Mr. Chris Fowler reports

CWB REPORTS THIRD QUARTER 2023 FINANCIAL PERFORMANCE

Canadian Western Bank has released its financial performance for the three- and nine-month periods ended July 31, 2023. Third quarter net income available to common shareholders of $83-million and adjusted earnings per common share (EPS) of 88 cents increased by 19 per cent from the previous quarter. The sequential growth in earnings was driven by a significant increase in net interest margin, prudent expense management and three additional interest-earning days. Compared with the same quarter last year, net income available to common shareholders was up 3 per cent.

The bank's board of directors declared a cash dividend of 33 cents per common share, up two cents from the dividend declared last year and consistent with last quarter.

"Through the focused performance of our teams, we delivered the strong financial results that we expected this quarter, supported by branch-raised deposit growth, improved revenues and disciplined management of our expenses," said Chris Fowler, president and chief executive officer. "We have targeted lending opportunities that provide strong returns within a prudent risk appetite for the current uncertain economic environment. Our secured lending model, prudent underwriting practices and pro-active loan management have continued to support provisions for credit losses that remain below the low end of our historical range.

"CWB's strategic focus to meet the full-service financial needs of businesses and their owners differentiates us from our Canadian peers. Our high client satisfaction levels demonstrate the value we create for mid-market commercial businesses, which represents a significant segment of the Canadian economy. In the fourth quarter, we expect to benefit from continued revenue growth and management of our expenses to deliver an annual adjusted return on equity within our 2023 target range of 10 to 11 per cent."

Common shareholders' net income increased 19 per cent as higher net interest income more than offset a higher provision for credit losses. Non-interest expenses were consistent with the prior quarter and reflected the bank's continued actions to contain expense growth. Pretax, preprovision income increased 16 per cent. Strong branch-raised deposit growth of 3 per cent reflected continued expansion of Canadian Western's full-service client relationships.

Total revenue grew 7 per cent sequentially. Net interest income increased 9 per cent due to an 11-basis-point increase in net interest margin and the impact of three additional interest-earning days. Higher net interest margin was driven by focusing loan growth on the bank's strategically targeted general commercial loan portfolio, which produced strong risk-adjusted returns. Net interest margin also benefited from the maturing and repricing of fixed-term assets at higher market interest rates, which had a larger impact than the increase in deposit costs this quarter. Non-interest income declined 8 per cent, which reflected a reduction in foreign exchange income, partially offset by higher wealth management fees.

The provision for credit losses on total loans as a percentage of average loans was 16 basis points this quarter, four basis points higher than last quarter. The impaired loan provision of 10 basis points was two basis points lower than last quarter and remained below Canadian Western's historical five-year average. The bank recognized a performing loan provision for credit losses of six basis points in the current quarter, reflecting the uncertainty of the economic environment.

Common shareholders' net income increased compared with the same quarter last year as revenue growth more than offset an increase in non-interest expenses. Pretax, preprovision income increased 4 per cent.

Higher revenue reflected a 5-per-cent increase in net interest income and a 1-per-cent increase in non-interest income. The increase in net interest income was primarily due to the benefit of 6-per-cent annual loan growth, partially offset by a six-basis-point decrease in net interest margin. The decline in net interest margin reflected the impact of lower loan-related fees, including payout penalties and a proportional shift in the bank's financing mix toward fixed-term branch-raised and insured broker deposits. Growth in fixed-rate asset yields has lagged the increase of fixed-rate deposit costs through the rising interest rate environment, as Canadian Western's fixed-term deposit portfolio has a shorter 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. These pressures have lessened in recent periods and a proportional shift in the bank's asset mix associated with strong loan growth in its general commercial loan portfolio has supported improved net interest margin performance in the current quarter.

Non-interest expenses were up 4 per cent from the prior year, primarily driven by higher people costs related to the impact of salary increments enacted in the prior year and a higher staffing complement, and Canadian Western's continued investment in its digital capabilities.

The provision for credit losses on total loans as a percentage of average loans was consistent with the same quarter last year, as a two-basis-point decrease in the impaired loan provision was offset by a two-basis-point increase in the performing loan provision.

Common shareholders' net income increased compared with last year as 3-per-cent growth in revenue and an eight-basis-point decline in the total provision for credit losses more than offset higher non-interest expenses. Pretax, preprovision income decreased 1 per cent.

Total revenue increased 3 per cent, reflecting a 4-per-cent increase in net interest income, partially offset by a 1-per-cent decrease in non-interest income. Net interest income increased from the prior year as 6-per-cent annual loan growth was partially offset by a 12-basis-point decrease in net interest margin.

Non-interest expenses were up 7 per cent, driven by higher people costs due to a higher staffing complement and the bank's continued investment in its digital capabilities.

The total provision for credit losses as a percentage of average loans of six basis points was eight basis points lower than the prior year, driven by a decrease in the impaired loan provision that primarily reflected the reversal of a previously recognized impaired loan write-off recorded in the first quarter of this year.

About Canadian Western Bank

Canadian Western 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 Canadian Western for a differentiated level of service through specialized expertise, customized solutions and faster response times relative to the competition. Its people take the time to understand its clients and their business, and work as a united team to provide holistic solutions and advice.

Fiscal 2023 third quarter results conference call

Canadian Western's third quarter results conference call is scheduled for Friday, Sept. 1, 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 74770285. The call will also be webcast live on Canadian Western's website.

A replay of the conference call will be available until Sept. 8, 2023, by dialling 416-764-8677 (Toronto) or 1-888-390-0541 (toll-free) and entering passcode 770285 followed by the pound key.

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