CWB reports second quarter 2021 financial and strategic performance

Second Quarter 2021 Highlights⁽¹⁾ (compared to the same period in the prior year)

Adjusted EPS	Total revenue	Loans^(2)	Branch-raised deposits	Common share dividend declared^(3)
$0.84	$247.1 million	$31.4 billion	$18.0 billion	$0.29
Up 40%	Up 15%	Up 7% in total; Up 10% in Ontario	Up 18%	Consistent with the dividend declared last year and last quarter

^(1)	Includes certain non-IFRS measures – refer to definitions provided on page 6 of this news release, with further detail provided on page 7 of the 2021 Second Quarter Report to Shareholders.
^(2)	Excludes the allowance for credit losses.
^(3)	Declared by our Board of Directors on May 27, 2021.

This news release and accompanying financial highlights are supplementary to CWB's 2021 Second Quarter Report to Shareholders and 2020 Annual Report and should be read in conjunction with those documents.

EDMONTON, AB, May 28, 2021 /CNW/ - CWB Financial Group (TSX: CWB) (CWB) today announced financial performance for the three and six month periods ended April 30, 2021, with second quarter net income available to common shareholders of $72 million, up 40% compared to the same period last year. Second quarter pre-tax, pre-provision income was up 11% from the same period last year and down 3% sequentially, with three fewer interest-earning days compared to the prior quarter.

"Our financial results surpassed our expectations again this quarter, supported by very strong branch-raised deposit and loan growth across the country," said Chris Fowler, President and CEO. "Our focus to create an unrivaled experience for our clients and invest in our capabilities and product offering is creating exciting growth opportunities for CWB, especially as the near-term economic outlook improves. Based on the expected trajectory of our financial performance for the rest of the year, we now expect to deliver high single-digit loan growth and mid-teens adjusted earnings per share growth on a full year basis in fiscal 2021."

"Our focus to offer a superior client experience by transforming our capabilities has accelerated growth of full-service relationships within our risk appetite. The $805 million of net loan growth this quarter is one of the highest levels of quarterly organic loan growth that we have delivered in our history. We also continued to drive strong growth of lower cost branch-raised deposits, which has contributed to another sequential increase in our net interest margin."

"As the economy recovers, we will be well-positioned to accelerate our growth and capture increased market share through our continued expansion in Ontario, where we are planning for the opening of our second full-service banking centre in fiscal 2022. I am also pleased with the progress we have made in the development of our digital client offering, which complements our proactive relationship-based client experience. In the second half of 2021, we will commence a limited initial roll-out of our Virtual COO, a digital solution powered by explainable artificial-intelligence that will provide small business owners with access to real-time information on their financial health and relevant insights to accelerate their business growth. This innovative digital tool enables us to be a disruptor as we proactively support small business owners across Canada."

"As we look to the year ahead, we are seeing signals of a strong economic recovery that could provide additional accretive opportunities to surpass our baseline loan growth expectations within our risk appetite. To provide the capital flexibility to take full advantage of these potential opportunities, we plan to establish an at-the-market common equity distribution program. This program will provide a flexible and efficient tool to grow our regulatory capital base, if needed, in parallel with stronger levels of loan growth to drive incremental shareholder returns."

"The parallel run of our AIRB tools and processes continued this quarter. We have gained significant insights as we continue to use these tools across our business and identified opportunities for enhancements that we expect will improve our efficiency and effectiveness as a model-enabled bank. We plan to implement these enhancements and expect to extend our previously communicated timeline for resubmission of our AIRB application beyond the first half of 2022, but believe this approach will result in more favorable long-term outcomes for our teams and our investors."

"The success we have achieved would not be possible without our talented and dedicated teams. I am very proud that for the second consecutive year, CWB Financial Group was recognized as one of the 50 Best Work Places^TM in Canada. This award is based on confidential employee trust and engagement survey results, and reflects the strength of our culture. Our continued strategic execution and strong financial results reflects our teams' passion and dedication to realize our full potential across Canada."

Financial Performance

On June 1, 2020, we acquired the businesses of T.E. Wealth and Leon Frazer & Associates (the wealth acquisition). The operations of the wealth acquisition contributed to non-interest income growth while negatively affecting our efficiency ratio compared to the prior year. The wealth acquisition has contributed approximately $0.01 to adjusted earnings per common share in the first half of fiscal 2021, with higher levels of accretion anticipated starting in fiscal 2022.

Q2 2021, compared to Q2 2020^(1)	Common shareholders' net income of $72 million	Up 40%
	Adjusted EPS of $0.84	Up 40%
	Adjusted ROE of 10.8%	Up 280 bp^(2)
	Efficiency ratio of 48.9% (47.1% excluding the impact of the wealth acquisition)	Worsened 180 bp (No change)

Compared to the same quarter last year, common shareholders' net income increased as 15% revenue growth and a decline in the provision for credit losses more than offset the impact of higher non-interest expenses. Accelerated growth of full-service client relationships was the primary driver of very strong branch-raised deposit growth of 18%, which included a 34% increase in lower-cost demand and notice deposits. Net interest income increased 14%, driven by a 13 basis point increase in net interest margin and 7% loan growth, including 10% growth in Ontario. Non-interest income growth of 29% was primarily related to the wealth acquisition. Non-interest expenses were up 20%, or approximately 9% excluding the wealth acquisition and costs associated with operating our Advanced Internal Ratings Based (AIRB) tools and processes. The provision for credit losses as a percentage of average loans was 29 basis points lower than last year, primarily due to improved macroeconomic forecasts associated with the ongoing economic recovery, which drove a 34 basis point decrease in the performing loan provision for credit losses.

Q2 2021, compared to Q1 2021^(1)	Common shareholders' net income of $72 million	Down 9%
	Adjusted EPS of $0.84	Down 10%
	Adjusted ROE of 10.8%	Down 70 bp^(2)
	Efficiency ratio of 48.9%	Worsened 210 bp

Compared to the prior quarter, common shareholders' net income decreased as 1% revenue growth was more than offset by a 5% increase in non-interest expenses and the impact of the first semi-annual coupon payment on our Series 1 Non-Viability Contingent Capital (NVCC) Limited Recourse Capital Notes (LRCN) during the quarter of $4 million, after-tax. Revenue increased, despite three fewer interest-earning days, primarily due to the impact of a six basis point increase in net interest margin, which included a one-time two basis point benefit associated with adjusting certain balance sheet management activities in response to a shift in our funding mix, and very strong 3% loan growth. Strong growth in branch-raised deposits, including 6% sequential growth in lower cost demand and notice deposits, supported continued net interest margin expansion during the quarter. The provision for credit losses as a percentage of average loans was two basis points higher than last quarter, primarily due to an increase in the impaired loan provision for credit losses.

YTD 2021, compared to YTD 2020^(1)	Common shareholders' net income of $151 million	Up 23%
	Adjusted EPS of $1.77	Up 24%
	Adjusted ROE of 11.2%	Up 160 bp^(2)
	Efficiency ratio of 47.8% (46.1% excluding the impact of the wealth acquisition)	Worsened 150 bp (Improved 20 bp)

^(1)	Includes certain non-IFRS measures – refer to definitions provided on page 6 of this news release, with further detail provided on page 7 of the 2021 Second Quarter Report to Shareholders.
^(2)	bp – basis point

On a year-to-date basis, the increase in common shareholders' net income was driven by 13% growth in revenue and a decline in the provision for credit losses, partially offset by an increase in non-interest expenses. Revenue growth included a 10% increase in net interest income and a 41% increase in non-interest income from the wealth acquisition. The increase in net interest income was attributable to 7% annual loan growth and a three basis point increase in net interest margin. Non-interest expenses were up 18%, or approximately 7% excluding the wealth acquisition and costs associated with operating our AIRB tools and processes. A 19 basis point provision for credit losses as a percentage of average loans was 15 basis points lower than the prior year, reflecting a 21 basis point decline in the performing loan provision for credit losses due to an improved macroeconomic outlook through the first half of 2021, offset by a six basis point increase in the impaired loan provision for credit losses.

Strategic Performance

We continue to transform our capabilities to offer a superior full-service client experience through a complete range of in-person and digital channels, delivered by our highly engaged teams that operate within a client-centric, collaborative and change-ready culture. Our differentiated market position and transformation-focused strategy sets the stage for CWB to be a disruptive force in Canadian financial services, deliver profitable long-term growth and provide attractive, sustainable returns to investors.

This quarter, work progressed as expected on our key strategic projects, including the development of digital onboarding for small business clients and enhanced digital banking platforms for all business and personal clients. In addition, this quarter we:

• were recognized by Great Place to Work^® as one of the 50 Best Workplaces^TM in Canada, for the second consecutive year;
• continued to focus on our geographic diversification strategy, with formalized plans to open a new banking centre in Ontario in fiscal 2022, building on the success of our Mississauga banking centre opened in August 2020;
• continued our progress towards AIRB approval. We plan to implement enhancements to improve the efficiency and effectiveness of our AIRB tools and processes that we identified through our parallel run. We expect the implementation of these enhancements to extend our timeline for resubmission of our application to the Office of the Superintendent of Financial Institutions Canada (OSFI) beyond the first half of 2022, as previously expected; and,
• progressed development of the Virtual COO solution in partnership with Temenos, a global leader in banking software, to provide small business owners with a differentiated digital banking experience and accelerate our full-service client growth. The explainable artificial-intelligence powered solution, which is scheduled for a limited initial roll-out in the second half of 2021, will provide our small business owner clients with access to real-time information on their financial health and relevant insights to accelerate their business growth.

Capital Management

During the third quarter of fiscal 2021, we intend to establish an at-the-market (ATM) common equity distribution program that will allow for the incremental issuance, at our discretion and if needed, of up to $150 million of common shares at market prices in effect at the time. This program will provide additional flexibility to gradually support stronger than expected loan growth, while prudently managing our regulatory capital ratios.

Following the successful issuance of our $175 million Series 1 NVCC LRCN in October 2020, we completed the issuance of $150 million Series 2 NVCC LRCN in March 2021. With the recent LRCN issuances that bolstered our Tier 1 and Total capital ratios, we intend to redeem all of the outstanding NVCC Non-Cumulative 5-Year Rate Reset First Preferred Shares Series 7, in accordance with the provisions of the Series 7 Preferred Shares. If we proceed with the redemption, we estimate that it will reduce our Tier 1 and Total capital ratios by approximately 50 basis points. This announcement does not constitute a notice of redemption. If a decision is made to proceed with the redemption, formal notice will be provided in accordance with the provisions of the Series 7 Preferred Shares.

About CWB Financial Group

CWB Financial Group (CWB) is a diversified financial services organization known for a highly proactive client experience serving businesses and individuals across Canada. CWB's key business lines include full-service business and personal banking offered through branch locations of Canadian Western Bank, and personal banking through our digital channels, including Motive Financial. Highly responsive nation-wide specialized financing is delivered under the banners of CWB Optimum Mortgage, CWB Equipment Financing, CWB National Leasing, CWB Maxium Financial and CWB Franchise Finance. Trust services are offered through CWB Trust Services. Comprehensive wealth management services are provided through CWB Wealth Management and its affiliate brands, including T.E. Wealth, Leon Frazer & Associates, CWB McLean & Partners, and Canadian Western Financial. 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), "CWB.PR.C" (Series 7 preferred shares) and "CWB.PR.D" (Series 9 preferred shares). Learn more at www.cwb.com.

Fiscal 2021 Second Quarter Results Conference Call

CWB's second quarter results conference call is scheduled for Friday, May 28, 2021, 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: 5359996. 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 June 4, 2021 by dialing [phone] (Toronto) or 1 [phone] (toll-free) and entering passcode: 5359996.

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 press releases and corporate presentations. Forward-looking statements include, but are not limited to, statements about our objectives and strategies, targeted and expected financial results, the outlook for CWB's businesses or for the Canadian economy, the intended redemption of the Series 7 Preferred Shares, including the timing thereof, and the estimated impact on our Tier 1 and Total capital ratios. 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 may 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 Advanced Internal Ratings Based (AIRB) approach for calculating regulatory capital, 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 annual Management's Discussion and Analysis (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. The full extent of the impact that the COVID-19 pandemic, including government and regulatory responses to the outbreak, will have on the Canadian economy and our business is highly uncertain and difficult to predict at this time. 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-IFRS Measures

We use a number of financial measures to assess our performance against strategic initiatives and operational benchmarks. Non-IFRS measures provide readers with an enhanced understanding of how we view our ongoing performance. These measures may also provide the ability to analyze trends related to profitability and the effectiveness of our operations and strategies, and determine compliance against regulatory standards. To arrive at certain non-IFRS measures, we make adjustments to the results prepared in accordance with International Financial Reporting Standards (IFRS). Adjustments relate to items which we believe are not indicative of underlying operating performance. Some of these financial measures do not have standardized meanings prescribed by IFRS, and therefore, may not be comparable to similar measures presented by other financial institutions. The non-IFRS measures used in this news release are calculated as follows:

• Adjusted non-interest expenses – total non-interest expenses, excluding pre-tax amortization of acquisition-related intangible assets, and acquisition and integration costs (see calculation on page 7 of the 2021 Second Quarter Report to Shareholders). Acquisition and integration costs include direct and incremental costs incurred as part of the execution and ongoing integration of the acquisition of the businesses of T.E. Wealth and Leon Frazer & Associates.
• Adjusted common shareholders' net income – total common shareholders' net income, excluding the amortization of acquisition-related intangible assets, and acquisition and integration costs, net of tax (see calculation on page 7 of the 2021 Second Quarter Report to Shareholders).
• Pre-tax, pre-provision income – total revenue less adjusted non-interest expenses (see calculation on page 7 of the 2021 Second Quarter Report to Shareholders).
• Adjusted earnings per common share – diluted earnings per common share calculated with adjusted common shareholders' net income. Prior to the third quarter of fiscal 2020, this metric was named 'Adjusted cash earnings per common share'.
• Return on common shareholders' equity – annualized common shareholders' net income divided by average common shareholders' equity.
• Adjusted return on common shareholders' equity – annualized adjusted common shareholders' net income divided by average common shareholders' equity.
• Return on assets – annualized common shareholders' net income divided by average total assets.
• Efficiency ratio – adjusted non-interest expenses divided by total revenue.
• Net interest margin – annualized net interest income divided by average total assets.
• 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.
• Operating leverage – growth rate of total revenue less growth rate of adjusted non-interest expenses.
• Basel III common equity Tier 1, Tier 1, Total capital, and leverage ratios – calculated in accordance with guidelines issued by OSFI.
• Risk-weighted assets – on and off-balance sheet assets assigned a risk weighting calculated in accordance with the Standardized approach guideline issued by OSFI.
• Average balances – average daily balances.

Selected Financial Highlights^(1)
	For the three months ended												For the six months ended
(unaudited) ($ thousands, except per share amounts)		April 30  2021			January 31 2021			April 30 2020			Change from April 30 2020			April 30 2021			April 30 2020		Change from April 30 2020
Results from Operations
Net interest income	$	216,964		$	215,453		$	190,988			14	%	$	432,417		$	391,998		10	%
Non-interest income		30,142			29,635			23,376			29			59,777			42,338		41
Total revenue		247,106			245,088			214,364			15			492,194			434,336		13
Pre-tax, pre-provision income		126,342			130,474			113,314			11			256,816			233,102		10
Common shareholders' net income		71,956			79,237			51,381			40			151,193			123,324		23
Earnings per common share
Basic		0.83			0.91			0.59			41			1.74			1.41		23
Diluted		0.82			0.91			0.59			39			1.73			1.41		23
Adjusted		0.84			0.93			0.60			40			1.77			1.43		24
Return on common shareholders' equity		10.6	%		11.3	%		7.9	%		270	bp^(6)		10.9	%		9.5	%	140	bp^(6)
Adjusted return on common shareholders' equity		10.8			11.5			8.0			280			11.2			9.6		160
Return on assets		0.84			0.91			0.65			19			0.87			0.78		9
Net interest margin		2.53			2.47			2.40			13			2.50			2.47		3
Efficiency ratio		48.9			46.8			47.1			180			47.8			46.3		150
Operating leverage^(2)		(4.2)			(3.0)			(0.8)			(340)			(3.6)			(1.7)		(190)
Provision for credit losses on total loans as a percentage of average loans^(3)		0.20			0.18			0.49			(29)			0.19			0.34		(15)
Provision for credit losses on impaired loans as a percentage of average loans^(3)		0.27			0.24			0.22			5			0.25			0.19		6
Number of full-time equivalent staff		2,516			2,498			2,325			8	%		2,516			2,325		8	%
Per Common Share
Cash dividends	$	0.29		$	0.29		$	0.29			-	%	$	0.58		$	0.57		2	%
Book value		32.26			32.24			31.24			3			32.26			31.24		3
Closing market value		33.80			28.45			22.03			53			33.80			22.03		53
Common shares outstanding (thousands)		87,162			87,101			87,100			-			87,162			87,100		-
Balance Sheet and Off-Balance Sheet Summary
Assets	$	35,917,565		$	35,301,768		$	32,958,184			9	%
Loans^(4)		31,372,100			30,566,902			29,197,575			7
Deposits		29,067,025			28,635,312			26,147,086			11
Debt		2,587,326			2,572,638			2,813,882			(8)
Shareholders' equity		3,527,213			3,373,145			3,110,775			13
Wealth Management
Assets under management		7,166,287			6,763,658			1,981,062			262
Assets under advisement and administration		2,479,606			2,372,393			339,403			631
Assets under administration - other^(5)		12,525,645			11,971,322			9,684,063			29
Capital Adequacy
Common equity Tier 1 ratio		8.7	%		8.8	%		9.1	%		(40)	bp^(6)
Tier 1 ratio		11.2			10.8			10.5			70
Total ratio		12.9			12.6			11.9			100

^(1)	Includes certain non-IFRS measures – refer to definitions provided on page 6 of this news release, with further detail provided on page 7 of the 2021 Second Quarter Report to Shareholders.
^(2)	Excluding the impact of the wealth acquisition, our operating leverage ratio would have been positive 0.2% and 1.1% for the second and first quarters of fiscal 2021, respectively, and positive 0.6% for the first six months of fiscal 2021.
^(3)	Includes provisions for credit losses on loans, committed but undrawn credit exposures and letters of credit.
^(4)	Excludes the allowance for credit losses.
^(5)	Comprised of trust assets under administration, third-party leases under administration and loans under service agreements.
^(6)	bp – basis point

SOURCE CWB Financial Group

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

Related Links

https://www.cwbank.com/