807      989,714
    Other assets                            31,406       30,667       34,739
                                      ------------- ------------ ------------

                                       $ 1,583,321  $ 1,512,467  $ 1,334,269
                                      ------------- ------------ ------------
                                      ------------- ------------ ------------

    Liabilities and Shareholders'
     Equity
    Deposits                           $ 1,417,663  $ 1,389,455  $ 1,214,123
    Notes payable                          103,647       70,405       40,805
    Other liabilities                       45,740       28,476       31,842
                                      ------------- ------------ ------------
                                         1,567,050    1,488,336    1,286,770
                                      ------------- ------------ ------------

    Shareholders' equity
    Share capital                           39,451       39,387       39,143
    Retained earnings (deficit)             (1,313)       3,796       23,820
    Accumulated other comprehensive
     income (loss)                         (21,867)     (19,052)     (15,464)
                                      ------------- ------------ ------------
                                            16,271       24,131       47,499
                                      ------------- ------------ ------------

                                       $ 1,583,321  $ 1,512,467  $ 1,334,269
                                      ------------- ------------ ------------
                                      ------------- ------------ ------------



    PACIFIC & WESTERN CREDIT CORP.
    Consolidated Statement of Operations
    (thousands of dollars)

                                   for the                   for the
                             three months ended          six months ended
                          ------------------------- -------------------------
                            April 30     April 30     April 30     April 30
                              2009         2008         2009         2008
                          ------------------------- -------------------------
                           (unaudited)  (unaudited)  (unaudited)  (unaudited)

    Interest income
      Interest income
       on loans           $    15,512  $    13,317  $    30,630  $    27,275
      Interest and income
       from securities          3,629        3,968        6,335        9,460
      Loan fee income             197          820          774        1,747
                          ------------------------- -------------------------
                               19,338       18,105       37,739       38,482

    Interest expense
      Deposits and other       16,440       14,824       32,773       30,106
      Notes payable             2,120          996        3,800        1,879
                          ------------------------- -------------------------
                               18,560       15,820       36,573       31,985
                          ------------------------- -------------------------

      Net interest income         778        2,285        1,166        6,497

      Provision for
       credit losses                8           64          118           72
                          ------------------------- -------------------------

      Net interest income
       after provision
       for credit losses          770        2,221        1,048        6,425

      Other income
       (charges)                 (275)         130         (945)          44
                          ------------------------- -------------------------

                                  495        2,351          103        6,469
                          ------------------------- -------------------------

    Non-interest expenses
      Salaries and
       benefits                 1,685        1,966        3,341        4,112
      General and
       administrative           1,092          989        2,323        2,142
      Premises and
       equipment                  551          486        1,082          968
                          ------------------------- -------------------------
                                3,328        3,441        6,746        7,222
                          ------------------------- -------------------------

      Income (loss) before
       income taxes            (2,833)      (1,090)      (6,643)        (753)

      Income tax (recovery)
       provision                 (654)        (489)      (1,774)        (688)
                          ------------------------- -------------------------

    Net income (loss)     $    (2,179) $      (601) $    (4,869) $       (65)
                          ------------------------- -------------------------
                          ------------------------- -------------------------

    Basic earnings (loss)
     per share            $     (0.16) $     (0.05) $     (0.37) $     (0.01)
                          ------------------------- -------------------------
                          ------------------------- -------------------------

    Diluted earnings
     (loss) per share     $     (0.16) $     (0.05) $     (0.37) $     (0.01)
                          ------------------------- -------------------------
                          ------------------------- -------------------------

    Weighted average
     number of common
     shares                13,642,000   13,602,000   13,642,000   13,626,000
                          ------------------------- -------------------------
                          ------------------------- -------------------------



    PACIFIC & WESTERN CREDIT CORP.
    Consolidated Statement of Comprehensive Income (Loss)
    (thousands of dollars)

                                   for the                   for the
                             three months ended          six months ended
                          ------------------------- -------------------------
                            April 30     April 30     April 30     April 30
                              2009         2008         2009         2008
                          ------------------------- -------------------------
                           (unaudited)  (unaudited)  (unaudited)  (unaudited)

    Total net income
     (loss)               $    (2,179) $      (601) $    (4,869) $       (65)
    Other comprehensive
     income (loss), net
     of tax:
      Net unrealized losses
       on assets held as
       available-for-sale(1)    1,636       (3,716)      (3,238)      (8,876)
      Amount transferred
       to net income (loss)
       for hedges(2)                -           54            -          109
      Amount transferred to
       net income (loss)
       for available-for-
       sale assets(3)              91          (33)         423         (156)
                          ------------------------- -------------------------
      Total other
       comprehensive
       income (loss)            1,727       (3,695)      (2,815)      (8,923)
                          ------------------------- -------------------------
    Total comprehensive
     income (loss)        $      (452) $    (4,296) $    (7,684) $    (8,988)
                          ------------------------- -------------------------

    (1) Net of income tax benefit (expense) for the three months of ($1,189)
        (2008-$1,749) and six months of $433 (2008-$4,177)
    (2) Net of income tax benefit (expense) for the three months of $nil
        (2008-($28)) and six months of $nil (2008-($58))
    (3) Net of income tax benefit (expense) for the three months of ($40)
        (2008-$14) and six months ($178) (2008-$77)



    PACIFIC & WESTERN CREDIT CORP.
    Consolidated Statement of Changes in Shareholders' Equity
    (thousands of dollars)

                                   for the                   for the
                             three months ended          six months ended
                          ------------------------- -------------------------
                            April 30     April 30     April 30     April 30
                              2009         2008         2009         2008
                          ------------------------- -------------------------
                           (unaudited)  (unaudited)  (unaudited)  (unaudited)

    Common shares
    Balance, beginning
     of period            $    35,663  $    35,532  $    35,663  $    35,743
    Shares issued                   -           30            -           36
    Shares repurchased              -          (44)           -         (261)
                          ------------------------- -------------------------
    Balance, end of
     period               $    35,663  $    35,518  $    35,663  $    35,518
                          ------------------------- -------------------------

    Class A preferred
     shares
                          ------------------------- -------------------------
    Balance, beginning
     and end of period    $     3,545  $     3,545  $     3,545  $     3,545
                          ------------------------- -------------------------

    Contributed surplus
    Balance, beginning
     of period            $       217  $         -  $       179  $       182
    Fair value of stock
     option transactions
     (note 5)                      26          166           64          429
    Repurchase of shares            -          (86)           -         (531)
                          ------------------------- -------------------------
    Balance, end of
     period               $       243  $        80  $       243  $        80
                          ------------------------- -------------------------

    Retained earnings
     (deficit)
    Balance, beginning
     of period            $       866  $    24,421  $     3,796  $    24,125
    Net income (loss)          (2,179)        (601)      (4,869)         (65)
    Dividends on
     preferred shares                            -         (240)        (240)
                          ------------------------- -------------------------
    Balance, end of
     period               $    (1,313) $    23,820  $    (1,313) $    23,820
                          ------------------------- -------------------------

    Accumulated other
     comprehensive income
     (loss), net of taxes
    Balance, beginning
     of period            $   (23,594) $   (11,769) $   (19,052) $    (6,541)
    Other comprehensive
     income (loss)              1,727       (3,695)      (2,815)      (8,923)
                          ------------------------- -------------------------
    Balance, end of
     period               $   (21,867) $   (15,464) $   (21,867) $   (15,464)
                          ------------------------- -------------------------

    Total shareholders'
     equity               $    16,271  $    47,499  $    16,271  $    47,499
                          ------------------------- -------------------------
                          ------------------------- -------------------------



    PACIFIC & WESTERN CREDIT CORP.
    Consolidated Statement of Cash Flows
    (thousands of dollars)

                                  for the                   for the
                             three months ended         six months ended
                          ------------------------- -------------------------
                             April 30     April 30     April 30    April 30
                               2009         2008         2009        2008
                          ------------------------- -------------------------
                           (unaudited)  (unaudited)  (unaudited)  (unaudited)

    Cash provided by
     (used in):

    Operations:
    Net income (loss)     $    (2,179) $      (601) $    (4,869) $       (65)
    Items not involving
     cash:
      Provision for
       credit losses                8           64          118           72
      Stock-based
       compensation
       (note 5)                    26          166           64          429
      Future income tax
       provision (recovery)      (654)        (489)      (1,774)        (688)
      Gain on sale of
       available-for-sale
       securities              (1,032)        (165)      (1,203)        (664)
      Change in derivative
       financial
       instruments                 83            -          786          197
    Change in other assets
     and liabilities            1,839       (6,334)         (68)      (9,150)
                          ------------------------- -------------------------
                               (1,909)      (7,359)      (6,946)      (9,869)
                          ------------------------- -------------------------

    Investing:
    Purchase of securities   (293,853)    (396,413)    (548,505)    (736,383)
    Proceeds from sale and
     maturity of securities   148,496      538,571      435,394      910,373
    Mortgages and loans        67,694      (10,405)      81,468       (2,149)
                          ------------------------- -------------------------
                              (77,663)     131,753      (31,643)     171,841
                          ------------------------- -------------------------

    Financing:
    Deposits                   80,398     (148,927)      28,208      (68,633)
    Notes payable              30,948            -       33,888        5,000
    Short term financings           -            -            -      (49,917)
    Proceeds of common
     shares issued                  -           30            -           36
    Shares repurchased              -         (113)           -         (792)
    Dividends paid                  -            -         (240)        (240)
                          ------------------------- -------------------------
                              111,346     (149,010)      61,856     (114,546)
                          ------------------------- -------------------------

    Increase (decrease)
     in cash resources         31,774      (24,616)      23,267       47,426

    Cash resources,
     beginning of period      199,324      185,463      207,831      113,421
                          ------------------------- -------------------------

    Cash resources,
     end of period        $   231,098  $   160,847  $   231,098  $   160,847
                          ------------------------- -------------------------
                          ------------------------- -------------------------

    Supplementary cash
     flow information:
      Interest paid
       during the
       period             $    10,983  $    12,151  $    23,556  $    23,084
      Income taxes paid
       during the period  $         -  $         -  $         -  $        68



    PACIFIC & WESTERN CREDIT CORP.
    Notes to the interim consolidated financial statements (unaudited)
    For the six months ended April 30, 2009

    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
        October 31, 2008, which are available on SEDAR at www.sedar.com.
        These consolidated financial statements have been prepared in
        accordance with Canadian generally accepted accounting principles
        using the same accounting policies and methods as were used for the
        Corporation's financial statements for the year ended October 31,
        2008.

        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 April 30, 2009 is an investment in
        a collateral debt obligation (CDO) which has an amortized cost of
        $5.6 million (2008 - $10 million) and a fair value of $785,000
        (2008 - $5.9 million). Fair value was determined by the use of
        external valuation models which incorporate observable market
        parameters. These include observable interest rates, credit spreads
        and loss expectations. The fair value amount determined based on the
        above may not ultimately reflect what the Corporation would receive
        if it were to sell the CDO in the market. The CDO is secured by
        corporate credits and does not have any direct residential sub-prime
        exposure.

    3.  Allowance for credit losses

                                       for the three months ended
                          ---------------------------------------------------
                                                       April 30,    April 30,
                                                           2009         2008
                          ---------------------------------------------------
        (thousands            General     Specific        Total        Total
         of dollars)        allowance    allowance    allowance    allowance
        ---------------------------------------------------------------------

        Balance,
         beginning of
         the period       $     5,167  $       985  $     6,152  $     3,214
        Provision
         (recovery) for
         credit losses              -            8            8           64
        Recoveries                  -            -            -           20
        ---------------------------------------------------------------------
        Balance, end of
         period           $     5,167  $       993  $     6,160  $     3,298
        ---------------------------------------------------------------------


                                        for the six months ended
                          ---------------------------------------------------
                                                       April 30,    April 30,
                                                           2009         2008
                          ---------------------------------------------------
        (thousands            General     Specific        Total        Total
         of dollars)        allowance    allowance    allowance    allowance
        ---------------------------------------------------------------------

        Balance,
         beginning of
         the period       $     5,212  $       830  $     6,042  $     3,206
        Provision
         (recovery) for
         credit losses            (45)         163          118           72
        Recoveries                  -            -            -           20
        ---------------------------------------------------------------------
        Balance, end of
         period           $     5,167  $       993  $     6,160  $     3,298
        ---------------------------------------------------------------------

        Gross impaired loans at April 30, 2009 totalled $7,794,000 (April 30,
        2008 - $1,366,000). Loans past due but not impaired at April 30, 2009
        totalled $851,000 (April 30, 2008 - $2,755,000). Loans are secured
        primarily by collateral mortgages against real estate with respect to
        real estate lending and specific charges against equipment being
        financed for other lending activities.


    4.  Notes payable

        At April 30, 2009 notes payable consist of Series C Notes totalling
        $64.0 million which mature in 2018, Series A Notes totalling
        $11.5 million which mature in 2010 and short term notes totalling
        $11.6 million which mature in 2009. Notes payable bear interest at
        rates ranging from 7.0% to 9.25% per annum. In addition, the
        Corporation has subordinated notes of the Bank totalling
        $20.0 million owing to a third party. These subordinated notes bear
        interest at 11% and mature in 2019.

    5.  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                               -            -            -
           Exercised                             -            -            -
           Expired                               -     (181,709)       10.15
           Repurchased                           -            -            -
           ------------------------------------------------------------------
           Outstanding, end of period   13,642,452      895,401  $      8.79
           ------------------------------------------------------------------

           In addition, at April 30, 2009, there were 1,142,556 (2008-
           1,142,556) preferred shares outstanding.

           During the six months ended April 30, 2009, the Corporation
           recognized $64,000 (2008-$429,000) of salaries and benefits
           expense relating to the estimated fair value of stock options
           granted. No options were granted during the current period,
           however, the fair value of options granted during the prior period
           was estimated using the Black-Scholes option pricing model based
           on the following weighted-average assumptions: (i) risk-free
           interest rate of 4.03%, (ii) expected option life of 5 years,
           (iii) expected volatility of 30%, and (iv) expected forfeiture
           rate of 5%. The weighted average fair value of options granted was
           estimated at $ 2.66 per share.

           In July 2008, the Corporation announced that it had filed a Notice
           of Intention to make a Normal Course Issuer Bid, pursuant to which
           the Corporation may purchase for cancellation up to 500,000 of its
           common shares. The bid commenced on July 22, 2008 and will
           terminate on July 21, 2009. The price that the Corporation pays
           for any common shares will be the market price at the time of
           acquisition. To April 30, 2009 the Corporation has repurchased for
           cancellation 7,300 common shares under this bid for a total cost
           of $36,500. It is anticipated that the Corporation will not make
           any further purchases pursuant to this Bid.


        b. Accumulated other comprehensive income (loss):

           The balance in accumulated other comprehensive income (loss), net
           of income taxes, consists of:

                                                      April 30     April 30
                                                        2009         2008
                                                    -------------------------
           Net unrealized losses on assets held as
            available-for-sale                      $   (21,867) $   (15,382)
           Deferred losses related to previously
            closed cash flow hedges                           -          (82)
                                                    -------------------------
           Balance, end of period                   $   (21,867) $   (15,464)
                                                    -------------------------

           Net of income tax benefit of $8,645,000 (2008-$6,477,000).

    6.  Derivative instruments

        At April 30, 2009, the Corporation had outstanding contracts for
        asset liability management purposes to swap between floating and
        fixed interest rates with notional amounts totalling $399,841,000
        (2008 - $124,822,000). The Corporation only enters into these
        interest rate contracts for its own account and does not act as an
        intermediary in this market. These contracts have a current
        replacement cost of $237,000 (2008 - $283,000), a credit equivalent
        amount of $4,211,000 (2008 - $1,870,000) and a risk-weight of
        $842,000 (2008 - $374,000). As required under the accounting standard
        relating to hedges, at April 30, 2009, $38,838,000 (2008 -
        $10,502,000) relating to these contracts was included in other
        liabilities and the offsetting amount included in the carrying values
        of the assets to which they relate.

    7.  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.

        Loan commitments     $ 128,153,000
        Letters of credit       28,661,000
                            ---------------
                             $ 156,814,000
                            ---------------

        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.

    8.  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
           Canada, (the "Bank") and as a result, the following discussion on
           capital management is with respect to the capital of the Bank. The
           Bank operates as a bank under the Bank Act (Canada) and is
           regulated by the Office of the Superintendent of Financial
           Institutions Canada (OSFI). OSFI sets and monitors capital
           requirements for the Bank.

           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 accumulated other comprehensive income (loss) (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 ratio.

        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:

                                                      April 30     April 30
           (thousands of dollars)                       2009         2008
           ------------------------------------------------------------------
           Total assets (on and off-balance sheet)  $ 1,609,296  $ 1,368,172
           Capital
             Common shares                          $    95,365  $    57,117
             Retained earnings                            6,082       25,599
             Unrealized loss on available-for-sale
              equity securities                         (19,601)     (12,789)
             Subordinated debentures                     40,000       20,000
           ------------------------------------------------------------------
           Total regulatory capital                 $   121,846  $    89,927
           ------------------------------------------------------------------

           Assets-to-capital ratio                        13.21        15.21
           ------------------------------------------------------------------

           For a period of time during the previous quarter ended January 31,
           2009, the Bank estimated that it had, on a temporary basis,
           exceeded by a minor amount, the assets-to-capital multiple
           established by OSFI. This exception took place primarily as a
           result of a decrease in the market value of preferred shares held
           in the Bank's securities portfolio and which are primarily those
           of major Canadian banks and insurance companies. This decrease
           took place as a result of market volatility versus any credit
           impairment in the issuers of the securities. In January 2009, the
           Bank's adherence to this requirement was re-established and has
           been adhered to since that date.

        c. Risk-Based Capital Ratio:

           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 June 2004, the Basel Committee on Banking Supervision released
           its report entitled "International Convergence of Capital
           Measurement and Capital Standards: A Revised Framework"
           (Basel II). The new framework is designed to more closely align
           regulatory capital requirements with underlying risks by
           introducing changes in the treatment of credit risk. An explicit
           new capital charge for operational risk was introduced, as well as
           increased supervisory review of capital adequacy and expansion of
           the related public disclosure. The new Basel II Framework was
           effective November 1, 2007 for Canadian banks. The Bank's risk-
           based capital ratios are presented below using the guidelines
           under Basel II.

                                  April 30                  April 30
                                    2009                      2008
           ------------------------------------------------------------------
                           Notional/       Risk      Notional/       Risk
           (thousands        Drawn       Weighted      Drawn       Weighted
            of dollars)      Amount      Balance       Amount      Balance
           ------------------------------------------------------------------

           Balance sheet
            assets        $ 1,580,634  $   895,965  $ 1,332,964  $   729,959
           Off-balance
            sheet assets      556,655       22,162      619,425       57,984
           Charge for
            operational
            risk                            33,388                    45,160
           ------------------------------------------------------------------
           Total
            risk-weighted
            assets                     $   951,515               $   833,103
           ------------------------------------------------------------------
           Regulatory
            capital                        121,845                    89,927
           ------------------------------------------------------------------
           Total risk-based
            capital ratio                    12.81%                    10.79%
           ------------------------------------------------------------------
           Tier 1 risk-based
            capital ratio                     8.60%                     8.39%
           ------------------------------------------------------------------

    9.  Comparative figures

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

    Pacific & Western Bank of Canada (PWBank), a Schedule I chartered bank, is
a branchless financial institution with approximately $1.6 billion in assets.
PWBank specializes in providing innovative financing to large corporate and
government entities including hospitals, school boards, universities and
colleges, municipalities and provincial and federal government agencies.
    Pacific & Western Bank of Canada is wholly owned by Pacific & Western
Credit Corp., whose shares trade on the TSX under the symbol PWC.

    On behalf of the Board of Directors: David R. Taylor, President & C.E.O.

    To receive company news releases, please contact:
    Carla McPhee at carlam@pwbank.com, (519) 675-4204
    





For further information:

For further information: Investor Relations: (800) 244-1509,
InvestorRelations@pwbank.com; Public Relations & Media: Tel Matrundola,
Vice-President, (416) 203-0882, telm@pwbank.com, Visit our website at:
http://www.pwbank.com

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Pacific & Western Credit Corp.

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