CWB reports first quarter 2024 performance

This news release and accompanying financial highlights are supplementary to CWB's 2024 First Quarter Report to Shareholders and 2023 Annual Report and should be read in conjunction with those documents.

EDMONTON, AB, March 1, 2024 /CNW/ - CWB Financial Group (TSX: CWB) (CWB) announced financial performance for the three months ended January 31, 2024, with quarterly common shareholders' net income of $88 million, down 7% from the prior year, primarily due to an increase in the provision for credit losses as a percentage of average loans⁽¹⁾ to within our historical normal range. Net income was elevated in the prior year due to a large recovery recognized in the provision for credit losses. Pre-tax, pre-provision income⁽¹⁾ increased by 14% compared to the prior year as net interest margin⁽¹⁾ growth and prudent expense management drove positive operating leverage⁽¹⁾ of 7.1%.

Quarterly common shareholders' net income increased 14% sequentially, primarily driven by lower non-interest expenses due to costs incurred in the prior quarter related to the reorganization of our operations. Adjusted earnings per share common share (EPS)⁽¹⁾ of $0.93 was down one cent from last quarter, as lower adjusted non-interest expenses⁽¹⁾ was more than offset by the expected increase in the provision for credit losses to within our normal historical range.

Our Board of Directors declared a cash dividend of $0.34 per common share, consistent with the dividend declared last quarter and up two cents, or 6%, from last year.

"CWB's focused performance continued in the first quarter with positive operating leverage driven by disciplined expense management while targeting new lending opportunities that met our risk adjusted return expectations in the current environment," said Chris Fowler, President and CEO. "Our strong balance sheet, prudent risk management, and the differentiated experience we provide to our clients supports the continued delivery of solid results."

"Our financial outlook for 2024 is unchanged and we are well positioned to create value for our investors in the year ahead."

Financial Performance

Q1 2024, compared to Q1 2023(1)	Common shareholders' net income	$88 million	Down 7%
	Diluted EPS Adjusted EPS	$0.91 $0.93	Down 8% Down 9%
	Adjusted Return on Equity (ROE)	10.1 %	Down 190 bp
	Efficiency ratio	49.2 %	Down 350 bp
	Pre-tax, pre-provision income	$147 million	Up 14%

(1)	Provision for credit losses as a percentage of average loans, pre-tax, pre-provision income, net interest margin, operating leverage, adjusted EPS, adjusted non-interest expenses, adjusted ROE and efficiency ratio are non-GAAP measures. Refer to definitions and detail provided on pages 3 and 4.

Common shareholders' net income decreased 7% compared to the same quarter last year as a 6% increase in revenue and a 1% decline in non-interest expenses were more than offset by an increase in the total provision for credit losses as a percentage of average loans. An expanding net interest margin and prudent expense management drove 7.1% operating leverage and a 14% increase in our pre-tax, pre-provision income compared to the prior year.

Higher revenue was primarily driven by a 7% increase in net interest income, which reflected the benefit of an eight basis point increase in net interest margin and 1% annual loan growth. The increase in net interest margin primarily reflected the benefit of increased yields on fixed term assets from higher market interest rates, which had a larger impact than the increase in deposit costs. 

Non-interest expenses were down 1% from the prior year, primarily driven by lower people costs associated with a reduction in our overall staffing levels following our reorganization activities last quarter. This impact was partially offset by higher depreciation expense associated with the opening of our new Toronto financial district banking centre and the phased roll-out of our new commercial digital and cash management platform initiated in the quarter.

The provision for credit losses on total loans as a percentage of average loans was 28 basis point higher than the same quarter last year, reflecting a 31 basis point increase in the impaired loan provision, offset by a three basis point decrease in the performing loan provision. The prior year impaired loan provision represented a 12 basis point recovery, primarily due to the reversal of a previously recognized impaired loan write-off. 

Q1 2024, compared to Q4 2023	Common shareholders' net income	$88 million	Up 14%
	Diluted EPS Adjusted EPS	$0.91 $0.93	Up 14% Down 1%
	Adjusted Return on Equity (ROE)	10.1 %	Down 50 bp
	Efficiency ratio	49.2 %	Down 180 bp
	Pre-tax, pre-provision income	$147 million	Up 3%

Compared to the prior quarter, common shareholders' net income increased 14% as lower non-interest expenses were partially offset by an increase in the total provision for credit losses and a 1% decline in revenue. Adjusted common shareholders' net income decreased 1%, while pre-tax, pre-provision income increased 3%.

Lower revenue reflected a 13% 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. Net interest margin was consistent with the prior quarter as the negative impact of higher average liquidity was offset by increased yields on fixed term assets that exceeded the increase in deposit costs in the quarter.

Non-interest expenses were down 13%, primarily driven by costs incurred in the previous quarter related to the reorganization of our operations, with the remaining reorganization activities fully completed within the current quarter. Adjusted non-interest expenses were down 4%, primarily due to lower people costs following our reorganization activities, and lower spend due to the timing of ongoing strategic execution activities.

The provision for credit losses on total loans as a percentage of average loans represented 19 basis points this quarter and was eight basis points higher than last quarter. A 19 basis point impaired loan provision, compared to an eight basis point provision last quarter and reflects the expected return to a level within our historical normal range of 18 to 23 basis points.

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 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. 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 2024 First Quarter Results Conference Call

CWB's first quarter results conference call is scheduled for Friday, March 1, 2024, 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: 79296021. 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 8, 2024 by dialing [phone] (Toronto) or 1 [phone] (toll-free) and entering passcode: 296021#.

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 and commercial real estate market conditions and household and business indebtedness, 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 regulatory capital purposes, legislative and regulatory developments, changes in supervisory expectations or requirements for capital, interest rate and liquidity management, 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, the impact of bank failures or other adverse developments at other banks that drive negative investor and depositor sentiment regarding the stability and liquidity of banks, 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 2023 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 costs associated with a reorganization of our operations, amortization of acquisition-related intangible assets, and acquisition and integration costs. Non-recurring reorganization costs were incurred to execute reorganization initiatives to realize efficiencies in our banking centre footprint, operational support functions, and administrative processes. 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 costs associated with organizational redesign initiatives, accelerated 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 2023
(unaudited) (thousands)			January 31 2024			October 31 2023			January 31 2023
Non-interest expenses		$	145,627		$	167,600		$	147,217		(1)	%
Adjustments (before tax):
Non-recurring reorganization costs			(1,202)			(17,146)			-		100
Amortization of acquisition-related intangible assets			(1,728)			(1,728)			(2,981)		(42)
Acquisition and integration costs			-			-			(375)		(100)
Adjusted non-interest expenses		$	142,697		$	148,726		$	143,861		(1)
Common shareholders' net income adjustments (after-tax):		$	87,921		$	76,845		$	94,363		(7)	%
Non-recurring reorganization costs (1)			894			12,726			-		100
Amortization of acquisition-related intangible assets(2)			1,268			1,267			2,446		(48)
Acquisition and integration costs(3)			-			-			281		(100)
Adjusted common shareholders' net income		$	90,083		$	90,838		$	97,090		(7)
Total revenue		$	289,991		$	291,763		$	272,891		6
Less:
Adjusted non-interest expenses (see above)			142,697			148,726			143,861		(1)	%
Pre-tax, pre-provision income		$	147,294		$	143,037		$	129,030		14

(1)	Net of income tax of $308 for the three months ended January 31, 2024 (Q4 2023 – $4,420, Q1 2023 – $nil).
(2)	Net of income tax of $460 for the three months ended January 31, 2024 (Q4 2023 – $461, Q1 2023 – $535).
(3)	Net of income tax of $nil for the three months ended January 31, 2024 (Q4 2023 – $nil, Q1 2023 – $94).

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.
• Franchise deposits (formerly referred to as 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 2023
(unaudited) (thousands, except per share amounts)		January 31 2024			October 31 2023			January 31 2023
Results from Operations
Net interest income	$	259,071		$	256,316		$	242,280		7	%
Non-interest income		30,920			35,447			30,611		1
Total revenue		289,991			291,763			272,891		6
Pre-tax, pre-provision income(1)		147,294			143,037			129,030		14
Common shareholders' net income		87,921			76,845			94,363		(7)
Common Share Information
Earnings per common share
Basic	$	0.91		$	0.80		$	0.99		(8)	%
Diluted		0.91			0.80			0.99		(8)
Adjusted(1)		0.93			0.94			1.02		(9)
Cash dividends		0.34			0.33			0.32		6
Book value(1)		37.11			35.79			34.26		8
Closing market value		29.61			27.48			28.12		5
Common shares outstanding (thousands)		96,485			96,434			96,229		-
Performance Measures(1)
Return on common shareholders' equity		9.9	%		9.0	%		11.6	%	(170)	bp
Adjusted return on common shareholders' equity		10.1			10.6			12.0		(190)
Return on assets		0.82			0.72			0.90		(8)
Net interest margin		2.40			2.40			2.32		8
Efficiency ratio		49.2			51.0			52.7		(350)
Operating leverage		7.1			3.3			(9.0)		1,610
Credit Quality(1)
Provision for (recovery of) credit losses on total loans as a percentage of average loans(2)		0.19			0.11			(0.09)		28
Provision for (recovery of) credit losses on impaired loans as a percentage of average loans(2)		0.19			0.08			(0.12)		31
Balance Sheet
Assets	$	42,694,873		$	42,320,103		$	41,706,375		2	%
Loans(3)		36,942,450			37,209,850			36,416,656		1
Deposits		33,487,898			33,328,449			33,113,849		1
Debt		3,991,534			3,839,159			3,803,068		5
Shareholders' equity		4,155,537			4,026,667			3,871,964		7
Off-Balance Sheet
Wealth Management
Assets under management and administration		8,629,063			7,925,785			8,260,366		4
Assets under advisement(4)		2,355,753			2,197,397			1,924,278		22
Assets Under Administration - Other		16,744,975			15,370,989			14,290,188		17
Capital Adequacy(5)
Common equity Tier 1 ratio		10.0	%		9.7	%		9.1	%	90	bp
Tier 1 ratio		11.8			11.5			10.9		90
Total ratio		14.6			13.5			12.8		180
Other
Number of full-time equivalent staff		2,454			2,505			2,737		(10)	%

(1)	Non-GAAP measure – refer to definitions and detail provided on pages 3 and 4.
(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

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