Mr. Chris Fowler reports

CWB REPORTS SECOND QUARTER 2023 PERFORMANCE

Canadian Western Bank has released its financial performance for the three and six months ended April 30, 2023. Quarterly common shareholders' net income of $70-million was down 26 per cent and adjusted earnings per share (EPS) of 74 cents was down 27 per cent from last quarter, primarily reflecting a 21-basis-point increase in the provision for credit losses as a percentage of average loans, the impact of three fewer interest-earning days and a six-basis-point decrease in net interest margin. The prior quarter results reflected the reversal of a previously recognized impaired loan write-off, which drove a net recovery of credit losses, and the recognition of additional interest income that provided a three-basis-point increase to net interest margin. The provision for credit losses of 12 basis points this quarter remained below our five-year historical average, and reflected continued strong credit performance.

The bank's board of directors declared a cash dividend of 33 cents per common share, up one cent, or 3 per cent, from the dividend declared last quarter and up two cents, or 6 per cent, from last year.

"The strength and stability of our organization enabled us to navigate the significant volatility in the global banking industry this quarter. Subsequent to the emergence of these events, we grew branch-raised deposits, continued to maintain prudent levels of liquidity and increased our regulatory capital ratios with no use of the at-the-market (ATM) program this quarter," said Chris Fowler, president and chief executive officer. "We drove solid loan growth across our national footprint, with especially strong growth in Ontario and general commercial loans, and delivered another quarter of low credit losses.

"Based on our assessment of market pricing relative to risk and considering the expected volatility in economic conditions, we have targeted lower annual loan growth than previously expected. We are well positioned to capitalize on opportunities to accelerate new client growth when conditions improve, as we have in past periods of economic volatility. While we do not expect to achieve our annual pretax, preprovision income and efficiency ratio targets for this year, we are adjusting our expense trajectory to align to the lower loan growth outlook and deliver an annual adjusted return on equity in line with our 2023 target.

"We continue to earn national recognition for our commitment to a people-first culture and are very proud that, for the second consecutive year, CWB placed within the top 25 on this year's Best Workplaces in Canada. We thank our teams for their continued dedication and focus to make CWB the best bank for business owners in Canada."

Compared with the prior quarter, lower common shareholders' net income was primarily driven by a 21-basis-point increase in the total provision for credit losses as a percentage of average loans and a 3-per-cent decline in revenue. Pretax, preprovision income decreased 8 per cent.

Lower revenue reflected a 5-per-cent decrease in net interest income, partially offset by an 11-per-cent increase in non-interest income. Higher non-interest income was primarily due to an increase in foreign exchange revenue recorded within other non-interest income, reflective of a strengthening United States dollar in the quarter. Net interest income decreased compared with last quarter, as 2-per-cent sequential loan growth was more than offset by three fewer interest-earning days and a six-basis-point decrease in net interest margin. Net interest margin was lower primarily due to a three-basis-point interest income recovery recorded in the prior quarter related to the reversal of a previously recognized impaired loan. The remaining decline in net interest margin was primarily due to lower loan-related fees and strategic pricing adjustments to certain administered rate deposit products. As expected, the impact on net interest margin from higher fixed rate deposit costs continued to decline this quarter, and was offset by the benefit from repricing fixed rate loans at higher market interest rates.

Non-interest expenses were well-contained and increased 1 per cent, primarily driven by the seasonal increase in statutory employee benefits.

The provision for credit losses on total loans as a percentage of average loans represented 12 basis points this quarter and was 21 basis points higher than last quarter. The impaired loan provision of 12 basis points remained below the bank's historical five-year average of 19 basis points, but increased 24 basis points from the net recovery of 12 basis points last quarter. The previous quarter's impaired loan provision included the impact of the reversal of a previously recognized impaired loan write-off. A nil performing loan provision in the quarter was three basis points lower than last quarter.

The bank recognized a 20-basis-point increase to its common equity Tier 1 (CET1) capital ratio this quarter, reflecting the adoption of the capital adequacy requirements (CAR) 2023 guidelines effective Feb. 1, 2023, and lower accumulated other comprehensive losses related to a reversal of previously recognized unrealized losses on the banks's debt securities portfolio. No common shares were issued under the ATM equity distribution program this quarter.

Common shareholders' net income decreased compared with the same quarter last year, as a 2-per-cent increase in revenue was more than offset by a 5-per-cent increase in non-interest expenses. Preax, preprovision income decreased 1 per cent.

Higher revenue reflected a 2-per-cent increase in net interest income and a 4-per-cent increase in non-interest income. The increase in net interest income was primarily due to the benefit of 9-per-cent annual loan growth, partially offset by a 16-basis-point decrease in net interest margin. The decline in net interest margin reflects the impact of lower loan-related fees, including payout penalties, a proportional shift in the bank's financing mix toward fixed term branch-raised and insured broker deposits, and fixed rate asset yields that have lagged the growth of fixed rate deposit costs through the rising interest rate environment. The bank's fixed term deposit portfolio has repriced faster to reflect higher market interest rates than its fixed term loans, which have a longer average duration. Loan yields have also been slower to reflect the changes in market interest rates due to higher levels of competition for new lending. The decline in net interest margin was partially offset by the net positive impact of rising Bank of Canada policy interest rates on the bank's floating rate loans and deposits.

Non-interest expenses were up 5 per cent from the prior year, primarily driven by higher people costs related to the impact of salary increments in the prior year and a higher staffing complement, including in the Ontario market to support the bank's continued expansion.

The provision for credit losses on total loans as a percentage of average loans was two basis points lower than the same quarter last year due to a decline in the provision for credit losses on impaired loans.

Common shareholders' net income increased compared with last year as an 11-basis-point decline in the total provision for credit losses and 2-per-cent growth in revenue more than offset higher non-interest expenses. Pretax, preprovision income decreased 4 per cent.

Total revenue increased 2 per cent, reflecting a 3-per-cent increase in net interest income, partially offset by a 2-per-cent decrease in non-interest income. Net interest income increased from the prior year as 9-per-cent annual loan growth was partially offset by a 15-basis-point decrease in net interest margin.

Non-interest expenses were up 8 per cent, driven by higher people costs due to the same factors as noted in the comparison with the same quarter last year and the bank's continued investment in its digital capabilities.

The total provision for credit losses as a percentage of average loans of one basis point was 11 basis points lower than the prior year, due to a 14-basis-point decrease in the impaired loan provision, partially offset by a three-basis-point increase in the performing loan provision. The lower impaired loan provision primarily reflects the reversal of a previously recognized impaired loan write-off recorded in the first quarter of this year.

Financial targets

The financial targets outlined herein reflect key financial objectives the bank expected to drive on the assumption of relatively stable economic conditions and under the standardized approach for capital management.

Economic and financial market conditions have been volatile over the past quarter. As described further in the outlook section of the bank's 2023 second quarter management's discussion and analysis (MD&A), based on its assessment of market pricing relative to risk and considering the expected volatility in economic conditions, the bank hs targeted lower annual loan growth than previously expected. Given a lower outlook for loan growth, it no longer expects to achieve its annual pretax, preprovision income and efficiency ratio performance targets for fiscal 2023. The bank continues to expect to deliver annual adjusted ROE (return on equity) in line with its 2023 performance target, supported by lower-than-expected credit losses and management of non-interest expenses reflecting the bank's expectation of lower loan growth.

The bank will provide its 2024 outlook in its 2023 annual management's discussion and analysis, reflecting the expected economic conditions at that time.

About Canadian Western Bank

CWB Financial Group is the only full-service bank in Canada with a strategic focus to meet the unique financial needs of businesses and their owners. It provides its nationwide clients with full-service business and personal banking, specialized financing, comprehensive wealth management offerings, and trust services. Clients choose CWB for a differentiated level of service through specialized expertise, customized solutions and faster response times relative to the competition. The bank's people take the time to understand clients and their business, and work as a united team to provide holistic solutions and advice.

Canadian Western is firmly committed to the responsible creation of value for all its stakeholders and its approach to sustainability will support its continued success.

Fiscal 2023 second quarter results conference call

The bank's second quarter results conference call is scheduled for Friday, May 26, 2023, at 10 a.m. ET (8 a.m. MT ). The bank's executives will comment on financial results and respond to questions from analysts.

The conference call may be accessed on a listen-only basis by dialling 416-764-8688 (Toronto) or 1-888-390-0546 (toll-free) and entering passcode: 07376453. The call will also be webcast live on the bank's website.

A replay of the conference call will be available until June 2, 2023, by dialling 416-764-8677 (Toronto) or 1-888-390-0541 (toll-free) and entering passcode: 376453 followed by the pound sign.

We seek Safe Harbor.