Canadian Western Bank : Shareholders Report (PDF, 2.3MB)

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

Common share

deposits

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 18%

Consistent with the

Up 10% in Ontario

dividend declared last

year and last quarter

1. Includes certain non-IFRS measures - refer to definitions and detail provided on page 7.
2. Excludes the allowance for credit losses.
3. Declared by our Board of Directors on May 27, 2021.

Edmonton, May 28, 2021 - 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-termeconomic outlook improves. Based on the expected trajectoryof 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-intelligencethat will provide small business owners with access to real-timeinformation ontheir 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 thecapital flexibility to take full advantage of these potential opportunities, we plan to establish an at-the-marketcommon equity distribution program. This program will provide a flexible and efficient tool to grow our regulatorycapital 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-termoutcomes 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 PlacesTM 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."

CWB 2021 Second Quarter Report

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.

			Common shareholders' net income of $72 million	Up 40%
	Q2 2021,		Adjusted EPS of $0.84	Up 40%
	compared to		Adjusted ROE of 10.8%	Up 280 bp(2)
	Q2 2020(1)		Efficiency ratio of 48.9%	Worsened 180 bp
			(47.1% excluding the impact of the wealth acquisition)	(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.

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

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

1. Includes certain non-IFRS measures - refer to definitions and detail provided on page 7.
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.

CWB 2021 Second Quarter Report

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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 WorkplacesTM 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-Cumulative5-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.

CWB 2021 Second Quarter Report

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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 (888) 231-

8191 (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.

FOR FURTHER INFORMATION CONTACT:

Chris Williams, MBA

AVP, Investor Relations

Phone: [phone]

Email:[e-mail]

			Selected Financial Highlights	5
	Contents		Management's Discussion and Analysis	6
		Interim Consolidated Financial Statements	21
			Shareholder Information	41

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Selected Financial Highlights(1)

		For the three months ended		Change from			For the six months ended		Change from
(unaudited)		April 30		January 31		April 30		April 30			April 30		April 30		April 30
($ thousands, except per share amounts)		2021		2021		2020		2020			2021		2020		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 and detail provided on page 7.
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

CWB 2021 Second Quarter Report

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