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