CWB reports first quarter 2023 performance

This news release and accompanying financial highlights are supplementary to CWB's 2023 First Quarter Report to Shareholders and 2022 Annual Report and should be read in conjunction with those documents.

EDMONTON, AB, March 2, 2023 /CNW/ - CWB Financial Group (TSX: CWB) (CWB) announced financial performance for the three months ended January 31, 2023, with quarterly common shareholders' net income of $94 million, up 39% sequentially and 8% from the same period last year. Adjusted EPS⁽¹⁾ of $1.02 was up 16% from last quarter, as the impact of lower foreign exchange revenue compared to elevated levels last quarter was more than offset by a reduction in the provision for credit losses. The reduction in the provision for credit losses primarily related to the reversal of a previously recognized impaired loan write-off, which more than offset net new impaired loan provisions for credit losses. Our Board of Directors declared a cash dividend of $0.32 per common share, consistent with the dividend declared last quarter and up two cents, or 7%, from last year.

"Execution of our winning strategy and demonstrated history of earning new relationships through economic cycles supports our expectation that we will deliver strong full-service growth this year," said Chris Fowler, President, and CEO. "Our teams delivered strategically targeted loan growth this quarter, with very strong increases in Ontario and in general commercial loans, which represent our largest opportunity to convert clients into full-service relationships."

"Gross impaired loans are returning to more normal levels from very benign conditions last year. Our secured lending model and disciplined underwriting processes continue to support our expectation that our provision for credit losses will remain within our strong historical range."

"We are focused on the significant opportunities ahead of us and expect momentum to build through the year as we execute against our strategic priorities and initiatives to support revenue growth while we proactively manage our expenses to drive profitability in line with our full year targets."

^(1)	Non-GAAP measure – refer to definitions and detail provided on page 5.

Financial Performance

Q1 2023, compared to Q4 2022^(1)	Common shareholders' net income	$94 million	Up 39%
	Diluted EPS Adjusted EPS	$0.99 $1.02	Up 38% Up 16%
	Adjusted Return on Equity (ROE)	12.0 %	Up 150 bp
	Efficiency ratio	52.7 %	Up 10 bp

Compared to the prior quarter, common shareholders' net income increased as the beneficial impact of a 23 basis point decrease in the total provision for credit losses as a percentage of average loans⁽¹⁾ and lower non-interest expenses more than offset a 2% decline in revenue. Pre-tax, pre-provision income⁽¹⁾ decreased 3%.  

Lower revenue reflected a 23% decline in non-interest income, as we recognized elevated foreign exchange gains in the prior quarter, partially offset by a 1% increase in net interest income. Higher net interest income was driven by 1% sequential loan growth, partially offset by a one basis point decrease in net interest margin⁽¹⁾. Net interest margin was lower as the net positive impact of rising Bank of Canada policy interest rates on our floating rate loans and deposits was more than offset by the growth in fixed rate deposit costs, which have continued to outpace fixed term asset yields. Our fixed term deposit portfolio has repriced faster to reflect higher market interest rates than our 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 high competition for new lending, and loan related fees, including payout penalties, are lower compared to last quarter. The decline in net interest margin was partially offset by a three basis point impact from the interest income recovery from a previously impaired loan.

Non-interest expenses were down 12%, primarily due to accelerated amortization of previously capitalized Advanced Internal Ratings Based (AIRB) assets recognized in the prior quarter. Adjusted non-interest expenses⁽¹⁾ were down 2%.

The provision for credit losses on total loans as a percentage of average loans⁽¹⁾ represented a nine basis point recovery this quarter and was 23 basis points lower than last quarter. A 12 basis point impaired loan recovery, compared to a nil provision last quarter, primarily due to the reversal of a previously recognized impaired loan write-off, which more than offset net new impaired loan provisions for credit losses required this quarter. The performing loan provision of three basis points was 11 basis points lower than last quarter.

Q1 2023, compared to Q1 2022^(1)	Common shareholders' net income	$94 million	Up 8%
	Diluted EPS Adjusted EPS	$0.99 $1.02	Up 2% Up 3%
	Adjusted Return on Equity (ROE)	12.0 %	Up 20 bp
	Efficiency ratio	52.7 %	Up 420 bp

^(1)	Adjusted EPS, adjusted ROE, efficiency ratio, pre-tax, pre-provision income, net interest margin, adjusted non-interest expenses and the provision for credit losses on total loans as a percentage of average loans are non-GAAP measures. Refer to definitions and detail provided on page 5.
	bp – basis point

Common shareholders' net income increased compared to the same quarter last year as a 20 basis point decline in the total provision for credit losses and 3% growth in revenue more than offset higher non-interest expenses. Pre-tax, pre-provision income decreased 6%.   

Higher revenue reflected a 4% increase in net interest income, partially offset by a 7% decline in non-interest income. The increase in net interest income reflected the benefit of 9% annual loan growth, partially offset by a 15 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 our funding mix towards fixed term branch-raised and insured broker deposits and asset yields that have lagged the growth of deposit costs through the rising interest rate environment. The decline in net interest margin was partially offset by the net positive impact of rising Bank of Canada policy interest rates on our floating rate loans and deposits and a three basis point impact from the interest income recovery from a previously impaired loan.

Non-interest expenses were up 12% 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, including in the Ontario market to support our continued expansion. Higher non-interest expenses also reflect an expansion of our digital capabilities as we optimize our business, deliver an unrivaled experience to our clients and accelerate full-service client growth.

The provision for credit losses on total loans as a percentage of average loans was 20 basis points lower than the same quarter last year, which reflected a 24 basis point decrease in the impaired loan provision, partially offset by a four basis point increase in the performing loan provision. We recorded a recovery in the performing loan provision last year, reflective of an improvement in forecast economic conditions at that point in time.

Financial Scorecard

The targets below reflect key financial objectives we expect to drive on an annual basis over the next two fiscal years, and have been developed on the assumption of relatively stable economic conditions and under the Standardized approach for capital management.

Annual Metrics	Performance Target
Pre-tax pre-provision income growth	Greater than 10%
Adjusted ROE	12% by 2024
Efficiency ratio	Less than 50%

About CWB Financial Group

CWB Financial Group (CWB) is the only full-service bank in Canada with a strategic focus to meet the unique financial needs of businesses and their owners. We provide our nation-wide 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. Our people take the time to understand our clients and their business, and work as a united team to provide holistic solutions and advice.

As a public company on the Toronto Stock Exchange (TSX), CWB trades under the symbols "CWB" (common shares), "CWB.PR.B" (Series 5 preferred shares) and "CWB.PR.D" (Series 9 preferred shares). We are firmly committed to the responsible creation of value for all our stakeholders and our approach to sustainability will support our continued success. Learn more at www.cwb.com.

Fiscal 2023 First Quarter Results Conference Call

CWB's first quarter results conference call is scheduled for Thursday, March 2, 2023, at 10:00 a.m. ET (8:00 a.m. MT). CWB'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 dialing [phone] (Toronto) or 1 [phone] (toll-free) and entering passcode: 83287796. The call will also be webcast live on CWB's website:

www.cwb.com/investor-relations/quarterly-reports.

A replay of the conference call will be available until March 9, 2023 by dialing [phone] (Toronto) or 1 [phone] (toll-free) and entering passcode: 287796#.

Forward-looking Statements

From time to time, we make written and verbal forward-looking statements. Statements of this type are included in our Annual Report and reports to shareholders and may be included in filings with Canadian securities regulators or in other communications such as media releases and corporate presentations. Forward-looking statements include, but are not limited to, statements about our objectives and strategies, targeted and expected financial results and the outlook for CWB'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", "goal", "focus", "potential", "proposed" 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 and are subject to inherent risks and uncertainties, which give rise to the possibility that our predictions, forecasts, projections, expectations and conclusions will not prove to be accurate, that our assumptions may not be correct, and that our strategic goals will not be achieved.

A variety of factors, many of which are beyond our 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 housing market conditions, the volatility and level of liquidity in financial markets, fluctuations in interest rates and currency values, the volatility and level of various commodity prices, changes in monetary policy, changes in economic and political conditions, material changes to trade agreements, transition to the AIRB approach for regulatory capital purposes, legislative and regulatory developments, legal developments, the level of competition, the occurrence of natural catastrophes, outbreaks of disease or illness that affect local, national or international economies, changes in accounting standards and policies, information technology and cyber risk, the accuracy and completeness of information we receive 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 business infrastructure, changes in tax laws, technological developments, unexpected changes in consumer spending and saving habits, timely development and introduction of new products, and our 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.

Additional information about these factors can be found in the Risk Management section of our 2022 Annual MD&A. 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 our actual results to differ materially from the expectations expressed in such forward-looking statements. Any forward-looking statements contained in this document represent our views as of the date hereof. Unless required by securities law, we do not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time by us or on our behalf. The forward-looking statements contained in this document are presented for the purpose of assisting readers in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our strategic priorities and objectives, and may not be appropriate for other purposes.

Assumptions about the performance of the Canadian economy over the forecast horizon and how it will affect our business are material factors considered when setting organizational objectives and targets. In determining expectations for economic growth, we consider our own forecasts, economic data and forecasts provided by the Canadian government and its agencies, as well as certain private sector forecasts. These forecasts are subject to inherent risks and uncertainties that may be general or specific. Where relevant, material economic assumptions underlying forward-looking statements are disclosed within the Outlook and Allowance for Credit Losses sections of our interim and annual MD&A.

Non-GAAP Measures

We use a number of financial measures and ratios to assess our performance against strategic initiatives and operational benchmarks. Some of these financial measures and ratios do not have standardized meanings prescribed by Generally Accepted Accounting Principles (GAAP) and may not be comparable to similar measures presented by other financial institutions. Non-GAAP financial measures and ratios provide readers with an enhanced understanding of how we view our financial performance. These measures and ratios may also provide the ability to analyze trends related to profitability and the effectiveness of our operations and strategies, and are disclosed in compliance with National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure.

To calculate non-GAAP financial measures, we exclude certain items from our financial results prepared in accordance with IFRS. Adjustments relate to items which we believe are not indicative of underlying operating performance. Our non-GAAP financial measures include:

• Adjusted non-interest expenses – total non-interest expenses, excluding pre-tax accelerated amortization of previously capitalized AIRB assets, amortization of acquisition-related intangible assets, and acquisition and integration costs. Accelerated amortization of AIRB assets is a result of a reduction in estimated useful lives of certain previously capitalized AIRB assets recognized in the three months ended October 31, 2022. Acquisition and integration costs include direct and incremental costs incurred as part of the execution and integration of business acquisitions.
• Adjusted common shareholders' net income – total common shareholders' net income, excluding the accelerated amortization of previously capitalized AIRB assets, amortization of acquisition-related intangible assets, and acquisition and integration costs, net of tax.
• Pre-tax, pre-provision income – total revenue less adjusted non-interest expenses.

The following table provides a reconciliation of our non-GAAP financial measures to our reported financial results.

		For the three months ended									Change from  January 31 2022
(unaudited) (thousands)			January 31 2023			October 31 2022			January 31 2022
Non-interest expenses		$	147,217		$	166,783		$	131,407		12	%
Adjustments (before tax):
Amortization of acquisition-related intangible assets			(2,981)			(2,557)			(2,541)		17
Acquisition and integration costs			(375)			(361)			-		100
Accelerated amortization of previously capitalized AIRB assets			-			(16,555)			-		-
Adjusted non-interest expenses		$	143,861		$	147,310		$	128,866		12
												%
Common shareholders' net income adjustments (after-tax):		$	94,363		$	67,687		$	87,642		8
Amortization of acquisition-related intangible assets^(1)			2,446			1,913			1,901		29
Acquisition and integration costs^(2)			281			270			-		100
Accelerated amortization of previously capitalized AIRB assets^(3)			-			12,549			-		-
Adjusted common shareholders' net income		$	97,090		$	82,419		$	89,543		8
Total revenue		$	272,891		$	279,838		$	265,976		3	%
Less:
Adjusted non-interest expenses (see above)			143,861			147,310			128,866		12	%
Pre-tax, pre-provision income		$	129,030		$	132,528		$	137,110		(6)

^(1)	Net of income tax of $535 for the three months ended January 31, 2023 (Q4 2022 – $644, Q1 2022 – $640).
^(2)	Net of income tax of $94 for the three months ended January 31, 2023 (Q4 2022 – $91, Q1 2022 – $nil).
^(3)	Net of income tax of $nil for the three months ended January 31, 2023 (Q4 2022 – $4,006, Q1 2022 – $nil).

Non-GAAP ratios are calculated using the non-GAAP financial measures defined above. Our non-GAAP ratios include:

• Adjusted earnings per common share – diluted earnings per common share calculated with adjusted common shareholders' net income.
• Adjusted return on common shareholders' equity – annualized adjusted common shareholders' net income divided by average common shareholders' equity, which is total shareholders' equity excluding preferred shares and limited recourse capital notes.
• Efficiency ratio – adjusted non-interest expenses divided by total revenue.
• Operating leverage – growth rate of total revenue less growth rate of adjusted non-interest expenses.

Supplementary financial measures are measures that do not have definitions prescribed by GAAP, but do not meet the definition of a non-GAAP financial measure or ratio. Our supplementary financial measures include:

• Return on assets – annualized common shareholders' net income divided by average total assets.
• Net interest margin – annualized net interest income divided by average total assets.
• Return on common shareholders' equity – annualized common shareholders' net income divided by average common shareholders' equity.
• Write-offs as a percentage of average loans – annualized write-offs divided by average total loans.
• Book value per common share – total common shareholders' equity divided by total common shares outstanding.
• Branch-raised deposits – total deposits excluding broker term and capital market deposits.
• Provision for credit losses on total loans as a percentage of average loans – annualized provision for credit losses on loans, committed but undrawn credit exposures and letters of credit divided by average total loans. Provisions for credit losses related to debt securities measured at fair value through other comprehensive income (FVOCI) and other financial assets are excluded.
• Provision for credit losses on impaired loans as a percentage of average loans – annualized provision for credit losses on impaired loans divided by average total loans.
• Provision for credit losses on performing loans as a percentage of average loans – annualized provision for credit losses on performing loans (Stage 1 and 2) divided by average total loans.
• Average balances – average daily balances.

Selected Financial Highlights

		For the three months ended								Change from January 31    2022
(unaudited) (thousands, except per share amounts)		January 31 2023			October 31 2022			January 31 2022
Results from Operations
Net interest income	$	242,280		$	240,202		$	233,072		4		%
Non-interest income		30,611			39,636			32,904		(7)
Total revenue		272,891			279,838			265,976		3
Pre-tax, pre-provision income^(1)		129,030			132,528			137,110		(6)
Common shareholders' net income		94,363			67,687			87,642		8
Common Share Information
Earnings per common share
Basic	$	0.99		$	0.72		$	0.98		1		%
Diluted		0.99			0.72			0.97		2
Adjusted^(1)		1.02			0.88			0.99		3
Cash dividends		0.32			0.31			0.30		7
Book value^(1)		34.26			33.48			33.64		2
Closing market value		28.12			23.70			38.63		(27)
Common shares outstanding (thousands)		96,229			94,326			90,203		7
Performance Measures^(1)
Return on common shareholders' equity		11.6	%		8.6	%		11.6	%	-		bp
Adjusted return on common shareholders' equity		12.0			10.5			11.8		20
Return on assets		0.90			0.66			0.93		(3)
Net interest margin		2.32			2.33			2.47		(15)
Efficiency ratio		52.7			52.6			48.5		420
Operating leverage		(9.0)			0.5			(3.9)		(510)
Credit Quality^(1)
Provision for (recovery of) credit losses on total loans as a percentage of average loans^(2)		(0.09)			0.14			0.11		(20)
Provision for (recovery of) credit losses on impaired loans as a percentage of average loans^(2)		(0.12)			-			0.12		(24)
Balance Sheet
Assets	$	41,711,554		$	41,431,558		$	37,676,997		11		%
Loans^(3)		36,416,656			35,905,622			33,364,006		9
Deposits		33,113,849			33,010,462			30,294,781		9
Debt		3,808,247			3,461,899			3,041,667		25
Shareholders' equity		3,871,964			3,732,976			3,609,475		7
Off-Balance Sheet
Wealth Management
Assets under management and administration		8,260,366			7,825,003			8,689,298		(5)
Assets under advisement^(4)		1,924,278			1,824,961			2,185,748		(12)
Assets Under Administration - Other		14,290,188			13,943,199			14,421,779		(1)
Capital Adequacy^(5)
Common equity Tier 1 ratio		9.1	%		8.8	%		9.0	%	10		bp
Tier 1 ratio		10.9			10.6			10.9		-
Total ratio		12.8			12.1			12.5		30
Other
Number of full-time equivalent staff		2,737			2,712			2,643		4		%

^(1)	Non-GAAP measure – refer to definitions and detail provided on page 5.
^(2)	Includes provisions for credit losses on loans, committed but undrawn credit exposures and letters of credit.
^(3)	Excludes the allowance for credit losses.
^(4)	Primarily comprised of assets under advisement related to our Indigenous Services wealth management business.
^(5)	Calculated using the Standardized approach in accordance with guidelines issued by the Office of the Superintendent of Financial Institutions Canada (OSFI).
	bp – basis point

SOURCE CWB Financial Group

Chris Williams, MBA, AVP, Investor Relations, Phone: [phone], Email: [email protected]