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CWB reports strong second quarter financial performance – Part 7


The financial results for each of the last eight quarters are summarized above. In general, CWB's performance reflects a relatively consistent trend, although the second quarter contains three fewer revenue-earning days in non-leap years, and two fewer days in leap years such as 2016. Common shareholders' net income in the second quarter of 2016 reflects the impact of the credit performance of oil and gas production loans. Results of Discontinued and Combined Operations for the third quarter of fiscal 2015 include divestiture gains.

For additional details on variations between the prior quarters, refer to the summary of quarterly results section of CWB's MD&A for the year ended October 31, 2016 and the individual quarterly reports to shareholders which are available on SEDAR at www.sedar.com and on CWB's website at www.cwb.com.

Taxable Equivalent Basis (teb)

Most banks analyze revenue on a taxable equivalent basis to permit uniform measurement and comparison of net interest income. Net interest income (as presented in the Consolidated Statement of Income) includes tax-exempt income on certain securities. Since this income is not taxable, the rate of interest or dividends received is significantly lower than would apply to a loan or security of the same amount. The adjustment to taxable equivalent basis increases interest income and the provision for income taxes to what they would have been had the tax-exempt securities been taxed at the statutory rate. The taxable equivalent basis does not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other financial institutions. Total revenues, net interest income and income taxes are discussed on a taxable equivalent basis throughout this quarterly report to shareholders.

Non-IFRS Measures

CWB uses a number of financial measures to assess its performance. These measures provide readers with an enhanced understanding of how management views the results. Non-IFRS measures may also provide readers the ability to analyze trends and provide comparisons with our competitors. Taxable equivalent basis, adjusted cash earnings per common share, return on common shareholders' equity, adjusted return on common shareholders' equity, return on assets, efficiency ratio, net interest margin, common equity Tier 1, Tier 1 and total capital adequacy ratios, and average balances 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 MD&A are calculated as follows:

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-- taxable equivalent basis - described above;
-- pre-tax, pre-provision income - total revenue (teb) less non-interest

expenses, excluding the pre-tax amortization of acquisition-related intangible assets (see calculation below); -- adjusted cash earnings per common share - diluted earnings per common share excluding the acquisition-related amortization of intangible assets and contingent consideration fair value changes, net of tax (see calculation below). Excluded items are not considered to be indicative of ongoing business performance; -- return on common shareholders' equity - annualized common shareholders' net income divided by average common shareholders' equity; -- adjusted return on common shareholders' equity - annualized common shareholders' net income excluding the acquisition-related amortization of intangible assets and contingent consideration fair value changes, net of tax (see calculation below), divided by average common shareholders' equity; -- return on assets - annualized common shareholders' net income divided by average total assets; -- efficiency ratio - non-interest expenses, excluding the pre-tax amortization of acquisition-related intangible assets, divided by total revenues, (see calculation below); -- net interest margin - net interest income divided by average total assets; -- operating leverage - total revenue (teb) growth less growth of non- interest expenses, excluding the pre-tax amortization of acquisition- related intangible assets; -- common share dividend payout ratio - common share dividends declared during the past twelve months divided by common shareholders' net income earned over the same period; -- Basel III common equity Tier 1, Tier 1, Total capital, and leverage ratios - in accordance with guidelines issued by OSFI; and -- average balances - average daily balances.

Adjusted Financial
Measures

For the three months ended ---------------------------------------- Change from April 30 January 31 April 30 April 30 2016 (unaudited) 2017 2017 2016
($ thousands) ---------------------------------------------------------------------------- Non-interest expenses $ 84,139 $ 82,815 $ 78,461 7% Adjustments (before tax): Amortization of acquisition- related intangible assets (1,899) (1,852) (1,605) 18 ---------------------------------------------------------------------------- Adjusted non- interest expenses $ 82,240 $ 80,963 $ 76,856 7% ----------------------------------------------------------------------------
Common shareholders' net income $ 47,594 $ 49,542 $ 32,213 48% Adjustments (after- tax) Amortization of acquisition- related intangible assets 1,399 1,364 1,182 18 Contingent consideration fair value change 3,392 3,184 - 100 ---------------------------------------------------------------------------- Adjusted common shareholders' net income $ 52,385 $ 54,090 $ 33,395 57% ----------------------------------------------------------------------------

Adjusted Financial
Measures

For the six months ended -------------------------- Change from April 30 April 30April 30 2016 (unaudited) 2017 2016
($ thousands) ---------------------------------------------------------------------------- Non-interest expenses $ 166,954 $ 154,014 8% Adjustments (before tax): Amortization of acquisition- related intangible assets (3,751) (2,783) 35 ---------------------------------------------------------------------------- Adjusted non- interest expenses $ 163,203 $ 151,231 8% ----------------------------------------------------------------------------
Common shareholders' net income $ 97,136 $ 84,345 15% Adjustments (after- tax) Amortization of acquisition- related intangible assets 2,763 2,051 35 Contingent consideration fair value change 6,576 - 100 ---------------------------------------------------------------------------- Adjusted common shareholders' net income $ 106,475 $ 86,396 23% ----------------------------------------------------------------------------

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Pre-tax, pre-provision (PTPP) income

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For the three months ended ------------------------------------------ (unaudited) January 31 April 30 Change from April 30 2017 2017 2016 April 30 2016
($ thousands) ---------------------------------------------------------------------------- Total revenue (teb)$ 173,026 $ 175,843 $ 164,484 5% Less: Adjusted non- interest expenses 82,240 80,963 76,856 7 ---------------------------------------------------------------------------- Pre-tax, pre- provision income $ 90,786 $ 94,880 $ 87,628 4% ----------------------------------------------------------------------------
For the six months ended ---------------------------- (unaudited) April 30 April 30 Change from 2017 2016 April 30 2016
($ thousands) ---------------------------------------------------------------------------- Total revenue (teb) $ 348,869 $ 323,217 8% Less: Adjusted non- interest expenses 163,203 151,231 8 ---------------------------------------------------------------------------- Pre-tax, pre- provision income 185,666 $ 171,986 8% ----------------------------------------------------------------------------

Consolidated
Balance Sheets

As at As at As at As at Change (unaudited) April 30 January 31 October 31 April 30 from April ($ thousands) 2017 2017 2016 2016 30 2016 ---------------------------------------------------------------------------- Assets Cash Resources Cash and non- interest bearing deposits with financial institutions $ 67,963 $ 46,778 $ 11,490 $ 6,271 nm% Interest bearing deposits with regulated financial institutions (Note 3) 722,075 403,925 890,516 169,997 325 Cheques and other items in transit 15,708 - 18,050 19,844 (21) ---------------------------------------------------------------------------- 805,746 450,703 920,056 196,112 311 ---------------------------------------------------------------------------- Securities (Note 3) Issued or guaranteed by Canada 725,527 1,330,814 1,142,798 1,522,143 (52) Issued or guaranteed by a province or municipality 173,268 349,646 291,947 360,837 (52) Other debt securities 88,614 275,628 154,648 173,040 (49) Preferred shares 141,925 144,921 119,201 131,437 8 ---------------------------------------------------------------------------- 1,129,334 2,101,009 1,708,594 2,187,457 (48) ---------------------------------------------------------------------------- Securities Purchased Under Resale Agreements - - 163,318 142,915 (100) ----------------------------------------------------------------------------
Loans (Notes 4 and 6) Personal 4,475,620 4,177,551 4,063,552 3,699,902 21 Business 17,852,517 17,705,173 18,001,584 17,675,776 1 ---------------------------------------------------------------------------- 22,328,137 21,882,724 22,065,136 21,375,678 4 Allowance for credit losses (Note 5) (112,947) (109,275) (103,788) (127,673) (12) ---------------------------------------------------------------------------- 22,215,190 21,773,449 21,961,348 21,248,005 5 ---------------------------------------------------------------------------- Other Property and equipment 56,131 56,557 57,330 59,053 (5) Goodwill 85,669 85,669 84,762 84,488 1 Intangible assets 149,134 148,901 149,312 143,580 4 Derivative related (Note 8) 5,437 8,456 10,370 28,308 (81) Other assets 170,927 189,934 167,459 146,983 16 ---------------------------------------------------------------------------- 467,298 489,517 469,233 462,412 1 ---------------------------------------------------------------------------- Total Assets $24,617,568 $24,814,678 $25,222,549 $24,236,901 2% ----------------------------------------------------------------------------
Liabilities and Equity Deposits Personal $12,694,328 $13,096,585 $13,223,702 $12,463,248 2% Business and government 7,779,411 7,586,775 7,970,851 7,877,677 (1) ---------------------------------------------------------------------------- 20,473,739 20,683,360 21,194,553 20,340,925 1 ---------------------------------------------------------------------------- Other Cheques and other items in transit 54,192 49,444 27,683 122,309 (56) Securities sold under repurchase agreements (Note 7) 102,553 108,480 - 99,003 4 Derivative related (Note 8) 9,470 13,243 7,172 7,757 22 Other liabilities 401,228 363,029 382,130 338,938 18 ---------------------------------------------------------------------------- 567,443 534,196 416,985 568,007 - ---------------------------------------------------------------------------- Debt Debt securities (Note 7) 917,217 909,050 943,198 885,202 4 Subordinated debentures 250,000 325,000 325,000 325,000 (23) ---------------------------------------------------------------------------- 1,167,217 1,234,050 1,268,198 1,210,202 (4) ---------------------------------------------------------------------------- Equity Preferred shares (Note 10) 265,000 265,000 265,000 265,000 - Common shares (Note 10) 725,912 724,252 718,377 565,927 28 Retained earnings 1,413,324 1,384,221 1,354,966 1,305,522 8 Share-based payment reserve 26,878 26,932 31,276 30,014 (10) Other reserves (23,050) (37,747) (27,579) (49,054) (53) ---------------------------------------------------------------------------- Total Shareholders' Equity 2,408,064 2,362,658 2,342,040 2,117,409 14 Non-controlling interests 1,105 414 773 358 209 ---------------------------------------------------------------------------- Total Equity 2,409,169 2,363,072 2,342,813 2,117,767 14 ---------------------------------------------------------------------------- Total Liabilities and Equity $24,617,568 $24,814,678 $25,222,549 $24,236,901 2% ----------------------------------------------------------------------------

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