CWB reports second quarter 2024 performance

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

EDMONTON, AB, May 31, 2024 /CNW/ - CWB Financial Group (TSX: CWB) (CWB) announced financial performance for the three and six months ended April 30, 2024, with quarterly common shareholders' net income of $76 million and adjusted earnings per common share⁽¹⁾ (EPS) of $0.81 both up 9% from the prior year. Pre-tax, pre-provision income⁽¹⁾ increased by 15% from the prior year, which reflected strong revenue growth from the expansion of our net interest margin⁽¹⁾ and our continued measures to contain expense growth to drive positive operating leverage⁽¹⁾ of 5.9%. Growth in earnings this quarter was partially offset by an increase in the provision for credit losses as a percentage of average loans⁽¹⁾, with the current quarter provision slightly above our historical normal range.  

Quarterly common shareholders' net income and adjusted EPS decreased 13% sequentially. Pre-tax, pre-provision income decreased 7%, reflecting the impact of two fewer interest-earning days and seasonally higher non-interest expenses.

Our Board of Directors declared a cash dividend of $0.35 per common share, up two cents, or 6% from the dividend declared last year and one cent, or 3%, from last quarter.

"We are well positioned to increase our loan growth through the back half of the year," said Chris Fowler, President and CEO. "Through the first half of the year, we have delivered a slower pace of loan growth than we originally anticipated which has dampened our full year revenue expectations and reduced our outlook for annual adjusted earnings per common share."

"We will leverage our strong balance sheet and differentiated client experience to capitalize on a compelling opportunity to expand our market share as the economy strengthens. We have a history of accelerating our loan growth leading out of challenging economic times and our teams will execute our winning playbook to drive more growth across our Canadian footprint."

(1)	Adjusted EPS, pre-tax, pre-provision income, net interest margin, operating leverage and the provision for credit losses on total loans as a percentage of average loans are non-GAAP measures. Refer to definitions and detail provided on pages 4 and 5.

Financial Performance

Q2 2024,      compared to      Q2 2023(1)	Common shareholders' net income	$76 million	Up 9%
	Diluted EPS Adjusted EPS	$0.79 $0.81	Up 8% Up 9%
	Adjusted Return on Equity (ROE)	8.9 %	No change
	Efficiency ratio	52.3 %	Down 300 bp
	Pre-tax, pre-provision income	$137 million	Up 15%

(1)	Adjusted ROE and efficiency ratio are non-GAAP measures. Refer to definitions and detail provided on pages 4 and 5.
	bp – basis point

Common shareholders' net income increased 9% compared to the same quarter last year as an 8% increase in revenue was partially offset by an increase in the total provision for credit losses as a percentage of average loans. An expanding net interest margin and our prudent expense management also drove 5.9% operating leverage and a 15% increase in our pre-tax, pre-provision income compared to the prior year.  

Higher revenue was primarily driven by an 8% increase in net interest income, which was driven by a 14 basis point increase in net interest margin. 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 up 2% primarily due to higher expenses 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. Higher non-interest expenses were partially offset by lower people costs associated with a temporary reduction in our overall staffing levels following our reorganization activities.

The second quarter effective tax rate was down 220 basis points from last year, reflecting the impacts of non-recurring adjustments arising from the completion of our 2023 tax filings this quarter.

The provision for credit losses on total loans as a percentage of average loans represented 26 basis points this quarter and was 14 basis points higher than the same quarter last year. A 24 basis point impaired loan provision was slightly above our historical normal experience, while the 12 basis point provision last year was significantly below.

Q2 2024,    compared to    Q1 2024	Common shareholders' net income	$76 million	Down 13%
	Diluted EPS Adjusted EPS	$0.79 $0.81	Down 13% Down 13%
	Adjusted ROE	8.9 %	Down 120 bp
	Efficiency ratio	52.3 %	Up 310 bp
	Pre-tax, pre-provision income	$137 million	Down 7%

Compared to the prior quarter, lower common shareholders' net income was primarily driven by higher non-interest expenses, a seven basis point increase in the total provision for credit losses as a percentage of average loans and a 1% decrease in revenue. Pre-tax, pre-provision income decreased 7%.

Lower revenue reflected a 4% decrease in net interest income, partially offset by a 17% increase in non-interest income. Higher non-interest income was driven by the combined impacts of higher foreign exchange income and higher wealth management fees. Net interest income decreased compared to the last quarter primarily due to two fewer interest-earning days and lower average interest-bearing assets. Net interest margin was consistent with the prior quarter as we benefitted from an increase in fixed term asset yields which exceeded the increase in deposit costs and from lower average liquidity. These benefits were offset by the impact from the $250 million subordinated debentures issued late in the first quarter to replace the Series F Non-Viability Contingent Capital (NVCC) subordinated debentures, which will be redeemed in the third quarter.

Non-interest expenses increased 4%, driven by the seasonal increase in statutory employee benefits and the timing of continued investments in our strategic priorities.

The provision for credit losses on total loans as a percentage of average loans was seven basis points higher than last quarter, reflecting a five basis point increase in the impaired loan provision and a two basis point increase in the performing loan provision.

YTD 2024,     compared to    YTD 2023	Common shareholders' net income	$164 million	No change
	Diluted EPS Adjusted EPS	$1.70 $1.74	Down 1% Down 1%
	Adjusted ROE	9.5 %	Down 90 bp
	Efficiency ratio	50.7 %	Down 330 bp
	Pre-tax, pre-provision income	$284 million	Up 15%

bp – basis point

Common shareholders' net income was consistent with last year as an increase in revenue was offset by a 21 basis point increase in the total provision for credit losses. Pre-tax, pre-provision income increased 15%.

Total revenue increased 7%, primarily reflecting an 8% increase in net interest income. Net interest margin increased by 11 basis points, which 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.

The total provision for credit losses as a percentage of average loans of 22 basis points was 21 basis points higher than the prior year, due to a 22 basis point increase in the impaired loan provision, partially offset by a one basis point decrease in the performing loan provision. The prior year impaired loan provision represented a one basis point recovery, primarily due to the reversal of a previously impaired loan write-off recognized in the first quarter of last year.

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 Second Quarter Results Conference Call

CWB's second quarter results conference call is scheduled for Friday, May 31, 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: 39517734. 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 7, 2024 by dialing [phone] (Toronto) or 1 [phone] (toll-free) and entering passcode: 517734#.

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, 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 amortization of acquisition-related intangible assets, a reorganization of our operations, 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 amortization of acquisition-related intangible assets, organizational redesign initiatives, 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 April 30  2023		For the six months ended					Change from April 30   2023
(unaudited) (thousands)		April 30 2024			January 31 2024			April 30 2023					April 30 2024			April 30 2023
Non-interest expenses	$	151,912		$	145,627		$	148,388		2	%	$	297,539		$	295,605	1	%
Adjustments (before tax):
Amortization of acquisition-related intangible assets		(1,728)			(1,728)			(2,032)		(15)			(3,456)			(5,013)	(31)
Non-recurring reorganization costs		(785)			(1,202)			-		100			(1,987)			-	100
Acquisition and integration costs		-			-			(190)		(100)			-			(565)	(100)
Adjusted non-interest expenses	$	149,399		$	142,697		$	146,166		2	%	$	292,096		$	290,027	1	%
Common shareholders' net income	$	76,359		$	87,921		$	70,040		9	%	$	164,280		$	164,403	-	%
Adjustments (after-tax):
Amortization of acquisition-related intangible assets(1)		1,268			1,268			1,500		(15)			2,536			3,946	(36)
Non-recurring reorganization costs (2)		583			894			-		100			1,477			-	100
Acquisition and integration costs(3)		-			-			143		(100)			-			424	(100)
Adjusted common shareholders' net income	$	78,210		$	90,083		$	71,683		9	%	$	168,293		$	168,773	-	%
Total revenue	$	285,922		$	289,991		$	264,414		8	%	$	575,913		$	537,305	7	%
Less:
Adjusted non-interest expenses (see above)		149,399			142,697			146,166		2			292,096			290,027	1
Pre-tax, pre-provision income	$	136,523		$	147,294		$	118,248		15	%	$	283,817		$	247,278	15	%

(1)	Net of income tax of $460 for the three months ended April 30, 2024 (Q1 2024 – $460, Q2 2023 – $532) and $920 for the six months ended April 30, 2024 (Q2 2023 – $1,067).
(2)	Net of income tax of $202 for the three months ended April 30, 2024 (Q1 2024 – $308, Q2 2023 – $nil) and $510 for the six months ended April 30, 2024 (Q2 2023 – $nil).
(3)	Net of income tax of $nil for the three months ended April 30, 2024 (Q1 2024 – $nil, Q2 2023 – $47) and $nil for the six months ended April 30, 2024 (Q2 2023 – $141).

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		For the six months ended							Change from
(unaudited) (thousands, except per share amounts)		April 30 2024			January 31 2024			April 30 2023		April 30 2023			April 30 2024			April 30 2023			April 30 2023
Results from Operations
Net interest income	$	249,758		$	259,071		$	230,523		8	%	$	508,829		$	472,803			8	%
Non-interest income		36,164			30,920			33,891		7			67,084			64,502			4
Total revenue		285,922			289,991			264,414		8			575,913			537,305			7
Pre-tax, pre-provision income(1)		136,523			147,294			118,248		15			283,817			247,278			15
Common shareholders' net income		76,359			87,921			70,040		9			164,280			164,403			-
Common Share Information
Earnings per common share
Basic	$	0.79		$	0.91		$	0.73		8	%	$	1.70		$	1.72			(1)
Diluted		0.79			0.91			0.73		8			1.70			1.72			(1)
Adjusted(1)		0.81			0.93			0.74		9			1.74			1.76			(1)
Cash dividends		0.34			0.34			0.32		6			0.68			0.64			6
Book value(1)		37.13			37.11			34.90		6			37.13			34.90			6
Closing market value		26.41			29.61			24.30		9			26.41			24.30			9
Common shares outstanding (thousands)		96,545			96,485			96,308		-			96,545			96,308			-
Performance Measures(1)
Return on common shareholders' equity		8.7	%		9.9	%		8.7	%	-	bp		9.3	%		10.1	%		(80)	bp
Adjusted return on common shareholders' equity		8.9			10.1			8.9		-			9.5			10.4			(90)
Return on assets		0.74			0.82			0.69		5			0.78			0.80			(2)
Net interest margin		2.40			2.40			2.26		14			2.40			2.29			11
Efficiency ratio		52.3			49.2			55.3		(300)			50.7			54.0			(330)
Operating leverage		5.9			7.1			(3.1)		nm			6.5			(5.9)			nm
Credit Quality(1)
Provision for credit losses on total loans as a    percentage of average loans(2)		0.26			0.19			0.12		14			0.22			0.01			21
Provision for (recovery of) credit losses on    impaired loans as a percentage of average    loans(2)		0.24			0.19			0.12		12			0.21			(0.01)			22
Balance Sheet
Assets	$	41,951,726		$	42,694,873		$	42,227,843		1	%
Loans(3)		37,174,346			36,942,450			37,150,595		-
Deposits		32,806,121			33,487,898			33,255,533		(1)
Debt		3,935,704			3,991,534			3,846,915		2
Shareholders' equity		4,159,289			4,155,537			3,935,941		6
Off-Balance Sheet
Wealth Management
Assets under management and administration		8,778,229			8,629,063			8,149,396		8
Assets under advisement(4)		2,394,694			2,355,753			2,208,618		8
Assets Under Administration – Other		17,550,681			16,744,975			15,092,141		16
Capital Adequacy(5)
Common equity Tier 1 ratio		10.1	%		10.0	%		9.3	%	80	bp
Tier 1 ratio		11.8			11.8			11.1		70
Total ratio		14.6			14.6			13.1		150
Other
Number of full-time equivalent staff		2,516			2,454			2,734		(8)	%

(1)	Non-GAAP measure – refer to definitions and detail provided on pages 4 and 5.
(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
	nm – not meaningful

Shareholder Information

CWB Financial Group
Corporate Headquarters                            
Suite 3000, 10303 Jasper Avenue NW                
CWB Place                                                       
Edmonton, AB T5J 3X6                                      
Telephone: [phone]                               
Fax: [phone]                                         
cwb.com                                                                                         

Stock Exchange Listings                            
The Toronto Stock Exchange (TSX)                    
Common Shares: CWB                                      
Series 5 Preferred Shares: CWB.PR.B
Series 9 Preferred Shares: CWB.PR.D

Transfer Agent and Registrar
Computershare
100 University Avenue, 8^th Floor
Toronto, ON M5J 2Y1
Telephone: [phone]
Toll-free: [phone]
Fax: [phone]
Website: www.computershare.com

Eligible Dividends Designation
CWB designates all common and preferred share dividends paid to Canadian residents as "eligible dividends", as defined in the Income Tax Act (Canada), unless otherwise noted.

Dividend Reinvestment Plan
CWB's dividend reinvestment plan allows common and preferred shareholders to purchase additional common shares by reinvesting their cash dividend without incurring brokerage and commission fees. For information about participation in the plan, please contact the Transfer Agent and Registrar.

Investor Relations Department
CWB Financial Group
Suite 3000, 10303 Jasper Avenue NW                
CWB Place                                                       
Edmonton, AB T5J 3X6                                      
Telephone: [phone]
Toll-free: [phone]
Email: [e-mail]

More comprehensive investor information - including supplemental financial reports, quarterly financial releases, corporate presentations, corporate fact sheets and frequently asked questions - is available in the Investor Relations section at cwb.com.

Filings are available on the Canadian Securities Administrators' website at sedarplus.ca.

Quarterly Conference Call and Webcast

CWB's quarterly conference call and live audio webcast will take place on May 31, 2024 at 10:00 a.m. ET. The webcast will be archived on CWB's website at cwb.com for sixty days. A replay of the conference call will be available until June 7, 2024, by dialing 1 [phone] and entering passcode 517734#.

SOURCE CWB Financial Group

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