CWB reports solid fourth quarter performance and record results for fiscal 2012

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Dec 04, 2012, 08:30 ET

Loan growth of 2% in the quarter and 14% for the year
Quarterly dividend declared of $0.17 per CWB common share, an increase of 6%

Fourth Quarter 2012 Highlights⁽¹⁾ (compared to the same period in the prior year)

Net income available to common shareholders of $43.0 million, up 20% ($7.1 million).
Diluted earnings per common share of $0.55, up 17%; adjusted cash earnings per common share⁽²⁾ of $0.56, up 6%.
Total revenues, on a taxable equivalent basis (teb)⁽²⁾, of $133.2 million, up 11% ($13.5 million).
Solid Basel II regulatory capital position using the standardized approach for calculating risk-weighted assets: tangible common equity to risk-weighted assets ratio⁽²⁾ of 8.8%, Tier 1 capital ratio of 10.6% and total capital ratio of 13.8%. Well positioned for transition to Basel III regulatory capital framework effective January 1, 2013.
Opened a new full-service business and personal banking centre in Winnipeg, Manitoba, bringing the total number of CWB branches to 41.
Recognized for a seventh consecutive year as one of the 50 Best Employers in Canada in a list compiled by Aon Hewitt, a global human resources consultant.
On December 3, 2012, declared a quarterly dividend of $0.17 per CWB common share, an increase of 6% over the prior quarter and 13% over the dividend declared a year earlier.

(1)	Effective in the first quarter of 2012, CWB's unaudited interim consolidated financial statements and the accompanying notes, along with all comparative information, are prepared in accordance with International Financial Reporting Standards (IFRS).
(2)	Non-GAAP measure - refer to definitions following the table of Selected Financial Highlights.

Fiscal 2012 Highlights (compared to the prior year)

Record net income available to common shareholders of $172.2 million, up 15% ($22.7 million).
Record diluted earnings per common share of $2.22, up 14%; adjusted cash earnings per share of $2.30, up 6%.
Very strong loan growth of 14% ($1,660 million).
Record total revenues (teb) of $525.5 million, up 9% ($41.9 million).
Return on common shareholders' equity of 15.0%, up 30 basis points.
Net interest margin (teb) of 2.79%, down 20 basis points.
Efficiency ratio (teb) of 44.8%, an improvement of 10 basis points.
Dollar level of gross impaired loans decreased 31% ($30.4 million) to $66.8 million, or 0.48% of total loans (compared to 0.79% of total loans at October 31, 2011).
Total assets and total loans surpassed $16 billion and $13 billion, respectively.

Fiscal 2012 Performance versus Minimum Targets

2012 Minimum Targets	2012 Performance
Net income available to common shareholders growth of 10%	15%
Total revenues (teb) growth of 7%	9%
Loan growth of 10%	14%
Provision for credit losses between 0.20% - 0.25% of average loans	0.19%
Efficiency ratio (teb)⁽¹⁾ of 46% or less	44.8%
Return on common shareholders' equity⁽¹⁾ of 15%	15.0%
Return on assets⁽¹⁾ of 1.05%	1.08%

⁽¹⁾Defined on page 2.

Selected Financial Highlights

		For the three months ended									Change from October 31 2011		For the year ended						Change from October 31 2011
(unaudited)			October 31 2012			July 31 2012			October 31 2011					October 31 2012			October 31 2011
($ thousands, except per share amounts)			October 31 2012			July 31 2012			October 31 2011					October 31 2012			October 31 2011
Results of Operations
Net interest income (teb - see below)		$	113,246		$	115,217		$	106,184		7	%	$	443,572		$	411,452		8	%
Less teb adjustment			1,979			2,086			3,133		(37)			9,143			11,059		(17)
Net interest income per financial statements			111,267			113,131			103,051		8			434,429			400,393		9
Other income			19,932			22,933			13,489		48			81,910			72,103		14
Total revenues (teb)			133,178			138,150			119,673		11			525,482			483,555		9
Total revenues			131,199			136,064			116,540		13			516,339			472,496		9
Net income available to common shareholders			43,046			48,004			35,921		20			172,197			149,538		15
Earnings per common share
	Basic⁽¹⁾		0.55			0.62			0.48		15			2.24			2.07		8
	Diluted⁽²⁾		0.55			0.61			0.47		17			2.22			1.95		14
	Adjusted cash⁽³⁾		0.56			0.63			0.53		6			2.30			2.17		6
Return on common shareholders' equity⁽⁴⁾			13.8	%		16.1	%		13.6	%	20	bp		15.0	%		14.7	%	30	bp⁽⁵⁾
Return on assets⁽⁶⁾			1.03			1.19			0.97		6			1.08			1.09		(1)
Efficiency ratio (teb)⁽⁷⁾			46.7			42.8			45.5		120			44.8			44.9		(10)
Efficiency ratio			47.4			43.4			46.7		70			45.6			45.9		(30)
Net interest margin (teb)⁽⁸⁾			2.71			2.85			2.87		(16)			2.79			2.99		(20)
Net interest margin			2.67			2.80			2.79		(12)			2.73			2.91		(18)
Provision for credit losses as a percentage of average loans			0.17			0.19			0.17		-			0.19			0.19		-
Per Common Share
Cash dividends		$	0.16		$	0.16		$	0.14		14	%	$	0.62		$	0.54		15	%
Book value			15.94			15.56			13.87		15			15.94			13.87		15
Closing market value			29.56			26.27			28.50		4			29.56			28.50		4
Common shares outstanding (thousands)			78,743			78,319			75,462		4			78,743			75,462		4
Balance Sheet and Off-Balance Sheet Summary
Assets		$	16,873,269		$	16,033,025		$	14,849,141		14	%
Loans			13,953,686			13,642,414			12,293,282		14
Deposits			14,144,837			13,455,398			12,394,689		14
Debt			634,273			603,931			634,877		-
Shareholders' equity			1,464,981			1,428,090			1,256,613		17
Assets under administration			7,171,826			6,830,282			9,369,589		(23)
Assets under management			855,333			814,498			816,219		5
Capital Adequacy⁽⁹⁾
Tangible common equity to risk-weighted assets⁽¹⁰⁾			8.8	%		8.7	%		8.6	%	20	bp
Tier 1 ratio			10.6			10.5			11.1		(50)
Total ratio			13.8			13.7			15.4		(160)

(1)	Basic earnings per common share (EPS) is calculated as net income available to common shareholders divided by the average number of common shares outstanding.
(2)	Diluted EPS is calculated as net income available to common shareholders divided by the average number of common shares outstanding adjusted for the dilutive effects of stock options and warrants.
(3)	Adjusted cash EPS is diluted EPS excluding the after-tax amortization of acquisition-related intangible assets and the non-tax deductible change in fair value of contingent consideration. These exclusions represent non-cash charges mainly related to the acquisition of National Leasing Group Inc. and are not considered indicative of ongoing business performance. The effect of the non-tax deductible change in the fair value of contingent consideration was eliminated in the third quarter of 2012 on the settlement of such consideration. The Bank believes the adjusted results provide the reader with a better understanding about how management views CWB's performance.
(4)	Return on common shareholders' equity is calculated as net income available to common shareholders divided by average common shareholders' equity.
(5)	bp - basis point change.
(6)	Return on assets is calculated as net income available to common shareholders divided by average total assets.
(7)	Efficiency ratio is calculated as non-interest expenses divided by total revenues excluding the non-tax deductible change in fair value of contingent consideration.
(8)	Net interest margin is calculated as annualized net interest income divided by average total assets.
(9)	Capital adequacy is calculated in accordance with Basel II guidelines issued by the Office of the Superintendent of Financial Institutions Canada (OSFI). The 2011 ratio reflects the returns filed and has not been restated to International Financial Reporting Standards (IFRS).
(10)	Tangible common equity to risk-weighted assets is calculated as shareholders' equity less subsidiary goodwill divided by risk-weighted assets, calculated in accordance with guidelines issued by OSFI. The 2011 ratio has not been restated to IFRS.

Taxable Equivalent Basis (teb)

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

Non-GAAP Measures

Taxable equivalent basis, adjusted cash earnings per common share, return on common shareholders' equity, return on assets, efficiency ratio, net interest margin, tangible common equity to risk-weighted assets, Tier 1 and total capital adequacy ratios, and average balances do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures presented by other financial institutions.

Management's Discussion and Analysis

This financial summary should be read in conjunction with Canadian Western Bank's (CWB or the Bank) unaudited interim consolidated financial statements for the period ended October 31, 2012 and the audited consolidated financial statements and Management's Discussion and Analysis (MD&A) for the year ended October 31, 2011, available on SEDAR at www.sedar.com and the Bank's website at www.cwbankgroup.com. Commencing in 2012, CWB's financial results and quarterly financial statements, including comparative information, are prepared under International Financial Reporting Standards (IFRS). Except where indicated below, the factors discussed and referred to in the MD&A for fiscal 2011 remain substantially unchanged. Commencing in the first quarter of 2012, operating results are presented as one segment - Banking and Financial Services. The 2012 Annual Report and audited consolidated financial statements for the year ended October 31, 2012 will be available on both SEDAR and the Bank's website on December 6, 2012. The 2012 Annual Report will be distributed to shareholders in January 2013.

EDMONTON, Dec. 4, 2012 /CNW/ - Canadian Western Bank (TSX: CWB) today announced solid financial performance marking the Bank's 98^th consecutive profitable quarter. Fourth quarter net income available to common shareholders of $43.0 million was up 20% ($7.1 million) compared to the same quarter last year while diluted earnings per common share increased 17% to $0.55. Adjusted cash earnings per share, which excludes the after-tax amortization of acquisition-related intangible assets and the non-tax deductible change in fair value of contingent consideration, was $0.56, up 6%.

Fourth quarter total revenues, measured on a taxable equivalent basis (teb - see definition following the Financial Highlights table), grew 11% ($13.5 million) to reach a record $133.2 million as the benefit of very strong 14% year-over-year loan growth and 48% ($6.4 million) higher other income more than offset the impact of a 16 basis point decline in net interest margin (teb) to 2.71%. Growth in other income mainly resulted from an $8.5 million positive change in net gains on securities and the elimination of charges related to changes in fair value of contingent consideration ($3.6 million in the fourth quarter of 2011), partially offset by $4.0 million lower net insurance revenues and a $2.6 million decline in the "other" component of other income. Net gains on securities of $5.4 million in the fourth quarter compared to net losses of $3.1 million in the same period of 2011. Charges for contingent consideration were eliminated in the third quarter of this year upon the settlement of the Bank's ownership of National Leasing Group Inc. Net insurance revenues were impacted by increased claims expense related to severe hailstorms in Alberta in August 2012. The 'other' component of other income in the fourth quarter of 2011 included a $2.0 million gain attributed to the sale of a residential mortgage portfolio.

Compared to last quarter, net income available to common shareholders declined 10% ($5.0 million) as the positive revenue contribution from 2% quarterly loan growth and $3.5 million higher gains on securities was more than offset by the combined impact of a 14 basis point reduction in net interest margin (teb), a $5.3 million decline in net insurance revenues and a $1.8 million reduction in the 'other' component of other income. The material reduction in net interest margin largely resulted from unusually high interest recoveries in the previous quarter, as well as lower yields on both loans and securities, partially offset by more favourable fixed term deposit costs. Diluted earnings per common share decreased 10% ($0.06) from the prior quarter while adjusted cash earnings per share was down 11% ($0.07).

Record annual net income available to common shareholders of $172.2 million increased 15% ($22.7 million) compared to last year while diluted earnings per common share was up 14% to $2.22. Adjusted cash earnings per share of $2.30 improved from $2.17 in the prior year. Record total revenues (teb) of $525.5 million increased 9%, reflecting 8% ($32.1 million) growth in net interest income (teb) and 14% ($9.8 million) higher other income. Growth in net interest income was driven by the benefit of very strong loan growth, partially offset by the significant impact of a 20 basis point reduction in net interest margin (teb) to 2.79%.

The quarterly return on common shareholders' equity of 13.8% increased 20 basis points compared to a year earlier, but was down 230 basis points from the prior quarter for the reasons already mentioned. Return on common shareholders' equity for the year of 15.0% was up from 14.7% in 2011. Fourth quarter return on assets of 1.03% compared to 0.97% last year and 1.19% in the previous quarter. Return on assets for the year was 1.08%, down one basis point from 2011.

The quarterly efficiency ratio (teb), which measures non-interest expenses as a percentage of total revenues (teb), excluding the non-tax deductible change in fair value of contingent consideration, was 46.7%, up 120 basis points. The annual efficiency ratio (teb) of 44.8% was a slight improvement from 44.9% in 2011.

"Solid fourth quarter performance marked the Bank's 98^th consecutive profitable quarter and capped off a record year for CWB Group," said Larry Pollock, Chief Executive Officer of CWB. "We met or exceeded all of our fiscal 2012 targets, led by very strong loan growth. The volume in our pipeline for new loans remains solid and continues to be supported by favourable economic conditions in our key western Canadian markets. Although we will likely see an increase from the current very low dollar level of impaired loans, this period marked the 10th consecutive quarter of declines in this measure. Overall credit quality remains sound and we expect this will continue going forward."

"Our minimum performance targets for 2013 reflect ongoing confidence across all of our businesses," added Chris Fowler, President and Chief Operating Officer of CWB. "However, near-term growth in both revenues and earnings will likely be range-bound in the high single-digits owing to the significant headwinds on net interest margin from a very low interest rate environment and flat yield curve. Until we enter a rising rate environment, which could still be quite some time away, our focus will remain centred on diligently serving our clients and underwriting quality, secured loans that offer a fair return in the context of today's markets. We will also keep a close eye on managing expenses to maintain our industry-leading efficiency ratio."

"As always, maintaining our track record of strong growth requires that we adapt and constantly evolve our businesses to ensure we maintain our competitive advantages and continue to meet the needs of our clients and other stakeholders. CWB Group's vision is to be seen as crucial to our clients' futures and we are communicating and acting to achieve this vision across every corner of our business. Our tremendous team of people and their contributions to CWB Group's unique organizational culture are the basis of our past and future success, and we will continue to foster this core advantage going forward. CWB was recognized in November for a seventh straight year as one of the 50 Best Employers in Canada, which is something we're very proud of," added Mr. Fowler.

Regulatory Capital

The Bank's Basel II Tier 1 and total capital ratios at October 31, 2012 remained solid at 10.6% and 13.8%, respectively, compared to 11.1% and 15.4% a year earlier. Reported capital ratios for 2011 are based on the returns filed and have not been restated for the full transition impact of IFRS or a required change in the capital deduction related to CWB's insurance subsidiary, both of which were effective in the first quarter of 2012. The lower total capital adequacy ratio additionally reflects the March 2012 redemption of $125 million of subordinated debentures. The tangible common equity ratio, which represents the highest quality form of capital, was 8.8%, up from 8.6% a year earlier.

Going forward, all Canadian banks must comply with the Basel III capital standards. Pro forma application of the all-in Basel III standards to the Bank's financial position at October 31, 2012 results in an estimated 8.1% common equity Tier 1 (CET1) ratio, 9.9% Tier 1 ratio and 13.1% total capital ratio. This compares to required minimum Basel III regulatory capital ratios, which include a 250 basis point capital conservation buffer, of 7.0% CET1 effective January 1, 2013, and 8.5% Tier 1 and 10.5% total capital effective January 1, 2014. The maintenance of solid capital levels over-and-above regulatory minimums supports management's objectives to effectively manage risks and maintain strong growth.

Dividends

On December 3, 2012, CWB's Board of Directors declared a cash dividend of $0.17 per common share, payable on January 4, 2013 to shareholders of record on December 17, 2012. This quarterly dividend represents a 6% increase over the previous quarter and is 13% higher than the quarterly dividend declared one year ago. The Board of Directors also declared a cash dividend of $0.453125 per Series 3 Preferred Share payable on January 31, 2013 to shareholders of record on January 24, 2013.

Dividend Reinvestment Plan

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

Loan Growth

Total loans of $13,954 million grew 2% ($311 million) in the quarter and 14% ($1,660 million) over the past twelve months. Very strong performance in general commercial loans, equipment financing and leasing, and personal loans and mortgages contributed the greatest amount to loan growth in both the current quarter and for the year. Growth was achieved across all lending sectors, with the exception of oil and gas production loans, and the overall outlook for generating new loans remains solid. Management expects the Bank to maintain double-digit loan growth and has set the fiscal 2013 minimum loan growth target at 10%.

Credit Quality

Overall credit quality continued to show improvement reflecting sound underwriting, secured lending practices and a relatively strong level of economic activity in the Bank's key geographic markets. Gross impaired loans totaled $66.8 million at quarter end, compared to $70.2 million last quarter and $97.3 million a year earlier. This represented the tenth consecutive quarterly decrease in the dollar level of impaired loans. The quarterly provision for credit losses exceeded net new specific provisions and led to a slight increase in the dollar level of the collective allowance for credit losses compared to last quarter. Compared to October 31, 2011, the dollar level of the total allowance for credit losses increased $9.7 million to reach $81.7 million, exceeding the total balance of gross impaired loans. Based on management's current view of credit quality, a 2013 provision for credit losses between 18 and 23 basis points of average loans is expected.

Net Interest Margin

Net interest margin (teb) of 2.71% was down from 2.87% in the fourth quarter last year with the difference resulting from lower yields on both loans and securities, partially offset by more favourable costs on fixed term deposits and reduced debenture expense. Compared to the prior quarter, net interest margin (teb) decreased 14 basis points reflecting unusually high interest recoveries in the previous quarter, as well as lower yields on both loans and securities, partially offset by more favourable fixed term deposit costs. Annual net interest margin (teb) of 2.79% was down 20 basis points from the prior year reflecting the factors already noted. In view of expectations for a prolonged period of very low interest rates, a flat interest rate curve and ongoing competitive influences, fiscal 2013 net interest margin is expected to be lower compared to 2012.

Fiscal 2013 Minimum Performance Targets and Outlook

The Bank's minimum performance targets established for fiscal 2013 are presented in the following table:

	2013 Minimum Targets
Net income available to common shareholders growth	8%
Total revenue (teb) growth	8%
Loan growth	10%
Provision for credit losses as a percentage of average loans	0.18% - 0.23%
Efficiency ratio (teb)⁽¹⁾	46%
Return on common shareholders' equity⁽²⁾	14%
Return on assets⁽³⁾	1.05%

⁽¹⁾	Efficiency ratio (teb) calculated as non-interest expenses divided by total revenues (teb)
⁽²⁾	Return on common shareholders' equity calculated as net income available to common shareholders divided by average common shareholders' equity.
⁽³⁾	Return on assets calculated as net income available to common shareholders divided by average total assets.

Fiscal 2013 minimum performance targets are based on expectations for modest economic growth in Canada and comparatively stronger performance within the Bank's key western Canadian markets. Lending activity remains solid and double-digit loan growth is expected to be maintained despite the impacts of competitive factors and ongoing global economic uncertainties. Overall credit quality is expected to remain sound and the provision for credit losses is targeted between 18 and 23 basis points of average loans. The Bank will maintain its focus on secured loans that offer a fair and profitable return in an environment where net interest margin pressure is expected to persist as a result of a very low interest rate environment, a flat interest rate curve and increased competitive influences in certain sectors. The foregoing circumstances will continue to constrain growth in total revenues and earnings compared to what would be expected in a more normal historical interest rate environment. Targeted growth of 8% for both total revenues (teb) and net income available to common shareholders' reflects confidence in CWB's proven business model and overall strategic direction, but also considers expectations for a lower net interest margin compared to 2012. Minimum targets for return on common shareholders' equity and return on assets have been established at 14% and 1.05%, respectively. One of management's key priorities is to maintain effective control of costs while ensuring the Bank is positioned to deliver continued strong growth. In consideration of targeted revenue growth and planned expenditures, the 2013 efficiency ratio (teb) is expected to remain at 46% or less.

The ongoing development of CWB Group's core businesses will remain a key priority to achieve continued strong growth. Potential acquisitions that are both strategic and accretive for CWB shareholders will also be evaluated very closely. With its strong capital position under the more conservative standardized approach for calculating risk-weighted assets, CWB is well positioned to support continued growth and manage unforeseen challenges. Management will maintain its focus on creating value and growth for shareholders over the long term. Despite challenges arising from the current interest rate environment and related pressures on net interest margin, the current overall outlook for 2013 and beyond is positive.

Fiscal 2012 Fourth Quarter and Annual Results Conference Call
CWB's fourth quarter and annual results conference call is scheduled for Tuesday, December 4, 2012 at 3:00 p.m. ET (1:00 p.m. MT). The Bank's executives will comment on financial results and respond to questions from analysts and institutional investors.

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

A replay of the conference call will be available until December 18, 2012 by dialing 416-849-0833 (Toronto) or 1-855-859-2056 (toll-free) and entering passcode 59924778.

About Canadian Western Bank Group

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

Taxable Equivalent Basis (teb)

Non-GAAP Measures

taxable equivalent basis - described above;
adjusted cash earnings per common share - diluted earnings per common share excluding the after-tax amortization of acquisition-related intangible assets and the non-tax deductible change in fair value of contingent consideration. These exclusions represent non-cash charges mainly related to the acquisition of National Leasing Group Inc. and are not considered to be indicative of ongoing business performance;
return on common shareholders' equity - annualized net income available to common shareholders divided by average common shareholders' equity;
return on assets - annualized net income available to common shareholders divided by average total assets;
efficiency ratio - non-interest expenses divided by total revenues excluding the non-tax deductible change in fair value of contingent consideration;
net interest margin - net interest income divided by average total assets;
tangible common equity to risk-weighted assets - common shareholders' equity less subsidiary goodwill divided by risk-weighted assets, calculated in accordance with guidelines issued by the Office of the Superintendent of Financial Institutions Canada (OSFI);
Basel II Tier 1 and total capital adequacy ratios - in accordance with guidelines issued by OSFI;
Basel III common equity Tier 1, Tier 1 and total capital ratios - in accordance with CWB's interpretation of the Basel III capital requirements and OSFI proposed guidance; and
average balances - average daily balances.

Forward-looking Statements

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

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

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

Assumptions about the performance of the Canadian economy in 2013 and how it will affect CWB's businesses are material factors the Bank considers when setting its objectives. In setting minimum performance targets for fiscal 2013, management's assumptions included: modest economic growth in Canada and relatively stronger performance in the four western provinces; relatively stable prices for energy and other commodities compared to the levels observed at October 31, 2012; sound credit quality with actual losses remaining within the Bank's historical range of acceptable levels; and, a lower net interest margin attributed to expectations for the continuation of a very low interest rate environment, a flat interest rate curve, competitive factors and ongoing uncertainties about global economic conditions. Potential risks that would have a material adverse impact on the Bank's current economic expectations and forecasts include a global economic recession spurred by unfavourable developments in the euro zone, the strength of economic recovery in the United States, a meaningful slowdown in China's economic growth, or a significant and sustained deterioration in Canadian residential real estate prices.

Consolidated Balance Sheets

		As at		As at		As at		As at	Change from
(unaudited)		October 31		July 31		October 31		November 1	October 31
($ thousands)		2012		2012		2011		2010	2011
Assets
Cash Resources
Cash and non-interest bearing deposits with financial institutions	$	33,690	$	59,470	$	73,318	$	8,965	(54)	%
Interest bearing deposits with regulated financial institutions		177,028		217,290		233,964		168,998	(24)
Cheques and other items in transit		26,265		112		5,053		9,981	420
		236,983		276,872		312,335		187,944	(24)
Securities
Issued or guaranteed by Canada		980,200		688,164		644,356		564,694	52
Issued or guaranteed by a province or municipality		478,622		272,826		380,031		88,478	26
Other securities		877,278		839,519		901,317		857,015	(3)
		2,336,100		1,800,509		1,925,704		1,510,187	21
Securities Purchased Under Resale Agreements		-		-		-		177,954	-
Loans
Residential mortgages		3,352,735		3,311,330		3,008,545		2,479,957	11
Other loans		10,682,674		10,410,879		9,356,717		8,276,263	14
		14,035,409		13,722,209		12,365,262		10,756,220	14
Allowance for credit losses		(81,723)		(79,795)		(71,980)		(81,523)	14
		13,953,686		13,642,414		12,293,282		10,674,697	14
Other
Property and equipment		86,941		75,685		72,674		65,978	20
Goodwill		45,536		45,536		45,691		45,562	-
Other intangible assets		31,956		33,245		37,420		43,420	(15)
Insurance related		57,650		56,774		56,734		59,652	2
Derivative related		1,951		130		-		134	nm
Other assets		122,466		101,860		105,301		116,200	16
		346,500		313,230		317,820		330,946	9
Total Assets	$	16,873,269	$	16,033,025	$	14,849,141	$	12,881,728	14	%

Liabilities and Shareholders' Equity
Deposits
Payable on demand	$	685,193	$	590,923	$	583,267	$	530,608	17	%
Payable after notice		3,773,611		3,763,642		3,407,590		2,999,599	11
Payable on a fixed date		9,686,033		9,100,833		8,403,832		7,177,560	15
		14,144,837		13,455,398		12,394,689		10,707,767	14
Other
Cheques and other items in transit		54,030		78,726		45,986		39,628	17
Insurance related		160,302		151,052		149,130		149,396	7
Derivative related		10		238		436		992	(98)
Securities sold under repurchase agreements		70,089		-		-		-	nm
Other liabilities		239,503		210,353		262,185		239,474	(9)
		523,934		440,369		457,737		429,490	14
Debt
Debt securities		209,273		178,931		89,877		202,006	133
Subordinated debentures		425,000		425,000		545,000		315,000	(22)
		634,273		603,931		634,877		517,006	-
Equity
Preferred shares		209,750		209,750		209,750		209,750	-
Common shares		490,218		483,266		408,282		279,620	20
Retained earnings		733,298		702,799		608,848		586,933	20
Share-based payment reserve		22,468		23,339		21,884		21,291	3
Other reserves		9,247		8,936		7,849		24,692	18
Total Shareholders' Equity		1,464,981		1,428,090		1,256,613		1,122,286	17
Non-controlling interests		105,244		105,237		105,225		105,179	-
Total Equity		1,570,225		1,533,327		1,361,838		1,227,465	15
Total Liabilities and Shareholders' Equity	$	16,873,269	$	16,033,025	$	14,849,141	$	12,881,728	14	%

nm - not meaningful.

Consolidated Statements of Income

	For the three months ended						Change from October 31 2011			For the year ended				Change from October 31 2011
(unaudited)		October 31 2012		July 31 2012		October 31 2011					October 31 2012		October 31 2011
($ thousands, except per share amounts)		October 31 2012		July 31 2012		October 31 2011					October 31 2012		October 31 2011
Interest Income
Loans	$	177,191	$	176,977	$	162,945		9	%	$	686,534	$	625,048	10	%
Securities		10,135		10,578		12,011		(16)			43,548		44,177	(1)
Deposits with regulated financial institutions		567		500		808		(30)			2,389		4,062	(41)
		187,893		188,055		175,764		7			732,471		673,287	9
Interest Expense
Deposits		70,022		68,387		64,265		9			269,772		238,701	13
Debt		6,604		6,537		8,448		(22)			28,270		34,193	(17)
		76,626		74,924		72,713		5			298,042		272,894	9
Net Interest Income		111,267		113,131		103,051		8			434,429		400,393	9
Provision for Credit Losses		5,962		6,453		5,183		15			25,107		21,783	15
Net Interest Income after
Provision for Credit Losses		105,305		106,678		97,868		8			409,322		378,610	8
Other Income
Credit related		5,284		5,026		4,638		14			19,705		18,307	8
Trust and wealth management services		4,725		4,587		4,336		9			19,065		19,050	-
Insurance, net		946		6,251		4,943		(81)			17,353		20,250	(14)
Gains on securities, net		5,433		1,896		(3,103)		nm			12,449		7,283	71
Retail services		2,310		2,249		2,289		1			9,227		9,486	(3)
Foreign exchange gains		965		812		930		4			3,255		3,488	(7)
Contingent consideration fair value change		-		-		(3,539)		nm			(2,489)		(12,305)	(80)
Other		269		2,112		2,995		(91)			3,345		6,544	(49)
		19,932		22,933		13,489		48			81,910		72,103	14
Net Interest and Other Income		125,237		129,611		111,357		12			491,232		450,713	9
Non-Interest Expenses
Salaries and employee benefits		39,826		39,350		35,183		13			153,844		141,865	8
Premises and equipment		10,404		9,839		9,383		11			39,502		36,738	8
Other expenses		11,790		9,779		11,419		3			42,720		42,449	1
Provincial capital taxes		156		150		125		25			500		1,399	(64)
		62,176		59,118		56,110		11			236,566		222,451	6
Net Income before Income Taxes		63,061		70,493		55,247		14			254,666		228,262	12
Income Taxes		14,445		16,915		13,773		5			60,209		56,541	6
Net Income	$	48,616	$	53,578	$	41,474		17	%	$	194,457	$	171,721	13	%
Net Income Attributable to
Non-Controlling Interests		1,768		1,772		1,751		1			7,052		6,975	1
Net Income Attributable to
Shareholders of the Bank	$	46,848	$	51,806	$	39,723		18	%	$	187,405	$	164,746	14	%
Preferred share dividends		3,802		3,802		3,802		-			15,208		15,208	-
Net Income Available to
Common Shareholders	$	43,046	$	48,004	$	35,921		20	%	$	172,197	$	149,538	15	%
Average number of common
shares (in thousands)		78,506		77,527		75,376		4			76,841		72,205	6
Average number of diluted common
shares (in thousands)		78,911		78,107		76,959		3			77,460		76,705	1
Earnings Per Common Share
Basic	$	0.55	$	0.62	$	0.48		15	%	$	2.24	$	2.07	8	%
Diluted		0.55		0.61		0.47		17			2.22		1.95	14

nm - not meaningful.

Consolidated Statements of Comprehensive Income

		For the three months ended				For the year ended
(unaudited) ($ thousands)			October 31 2012		October 31 2011		October 31 2012		October 31 2011
Net Income		$	48,616	$	41,474	$	194,457	$	171,721
Other Comprehensive Income (Loss), net of tax
Available-for-sale securities:
	Gains (losses) from change in fair value⁽¹⁾		3,426		(8,693)		9,580		(11,710)
	Reclassification to net income⁽²⁾		(3,984)		2,337		(9,129)		(5,133)
			(558)		(6,356)		451		(16,843)
Derivatives designated as cash flow hedges:
	Losses from change in fair value⁽³⁾		1,514		-		1,430		-
	Reclassification to net income⁽⁴⁾		(645)		-		(483)		-
			869		-		947		-
			311		(6,356)		1,398		(16,843)
Comprehensive Income for the Period		$	48,927	$	35,118	$	195,855	$	154,878

Comprehensive income for the period attributable to:
	Shareholders of the Bank	$	47,159	$	33,367	$	188,803	$	147,903
	Non-controlling interests		1,768		1,751		7,052		6,975
Comprehensive Income for the Period		$	48,927	$	35,118	$	195,855	$	154,878

⁽¹⁾										Net of income tax of $1,247 and $3,441 for the quarter and year ended October 31, 2012, respectively (2011 - $3,553 and $4,731).
⁽²⁾										Net of income tax of $1,450 and $3,320 for the quarter and year ended October 31, 2012, respectively (2011 - $824 and $2,093).
⁽³⁾										Net of income tax of $530 and $500 for the quarter and year ended October 31, 2012, respectively (2011 - nil).
⁽⁴⁾										Net of income tax of $226 and $169 for the quarter and year ended October 31, 2012, respectively (2011 - nil).

Consolidated Statements of Changes in Shareholders' Equity

		For the year ended
(unaudited)			October 31 2012		October 31 2011
($ thousands)			October 31 2012		October 31 2011
Retained Earnings
Balance at beginning of period		$	608,848	$	586,933
Net income attributable to shareholders of the Bank			187,405		164,746
Dividends	- Preferred shares		(15,208)		(15,208)
	- Common shares		(47,747)		(39,177)
Warrants purchased and cancelled			-		(88,446)
Balance at end of period			733,298		608,848
Other Reserves
Balance at beginning of period			7,849		24,692
Changes in available-for-sale securities			451		(16,843)
Changes in derivatives designated as cash flow hedges			947		-
Balance at end of period			9,247		7,849
Preferred Shares
Balance at beginning and end of period			209,750		209,750
Common Shares
Balance at beginning of period			408,282		279,620
Issued on settlement of contingent consideration			63,399		-
Issued under dividend reinvestment plan			12,252		5,941
Transferred from share-based payment reserve on the exercise or exchange of options			4,432		4,009
Issued on exercise of options			1,853		2,996
Issued on exercise of warrants			-		115,716
Balance at end of period			490,218		408,282
Share-based Payment Reserve
Balance at beginning of period			21,884		21,291
Amortization of fair value of options			5,016		4,602
Transferred to common shares on the exercise or exchange of options			(4,432)		(4,009)
Balance at end of period			22,468		21,884
Total Shareholders' Equity			1,464,981		1,256,613
Non-Controlling Interests
Balance at beginning of period			105,225		105,179
Net income attributable to non-controlling interests			7,052		6,975
Dividends to non-controlling interests			(7,033)		(6,929)
Balance at end of period			105,244		105,225
Total Equity		$	1,570,225	$	1,361,838

Consolidated Statements of Cash Flow

			For the year ended
(unaudited)				October 31 2012		October 31 2011
($ thousands)				October 31 2012		October 31 2011
Cash Flows from Operating Activities
	Net income		$	194,457	$	171,721
	Adjustments to determine net cash flows:
		Provision for credit losses		25,107		21,783
		Depreciation and amortization		17,261		19,748
		Current income taxes receivable and payable		8,981		5,036
		Amortization of fair value of employee stock options		5,016		4,602
		Accrued interest receivable and payable, net		(3,541)		2,529
		Deferred income taxes, net		(695)		(11,146)
		Gain on securities, net		(12,449)		(7,283)
		Other items, net		24,283		51,352
				258,420		258,342
Cash Flows from Financing Activities
	Deposits, net			1,750,148		1,686,922
	Securities sold under repurchase agreements, net			70,089		-
	Common shares issued, net of issuance costs			14,004		124,653
	Debt securities issued, net of issuance costs			226,249		-
	Debt securities repaid			(106,855)		(112,129)
	Dividends			(62,955)		(54,385)
	Distributions to non-controlling interests			(7,033)		(6,930)
	Debentures redeemed			(120,000)		(70,000)
	Debentures issued			-		300,000
	Warrants purchased and cancelled			-		(88,446)
				1,763,647		1,779,685
Cash Flows from Investing Activities
	Interest bearing deposits with regulated financial institutions, net			57,128		(65,414)
	Securities, purchased			(4,959,542)		(4,725,843)
	Securities, sale proceeds			2,855,832		2,095,077
	Securities, matured			1,711,152		2,192,675
	Loans, net			(1,685,511)		(1,640,368)
	Property and equipment			(27,586)		(19,041)
	Securities purchased under resale agreements, net			-		177,954
				(2,048,527)		(1,984,960)
Change in Cash and Cash Equivalents				(26,460)		53,067
Cash and Cash Equivalents at Beginning of Period				32,385		(20,682)
Cash and Cash Equivalents at End of Period *			$	5,925	$	32,385
* Represented by:
	Cash and non-interest bearing deposits with financial institutions		$	33,690	$	73,318
	Cheques and other items in transit (included in Cash Resources)			26,265		5,053
	Cheques and other items in transit (included in Other Liabilities)			(54,030)		(45,986)
Cash and Cash Equivalents at End of Period			$	5,925	$	32,385


Supplemental Disclosure of Cash Flow Information
	Interest and dividends received		$	724,759	$	672,271
	Interest paid			293,871		268,272
	Income taxes paid			51,923		63,034

SOURCE: Canadian Western Bank

Larry M. Pollock
Chief Executive Officer
Canadian Western Bank
Phone: (780) 423-8888

Kirby Hill, CFA
Director, Strategy and Communications
Canadian Western Bank
Phone: (780) 441-3770
E-mail: [email protected]

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