CWB Financial Group

CWB reports exceptional first quarter financial performance

Edmonton, March 4, 2010 – Canadian Western Bank (CWB on TSX) today announced an exceptional first quarter financial performance highlighted by record earnings and total revenues and the Bank’s 87th consecutive profitable quarter. First quarter net income of $40.0 million increased 56% compared to the same quarter last year. The increase reflects a 57 basis point recovery in net interest margin, on a taxable equivalent basis (teb – see definition following Financial Highlights table), to more normal historical levels and very strong other income. Diluted earnings per common share increased 30% to a record $0.52 and include the net impact of the preferred units issued in March 2009. Compared to the prior quarter, the combined positive impact of a 22 basis point recovery in net interest margin (teb), a 19% increase in other income and lower non-interest expenses led to growth in net income and diluted earnings per common share of 32% and 33%, respectively.

First Quarter Highlights:
(three months ended January 31, 2010 compared with three months ended January 31, 2009 unless otherwise noted)

  • Record net income of $40.0 million, up 56%.
  • Record diluted earnings per common share of $0.52, up 30%, which includes the net impact of the preferred units issued in March 2009.
  • Record return on common shareholders’ equity of 18.0%, up 330 basis points.
  • Total shareholders’ equity surpassed the $1 billion milestone.
  • Record quarterly total revenues (teb) surpassed the $100 million milestone to reach $100.7 million, up 31%.
  • Net interest margin (teb) of 2.56%, up 57 basis points compared to last year and up 22 basis points from the prior quarter.
  • Tier 1 capital ratio of 11.6% and total capital ratio of 15.1%, up from 8.7% and 13.0% respectively.
  • Record quarterly earnings contribution from Canadian Direct Insurance.
  • Announced the acquisition of National Leasing Group Inc. (National Leasing), completed February 1, 2010.

On March 3, 2010, CWB’s Board of Directors declared a cash dividend of $0.11 per common share, payable on April 1, 2010 to shareholders of record on March 18, 2010. This quarterly dividend is unchanged from both the previous quarter and one year ago. The Board of Directors also declared a cash dividend of $0.453125 per Series 3 Preferred Share payable on April 30, 2010 to shareholders of record on April 21, 2010.

Record banking and trust earnings of $36.7 million were up 48% compared to the same quarter last year as the positive earnings impact from the strong recovery in net interest margin and 3% loan growth helped push this segment’s total revenues (teb) up 27% to reach $93.2 million. Quarterly net income from insurance operations was a record $3.3 million, up $2.5 million compared to a year earlier reflecting a positive $1.9 million before tax contribution from the Alberta risk sharing pools and solid results in the core underwriting business.

“The first quarter included record performance from both business segments that resulted from a combination of positive circumstances,” said Larry Pollock, President and CEO of CWB. “Margins recovered more quickly than we expected and Canadian Direct posted a very strong contribution. High gains on securities sales further increased earnings reflecting both our investment strategies and favourable capital market conditions. While it will be very difficult to duplicate these exceptional results through the remaining three quarters, fiscal 2010 is so far shaping up to be a great year for CWB.”

“The real benefit of strategies implemented in fiscal 2009 to help mitigate margin compression, together with lower deposit costs, is now clearly evident. Although we expect net interest margin will be stable from here on, absent meaningful increases in the prime rate, this recovery will positively impact our results for the rest of the year.”

“Overall loan growth continues to be impacted by the recessionary slowdown and an atmosphere of uncertainty, particularly in the equipment financing and real estate construction portfolios,” continued Pollock. “While there are many positive indicators, we expect ongoing challenges until there is a sustained and clear recovery in global economies. We have exceptional growth potential, but our near-term focus will remain concentrated on maintaining our sound credit quality as we progress through the bottom of the current credit cycle.”

“Perhaps the most significant highlight this quarter was our announced acquisition of National Leasing, which we completed on February 1 st. This company, with its seasoned management and dedicated employees, is an excellent fit with the CWB Group. National Leasing immediately adds about $390 million of balance sheet assets and should be accretive right out of the gate. But that’s just the beginning; we believe this acquisition represents a meaningful step in taking CWB to another level of profitability and growth,” Pollock added.    

Read the release in full.