Canadian Western Bank Annual Report 2000

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FY2000 Annual Report · Canadian Western Bank

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Table of Contents

Financial Summary

Highlights

The Canadian Western Bank Edge

23 Message to Shareholders

27 Management’s Analysis of Operations and

Financial Condition

Financial Statements

53 Notes to Consolidated Financial Statements

64 Corporate Governance

Executive Officers

71 Board of Directors and Shareholder Information

72 Banking Offices

F I N A N C I A L S U M M A R Y

F I V E Y E A R F I N A N C I A L S U M M A RY

($ thousands, except per share amounts)

Results of Operations

Total interest income

Net interest income

Provision for credit losses

Other income

Net income from continuing operations

Net income

Return on common shareholders’ equity

Return on average total assets

Per Common Share

Average common shares outstanding (thousands)

Earnings per share, continuing operations

basic

fully diluted

Earnings per share

basic

fully diluted

Dividends 1

Book value

Market Price

High

Low

Closing market value

Balance Sheet and Off-Balance Sheet Summary

Assets

Cash resources and securities

Loans

Deposits

Debentures

Shareholders’ equity

Assets under administration

Capital Adequacy

Tier 1 ratio

Total ratio

Other Information

Net interest margin 2

Net impaired loans as a percentage of total loans

Efficiency ratio 3

Number of full time equivalent staff 4

Number of branches

2000

1999

1998

1997

1996

$ 210,282

$ 177,013

$ 157,966

$ 131,917

$ 133,399

73,367

5,100

15,255

29,994

26,949

61,729

3,750

13,017

22,754

19,853

55,751

4,150

12,165

20,616

19,012

45,414

4,000

11,520

15,837

40,731

4,073

10,466

12,822

14.98 %

0.96 %

12.82 %

0.81 %

13.97 %

0.87 %

13.12 %

0.85 %

13.27 %

0.81 %

11,134

10,153

9,421

9,322

8,116

2.69

2.49

2.42

2.26

0.34

17.40

24.00

16.25

23.00

2.24

2.00

1.96

1.79

0.48

15.68

24.25

17.30

17.60

2.02

1.77

2.02

1.77

0.30

15.39

27.00

14.75

17.15

1.70

1.55

1.70

1.55

0.25

13.70

22.10

12.20

20.25

1.58

1.45

1.58

1.45

0.15

12.61

13.00

9.25

12.80

$ 3,055,603

$ 2,692,382

$ 2,386,478

$ 2,022,951

$ 1,754,072

446,351

2,560,092

2,727,809

67,126

195,195

741,181

375,182

2,253,598

2,371,075

78,691

159,550

559,978

320,405

1,989,656

2,059,545

87,091

145,268

453,058

271,883

1,710,007

1,817,512

37,116

128,533

395,486

247,614

1,478,392

1,585,855

26,000

102,554

371,798

8.1 %

11.6 %

2.64 %

0.2 %

54.3 %

509

7.4 %

11.8 %

2.57 %

0.5 %

59.8 %

555

7.8 %

11.9 %

2.58 %

0.7 %

60.7 %

522

8.4 %

11.0 %

2.48 %

0.5 %

64.4 %

388

8.1 %

10.2 %

2.59 %

1.0 %

64.8 %

359

2
3
4

The dividend policy was amended to be semi-annual instead of annual during the third quarter of fiscal 1999. The dividend rate for fiscal 1999 appears unusally high as it includes the last annual dividend of $0.32 per
share paid in the first quarter and the first semi-annual dividend of $0.16 paid in the third quarter.
Net interest income divided by average assets.
Non-interest expenses expressed as a percentage of net interest income and other income.
Reflects sale of subsidiary (74 employees) in first quarter 2000.

4,000

3,000

2,000

1,000

TO TAL ASSETS
($ m illions)

NET INCOME
($ thousands)

2000 Target
$3,069 Million

2000 Target
$23.5 Million

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9
9
9
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0
0
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35,000

30,000

25,000

20,000

15,000

10,000

5,000

2000 Total assets increased to $3,056 million or 13.5% year over year virtually meeting our target.

T O T A L A S S E T S

2001 Our target is for total asset growth of 14%.

2000 Net income at $26.9 million exceeded our target of $23.5 million and was up 36% over

N E T I N C O M E

fiscal 1999.

2001 Our target for fiscal 2001 is to grow net income by 10%, notwithstanding that the remaining

tax deduction pools are expected to be fully utilized within the year and the Bank will

become fully taxable.

F I N A N C I A L H I G H L I G H T S

• surpassed the $3 billion milestone in total assets, up 13.5% over last year

• achieved a 36% increase in net income over last year to $26.9 million and on a continuing

operations basis it increased $7.2 million, or 32%

• significantly improved our efficiency ratio (expenses to revenues) which at 54.3% is one of the

best in the Canadian banking industry

• increased return on equity to 14.98% and return on assets to 0.96%

• increased assets under administration 32% to $741 million

• on November 30, 1999 the remaining $11.7 million of 6.75% convertible debentures converted

to 925,200 shares, which strengthened our Tier 1 capital ratio and reduced the dilution of

earnings per share going forward

• will benefit from the elimination of capital taxes on financial institutions in Alberta during 2001

• will also benefit from announced reductions in corporate income tax rates federally

and in Alberta

O P E R A T I O N A L H I G H L I G H T S

• the Bank’s stock was added to the TSE 300 index, a composite index of Canadian equities

• as a result of the restructuring of Canada’s capital markets, the Bank’s securities are now listed

only on the Toronto Stock Exchange (“TSE”) as it became the sole market for senior equities

• opened the new Foothills branch in southeast Calgary

• replaced our banking system hardware and operating environment with a new highly flexible

platform which will accommodate our ongoing initiatives toward enhanced customer service

and e-business developments

• expanded the corporate trust product line at Canadian Western Trust to include share

purchase plan and stock option plan administration

• announced an alliance between Canadian Western Trust and Pacific Corporate Trust,

a recognized leader in security transfer services to companies trading on the Canadian

Venture Exchange

• extended sales of mutual funds to British Columbia branches

• sold our brokerage subsidiary, Canadian Western Capital Limited, in February 2000 to Goepel

McDermid Inc. of Vancouver

RETURN ON AS SETS

2000 Target
0.90%

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9
9
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9
9
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9
9
9
1

0
0
0
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1.20%

1.00%

0.80%

0.60%

0.40%

0.20%

0.00%

L A R RY P O L L O C K

President and Chief Executive Officer
Eleven years with Canadian Western Bank

Growth
If your primary financial goal is growth,
you’ve got to set the bar high…

It’s been a few years since our last major acquisition, so in 2000

we put a high priority on sustaining our rate of internal growth.

Our goal was asset growth of 14 percent and we came close,

at 13.5 percent. This growth came with the bonus of pushing us past

the $3 billion milestone in total assets.

Increasingly, we’ve been providing banking services for larger

companies with higher borrowing needs, and this should continue.

This expands our capacity for growth – in human resources as well as

capital - so, we’ll aim for 14 percent internal growth again this year.

In 2000, one of our main objectives was to ensure an adequate

return on assets. Our target was a 0.90 percent ROA and we

achieved 0.96 percent. Again, we’ll keep the
standard high, with 0.90 percent ROA as our

target for 2001.

Last year, we also set out to strengthen our
position in the marketplace by
strengthening our identity.“Think Western” is our new
brand. It captures the commitment our employees have to delivering

a common-sense, friendly banking environment. Our brand speaks to

the style of both our people and our customers.

It is in this style that we will continue to grow, delivering positive

results to every stakeholder.

T R A C E Y B A L L , C . A .

Senior Vice President and Chief Financial Officer
Fourteen years with Canadian Western Bank

Progress
As a bank we face many of the same financial
challenges as our customers…

Chiefly, as Larry says, we need to grow. And growth, if managed correctly,
produces economies of scale…

In the banking business one measure of success is often judged through

your efficiency ratio (expenses expressed as a percentage of revenues).

At the beginning of the year, we said we’d come in under 55 percent,

well below the current Canadian banking average of 63.5 percent.

We made it, with a final ratio of 54.3 percent, for the year.

We congratulate all our staff on the dedication and

teamwork that made this possible.

Next year we plan to keep this ratio below 55 percent, even though we

have planned branch openings and expansions that will add to our

expenses.

65%

60%

55%

EF FIC IENCY RATIO
( e x p e n s e s t o re v e n u e s )

2000 Target
below 55%

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9
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0
0
2

CREDIT RISK

TOTAL REVENUES
($ thousands)

0.35%

0.30%

0.25%

0.20%

0.15%

0.10%

0.05%

0.00%

2000 Target
below 0.25%

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100,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

2000 Target
$82.5 Million

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0
0
2

Total revenues... that’s net interest income and other income

combined... reached $88.6 million this year. We were very pleased...

the growth represented an increase of 18 percent over last year and

was much higher than our target for 2000. For 2001, total revenue

is targeted for a minimum of 15 percent growth.

Another challenge we face as a business is dealing with risk.

In banking, the biggest single threat is typically credit losses. For

2000, we experienced losses (expressed as a percentage of average

loans) of 0.21 percent, bettering our target of being under 0.25

percent.

The credit goes to the people
managing our loan portfolios for not only making good
decisions initially, but also for managing risk over the life of a loan.

We’re targeting to be under 0.25 percent again this year. It will keep

us among the leaders in our industry.

edgethe Canadian Western Bank

Thinking Western gives CWB the edge.

And just what is western thinking?

It’s hard to pin down because it looks different on

every person at CWB. But you know it when you see

it… There’s no mistaking it. It’s the attitude that

sets us apart… the attitude that says pioneers can

not only exist, but flourish, in the 21st century; that

employees are people who have more to contribute

than just hours; and that organizations are organic

and so need care to grow.

You’ll see, because we let them all speak for

themselves…

. . . O N W H A T ’ S I M P O R T A N T W H E R E Y O U W O R K

Sometimes it must seem
like the bank is my whole life. It’s not…
I just think it’s important
to like where
you work…

T H E R E S A H O W A R D

I used to work at CWB in Calgary. When we

Next week I’m off for training with a group

Retail Banking Manager,
Langley Branch,
Three and a half years with
Canadian Western Bank

moved to the west coast, I transferred with

of my peers from across the bank. I’m

the bank, but the commute from Langley to

excited about it and I’d like to see more

Vancouver was really tedious, so I decided to

formal training for myself, as well as my

work elsewhere to be closer to home… Until

staff. We like to promote from within and

a couple of years ago… Then one day I

I can see solid opportunities for a number

noticed the developer’s sign for the bank’s

of them… I want them to have the same

new Langley branch. I called that afternoon

chances I’ve had.

and I was on staff the day we opened.

They didn’t have any positions for someone

with my experience when I applied, so I took

the one they offered, as a CSR*. I remembered

When the whole organization is small and
growing, there’s room to get to
know the people… not just the jobs
they do. Some of my colleagues have

from my days in Calgary how they treat the

become my friends and I often see my

people in this bank with a definite western

neighbours in here doing their banking. It’s

flair. They invest in you, when you invest

a great environment… and very productive.

in them.

*Customer Service Representative

Keeping our people happy is
essential in turning out a good product.

And it’s not entirely what you pay

them… they want to feel like part of

the family… especially for us, because

we have such a specialized work force.

Obviously, communication is the key.

I deal directly with staff whenever I can.

The door is always open and no one
here is shy about coming through it…

It’s just horse sense… you need good

dialogue to get things done.

That also holds true for customers,

business associates and bankers…

Craig, from CWB in Langley came

through my door three years ago, and

we haven’t looked back. He was direct,

compelling, and persuasive. I have an

excellent rapport with him and the
others at the branch… They
delivered everything they
promised. I’m moving my personal
accounts over now…

R O G E R M I L L E R
President/General Manager, Custom Plastics
Langley, British Columbia
Three years as customer at Canadian Western Bank

… O N W H A T S P E C I A LT Y S E R V I C E R E A L LY M E A N S

When I came from Northwest Trust in ’95,

I also study the economy and keep in touch

I went directly into real estate
and I’ve been here ever since

(At the main branch, corporate lending is

split three ways: industrial, commercial and

real estate).

It’s great.

I like being able to
specialize.

You can’t normally do that as an account

manager in a big bank.

Almost 75 percent of the lending I do is for

construction and development of projects

like condos and multi-family dwellings and

servicing raw land.

I look at value and how much income the

property generates. Then, I lend against it.

There’s a certain simplicity to it… because

the values don’t change too quickly.

with the building and real estate trades,

so I know what’s going on... The oil giants

are making big investments right now in

northern Alberta, creating good conditions

for growth. Today we’re looking at two to

three years of solid growth…

Our team helps western companies take

advantage of the opportunities we

anticipate in the marketplace…

Radhe Gupta, an Edmonton developer, is an

excellent example of someone who knows

how to make the most of an opportunity.

Our branch has been working with him

since ’94. We have many letters on file from

owners of his units praising him for the

quality of his work. He was exceptional

from the beginning…

We appreciate his way of doing business

so much that we brought him in when we

needed someone to finish and sell a

property. Excellent results…

G A R N E T W AY

Assistant Vice President,
Real Estate Lending

Edmonton Main Branch

Five years with Canadian Western Bank

I know how important it is to
tailor the product to each customer.

I recognize when I get that
kind of service from a bank and I very
much appreciate it.

We are specialty builders. Most of our

projects are designed for two age

groups: young professionals… singles

and young couples who don’t need that

much space but want a high end

appearance… and the 45-plus group,

who wants to live in an adult

community. The best part of my

relationship with CWB is that I can

approach senior people without

hesitation… from the account managers

to the vice presidents… I work mostly

with Garnet. He’s very knowledgeable

and gives me useful, impartial advice.

In the realm of banking,
I find the situation quite
unique, really…

R A D H E G U P TA
Owner, Rohit Holdings
Edmonton, Alberta
Over five years as customer at Canadian Western Bank

… O N B E I N G S M A L L A N D G E T T I N G B I G G E R

C H R I S T I N A J O N E S
Retail Banking Manager,
Calgary Main Branch
Winner of Chairman’s Award, 1998
Nine years with Canadian Western Bank

People usually come into the bank for two

rates. We also have a freedom that you

reasons: their mother or their brother-in-law

don’t get in other banks to do things our

suggested it, or, they saw our deposit rates

own way.

in the paper. (We’re usually higher by as

much as one percent.) Either way, we’re

happy to see them.

As a smaller bank,
we’re always looking
to build our client base.

And, it follows we don’t have branches on

every street corner, so overhead is low and

we can afford to offer the higher deposit

For example, I think some banking still has

to be done face-to-face. And when some

clients can’t come in, I make house calls…

surprisingly often, really.

I have one customer who had hip surgery…

She can’t exactly get out to do her

banking… so I visit her on occasion and

we have a few minutes to catch up.

There’s satisfaction in being able to provide

what the client needs and wants.

I’m a small business man. I have

four people on staff and

that’s the way I like it
– small.

Right now, I have two companies:

oil and gas production… and

publishing. I’ve been in oil and gas

for years (we’ve been very active

recently… doubled production), but

the publishing is relatively new… it

started with my paleontology

hobby… dinosaur books for kids...

five so far, a new contract for

distribution and we’re waiting on a

deal with a Japanese publisher.

When things get crazy, Christina or

one of the others calls me… or

now, they usually just send the

paperwork right over to jog my
memory. It’s unbelievable
service. So, I keep
recommending them to every new

small business that I come across.

I think if they keep the people they

have that they’ll be able to

keep their small western bank
attitude intact as they grow…

E R I C F E L B E R
Owner, Troodon Energy and Troodon Publications
Nine years as customer at Canadian Western Bank

… O N B E I N G S M A L L A N D G E T T I N G B I G G E R

C H R I S T I N A J O N E S

There’s no doubt

the bank and the trust will

continue to grow

and offer more and more products.

For one thing, we work well with the people

So, naturally our roles will continue to

develop which is a good thing since the

people here genuinely want to grow

at other branches... We don’t compete with

each other. So they’re as anxious to help my

customer as I am.

themselves.

Then there’s the ABM cards. Clients can even

I started as a CSR* and now I have eleven

use them internationally.

people on my staff. I wouldn’t have stayed

We also upgraded the telephone banking

nine years without the chance to go forward.

system. Customers really appreciate the

Today, I’m excited about the trust division.

quick responses they’re getting.

I see a lot of opportunity… both in terms of

And, this year we started to offer

what I can offer customers and where I can

MasterCard® and Visa® receipt deposit service

go in my career.

This is the kind of place you never hear

to merchants. They love the service; now

they can do all their banking in one place.

anyone say “that’s not my department.”

Next year it’ll only get better with internet

We’re all game to take on whatever needs

banking…

to be done.

And we don’t have a problem just because

we don’t have as many branches.

*Customer Service Representative

Back in the fall of ‘97 we were over

a year old… We had a good

balance sheet and were profitable,

but the good bottom line numbers

had really just started to roll in. We

were acquiring our fifth and sixth

aircrafts, had no debt and wanted

to put leverage into the company.

CWB approached us…

We get that from banks
all the time but they’re
not usually serious…

CWB was.

They took the time to look at us

and our past performance. Their

financing gave us the kickstart we

needed. Then, in ’98, they went

beyond their typical comfort zone

to finance planes eight and nine.

They have again stepped up to the

plate and are currently financing a

16 million dollar flight simulator to

train our pilots to use the new 737

– 700s we’ve ordered.

The biggest pay off goes to average

Canadians. Our concept of a

‘budget airline’ has made air travel

accessible to anyone and everyone

travelling in Canada. We’re
pioneers in this field. And, we
like the synergy of
working with a bank
that understands what that’s
like...

S A N D Y C A M P B E L L , C . G . A .
Senior Vice President and Chief Financial Officer, WestJet
Calgary, Alberta
Four years as customer at Canadian Western Bank

… O N S E R V I C E A T T H E P E R S O N A L L E V E L

Out of all the clients
that walk in that door, I bet

I know 90 percent
of them by name…

and their spouses’ names, and sometimes

I enjoy the people I work with and the

even their pets too.

I’ve been on the front line at the Calgary

Northeast Branch for about a year and a

half. I’m a customer service representative

and a loan administrator. I like it. I was a

environment… we have a small crew… and

we cover off for each other when we need

to… So, we can understand other peoples’

positions, their frustrations and their

accomplishments… I’m learning so much.

bookkeeper for years before this so I was on

There’s a lot of talking and laughing in here

the other side of the counter, a lot. And I

some days. We have a good time and clients

never came across a bank like this one.

recognize that. A couple of months ago, a

client brought the whole front line flowers

just to say thanks for what she called

exceptional everyday service. It was so nice

to be appreciated like that.

Its not just numbers. It’s a great
way to spend your day.

I get to know people because I want to. And

it fits with what I think our bank stands
for… acknowledging people as
individuals and working with them on
an individual basis. It’s huge. People like to

deal with people they know, especially when

it comes to money. People are sensitive

about money and they need to be

comfortable.

This is where I think we break the mold…

In a regular bank its click, click, click, stamp,

stamp, stamp… everybody shuffles through.

Well, we don’t make people stand in a line

up like little toy soldiers… We take a

western approach.

I do all that I can to make sure people get

what they need... Sometimes it’s an RSP or a

car loan. Sometimes it’s advice on how to

keep up to date on your chequing account.

Clients think of us as their
personal bankers.

That’s the edge.

F R A N C E S B E N B O W
Customer service representative
Calgary Northeast Branch
One and a half years
with Canadian Western Bank

At the risk of sounding like a TV ad,
I should tell you I’ve been
singing Frances’ praises,
well, it’s really the whole branch,

to everyone I know

who is having a difficult time with

their bank… and there sure are a

lot of them.

The travel business runs on referrals

and you don’t get referrals if you

don’t do a good job… I’m across

the street from CWB in Northeast

Calgary at Farebuster Travel. I met

Frances when I started doing the

company banking there after the

branch opened.

I found the service so extraordinary,

I moved all my personal business

over too… I had always had a

difficult time juggling our personal

accounts because my husband

doesn’t keep very good records…

or any records at all, really. Frances

suggested a change that lets me

keep track of what he’s doing. I’m
always up to date now. It’s made
my life so much simpler.

D A R L E N E M U N R O E
Supervisor and travel consultant
Farebuster Travel
Calgary, Alberta
Two and a half years as customer at Canadian Western Bank

. . . O N T H E D I F F E R E N C E B E T W E E N B U S I N E S S A S U S U A L

A N D B U S I N E S S T H A T I S O P E N , D Y N A M I C A N D F L E X I B L E

The biggest risk in
commercial banking is
losing a potential client
by not investigating thoroughly
enough to find a way to make
the relationship work…

T H O R T H O R G R I M S S O N
Senior Manager, Commercial Banking
Park Place Branch, Vancouver
Five years with Canadian Western Bank

Basically, our business is to structure credit

Sometimes the solution is simple. Pacific

facilities… Or you might call it lending

Blasting is a case in point. Recently they

money. There are two ways we do it:

entered a joint venture with a competitor in

through operating loans (usually to finance

the downtown excavation business. The deal

accounts receivable) or term loans (for

would work only if we could set up new

equipment, real estate, et cetera).

lines of credit – IMMEDIATELY – to

Either we match the term of a loan to the

life of the asset being financed, or, we make

it shorter… The desire to pay it off is a

function of the debt habits of the client and

the company’s cash flow... If a business is

growing, it needs money to fund growth.

If it pays a loan off too fast, it could starve.

The right term on a loan allows a company

to free up cash for business and reap the

benefits of a new piece of equipment while

paying for it.

On the operating side, we might find a way

to finance more of a company’s inventory

than another bank. We look for the places

where there’s a perception of greater risk.

Then we find ways to mitigate the risk…

accommodate the needs of both companies

during a rapid transition. So, we simply

made it a priority and responded quickly.

As I say, loans are facilities. I don’t think of
them as products… Our product is
not something we
manufacture… It is the
relationship between us and
our clients… it is our willingness to
take a closer look and find the logical

solution. Sounds universal, but it’s not.

Maybe one day… But for right now
it remains uniquely western
thinking.

We moved from Granville Island to

Coal Harbour so we could stand

apart from the competition. We are

the Western Canadian dealer for a

French yacht manufacturer,

Beneteau, and many of our

potential customers live in the high

rises around Coal Harbour. Now,

they can see our products from

their homes.

They can also see them on the

internet. We were one of the first

to go on-line and now we do

$500,000 of business a year selling

to internet customers. We also hold

the largest Beneteau owners

rendezvous in the world.

Our bankers are innovative too.
I had never heard of a buy
back arrangement until they
suggested it...
turned out to be

the perfect way to
minimize risk
for both us and
the bank.

It lets us operate with a high level

of confidence.

J . P. C A R D I N A L
Certified Yacht Broker, Westerly Yacht Sales
Coal Harbour, Vancouver, British Columbia
Five years as customer at Canadian Western Bank

… O N P E O P L E Y O U C A N T A L K T O

The investment world is
changing, almost daily. For one thing,
conventional GICs just don’t cut it anymore.

People want to diversify… hold a wide

As you know, we have a clear western focus.

range of investments…

As a trust company, we’d be foolish if we

didn’t change to facilitate diversified

portfolios and other needs of the

Western planners and agents come to us

because we know this marketplace, their

marketplace, like the back of our hand and

we have a better grasp than anyone else…

increasingly sophisticated modern investor…

And although our competitors offer the

Our clients are financial planners and all

the new breeds of investment professionals.

Believe me, they are an extremely savvy

and demanding group of people.

When they refer clients to us, they expect

us to handle them the way they would…
so the clients’ needs take
precedence over the
convenience or limitations of
the organization. Frankly, most of the
big trust companies don’t even come close

same kinds of products we do, they’re hard

pressed to beat our service. Last year, to

augment our service focus we completed a

number of on-line automation projects like:

One: we moved from monthly to daily on-

line market pricing on our increasingly

popular CWeb which also features an RRSP

loan application process;

and Two: we enhanced our delivery system

by upgrading the personal trust system and

by our participation in the industry mutual

anymore. There is such a void out there…

fund clearing system, FundSERV© (CSS).

and CWT is filling that gap in western

Canada where planners often have to run

on an eastern clock.

We are taking market share from others and

the biggest advantage we have is our staff’s

commitment to deliver excellence in service.

C AT H Y P H I L L I P S
Senior Manager, Trust Operations
Vancouver, British Columbia
Winner of Award of Excellence, 2000
Eight years with Canadian Western Trust

My clients are sophisticated,

intelligent people. They’re serious

about money and fee conscious.

They expect service. I deal with

many trust services suppliers. It

doesn’t matter how fast I work,

I can’t deliver if I can’t
get the people at the trust on
the phone.

I always seem to be asking my

suppliers ‘Who are you working

for?’ I can tell by the speed of the

service that it’s not me. If I don’t

provide prompt service, my clients

will go to someone else. That’s why

I prefer to work with CWT.

It’s so refreshing to work with

Cathy and her people. Now we’re

talkin’ speed. And direct contact…

I have a list with every name and

number I need, and I always get

an answer. I get solutions and

immediate action…

For example, we had a question

about fees. They listened. Now

there’s a new lower fee for limited

purpose plans… and that’s good
news for us, because, we know
who we work for.

T R I S H C U L L E N
Director, All Canadian Investment Corp.
Vancouver, British Columbia
Three years as client of Canadian Western Trust

… O N S H A R I N G T H E W E A LT H

M A R L E N E S A R A F I N C H A N
Greeter and The Voice of Edmonton Main Branch
Winner of President’s Award, 1998
Six years with Canadian Western Bank

I come from a real big family; I’m one of 16

In the early 90’s I took three years to help

kids.

I learned early
that if you give,

my husband start his landscaping company.

(It’s really rolling now.) He even does the

landscaping and maintenance at the

branch here. He also does some of his

banking here. Everything is connected.

At the branch I like to get involved in

the daffodil drive for the Cancer Society, the

MS fundraising stuff, the United Way raffle

(that one’s really fun) and the Christmas

Bureau… Christmas is for kids and I think

every one of them should be able to enjoy it.

Doing things like helping Betty Gaumont

get the Christmas Bureau hampers ready,

collecting United Way donations and

running our community message board also
help me stay connected to the
people I work with… in the branch
and in the community… and that’s a great

feeling… That’s how I like to run my life.

you shall receive.
And I live by it…

at home, in the community, at work… it

holds true where ever you are.

I was talking about my daughter Michelle

with one of our corporate clients, Eugene

Aube of Blackstar Corporation. She was

checking out classes at the colleges and the

technical schools, but Mr. Aube said to check

into the Aboriginal Youth Funding

Association. They have a program for Metis

students… she loves it.

You see, somehow everything is
connected… and whatever you share
with in the world comes back to you ten-

fold. Helping out makes you feel good too.

Message to Shareholders

This is our ninth consecutive year of record
profits. Net earnings for the year are up 36% at almost $27
million or $2.26 per share fully diluted ($2.42 basic), compared

to $20 million or $1.79 per share fully diluted ($1.96 basic) in

1999. These results serve to reinforce the positive impact of

concentrating our resources this year on what we do best –

banking and trust services.

Breaking through the $3 billion dollar
mark in total assets was a highlight of the
strong growth behind this record profit
performance with loan growth of 14% as the primary
element of this increase. We remain focused on providing

individuals and small to medium-sized businesses in western

Canada with the banking and trust services they need to

succeed. We are pleased our increasing size and capital base

have allowed us to progress along with our existing clients and

also to look at additional opportunities, including lending to a

broad range of publicly traded entities.

Included in our financial reporting are a number of other

sources of particular pride. We have had for many years, and
continue to maintain, one of the lowest loan loss
ratios in the industry; our five year loan loss ratio is 0.23% of
average loans. Secondly, we are a low cost producer and with

our growth we have been able to achieve improving economies

of scale. Our efficiency ratio (expenses to revenues) of 54.3%

for fiscal 2000 is the best in the Canadian banking industry. We

pay close attention to these areas – it is essential they remain

well-managed so that our strong asset growth translates into

sustained and growing earnings.

Our product and service offerings were expanded this year, and

further enhancements are under ongoing review. New

additions to the corporate trust capacity were a particular

highlight of the year. Our goal is to continue to provide our

brand of specialty service to both our existing and our new

niche markets primarily within our current geographic focus.

This year we added a branch in Calgary, and we have two more

in the Vancouver Lower Mainland on our project list for the

2001 fiscal year.

Message to Shareholders

We are sometimes asked how we differentiate ourselves from

One person who has been setting this example from early on is

our competitors. We hope the comments that some of our staff

our Executive Vice President, Doug Dalgetty, who is retiring

and clients have provided in the front section of this report

after fifteen years of service. Through his key executive role,

give you some insight. Our culture is one of personal service

Doug has been instrumental in building the banking and trust

and knowing our customers. It relates quite naturally to the

operations from the beginning. He has also been a strong and

common sense, friendly and neighbourly manner long
associated with western Canadians. In fact we have
captured how our staff respond to their
customers with a new catch phrase –
“Think Western”.
Thinking Western is prompt and thoughtful
response to customer needs. It is the acceptance of a creative

contributing member of the Board of Directors for eight years.

While we will miss his input in guiding and developing the

Bank, he has certainly earned our thanks and the relaxation

associated with retirement. A strong and dedicated executive

management team remains on board to build upon the success

that he helped create.

Looking forward, we expect economic conditions to continue

approach when required, rather than the application of “by

to provide a favorable environment for the further growth of

the book” responses. It includes respect, smiles, being helpful,

our business. Some or all of the legislative changes to the

participating actively in the community, and remembering that

regulatory environment, which were introduced during 2000,

the customer comes first. Everyone within the Bank is

may be re-introduced in the coming year. These changes may

encouraged to embody the “Think Western” spirit, whether

alter the regulatory landscape we operate in, but will not

they are interacting with customers, other staff or shareholders.

affect the distinctive style of service we offer. We are all proud

This culture has been fundamental in creating a successful

to have been part of developing this successful western-based

bank, and we recognize that. Our strong, “leading by

banking model that can be simply translated into our

example” work ethic preserves this culture by instinctively

employees knowing their customers and being responsive to

passing it along to our new employees.

their needs. Our increasing customer base and resulting growth
attests to the fact that when they think of banking,
more and more people “Think Western”…
Canadian Western Bank.

”Jack C. Donald“ ”Larry M. Pollock“

Jack C. Donald Larry M. Pollock
Chairman President and Chief

Executive Officer

financial report

27 Management’s Analysis of Operations and Financial Condition
27 Overview of 2000

27 Quarterly Information

28 Net Interest Income

29 Other Income

29 Non-interest Expenses

Taxes

Loans

33 Deposits

34 Capital Funds and Adequacy

36 Risk Management

36 Overview

37 Credit Risk

Liquidity Risk

42 Market Risk

45 Operational Risk

46 Off-Balance Sheet Financial Instruments Including Derivatives

47 Financial Statements
47 Management’s Report

48 Auditors’ Report

49 Consolidated Balance Sheet

50 Consolidated Statement of Income

51 Consolidated Statement of Changes in Shareholders’ Equity

52 Consolidated Statement of Cash Flow

53 Notes to Consolidated Financial Statements

64 Corporate Governance
64

Introduction

The Board and Board Committees

66 Audit Committee

66 Conduct Review Committee

67 Corporate Governance & Human Resources Committee

Loans Committee

68 Other Areas of Consideration

68 Conclusion

From time to time we make written and verbal forward-looking statements about the objectives

and strategies, operations and financial results of Canadian Western Bank. These may be included

in the Annual Report, filings with regulators, reports to shareholders and other communications.

These forward-looking statements are inherently subject to risks and uncertainties beyond the Bank’s

control, including, but not limited to, fluctuations in interest rates and currency values, changes in

economic and political conditions, legislative or regulatory developments, technological developments

and competition. These and other factors may cause the Bank’s actual performance to differ materially

from that contemplated by forward-looking statements and the reader is therefore cautioned not to

place undue reliance on these statements.

Management’s Analysis of Operations and Financial Condition

K E Y P E R F O R M A N C E I N D I C ATO R S

Net income from continuing operations ($ thousands)
Net income ($ thousands)
Earnings per share, continuing operations

basic
fully diluted
Earnings per share

basic
fully diluted

Efficiency ratio (expenses to revenues)
Return on common shareholders’ equity

Return on average total assets

Overview of 2000

Consolidated net income for the
year ended October 31, 2000 was
$26.9 million, an increase of 36%
from $19.9 million reported in 1999. Fully diluted
earnings per share were $2.26 compared to $1.79.
Return on shareholders’ equity and return on assets
for the year ended October 31, 2000 were 14.98%
and 0.96% respectively, compared to 12.82% and
0.81% last year. The average number of shares
outstanding increased by 981,000 during the year,
primarily because the remaining 6.75% debentures
were converted to common shares (discussed in the
Capital Funds and Adequacy section).

Net income from continuing operations was
$30.0 million, an increase of $7.2 million, or 32%
from the $22.8 million earned in 1999. Fully diluted
earnings per share from continuing operations were
$2.49 compared to $2.00 last year, an increase of
25%. Return on shareholders’ equity and return on

$
$

2000
29,994
26,949

2.69
2.49

2.42
2.26
54.26 %
14.98 %

0.96 %

$
$

1999

22,754
19,853

2.24
2.00

1.96
1.79
59.84 %
12.82 %

0.81 %

2000/1999
Increase
(decrease )

% Change

32%
36%

20%
25%

23%
26%

$
$

7,240
7,096

0.45
0.49

0.46
0.47
(5.58 )%
2.16 )%

0.15 )%

assets for continuing operations were 16.67% and
1.06% respectively. Net income from continuing
operations excludes the operations and sale of
Canadian Western Capital (“CWC”) discussed below.

Total assets increased by over 13% from one year
ago to reach $3,056 million. Loans increased by
$306 million, providing 84% of the total asset
growth. The total capital adequacy ratio at
October 31, 2000 was 11.6% (1999 - 11.8%) with
a Tier 1 component of 8.1% (1999 - 7.4%).

On December 21, 1999, the Bank announced that
it would sell CWC to Goepel McDermid Inc. of
Vancouver. The sale closed February 16, 2000 and
was reflected in the Bank’s financial statements for
the quarter ended January 31, 2000. An after tax
loss of $3.0 million was charged to discontinued
operations. The comparative loss from CWC’s
operations in 1999 totalled $2.9 million.

Total assets
surpassed
the $3 billion
milestone
and were up more

than 13% over 1999.

Q U A R T E R L Y I N F O R M A T I O N

($ thousands, except per share data)

Total interest income
Net interest income
Other income
Net income from continuing operations
Net income
Earnings per share, continuing operations

basic
fully diluted
Earnings per share

basic
fully diluted

2000

1999

$54,812
19,069
4,086
8,150
8,150

$ 0.73
0.67

0.73
0.67

$49,610
17,426
3,735
7,115
7,115

$ 0.64
0.59

0.64
0.59

$48,330
16,731
3,485
6,505
3,460

$ 0.59
0.55

0.31
0.31

$46,422
15,856
3,398
5,638
4,706

$ 0.55
0.49

0.47
0.43

$44,620
15,518
3,229
5,774
5,229

$ 0.57
0.52

0.51
0.48

$42,951
15,134
3,191
5,535
4,883

$ 0.53
0.47

0.47
0.42

$43,020
15,221
3,199
5,807
5,035

$ 0.59
0.52

0.51
0.46

$57,530
20,141
3,949
8,224
8,224

$ 0.74
0.68

0.74
0.68

Net Interest Income

TA B L E 1 – N E T I N T E R E S T I N C O M E

($ thousands)

Assets

Securities and deposits with

2000

1999

Average

Balance

Mix

Interest

Rate

Interest

Average

Balance

Mix

Interest

Rate

regulated financial institutions

$ 332,191

12 %

18,276

5.50 %

$ 256,706

11 %

12,578

4.90 %

Loans

Securities purchased under resale agreements

Residential mortgages

Other loans

Total loans

Total interest bearing assets

Other assets

Total Assets
Liabilities

Deposits

Demand

Notice

Fixed term

Total deposits

Other liabilities

Debentures

Shareholders’ equity

Total Liabilities

Total Assets/Net Interest Income

29,647

261,214

2,104,729

2,395,590

2,727,781

48,936

1,581

18,002

172,423

192,006

210,282

–

5.33

6.89

8.19

8.01

7.71

0.00

28,645

272,868

1,795,917

2,097,430

2,354,136

44,166

1,377

18,618

144,440

164,435

177,013

–

4.81

6.82

8.04

7.84

7.52

0.00

$2,776,717

100 %

$ 210,282

7.57 %

$2,398,302

100 %

$ 177,013

7.38 %

48,132

2 %

–

0.00 %

35,447

1 %

–

0.00 %

246,364

2,175,228

2,469,724

57,763

67,126

182,104

$2,776,717

8,437

124,514

132,951

–

3,964

–

3.42

5.72

5.38

0.00

5.91

0.00

192,634

1,882,795

2,110,876

50,311

79,332

157,783

4,676

105,720

110,396

–

4,888

–

2.43

5.61

5.23

0.00

6.16

0.00

100 %

$ 136,915

73,367

4.93 %

2.64 %

$2,398,302

100 %

$ 115,284

61,729

4.81 %

2.57 %

Net interest income is the difference
between interest and dividends earned
on assets and interest expensed on
deposits and other liabilities, including
debentures. Net interest spread,
or margin, is net interest income as
a percentage of average total assets.

• an increased yield on securities due to

higher short term investment rates and a

diversification of our risk mix from treasury bills

to other higher yielding government debt; and

•

strong growth in both the higher yielding

commercial loan portfolios and the lower cost

demand and notice deposits.

As discussed in the Interest Rate Risk section,

the portfolio has a positive gap with maturing

In 2000, net interest income increased by

assets exceeding maturing liabilities during the

$11.6 million, or 19%, primarily due to:

one year time frame. If market rates increase this

• an increase of $374 million (16%) in average

would have a positive impact on spreads.

interest bearing assets; and

• an increase in net interest spread to 2.64%

from 2.57%.

In 2001 we expect:

•

interest rates will remain relatively stable; and

the yields on securities and net interest spread

The increased spread was primarily the result of:

will be comparable to 2000.

• an increase in average prime, from 6.49% to

7.05% year over year, which has a positive

impact due to the composition of our loan and

deposit portfolios;

Other Income

TA B L E 2 – OT H E R I N C O M E

($ thousands)

Credit related

Retail services

Trust services

Other (1)

Total Other Income

2000/1999

Increase (decrease)

2000
9,540

2,949

1,644

1,122

1999

7,805

2,476

1,485

1,251

1,735

473

159

(129 )

15,255

13,017

2,238

22 %

(10 )

17 %

(1) Other includes net gains on securities sales, loan administration fees, gains/losses on equipment disposals, foreign exchange service fees and other miscellaneous non-interest revenues.

Other income, which includes all revenues not

•

increased trust services fees in Canadian Western

classified as net interest income, was $15.3 million,
an increase of $2.2 million or 17% over 1999.

Trust (“CWT”) due to substantial growth (27%)
in the number of self-directed RRSP (registered

As shown in table 2, almost all categories of other

retirement savings plan) and RRIF (registered

income showed solid growth in 2000. Notable

retirement income fund) accounts.

changes include:

Other income as a percentage of total revenue

• an increase of $2.2 million in credit and retail

(net interest income and other income) was 17%

fees due to loan and deposit growth and

in 2000, the same as in 1999. In 2001 total other

increased activity in the retail branches; and

income is expected to show broad based growth

with a focus on increasing other income as a

percentage of total revenue.

Non-interest Expenses

Non-interest expenses increased 7.5%
to $48.1 million in 2000. The increase
is primarily due to:

•

increased salaries and employee benefits from

The efficiency ratio improved to 54.3% from 59.8%

expense growth (which

in 1999 as revenue growth of 18.6% exceeded

expense growth of 7.5%. Non-interest expenses as

a percentage of average assets was 1.73% in 2000,

an improvement from 1.86% in 1999.

an increase in full time staff complement to

In 2001 we anticipate:

accommodate growth; offset by

•

the full time staff complement will increase by

• a significant reduction in deposit insurance

approximately 5% to accommodate growth in

premiums as a result of the new premium rates

volumes and new branch initiatives;

which affected only the last half of fiscal 1999;

• other increases in non-interest expenses will be

and

primarily attributable to volume increases from

•

reduced provincial capital taxes (see Taxes

growth; and

section).

•

reduced capital taxes due to the elimination

of Alberta’s capital tax during 2001 (see Taxes

section).

In 2000,
efficiency
improved
significantly,
with the efficiency

ratio reduced

substantially from

59.8% to 54.3% as

revenue growth

(18.6%) exceeded

was held at 7.5%).

Similarly, non-interest

expenses were 1.73%

of average assets in

2000, an improvement

from 1.86% in 1999.

TA B L E 3 – N O N - I N T E R E S T E X P E N S E S A N D E F F I C I E N C Y R AT I O

($ thousands)

Salaries and Employee Benefits

Salaries

Employee benefits

Total

Premises

Rent

Depreciation

Other

Total

Equipment and Furniture

Depreciation

Other

Total

General

Capital and business taxes

Deposit insurance premiums

Professional fees and services

Communications

Marketing and business development

Postage and stationery

Banking charges

Travel

Other

Total

Total Non-interest Expenses

Efficiency Ratio

Net interest income

Other income

Total revenues

2000/1999

Increase (decrease)

2000

1999

23,750

20,549

3,457

27,207

3,145

23,694

3,854

822

770

5,446

1,934

1,444

3,378

2,405

801

2,067

494

1,340

1,318

934

791

1,906

12,056

48,087

73,367

15,255

88,622

3,711

891

689

5,291

1,503

1,337

2,840

2,972

1,695

2,214

522

1,104

1,235

788

767

1,604

12,901

44,726

61,729

13,017

74,746

3,201

312

3,513

143

(69 )

155

431

107

538

(567 )

(894 )

(147 )

(28 )

236

146

302

(845 )

3,361

11,638

2,238

13,876

15.6 %

9.9

14.8

3.9

(7.7 )

11.8

2.9

28.7

8.0

18.9

(19.1 )

(52.7 )

(6.6 )

(5.4 )

21.4

6.7

18.5

3.1

18.8

(6.5 )

7.5 %

18.9 %

17.2

18.6 %

Efficiency Ratio (expenses as a percentage of total revenues)

54.3 %

59.8 %

Capital expenditures of $1.4 million are budgeted

harmonize Canadian standards with those

for 2001 and will be funded from general operating

already existing in the United States (“U.S.”).

Efficiency Ratio
(expenses to revenues)

revenues. At year end there were no specific

Generally, any substantive commitment to provide

commitments relating to these capital expenditures.

post-employment or post-retirement benefits

The Bank will be required to adopt the Canadian

Institute of Chartered Accountants (“CICA”)

new accounting standard for employee future

benefits in fiscal 2001. The standard will essentially

to employees must be accrued as employees earn

the benefit entitlement. The adoption of this new

standard is not expected to have a material impact

on the Consolidated Financial Statements.

%
8
.
4
6

%
4
.
4
6

%
7
.
0
6

%
8
.
9
5

%
3
.
4
5

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

Taxes

The current income tax provision
represents amortization of unclaimed
deductions and tax loss carryforwards
of $4.2 million (1999 - $2.7 million),
income tax in a subsidiary of $606,000
(1999 - nil) and large corporations tax
of $604,000 (1999 - $552,000).

Deferred income taxes arise from current year

timing differences related to claiming deductions

for income tax purposes on a basis different from

accounting and relate primarily to the provision

Income taxes otherwise payable by the Bank for

the year ended October 31, 2000 were eliminated

by utilizing approximately $30.3 million (1999 -

$24.8 million) of unclaimed deductions and tax loss

carryforwards. At October 31, 2000, the Bank has

approximately $14.8 million of unclaimed

deductions which are available to reduce future

years’ income for tax purposes. In addition,

$6.9 million (1999 - $7.0 million) of capital losses

are available to apply against future capital gains

and have no expiry date. The tax benefit of these

unclaimed deductions and losses has not been

recognized.

for credit losses. The Bank has reasonable

During the year ending October 31, 2001 it is

assurance that its net deferred income tax asset

likely that the Bank will have utilized all of the

will be realized through future reversals of timing
differences.

unclaimed deductions and will become fully
taxable. To affect this transaction smoothly the

estimated effective annual income tax rate will be

used to record income tax expense on a quarterly

basis. For the year ended October 31, 2000 the

Bank’s effective tax rate was approximately 15%

and we expect this rate will be in the 32 - 37%

range in 2001.

In 2001 the Bank will

benefit from the

elimination
of provincial
capital tax
in Alberta

TA B L E 4 – C A P I TA L TA X E S

($ thousands)

British Columbia

Alberta

Saskatchewan

Manitoba

Total Capital Taxes

Capital

Tax Rate

Capital

Allocation (1)

1.00 %

0.70 %

3.00 %

39 % $

53 %

5 %

3 %

2000
888

1,078

198

1999

787

1,558

305

172

2,246

2,822

2000/1999

Increase (decrease)

101

(480 )

(223 )

(576 )

12.8 %

(30.8 )

(73.1 )

15.1

(20.4 )%

(1) These capital allocation percentages are for the Bank only although total capital tax includes capital taxes paid in British Columbia by subsidiaries.

Capital taxes for 2000 totalled $2.2 million

In Alberta the capital tax base was harmonized

compared to $2.8 million in 1999. The decrease

with the federal capital base and the tax rate

is attributable to:

dropped from 2.0% to 0.7% on the first

•

changes to the capital tax base and reduced tax

$400 million of capital. The lower rate replaced

rates in Alberta and Saskatchewan; offset by

the relief previously provided in the form of

•

increased capital due to the retention of

a remission calculation for financial institutions

earnings.

headquartered in Alberta. In Saskatchewan the

rate was lowered from 3.25% to 0.7% for financial

institutions with capital of $400 million or less.

The goods and services tax (GST) carries with it

In 2001 capital taxes will again decrease as

a significant cost to the Bank, as it does to all

Alberta is eliminating the capital tax on financial

financial institutions, to the extent that GST paid

institutions during the year.

is not recoverable through increased service

charges, increased loan costs or reduced deposit

rates. This cost is incurred because the majority

of the Bank’s activities, except leasing, loan

administration and trust services, are exempt under

GST legislation and thus GST cannot be charged

and collected from customers as occurs in the

majority of Canadian businesses. As a result, the

ability to recover the GST paid on most purchased

goods and services is lost. The estimated cost of

unrecoverable GST during 2000 was $940,000

compared to $848,000 in 1999.

As of November 1, 2000, the Bank will be required

to adopt the CICA’s new accounting standard

relating to future income taxes. This standard will

essentially harmonize Canadian corporate income

tax accounting with that in the U.S. Under the

new standard, the liability method will be used

to measure future income tax assets and liabilities

at the enacted tax rates expected to apply when

the asset is ultimately realized or the liability

settled. The adoption of this new standard is

not expected to have a material impact on the

Consolidated Financial Statements.

Loans

TA B L E 5 – O U T S TA N D I N G L OA N S B Y P O RT F O L I O T Y P E A N D B Y P R OV I N C I A L L O C AT I O N O F B R A N C H

($ millions)

October 31, 2000
Loans to Individuals

Residential mortgages

Other

Total

Loans to Businesses

Securities purchased under resale agreements

Commercial

Construction and real estate (2)

Industrial

Energy

Total

Total Loans

Composition %

October 31, 1999

Loans to Individuals

Residential mortgages

Other

Total

Loans to Businesses

Securities purchased under resale agreements

Commercial

Construction and real estate (2)

Industrial

Energy

Total

Total Loans

Composition %

Alberta

Saskatchewan

Manitoba

Total (1)

Composition %

British

Columbia

170

203

–

251

494

182

–

927

1,130

137

326

414

220

1,105

1,242

–

116

–

44 %

48 %

4 %

162

201

–

295

469

162

–

926

1,127

140

243

279

201

812

952

–

50 %

42 %

4 %

100 %

101

100

277

374

630

1,003

435

2,213

2,587

100 %

272

103

375

564

857

395

1,905

2,280

11 %

100 %

12 %

100 %

(1) This table does not include an allocation of the allowance for credit losses and deferred revenue and discounts.
(2) Includes term mortgages, project (interim) mortgages and multi-unit residential mortgages.

Loans by Portfolio

Commercial
24%
Securities Purchased under
Resale Agreements
3%
Real Estate
Project Mortgages
13%
Personal
15%

Industrial
17%

Multi-unit Residential
Mortgages
6%

Energy
2%

Real Estate Term
Mortgages
20%

Loans, as reported on the consolidated
balance sheet, totalled $2,560 million
at the end of 2000 compared to
$2,254 million at the end of 1999,
an increase of 14%. Highlights of the
year-over-year changes are:

Portfolio

•

commercial loans increased $66 million (12%)

and comprise 24% of the portfolio compared

to 25% one year ago;

•

construction and real estate loans grew

$146 million (12%) and represent 39% of

the portfolio versus 38% a year earlier;

•

the industrial portfolio increased $40 million (10%);

the energy portfolio, a specialty in our Calgary

market, grew $12 million (25%); and

•

loans to individuals represent 15% of the total

portfolio, down from 16% in 1999.

Location

•

loan growth of $261 million (23%) in the prairie

provinces (primarily in Alberta); and

•

loans held at Alberta branches increased from

42% of the total portfolio at October 31, 1999

to 48% at October 31, 2000 due to strong

economic growth in the province with a

corresponding decrease in the British Columbia

loan portfolio from 50% to 44%.

In 2001 the business plan focuses on continued

growth in all portfolios. Although the market

remains competitive, continued strong loan growth

is planned for 2001 as the Bank expands

its activities and adds to its branch network.

Deposits

TA B L E 6 – D E P O S I T S

($ thousands)

Canadian Currency

Personal chequing and savings

Business demand and savings

Fixed term:

Under $100,000

$100,000 and over

Registered retirement products

Total

Foreign Currency (Canadian equivalent)

Total Deposits

In 2001,
the Bank
will add to
its branch
network
and expand its

activities to foster

growth in all

portfolios. The Bank is

in a good position

to take advantage of

the current strength in

the western economy.

2000

1999

Amount

% of Total

Amount

% of Total

$ 117,215

238,579

4.3 % $

86,933

8.7

172,734

1,481,227

364,441

514,321

2,715,783

12,026

54.3

13.4

18.9

99.6

0.4

1,289,839

312,203

498,384

2,360,093

10,982

3.7 %

7.3

54.4

13.1

21.0

99.5

0.5

$ 2,727,809

100.0 % $ 2,371,075

100.0 %

Deposits by Source
($ millions)

4,000

3,000

2,000

1,000

Branches

Agent

Wholesale

1,345 | 1,311 | 72

1,108 | 1,176 | 87

958 | 1,007 | 95

828 | 859 | 131

703 | 786 | 97

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

Capital Funds and Adequacy

TA B L E 7 – C A P I TA L S T RU C T U R E A N D R E G U L ATO RY R AT I O S AT Y E A R E N D

($ thousands)

Tier 1 Capital

Retained earnings

Common shares

Non-controlling interest in subsidiary

Less unamortized goodwill

Total

Tier 2 Capital (gross)

General allowance for credit losses (Tier A) (1)

Subordinated debentures (Tier B)

Total

Total Regulatory Capital

Regulatory Capital to Risk-weighted Assets

Tier 1 capital

Tier 2 capital

Total Regulatory Capital Adequacy Ratio

Assets to Regulatory Capital Multiple (2)

Growth of 15% in deposits was
achieved this year which was consistent
with last year. Of note, is that the lower
cost business and personal deposits
grew faster than total deposits while
the mix of fixed term deposit types
remained much the same as in the
prior year. The focus on increasing
lower cost deposits will continue to
be an ongoing priority.

The source of deposits is broken down as follows:

• branches – 49% (1999 - 47%)

• deposit agents – 48% (1999 - 49%)

• wholesale clients – 3% (1999 - 4%)

CWT deposits are included in the foregoing numbers.

The Bank’s branch network generated $43.1 million

of CWT’s deposits (a 39% increase from last year),

and the remainder are received through deposit

agents, as CWT has no retail branches.

Retail branch deposits are generally considered to be

more stable and it is an ongoing objective to strive

for further growth in this area. Agent deposits are

slightly more expensive because a commission is

paid, but this added cost is countered by a reduced

need for a more extensive branch network.

2000

83,853

111,342

–

(194 )

1999

61,066

98,484

234

(448 )

2000/1999

Increase

(decrease )

22,787

12,858

(234 )

254

195,001

159,336

35,665

17,911

67,126

85,037

15,996

78,691

94,687

1,915

(11,565 )

(9,650 )

$ 280,038

$ 254,023

26,015

8.1 %

3.5 %

11.6 %

11.1

7.4 %

4.4 %

11.8 %

10.8

0.7 %

(0.9 )%

(0.2 )%

0.3

(1) Banks are allowed to include their general allowance for credit losses up to a prescribed percentage of risk-weighted assets in Tier 2A capital. The Bank has been granted an inclusion rate of 0.75% of risk-weighted assets.
(2)

Total assets plus off-balance sheet credit instruments, such as letters of credit and guarantees, less goodwill divided by total regulatory capital.

TA B L E 8 – R I S K - W E I G H T E D A S S E T S

($ thousands)

Balance Sheet Assets

Cash resources

Securities

Loans

Other assets

Total

Credit Instruments (1) (contract amounts)

Guarantees and standby letters of credit

Commitments to extend credit (2)

Total

Derivative Financial Instruments (3) (notional amounts)

Interest rate contracts

Equity contracts

Total

Total Risk-weighted Assets

2000
Risk-

weighted

Balance

42,695

30,274

2,255,509

46,141

1999

Risk-

weighted

Balance

33,685

40,287

2,001,990

54,709

Balance

$ 169,990

205,192

2,253,598

63,602

Balance

$ 214,935

231,416

2,560,092

49,160

$ 3,055,603

2,374,619

$ 2,692,382

2,130,671

42,489

1,844

44,333

$ 269,000

3,535

$ 272,535

29,366

922

30,288

27,479

843

28,322

136

164

300

$ 269,000

2,200

$ 271,200

17,659

422

18,081

119

$ 2,405,207

$ 2,148,871

See Note 11 to the Consolidated Financial Statements for further details.

(1)
(2) Greater than one year only.
(3)

See Note 15 to the Consolidated Financial Statements for further details.

The Office of the Superintendent of
Financial Institutions (“OSFI”) requires
banks to measure capital adequacy
in accordance with instructions for
determining risk-adjusted capital
and risk-weighted assets including
off-balance sheet commitments. Based
on the deemed credit risk of each type of asset a

inclusion of the general allowance in Tier 2A

capital at up to 75 basis points (0.75%) of risk-

weighted assets.

Capital funds are managed in accordance with

The Bank is well

policies and plans that are regularly reviewed and

approved by the Board of Directors and which take

into account forecasted capital needs and markets.

The goal is to maintain adequate regulatory

capital to be considered well capitalized, to protect

weighting of 0% to 100% is assigned. Published

customer deposits and to provide capacity for

regulatory guidelines require banks to maintain

internally generated growth and strategic

a minimum ratio of capital to risk-weighted assets

opportunities that do not otherwise require

and off-balance sheet items of 8%, of which 4%

accessing the public capital markets. The capital

must be core capital (Tier 1) and the remainder

mix is managed to improve the return on equity.

supplementary capital (Tier 2).

However, in order to be considered
well capitalized, OSFI has stated that
Canadian banks need to maintain a
minimum total capital adequacy ratio
of 10% with a Tier 1 ratio of not less
than 7%. In the Bank, Tier 1 capital is comprised
of common shareholders’ equity and Tier 2 capital

includes subordinated debentures (to the

regulatory maximum amount of 50% of Tier 1

capital) and an inclusion of the general allowance

for credit losses at a prescribed inclusion rate based

on risk-weighted assets. OSFI has authorized the

At October 31, 2000 the total capital adequacy

ratio was 11.6% (1999 - 11.8%) of which 8.1%

(1999 - 7.4%) was Tier 1 capital. Total regulatory

capital increased $26.0 million over 1999 as

a result of:

• earnings, net of dividends, of $23.2 million;

•

share capital of $1.3 million issued upon the

exercise of 119,026 stock options;

•

increase in the inclusion of the general

allowance for credit losses of $1.9 million due

to higher risk-weighted assets; offset by

• a charge to retained earnings of $383,000 for

share issue costs related to the conversion of

Tier 2 debentures.

capitalized with a
total capital
adequacy
ratio of
11.6%
of which 8.1%

is Tier 1 capital

Subordinated debentures include both convertible

Thus the total dividend rate of $0.48 for fiscal 1999

($54.0 million) and conventional ($13.1 million)

appears unusually high because in January 1999 the

debentures. Note 8 to the Consolidated Financial

final annual dividend of $0.32 per share was paid

Statements details the terms of the debentures.

and in July 1999 the first semi-annual dividend of

On November 30, 1999 the remaining $11.6 million

$0.16 was paid.

of the 6.75% convertible debentures were

converted by debentureholders into 925,000 shares

at $12.50 per share which resulted in a transfer

from Tier 2 to Tier 1 capital.

The Bank has share option plans that are provided

as an incentive to officers and employees who are

in a position to materially impact the longer term

financial success of the Bank as measured by

In each of January and July 2000, semi-annual

shareholder wealth. Note 9 to the Consolidated

dividends of $0.17 were paid. During the third

Financial Statements details the number of shares

quarter of 1999, the Bank’s dividend policy was

under option outstanding, the weighted average

amended to be semi-annual instead of annual.

exercise price and the amounts exercisable at

year-end.

Risk Management

O V E R V I E W

The risk management policies continue
to evolve and improve in order to
accommodate the new challenges that
come with growth, expansion and
changes in the regulatory and public
domain within which financial
institutions operate. Effective risk
management is central to the ability
to remain strong and profitable and
includes identifying, assessing,
managing and monitoring all forms
of risk. The Bank is primarily exposed
to four basic types of risk; credit,
liquidity, market and operational.

Senior management are responsible for

establishing the framework for identifying risks

and developing appropriate risk management

policies and frameworks. The Board of Directors,

either directly or through its committees, reviews

and approves the key policies, and implements

specific reporting procedures to enable them to

monitor ongoing compliance over significant risk

areas. At least annually a report on significant

internal controls is presented to the Board and the

Audit Committee.

The Loans Committee of the Board, which

maintains a close working relationship with the

credit risk management group, is responsible for:

•

the review and approval of credit risk

management policies;
loans in excess of delegated limits;

•

the review and monitoring of impaired and

other less than satisfactory loans; and

•

the recommendation of the adequacy

of the allowance for credit losses to the

Audit Committee.

At the operational level, the Asset Liability

Committee (“ALCO”) plays a key role in the

management of liquidity and market risk. ALCO is

a management committee chaired by an Executive

Vice President with the President and Chief

Executive Officer (“CEO”) and other senior

executives as members and is responsible for:

•

the establishment and maintenance of policies

and programs for liquidity management and

control, funding sources, investments, foreign

exchange risk, interest rate risk and derivatives;

and

•

regular meetings to review compliance and

discuss strategy in this area.

Asset liability management policies are approved

and reviewed at least annually by the Board with

quarterly status reporting provided to the Board.

The Operations Committee meets regularly and is

made up of supervisory and management personnel

from all areas of operations and is chaired by a

member of senior management. This committee is

responsible for developing appropriate policies and

procedures, including internal controls, respecting

day-to-day, routine operations.

The internal audit department performs inspections

in all areas of the Bank, including CWT, and reports

the results directly to senior management,

the President and CEO and the Audit Committee.

Senior management

put decades of

experience to work

managing the four

basic types of risks that

the Bank is exposed to:
credit
liquidity
market
operational

C R E D I T R I S K

•

independent annual reviews of credit valuation,

Credit risk is the risk that a financial
loss will be incurred due to the failure
of a counterparty to discharge its
contractual commitment or obligation
to the Bank. This risk can relate to balance
sheet assets, such as loans, as well as off-balance

sheet assets such as guarantees and letters of

credit. To diversify the risk, the exposure to a single

borrower or associated borrowers is limited to

$18 million. In certain circumstances, exposure can

be increased to an amount not exceeding 10% of

regulatory capital.

The Bank employs and is committed to a number

of important principles to manage credit exposures

which include:

• a Loans Committee of the Board whose

duties include approval of lending policies,

establishment of lending limits for the Bank,

the delegation of lending limits and the review

of larger credits as well as quarterly reports

prepared by management on watch list loans,

impaired loans, the adequacy of the allowance

for credit losses, environmental risk and

diversification of the portfolio;

risk classification and credit management

procedures by the internal audit group which

includes reporting the results to senior

management, the President and CEO and

the Audit Committee; and

• detailed quarterly reviews of accounts rated less

than satisfactory including a watch list report

recording accounts with evidence of weakness,

an impaired loan report covering loans which

show impairment to the point where a loss is

possible, and the establishment of an action

plan for each account.

Environmental Risk

The operations conducted by the Bank do not

impose a material effect on the environment.

However, losses can be incurred if a borrower is

unable to repay loans due to environmental clean

up costs or if the Bank becomes directly liable for
clean up costs if it is deemed to have taken control

or ownership of a contaminated property.

Risk assessment criteria and procedures are in place

to manage environmental risks and these are

communicated to lending personnel. Reports on

environmental inspections and findings are

reviewed by senior management and reported

• delegated lending authorities which are clearly

upon quarterly to the Board.

Account
management
is more
about
relationships
than just about

anything else.

It’s important to know

your customer’s

business and you can’t

do that unless you

know them by name

and feel comfortable

getting to know them

as people.

communicated to personnel engaged in the

credit granting process, a defined approval

process for loans in excess of limits and

the review of larger credits by a senior

management group prior to recommendation

to the Loans Committee of the Board;

•

credit policies, guidelines and directives which

are communicated to all branches and officers

whose activities and responsibilities include

credit granting and risk assessment;

• appointment of personnel engaged in credit

granting who are qualified, experienced

bankers;

• a standardized credit risk rating classification

established for all credits and reviewed not less

than annually;

• annual reviews of individual credit facilities

(excepting consumer loans and residential

mortgages);

• diversification of risk by client, geographic area,

industry sectors and products;

• pricing of credits commensurate with risk

to ensure appropriate compensation;

• management of growth within quality

objectives;

• early recognition of problem accounts and

immediate implementation of steps to protect

the safety of Bank funds;

Portfolio Quality

The Bank’s strategy is to continually improve and

maintain a quality portfolio. Efforts are directed

towards achieving a wide diversification, engaging

experienced personnel who provide a hands on

approach in credit granting, account management

and quick action when problems develop.

The lending focus is primarily directed to small

and medium-sized businesses and individuals

with operations conducted in the four western

provinces. Relationship banking and “know your

customers” are important tenets of account

management. An appropriate financial return

on the level of risk is fundamental.

Impaired Loans

Gross impaired loans decreased $7.1 million in

2000 reflecting a general improvement in the loan

portfolio. As shown in Table 9, gross impaired

loans total $31.1 million representing 1.21%

(1999 - 1.69%) of total outstanding loans.

Net Impaired Loans
as a Percentage of
Net Loans Outstanding

1.00

0.75

0.50

0.25

0.00

%
9
9
.
0

%
8
6
.
0

%
3
5
.
0

%
4
5
.
0

%
7
1
.
0

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

TA B L E 9 – C H A N G E I N G R O S S I M PA I R E D L OA N S

($ thousands)

Gross impaired loans, beginning of year

Net (reductions) additions

Write-offs

Total

Gross Impaired Loans as a Percentage of Total Loans

2000
38,189

(2,612 )

(4,480 )

1999

26,345

14,158

(2,314 )

2000/1999

Increase

(decrease )

11,844

(16,770 )

2,166

31,097

38,189

(7,092 )

1.21 %

1.69 %

(0.48 )%

Net impaired
loans were
0.17% of
total loans
at October 31, 2000,
compared to 0.54%
one year ago.

Impaired loans net of the allowance for credit

Table 10 shows the year over year change to the

losses have decreased over the past year and

allocation of the allowance for credit losses to

represent 0.17% (1999 - 0.54%) of net loans

specific provisions by category of impaired loans

outstanding. The impaired loan outlook going

and to the general allowance for credit risk.

forward into 2001 is expected to be stable as

economic conditions are trending positively.

TA B L E 1 0 – A L L OWA N C E F O R C R E D I T L O S S E S

($ thousands)

Specific Provisions

Consumer and personal

Real estate

Industrial

Other

General Allowance (2)

Total

1999

Ending

Balance

348

2,526

1,238

1,060

20,848

26,020

Write-offs,

Net of

Recoveries (1)

Provision

for Credit

Losses

265

2,395

481

1,117

–

227

1,633

1,521

1,652

4,258

5,100

2000
Ending

Balance

310

1,764

2,278

1,595

20,915

26,862

(1) Recoveries in 2000 totalled $222 (1999 - $48).
(2)

In 1999, in accordance with guidance provided by OSFI, the Bank increased its general allowance for credit risk by $11.7 million. Accordingly, retained earnings was reduced by $6.5 million representing the increase in the
general allowance, net of deferred income taxes of $5.2 million.

Allowance for
Credit Losses as a
Percentage of Gross
Impaired Loans

100

%
4
.
6
8

%
1
.
8
6

%
5
.
7

7
.
8
4

%
0
.
7
4

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

Allowance For Credit Losses

The allowance for credit losses consists of

a progressive (increasing with higher risk) loss ratio

$5.9 million in specific provisions and $20.9 million

range against groups of loans of a common risk

in the general allowance for credit risk with

rating is utilized to test the general allowance

the latter now representing 0.82% of gross

adequacy. The general allowance would be

outstandings and 0.92% of risk-weighted credit

expected to increase in strong economic times and

assets. This compares favorably with the Bank’s

decrease in weaker economic times as provisions

five year loan loss average of 0.23% which is based

are allocated to specific credits.

on the annual charges to the income statement.

The five year loan loss average based only on net

new specific provisions (i.e. excluding the annual

increase or decrease in the general allowance

for credit risk) is 0.18%. The general allowance

is available to cover credit losses inherent in the

portfolio which are not currently identifiable on

an account by account basis. An assessment of the

adequacy of the general allowance is conducted

quarterly and measured against the five year loan
loss average. In addition, a method of applying

In October 1998 OSFI began providing guidance

to all deposit-taking institutions on establishing

general allowances for credit risk (unallocated loan

loss provisions) in their ongoing program to

strengthen general allowances and related

methodologies. While OSFI did not believe that

there was a systemic problem of asset quality

in the Canadian system, they felt the need for

higher general allowances was supported by,

amongst other things, the current position in

Geographical Distribution of Loans

periods. Consequently, an amount of $6.5 million,

Alberta 46%
Other 3%
Manitoba 4%

Saskatchewan 6%

British Columbia 41%

representing the $11.7 million adjustment less

deferred income taxes of $5.2 million, was charged

to retained earnings. In response to OSFI’s ongoing

guidance the Bank is furthering the development

of policies governing the measurement and

minimum threshold of the general allowance as

well as action to be taken in the event of a

material drawdown of the general allowance.

Provision for Credit Losses

For the year ended October 31, 2000, the provision

for credit losses represented 0.21% of average

the economic cycle, growing potential off-balance

loans. As reflected in the graph below, the

sheet activity and associated credit risk, and the

provision for credit losses remains below the

current levels of allowances of a number of

five year average of 0.23% reflecting the strong

Canadian institutions in relation to historical levels

credit quality of the portfolio.

and compared to institutions in other jurisdictions.

Diversification of Portfolio

Provision for
Credit Losses as a
Percentage of Average
Loans Outstanding
(5 year average 0.23%)

%
0
3
.
0

%
5
2
.
%0
2
2
.
%0
8
1
.
0

%
1
2

0.40

0.30

0.20

0.10

0.00

OSFI’s revised general allowance criteria were effective

Total Advances Based on Location of Borrower

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

for 1999. In accordance with the guidance provided

(also see Table 5)

by OSFI, $11.7 million was added to the general

allowance at April 30, 1999 and was charged to

retained earnings with no restatement of prior

The following table illustrates the diversification

in our lending operations by industry sector.

TA B L E 1 1 – TOTA L A DVA N C E S BA S E D O N I N D U S T RY S E C TO R

(%) October 31

Construction

Real estate operations

Consumer loans and residential mortgages

Transportation and storage

Hotel/motel

Other services

Manufacturing

Logging/forestry

Finance and insurance

Oil and gas (production)

Wholesale trade

Government guaranteed

Other

Total

Management of the loan portfolio includes the

set up within branches or as stand alone operations,

strategy of avoiding high concentrations in one

while oil and gas lending is conducted by specialists

geographic area or industry sector. The Bank’s

in our Calgary market. In addition to these areas,

portfolio is well diversified with a mix of corporate

the Bank also has real estate divisions established

and personal business. Industrial lending units are

in the major centres in which it operates.

2000

22.7 %

22.2

13.8

1999

20.4 %

24.5

16.5

7.1

4.4

4.2

4.0

3.3

3.2

2.7

2.6

0.9

8.9

6.9

4.0

2.7

4.1

3.0

2.5

1.1

8.8

100.0 %

L I Q U I D I T Y R I S K

Liquidity risk is the risk that the Bank
will not have sufficient cash to meet
its obligations as they become due.
This risk arises from fluctuations in
cash flows from lending, deposit
taking, investing and other activities.
Effective liquidity management ensures that

adequate cash is available to honour all cash

outflow obligations. Maintenance of a prudent

liquidity base also provides flexibility to fund

loan growth and to react to other market

opportunities.

The Bank’s liquidity policy includes:

• measurement and forecast of cash flows;

• maintenance of a high quality pool of liquid

assets;

• a stable base of core deposits from retail and

commercial customers;

•

limits on single deposits and sources of

deposits;

• diversification of funding sources; and

• an approved contingency plan.

Key features of liquidity management are:

• daily monitoring of expected cash inflows and

outflows and tracking and forecasting the

liquidity position, including the flows from

off-balance sheet items, on a weekly and

forward three month rolling basis;

•

consideration of the term structure of assets and

liabilities, with emphasis on deposit maturities,

as well as expected loan fundings and other

commitments to provide funds when

determining required levels of liquidity; and

•

separate management of the liquidity position

of the Bank and CWT to ensure compliance with

related party and other regulatory tests.

A schedule outlining the consolidated securities

portfolio at October 31, 2000 is provided in Note 2

to the Consolidated Financial Statements.

A conservative policy is maintained in this area with:

•

virtually all investments limited to high quality

debt securities and short term money market

instruments to meet objectives of liquidity

management and to provide an appropriate

return;
specific investment criteria and procedures for

•

purposes of management of the securities

portfolio;

•

regular review, monitoring and approval by

ALCO of policies regarding these investments

and annual review and approval by the Board of

Directors; and

• quarterly reporting to the Board of Directors on

the securities portfolio.

TA B L E 1 2 – L I Q U I D A S S E T S

($ thousands)

Cash

Deposits with regulated financial institutions

Cheques in transit

Total Cash Resources

Securities purchased under resale agreements

Government of Canada treasury bills

Government of Canada and provincial bonds term to maturity 1 year or less

Government of Canada and provincial bonds term to maturity over 1 year

Other marketable securities

Total Securities Purchased Under Resale Agreements and Marketable Securities

Total Liquid Assets

Total Assets

Liquid assets as a percentage of total assets

Total Deposit Liabilities

Liquid assets as a percentage of total deposit liabilities

2000
1,460

168,652

44,823

214,935

84,932

15,826

123,844

61,477

28,921

315,000

1999

1,562

136,456

31,972

169,990

41,017

63,928

52,248

48,729

38,938

244,860

2000/1999

Increase

(decrease )

(102 )

32,196

12,851

44,945

43,915

(48,102 )

71,596

12,748

(10,017 )

70,140

$ 529,935

$ 414,850

$ 115,085

$ 3,055,603

$ 2,692,382

$ 363,221

17.3 %

15.4 %

1.9 %

$ 2,727,809

$ 2,371,075

$ 356,734

19.4 %

17.5 %

1.9 %

As shown in Table 12, liquid assets comprised

Also included in liquid assets are securities

of cash, interbank deposits, items in transit,

purchased under resale agreements. These are

securities purchased under resale agreements

short term advances, typically no more than a few

and marketable securities, totalled $530 million at

days in duration, to securities dealers and require

October 31, 2000, an increase of $115 million from

the dealer to repurchase the securities comprised

October 31, 1999. Liquid assets represented 17.3%

of treasury bills or other high quality liquid

(1999 - 15.4%) of total assets and 19.4% (1999 -

securities.

17.5%) of total deposit liabilities at that date.

Short term credit facilities have been arranged

Highlights of the composition of liquid assets at

with a number of financial institutions.

October 31, 2000 follow:

The expansion of such facilities will continue

• maturities within one year total 86% of liquid

to be pursued as an additional liquidity safeguard.

assets or $455 million;

The government insured/guaranteed mortgage

• Government of Canada treasury bills made up

and loan portfolios also represent a potential

3% of the liquid assets with other Government

source of liquidity.

of Canada and provincial debt securities

accounting for 35% of liquid assets; and

• deposits with regulated financial institutions

including bankers acceptances were 32% of

liquid assets.

The primary source of new funding is the issuance

of deposit instruments. A summary of the deposits

by maturity is presented in Tables 13 and 14.

Our retail and
commercial
customers
remain the
prime target
for growth in
deposits.
In 2001, the Bank will

continue to pursue

these customers

aggressively to increase

the number and size of

deposits made through

CWB’s 25 branches.

TA B L E 1 3 – D E P O S I T M AT U R I T I E S W I T H I N O N E Y E A R

($ millions)

October 31, 2000
Demand deposits

Notice deposits

Deposits payable on a fixed date

Total

October 31, 1999 Total

TA B L E 1 4 – TOTA L D E P O S I T M AT U R I T I E S

($ millions)

October 31, 2000
Demand deposits

Notice deposits

Deposits payable on a fixed date

Total

October 31, 1999 Total

Within

1 Year

293

1,432

1,797

1,479

1 to 2

Years

–

372

353

Within

1 Month

1 to 3

Months

3 Months

Cumulative

to 1 Year

Within 1 Year

293

343

708

521

2 to 3

Years

–

261

229

–

177

152

3 to 4

Years

–

186

158

–

912

806

4 to 5

Years

–

112

152

293

1,432

1,797

1,479

Total

293

2,363

2,728

2,371

A breakdown of deposits by source is provided

Interest Rate Risk

under the heading Deposits. Target limits by source

Interest rate risk or sensitivity can be defined as

have been established as part of the Bank’s overall

the impact on net interest income, both current

liquidity policy and are monitored to ensure an

and future, resulting from a change in market

acceptable level of diversification in sources of

interest rates. This risk and potential variability

funding is maintained. The Bank continues to

in earnings arises primarily when cash flows

aggressively pursue retail deposits generated

associated with interest sensitive assets and

through its branch network as a core funding

liabilities have different repricing dates.

source. However, the total dollar value of agent

The differentials, or interest rate gaps, arise as

generated deposits will likely continue to increase

a result of the financial intermediation process

When the Bank’s

even though the goal is to decrease funding from

and reflect differences in term preferences on

interest-sensitive assets

exceed interest-

sensitive liabilities

(over a specific period),
it creates
a positive
interest rate
gap,
which often leads to

an increase in net

interest income when

market interest rates

rise (since assets

reprice earlier than

liabilities).

this source as a percentage of total deposit

the part of borrowers and depositors.

liabilities. CWT continues to raise essentially all

of its deposits through agents. CWT’s deposit

products are also raised through the Bank’s branch

network and at October 31, 2000, $43.1 million

(1999 - $30.9 million) of CWT deposits had been

raised in this manner.

A positive interest rate gap exists when interest

sensitive assets exceed interest sensitive liabilities

for a specific maturity or repricing period.

A positive gap will tend to lead to an increase

in net interest income when market interest rates

rise since assets are repricing earlier than liabilities.

The opposite impact will occur when market
interest rates fall. A negative gap is the opposite

M A R K E T R I S K

of a positive gap.

Market risk is the impact on earnings
resulting from changes in financial
market variables such as interest rates
and foreign exchange rates. Market
risk arises when making loans, taking
deposits and making investments.
The Bank itself does not undertake trading

activities and, therefore, does not have risks

related to such activities as market making,

To manage interest rate risk arising as a result

of the financial intermediation process,

ALCO establishes policy guidelines for interest

rate gap positions and meets regularly to monitor

the Bank’s position and decide future strategy.

The objective is to manage the interest rate risk

within prudent guidelines. Interest rate risk policies

are approved and reviewed at least annually by

the Board of Directors with quarterly reporting

provided to the Board as to the gap position.

arbitrage or proprietary trading. Therefore,

Exposure to interest rate risk is controlled by

the Bank’s material market risks are confined

managing the size of the static gap positions

to interest rates and foreign exchange as

between interest sensitive assets and interest

discussed below.

sensitive liabilities for future periods. Gap analysis

is supplemented by computer simulation of the

asset liability portfolio structure and dollar

estimates of net interest income sensitivity for

periods of up to one year. The interest rate gap

is measured at least monthly.

Table 15 shows the consolidated gap position

at October 31, 2000 for selected time intervals.

Comparative summary figures are given at

October 31, 1999. Figures in brackets represent

an excess of liabilities over assets or a negative

gap position.

TA B L E 1 5 – A S S E T L I A B I L I T Y G A P P O S I T I O N S

($ millions)

October 31, 2000
Assets

Floating Rate

and Within

1 Month

1 to 3

Months

3 Months

to 1 Year

1 Year to

5 Years

Over

5 Years

Non-

interest

Sensitive

1,220

–

1,365

708

–

272

980

385

11.6 %

1,082

814

268

127

–

212

177

–

177

420

12.6 %

164

152

280

385

–

170

679

912

–

912

(233 )

187

5.6 %

623

806

(183 )

Cash resources

Securities

Loans

Other assets

Off-Balance sheet swaps

Total

Liabilities and Equity

Deposits

Other liabilities

Debentures

Shareholders’ equity

Off-Balance sheet swaps

Total

Interest Rate

Sensitive Gap

Cumulative Gap

as a Percentage

of Total Assets

October 31, 1999

Total assets

Total liabilities and equity

Interest Rate

Sensitive Gap

Cumulative Gap

as a Percentage

of Total Assets

Total

Within

1 Year

164

155

1,732

–

205

2,256

1,797

–

272

2,069

187

5.6 %

1,869

1,772

856

–

993

931

–

998

(5 )

182

5.5 %

995

959

133

–

192

5.8 %

–

142

Total

215

231

2,560

273

3,328

2,728

195

272

3,328

–

2,963

–

(28 )

–

195

–

261

(192 )

–

232

(142 )

–

9.0 %

9.4 %

3.3 %

4.5 %

4.8 %

Notes:
1.
2.

Accrued interest is excluded in calculating interest sensitive assets and liabilities.
Potential prepayments of fixed rate loans and early redemption of redeemable fixed term deposits have not been estimated. Redemptions of fixed term deposits where depositors have this option are not expected to be
material. Deposits with a redemption option totalled approximately $8 million as at October 31, 2000. The majority of fixed rate loans, mortgages and leases are either closed or carry prepayment penalties.

The gap analysis in Table 15 is a static

Of the $1,430 million in fixed term deposit liabilities

measurement of interest rate sensitive gaps at

maturing within one year from October 31, 2000,

a specific time. These gaps can change significantly

approximately $121 million (4.4% of total deposit

in a short period of time. The impact of changes

liabilities) are fixed term registered retirement

in market interest rates on earnings will depend

product deposits maturing between December 1,

upon the magnitude and rate of change in interest

2000 and April 30, 2001. The term in which these

rates as well as the size and maturity structure of

deposits and other maturing deposits are retained

the cumulative interest rate gap position and

will have an impact on the future asset liability

management of those positions over time.

structure and hence interest rate sensitivity.

During the year:

The effective interest rates for each class of

•

the one year and under cumulative gap

financial asset and liability, including off-balance

increased from 3.3% to 5.6%; and

sheet instruments, are shown in Table 16.

•

the one month and under gap increased

from 9.0% to 11.6%.

TA B L E 1 6 – W E I G H T E D AV E R AG E E F F E C T I V E I N T E R E S T R AT E S

(%)

October 31, 2000
Assets

Cash resources

Securities

Loans

Off-Balance sheet swaps

Total

Liabilities

Deposits

Debentures

Off-Balance sheet swaps

Total

Interest Rate Sensitive Gap

October 31, 1999

Total assets

Total liabilities

Interest Rate Sensitive Gap

Floating Rate

and Within

1 Month

1 to 3

Months

3 Months

to 1 Year

Total

Within

1 Year

1 Year to

5 Years

Over

5 Years

Total

5.7 %

5.9 %

6.0 %

5.8 %

6.0 %

– %

5.8 %

5.7

8.2

–

8.0

4.2

–

5.8

4.7

3.3 %

6.9 %

3.8

3.1 %

5.6

7.5

5.8

6.8

5.6

–

5.6

1.2 %

6.2 %

5.1

1.1 %

6.0

8.1

6.1

7.2

5.9

–

5.9

1.3 %

6.6 %

5.5

1.1 %

5.8

8.2

6.0

7.6

5.2

–

5.8

5.3

5.8

7.9

5.8

7.7

5.9

5.7

–

5.9

5.6

–

5.6

–

5.8

8.1

6.0

7.6

5.5

5.7

5.8

5.5

2.3 %

1.8 %

5.6 %

2.1 %

6.8 %

4.7

2.1 %

7.5 %

5.7

1.8 %

5.5 %

–

5.5 %

7.0 %

5.0

2.0 %

The estimated sensitivity of net interest income to

•

interest rate changes affect interest sensitive

a change in interest rates is presented in Table 17.

assets and liabilities by the same amount and

The amounts represent the estimated change in

are applied at the appropriate repricing dates;

net interest income over the time period shown

and

resulting from a one percentage point change in

• no early redemptions.

interest rates. If rates increase, the effect would

be an increase in net interest income while the

opposite would occur if rates decrease.

The estimates are based on a number of

assumptions and factors, which include:

• a constant structure in the asset liability

portfolio;

The interest sensitivity of the portfolio increased in

both absolute dollar terms and as a percentage of

estimated future net interest income during the

year, but remained within policy guidelines.

TA B L E 1 7 – E S T I M AT E D S E N S I T I V I T Y O F N E T I N T E R E S T I N C O M E A S A R E S U LT O F A O N E P E R C E N TAG E P O I N T C H A N G E I N
I N T E R E S T R AT E S

2000
948

3,654

1999

601

1,938

4.8 %

3.3 %

($ thousands)

Period

90 days

1 year

1 year percentage change

It is management’s intention to continue to manage

O P E R A T I O N A L R I S K

the asset liability structure and interest rate

sensitivity through pricing and product policies to

attract appropriate assets and liabilities as well as

through the use of interest rate swaps or other

appropriate hedging techniques (see discussion

under Off-Balance Sheet Financial Instruments

Including Derivatives). Assets and liabilities having

a term to maturity in excess of five years are subject

to specific review and control and with the

Operational risk is the potential for
loss as a result of a failure in
communication, information or
transaction processing due to system
or procedural failures, errors, natural
disasters or fraudulent activities.

exception of debentures, as outlined in Note 8 to

The financial measure of operational risk is actual

the Consolidated Financial Statements, such items

losses incurred. No material losses occurred in 2000

were not material as at October 31, 2000.

or 1999.

Foreign Exchange Risk

These risks can never be completely eliminated but

In providing financial services to its customers,

the Bank’s strategy to minimize operational risk

the Bank has assets and liabilities denominated

includes:

in U.S. dollars. At October 31, 2000, assets

• a knowledgeable and experienced management

denominated in U.S. dollars were 0.4% of total

team that is committed to the risk management

assets and U.S. dollar liabilities were 0.4% of total
liabilities. The percentages are unchanged from

policies;
regular meetings of the Operations Committee,

•

October 31, 1999. Currencies other than U.S. dollars

a management committee made up of

are not bought or sold other than to meet specific

supervisory and management personnel from

Operations
Committee...
is responsible
for the development

and recommendation

customer needs and therefore, the Bank has

all operational areas and chaired by a member

of policies and

procedures regarding

day-to-day operations.

virtually no exposure to currencies other than

of senior management, which is responsible for

U.S. dollars.

Foreign exchange risk arises when there is

a difference between assets and liabilities

denominated in U.S. dollars. Policy is established

setting a limit on the difference between U.S. dollar

assets and liabilities. The difference is measured

daily and managed by use of U.S. dollar contracts

or other means. Policy respecting foreign exchange

exposure is reviewed and approved at least

annually by the Board of Directors, and deviations

from policy are reported to the Board and ALCO.

the development and recommendation of

policies and procedures regarding day-to-day,

routine operations;

•

communication of the importance of effective

risk management to all levels of staff through

training and policy implementation;

•

regular inspections for compliance and the

effectiveness of procedural controls by a strong,

independent internal audit team;

•

implementation of policies and procedural

controls appropriate to address identified risks

and which include segregation of duties and

built-in checks and balances;

• use of technology via automated systems with

built-in controls;

•

continual review and upgrade of systems and

procedures; and

• updated and tested procedures and

contingency plans for disaster recovery and

business continuity.

In addition, the external auditors report annually

on the efficiency and effectiveness of internal

controls over significant risk areas and provide

their report to the Audit Committee. The Bank also

maintains appropriate insurance coverage through

a financial institution bond policy.

Off-Balance Sheet Financial Instruments Including Derivatives

TA B L E 1 8 – O F F - BA L A N C E S H E E T F I N A N C I A L I N S T RU M E N T S

($ thousands)

Credit Instruments

Guarantees and standby letters of credit (1)

Commitments to extend credit (2)

Total

Derivative Financial Instruments (notional amounts)

Interest rate contracts (3)

Equity contracts (4)

Total

Assets Under Administration

2000

1999

42,489

27,479

442,667

366,229

$ 485,156

$ 393,708

$ 269,000

3,535

2,200

$ 272,535

$ 271,200

$ 741,181

$ 559,978

Letters of credit and guarantees are issued on behalf of clients to third party beneficiaries as part of normal business operations.

(1)
(2) Commitments to extend credit to customers arise in the normal course of business. Includes undrawn availability authorized under lines of credit and commercial operating loans of $183 million (1999 - $150 million) and

(3)

(4)

recently authorized but unfunded loan commitments of $260 million (1999 - $216 million).
Interest rate swaps are used as hedging devices to control interest rate risk. The outstanding swaps mature between December 2000 and July 2004. The total gross positive replacement cost of interest rate swaps was
a positive $359 (1999 - $227). This market value represents an unrealized gain, or the payment the Bank would receive if these contracts were unwound and settled at that date.
Equity contracts are used to offset the return paid to depositors on certain deposit products where the return is linked to a stock index. The outstanding contracts mature between March 2004 and February 2005. The total
gross positive replacement cost is $538 (1999 - $17).

(5) U.S. dollar foreign exchange contracts are used from time to time to manage the difference between U.S. dollar assets and liabilities. At October 31, 2000 and 1999 there were no forward foreign exchange contracts

More detailed information on the nature of the

annual review. Policies regarding the use of off-

Bank’s off-balance sheet financial instruments is

balance sheet financial instruments are approved,

shown in Notes 11, 12 and 15 to the Consolidated

reviewed, and monitored on a regular basis by

Financial Statements.

ALCO and reviewed and approved by the Board of

Continued use of interest rate swaps or other

Directors at least annually.

off-balance sheet hedging instruments is expected

Trust assets under administration, administered

in the future for the purpose of asset liability

by CWT, totalled approximately $741 million at

structuring and management of interest rate risk.

October 31, 2000 (1999 - $560 million). These assets

The Bank only enters into these off-balance sheet

are primarily in self-directed RRSPs and RRIFs.

derivative financial instruments for its own account

Trust assets under administration are held in 11,468

and does not act as an intermediary in this market.

accounts (1999 - 9,007), an increase of 27% from

Transactions are entered into on the basis of

one year ago. Assets under administration,

industry standard contracts with approved

and the related fee income, are expected to

counterparties subject to periodic and at least

increase in 2001.

outstanding.

Number of Self-directed
Accounts

12,000

10,500

9,000

7,500

6,000

8
6
4
,
1
1

7
0
0
,
9

7
4
8
,
6

5
3
3
,
6

2
5
2
,
6

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

Financial Statements

Management’s Report

The consolidated financial statements of Canadian Western Bank and related financial information

presented in this annual report have been prepared by management, who are responsible

for the integrity, objectivity and reliability of the data presented. The consolidated financial statements

were prepared in accordance with Canadian generally accepted accounting principles, other than the

accounting for the general allowance for credit risk at October 31, 1999, which is in accordance with the

accounting requirements of the Superintendent of Financial Institutions Canada under the Bank Act,

as described in Note 1. The consolidated financial statements and related financial information reflect

amounts which must, of necessity, be based on informed estimates and judgements of management with

appropriate consideration to materiality. The financial information presented elsewhere in this annual

report is consistent with that in the consolidated financial statements.

The Bank’s accounting system and related internal controls are designed, and supporting procedures are

maintained, to provide reasonable assurance that financial records are complete and accurate, that assets
are safeguarded and that the Bank is in compliance with all regulatory requirements. These supporting

procedures include the careful selection and training of qualified staff, defined division of responsibilities

and accountability for performance, and the written communication of policies and guidelines of business

conduct and risk management throughout the Bank.

The system of internal controls is also supported by the internal audit department which carries out

periodic inspections of all aspects of the Bank’s operations. The Chief Inspector has full and free access

to the Audit Committee and to the external auditors.

The Audit Committee, appointed by the Board of Directors, is composed of directors who are not officers

or employees of the Bank. The committee is responsible for reviewing the financial statements and annual

report and recommending them to the Board of Directors for approval. Their responsibilities also include

meeting with management, the Chief Inspector and the external auditors to discuss the effectiveness of

internal controls over the financial reporting process, and the planning and results of the external audit.

The Conduct Review Committee, appointed by the Board of Directors, is composed of directors who are

not officers or employees of the Bank. Their responsibilities include reviewing related party transactions,

and reporting to the Board of Directors, those transactions which may have a material impact on the Bank.

The Superintendent of Financial Institutions Canada, at least once a year, makes such examination and

enquiry into the affairs of the Bank as he may deem necessary or expedient to satisfy himself that the

provisions of the Bank Act, having reference to the safety of the creditors and shareholders of the Bank,

are being duly observed and that the Bank is in a sound financial condition.

Deloitte & Touche LLP, the external auditors, are appointed by the shareholders of the Bank. They have

full and free access to, and meet periodically with, the Audit Committee to discuss their audit and matters

arising therefrom.

”Larry M. Pollock“

Larry M. Pollock

”Tracey C. Ball, C.A.“

Tracey C. Ball, C.A.

President and Chief Executive Officer

Senior Vice President and Chief Financial Officer

December 1, 2000

Auditors’ Report

To The Shareholders of Canadian Western Bank

We have audited the Consolidated Balance Sheet of Canadian Western Bank as at October 31, 2000

and 1999 and the Consolidated Statements of Income, Changes in Shareholders’ Equity and Cash Flow

for the years then ended. These financial statements are the responsibility of the Bank’s management.

Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing standards. Those

standards require that we plan and perform an audit to obtain reasonable assurance whether the

financial statements are free of material misstatement. An audit includes examining, on a test basis,

evidence supporting the amounts and disclosures in the financial statements. An audit also includes

assessing the accounting principles used and significant estimates made by management, as well as

evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial

position of the Bank as at October 31, 2000 and 1999 and the results of its operations and its cash flow

for the years then ended in accordance with Canadian generally accepted accounting principles, other

than the accounting for the general allowance for credit risk at October 31, 1999 which is in accordance

with the accounting requirements of the Superintendent of Financial Institutions Canada under the

Bank Act, as described in Note 1.

”Deloitte & Touche LLP“

Deloitte & Touche LLP

Chartered Accountants

Edmonton, Alberta

December 1, 2000

Consolidated Balance Sheet

As at October 31

($ thousands)

ASSETS

Cash Resources

Cash

Deposits with regulated financial institutions

Cheques and other items in transit, net

Securities

Issued or guaranteed by Canada

Issued or guaranteed by a province

Other securities

Loans (net of allowance for credit losses)

Securities purchased under resale agreements

Residential mortgages

Other

Land, buildings and equipment

Other assets

Total Assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits

Payable on demand

Payable after notice

Payable on a fixed date

Other

Other liabilities

Subordinated Debentures

Conventional

Convertible

Shareholders’ Equity

Capital stock

Retained earnings

2000

1,460

168,652

44,823

214,935

103,227

97,920

30,269
231,416

84,932

273,104

2,202,056

2,560,092

14,750

34,410

49,160

1999

1,562

136,456

31,972

169,990

112,826

52,079

40,287
205,192

41,017

272,428

1,940,153

2,253,598

13,218

50,384

63,602

3,055,603

2,692,382

71,572

293,370

2,362,867

2,727,809

45,043

221,456

2,104,576

2,371,075

65,473

13,126

54,000

67,126

111,342

83,853

195,195

83,066

13,126

65,565

78,691

98,484

61,066

159,550

(Note 2)

(Notes 3 & 4)

(Note 5)

(Note 6)

(Note 7)

(Note 8)

(Note 9)

Total Liabilities and Shareholders’ Equity

3,055,603

2,692,382

”Jack C. Donald“

Jack C. Donald
Chairman

”Larry M. Pollock“

Larry M. Pollock
President and Chief Executive Officer

Consolidated Statement of Income

For the year ended October 31

($ thousands, except per share amounts)

Interest Income

Loans

Securities

Deposits with regulated financial institutions

Interest Expense

Deposits

Debentures

Net Interest Income
Provision for credit losses

Net Interest Income after Provision for Credit Losses

Other Income

Credit related

Retail services

Trust services

Other

Net Interest and Other Income

Non-Interest Expenses

Salaries and employee benefits

Premises and equipment

Other expenses

Provincial capital taxes

Net Income before Provision for Income Taxes

Provision for income taxes

Net Income from Continuing Operations

Loss from discontinued operations

Net Income

Average number of common shares outstanding

Average number of fully diluted common shares

Earnings per common share, continuing operations

basic

fully diluted

Earnings per common share

basic

fully diluted

2000

1999

192,006

164,435

12,363

5,913

210,282

132,951

3,964

136,915

73,367
5,100

68,267

9,540

2,949

1,644

1,122

15,255

83,522

27,207

8,824

9,810

2,246

48,087

35,435

5,441

29,994

3,045

26,949

11,133,880

13,649,587

2.69

2.49

2.42

2.26

9,543

3,035

177,013

110,396

4,888

115,284

61,729
3,750

57,979

7,805

2,476

1,485

1,251

13,017

70,996

23,694

8,131

10,079

2,822

44,726

26,270

3,516

22,754

2,901

19,853

10,153,378

13,516,000

2.24

2.00

1.96

1.79

(Note 4)

(Note 10)

(Note 17)

(Note 1(k))

Consolidated Statement of Changes in Shareholders’ Equity

For the year ended October 31

($ thousands)

Capital Stock

Balance at beginning of year

Common shares issued

Common shares purchased for cancellation

Balance at end of year

Retained Earnings

Balance at beginning of year

Net income

Dividends

Share issue costs, net of income taxes of $175
Adjustment to general allowance for credit risk, net of income taxes of $5,185

Redemption of debenture

Balance at end of year

Total Shareholders’ Equity

2000

98,484

12,858

–

111,342

61,066

26,949

(3,779 )

(383 )
–

–

1999

89,595

9,069

(180 )

98,484

55,673

19,853

(4,860 )

–
(6,509 )

(3,091 )

(Note 9)

(Note 9)
(Note 4)

(Note 8)

83,853

195,195

61,066

159,550

Consolidated Statement of Cash Flow

For the year ended October 31

($ thousands)

Cash Flows from Operating Activities

Net income from continuing operations

Adjustments to determine net cash flows:

Provision for credit losses

Depreciation and amortization

Deferred income taxes, net

Gain on sale of securities, net

Change in accrued interest receivable and payable, net

Other items, net

Cash provided from continuing operations
Cash (used in) provided from discontinued operations

Loss from discontinued operations

Changes in non-cash net asset balances

Cash Flows from Financing Activities

Deposits, net

Dividends

Common shares issued, net of issue costs

Redemption of subordinated debentures

Issue of subordinated debentures

Common shares purchased for cancellation

Cash Flows Used in Investing Activities

Loans, net

Interest bearing deposits with regulated financial institutions, net

Securities, net

Land, buildings and equipment, net

Increase in Cash and Cash Equivalents

Cash and Cash Equivalents at Beginning of Year

Cash and Cash Equivalents at End of Year *

* Represented by:

Cash resources per Consolidated Balance Sheet

Less non-operating, interest bearing deposits with regulated financial institutions

Cash and Cash Equivalents at End of Year

Supplemental Disclosure of Cash Flow Information

Amount of interest paid in the year

Amount of income taxes paid in the year

(Note 9)

(Note 8)

(Note 9)

2000

1999

29,994

22,754

5,100

3,006

1,839

(49 )

7,753

3,371

51,014

(3,045 )

(13,780 )

34,189

356,734

(3,779 )

910

–

3,750

2,753

2,964

(261 )

5,714

(3,060 )

34,614

(2,901 )

1,407

33,120

311,530

(4,860 )

669

(7,091 )

4,000

(180 )

353,865

304,068

(311,594 )

(44,194 )

(26,176 )

(5,339 )

(387,303 )

751

47,269

48,020

214,935

166,915

48,020

126,728

1,514

(279,386 )

8,212

(43,531 )

(2,510 )

(317,215 )

19,973

27,296

47,269

169,990

122,721

47,269

108,919

751

Notes to Consolidated Financial Statements

October 31, 2000

($ thousands, unless otherwise stated)

1 S I G N I F I C A N T A C C O U N T I N G P O L I C I E S

These consolidated financial statements have been prepared
in accordance with subsection 308 (4) of the Bank Act which
states that, except as otherwise specified by the Office of the
Superintendent of Financial Institutions Canada (“OSFI”),
the financial statements are to be prepared in accordance
with generally accepted accounting principles. The significant
accounting policies used in the preparation of these financial
statements, including the accounting requirements of OSFI,
are summarized below.

Of necessity, management must make estimates and assumptions
that affect the reported amount of assets and liabilities at the
date of the financial statements and income and expenses
during the year. Actual results could differ from those estimates.

OSFI has specified an accounting treatment for the general
allowance for credit risk at October 31, 1999 which does not
conform to generally accepted accounting principles.
The accounting policies for all other financial statement
items conform, in all material respects, to Canadian generally
accepted accounting principles.

a ) B a s i s o f C o n s o l i d a t i o n

The consolidated financial statements include the assets,
liabilities and results of operations of the Bank and all
of its subsidiaries, after the elimination of intercompany
transactions and balances. Subsidiaries are defined as
corporations whose operations are controlled by the Bank
and are corporations in which the Bank owns more than
50 percent of the voting shares. See Note 20 for details of
the subsidiaries.

Business acquisitions are accounted for using the purchase
method. The difference between the acquisition cost of an
investment and the fair value of the net identifiable assets
acquired represents goodwill or other identifiable intangibles.
This excess amount is deferred and amortized to income over
the anticipated period of benefit, not to exceed 20 years.
The unamortized balance is recorded in other assets.
The carrying value of goodwill and other identifiable
intangibles is evaluated regularly by reviewing the expected
cash flows generated by the acquired subsidiary or asset.
Any permanent impairment in value is written off to
the Consolidated Statement of Income.

b ) S e c u r i t i e s

Securities are held in either the investment account
or the trading account.

Investment account securities are purchased with the
original intention to hold the securities to maturity or
until market conditions render alternative investments
more attractive. Debt securities are stated at amortized
cost and equity securities are stated at cost or, if the value
is permanently impaired, at net realizable value. Gains and
losses on disposal of securities and adjustments to record
any permanent impairment in value are included in other
income in the period of realization. Amortization of
premiums and discounts are reported in interest income
from securities in the Consolidated Statement of Income.

Trading account securities, which are purchased for resale over
a short period of time, are carried at estimated current market
value. Gains and losses realized on disposal and adjustments
to market value are reported in other income in the
Consolidated Statement of Income in the period during
which they occur.

c ) L o a n s

Loans are stated net of unearned income and an allowance
for credit losses (Note 1(d)).

Interest income is recorded on the accrual basis except for
loans classified as impaired. Loans are determined to be
impaired when payments are contractually past due 90 days,
or where the Bank has taken realization proceedings, or
where the Bank’s management is of the opinion that the loan
should be regarded as impaired. An exception may be made
where management determines that the loan is well secured
and in the process of collection and the collection efforts are
reasonably expected to result in either repayment of the loan
or restoring it to a current status within 180 days from the
date the payment went in arrears. All loans are classified as
impaired when a payment is 180 days in arrears other than
loans guaranteed or insured for both principal and interest
by the Canadian government, the provinces or a Canadian
government agency. These loans are classified as impaired
when payment is 365 days in arrears.

Impairment is measured as the difference between the
carrying value of the loan at the time it is classified as
impaired and the present value of the expected cash flows
(estimated realizable amount), using the interest rate inherent
in the loan at the date the loan is classified as impaired.
When the amounts and timing of future cash flows cannot
be reliably estimated, either the fair value of the security
underlying the loan, net of any expected realization costs,
or the current market price for the loan may be used to
measure the estimated realizable amount. At the time a
loan is classified as impaired, interest income will cease to
be recognized in accordance with the loan agreement, and
any uncollected but accrued interest will be added to the
carrying value of the loan together with any unamortized
premiums, discounts or loan fees. Subsequent payments
received on an impaired loan are recorded as a reduction
of the recorded investment in the loan. Impaired loans are
returned to performing status when the timely collection
of both principal and interest is reasonably assured and
all delinquent principal and interest payments are brought
current and all charges for loan impairment have been
reversed.

d ) A l l o w a n c e f o r C re d i t L o s s e s

g ) Tr a n s l a t i o n o f F o re i g n C u r re n c i e s

The Bank maintains an allowance for credit losses, which
in management’s opinion, is adequate to absorb credit
related losses in its loan portfolio. The allowance for credit
losses is deducted from the loan balance on the
Consolidated Balance Sheet.

The allowance for credit losses consists of specific provisions
and the general allowance for credit risk. Specific provisions
include all the accumulated provisions for losses on particular
impaired loans required to reduce the carrying value of those
loans to their estimated realizable amount. In October 1998,
OSFI provided guidance to all deposit-taking institutions on
establishing general allowances for credit risk. The general
allowance for credit risk includes provisions for future losses
inherent in the portfolio that are not presently identifiable
by management of the Bank on an account by account basis.
The general allowance for credit risk is established by taking
into consideration historical trends in the loss experience
during economic cycles, the current portfolio profile,
estimated losses for the current phase of the economic cycle
and historical experience in the industry. In compliance with
the guidance provided by OSFI at that time, any significant
adjustment to the general allowance for credit risk, net of
income taxes, was treated as a one-time charge to retained
earnings, with no adjustment to opening retained earnings
(Note 19).

Actual write-offs, net of recoveries, are deducted from the
allowance for credit losses. The provision for credit losses in
the Consolidated Statement of Income is charged with an
amount sufficient to keep the balance in the allowance
for credit losses adequate to absorb all credit related losses.

e ) S e c u r i t i e s P u rc h a s e d U n d e r R e s a l e A g re e m e n t s

Securities purchased under resale agreements are secured
loans as they represent a purchase of Government of Canada
securities by the Bank effected with a simultaneous agreement
to sell them back at a specified price on a future date, which
is generally short term. Securities purchased under resale
agreements are carried at cost. The difference between the
cost of the purchase and the predetermined proceeds to be
received on a resale agreement is recorded as loan interest
income in the Consolidated Statement of Income.

f ) L a n d , B u i l d i n g s a n d E q u i p m e n t

Land is carried at cost. Buildings, equipment and furniture,
and leasehold improvements are carried at cost less
accumulated depreciation and amortization. Depreciation
and amortization are calculated primarily using the
straight-line method over the estimated useful life of the
asset as follows: buildings – 20 years, equipment and furniture
– 3 to 5 years, and leasehold improvements – term of lease.
Gains and losses on disposal are recorded in other income in
the Consolidated Statement of Income in the year of disposal.

Assets and liabilities denominated in foreign currencies
are translated into Canadian dollars at rates prevailing
at the balance sheet date. Revenues and expenses in
foreign currencies are translated at the average exchange
rates prevailing during the year. Realized and unrealized
gains and losses on foreign currency positions are included
in other income in the Consolidated Statement of Income.

h ) L o a n F e e s

Loan fees, net of directly related costs, are amortized to
interest income over the expected term of the loan when such
fees are considered to be an integral part of the return earned
on the particular loan. Loans are stated net of unamortized
fees.

i )

I n c o m e Ta x e s
The Bank follows the tax allocation method of accounting
for income taxes whereby income taxes are based on
transactions recognized for accounting purposes regardless
of when they are recognized for tax purposes. The cumulative
timing differences between tax calculated on this basis and
taxes currently payable result in deferred income taxes which
are recorded in other assets. Total income taxes include the
provision for income taxes in the Consolidated Statement
of Income and income taxes applicable to items charged
or credited directly to retained earnings.

j ) D e r i v a t i v e F i n a n c i a l I n s t r u m e n t s

Interest rate, foreign exchange and equity contracts such
as futures, options and swaps are entered into for asset
liability management purposes. These contracts are designated
and function as hedges and are accounted for on the accrual
basis. Net accrued interest receivable/payable and deferred
gains/losses are recorded in other assets or other liabilities,
as appropriate. Interest income/expense and gains/losses
are recognized as interest income or interest expense,
as appropriate, over the hedged period.

k ) E a r n i n g s P e r C o m m o n S h a re

Basic earnings per common share is calculated based on the
average number of common shares outstanding during the
year. Fully diluted earnings per share includes the effect of
all potential dilutive factors on earnings per common share.

l ) S t o c k O p t i o n P l a n s

The Bank has stock option plans which are described in
Note 9. No expense is recognized for these plans when the
stock options are issued to the employees. Any consideration
paid by employees on exercise of stock options is credited to
share capital.

2 S E C U R I T I E S
The analysis of securities at carrying value, by type and maturity is as follows:

Securities Issued

or Guaranteed by:

Canada

A province

Other Debt Securities

Floating rate notes

Other debt

Equity Securities

Total (1)

(1) All securities are held in the investment account.
These securities have no specific maturity.
(2)

Maturities

Within

1 Year

Over 1

to 3 Years

Over 3

to 5 Years

Over 5

Years

2000
Total

1999

Total

Book Value

78,747

60,923

20,599

15,769

3,881

21,228

–

$ 103,227

$ 112,826

97,920

52,079

–

15,468

–

4,486

–

1,000

–

9,315 (2)

1,000

19,954

9,315

1,000

29,969

9,318

$ 155,138

40,854

25,109

10,315

$ 231,416

$ 205,192

The analysis of unrealized gains and losses on investment securities is as follows:

2000

1999

Book

Value

Unrealized

Gains

Losses

Estimated

Market

Value

Book

Value

Unrealized

Gains

Losses

Estimated

Market

Value

Securities Issued or

Guaranteed by:

Canada

A province

Other Debt Securities

Floating rate notes

Other debt

Equity Securities

$ 103,227

97,920

1,000

19,954

9,315

Total

$ 231,416

–

120

189

–

731

1,016

$ 103,163

$ 112,826

97,769

52,079

1,000

19,932

8,656

1,000

29,969

9,318

$ 230,520

$ 205,192

–

106

115

3 I M PA I R E D L O A N S
Impaired loans and the related allowance for credit losses are as follows:

Consumer and personal

Real estate

Industrial

Other

General allowance for credit risk (1)

Total (2)

Gross

Amount

2,683

15,218

7,495

5,701

31,097

–

31,097

Specific

Provisions

310

1,764

2,278

1,595

5,947

20,915

26,862

207

399

$ 112,620

51,688

–

410

1,017

1,000

29,968

9,014

$ 204,290

2000
Carrying

Amount

2,373

13,454

5,217

4,106

25,150

(20,915 )

1999

Carrying

Amount

2,861

20,336

6,735

3,085

33,017

(20,848 )

4,235

12,169

(1)
(2)

The general allowance for credit risk is available for the total loan portfolio.
Impaired loans include foreclosed real estate assets held for sale with a gross carrying value of $1,561 (1999 - $6,866 ) and a related specific allowance of $171 (1999 - $1,606).

At October 31, 2000 other past due loans totalled $1,828
(1999 - $249). Other past due loans are loans where payment
of interest or principal is contractually 90 - 180 days in arrears
but are not classified as impaired because they are well secured
and considered fully collectible.

During the year interest recognized as income on impaired loans
totalled $714 (1999 - $579).

4 A L L O WA N C E F O R C R E D I T L O S S E S

The following table shows the changes in the allowance for credit losses during the year.

2000
General

1999

General

Specific

Allowance

Specific

Allowance

Provisions

for Credit Risk

Total

Provisions

for Credit Risk

Total

Balance at beginning of year

Provision for credit losses

Write-offs

Recoveries

Adjustment to general allowance for credit risk (1)

5,172

5,033

(4,480 )

222

–

20,848

26,020

–

5,100

(4,480 )

222

–

3,517

3,921

(2,314 )

–

Balance at end of year

5,947

20,915

26,862

5,172

9,325

12,842

(171 )

–

11,694

20,848

3,750

(2,314 )

11,694

26,020

(1)

In 1999, in accordance with the guidance provided by OSFI as described in Note 1(d), the Bank increased its general allowance for credit risk by $11,694. Accordingly, retained earnings was reduced by $6,509,
representing the increase in the general allowance, net of deferred income taxes of $5,185.

The Bank has virtually no loans booked outside of Canada and therefore has no country risk provisions.

5 L A N D , B U I L D I N G S A N D E Q U I P M E N T

Land

Buildings

Equipment and furniture

Leasehold improvements

Total

Accumulated

Depreciation and

Amortization

–

1,758

7,676

2,742

2000
Net Book

1999

Net Book

Value

2,753

1,375

6,651

3,971

Value

2,753

1,528

5,183

3,754

Cost

2,753

3,133

14,327

6,713

26,926

12,176

14,750

13,218

Depreciation and amortization for the year amounted to $2,752 (1999 - $2,680).

6 O T H E R A S S E T S

Accrued interest receivable

Deferred income tax asset (Note 10)

Prepaid expenses

Deferred financing costs (1)

Goodwill and other identifiable intangibles (2)

Other

Due from clients and brokers

Total

2000
13,256

10,496

5,839

1,211

273

3,335

–

34,410

1999

10,822

12,335

5,817

1,933

731

4,076

14,670

50,384

(1) Amortization of deferred financing costs included in other expenses in the Consolidated Statement of Income is $163 (1999 - $250) and share issue expenses charged to retained earnings in the Consolidated Statement

of Shareholders’ Equity are $559 (1999 - $0).

(2) Amortization of goodwill and other identifiable intangibles included in other expenses in the Consolidated Statement of Income is $458 (1999 - $493).

7 O T H E R L I A B I L I T I E S

Accrued interest payable

Accounts payable

Deferred revenue

Other

Due to clients and brokers

Total

2000
57,617

1999

47,430

5,336

601

1,919

–

65,473

4,961

628

977

29,070

83,066

8 S U B O R D I N AT E D D E B E N T U R E S
Each of the following qualifies as a bank debenture under the
Bank Act and is subordinate in right of payment to all deposit
liabilities. All redemptions are subject to the approval of OSFI.
The convertible debentures are financial instruments which have
both debt and equity components. The recommendation issued

by the Canadian Institute of Chartered Accountants to account
for these components separately was considered but the value
assignable to the conversion option at the date of issue was
deemed to be immaterial in each case.

Conventional (1)

The Province of Alberta

CIC Industrial Interests Inc. (an agency of the Province of Saskatchewan)

CLIC Investments (Canada) Inc.

Convertible

5.50% convertible debentures (2)

Crown Life Insurance Company (3)

6.75% convertible debentures (4)

Total

Interest

Rate

6.660%

6.590%

6.415%

5.500%

5.700%

6.750%

Maturity

Date

March 31, 2007

June 30, 2007

July 31, 2007

March 31, 2008

July 31, 2009

April 15, 2006

2000

5,000

3,126

5,000

13,126

50,000

4,000

–

54,000

67,126

1999

5,000

3,126

5,000

13,126

50,000

4,000

11,565

65,565

78,691

(1)

(2)

Each of the conventional debentures has a ten year term with a fixed interest rate for the first five years. Thereafter, if not redeemed by the Bank, interest will be payable at a rate equal to the Canadian Dollar CDOR
90 day Bankers Acceptance Rate plus 1%.
These debentures are convertible into common shares at the option of the holder at any time prior to maturity, or the date specified for conversion by the Bank, whichever is earlier, at a conversion price
of $30.50 per share (1,639,344 shares). At any time after March 31, 2003 the debentures are convertible by the Bank.

(3) On July 6, 1994 the Bank issued a $4,000 subordinated debenture to Crown Life Insurance Company. The debenture was convertible into common shares of the Bank at the option of the holder, at a conversion price
of $11.00 per share. On July 28, 1999 the Bank completed negotiations with the holder for the redemption of the debenture and the related conversion option for aggregate consideration of $7,091 based upon the
current market value of the underlying common shares. The excess of the total consideration paid over the face value of the debenture was attributed to the conversion option and charged to retained earnings.
There was no income tax effect.
On July 28, 1999 the Bank issued a subordinated debenture to Crown Life Insurance Company for $4,000. This debenture is convertible into common shares at the option of the holder at any time prior to maturity.
The Bank may redeem the debenture after July 31, 2004. The number of shares issued at conversion will be determined based on a $25.00 per share conversion price (160,000 shares).

(4) On October 29, 1999 the Bank provided notice of its intention to convert all of the outstanding 6.75% convertible debentures to common shares on December 1, 1999. As a result of the notice the remaining

$11,565 (1999 - $8,400) of the original $20,000 issued were converted by debentureholders on November 30, 1999 at a conversion price of $12.50 per share.

9 C A P I TA L S T O C K

Authorized:
An unlimited number of common shares without nominal or par value
33,964,324 Class A shares without nominal or par value
25,000,000 First Preferred shares without nominal or par value, issuable in series

Issued and fully paid:

Common Shares

Outstanding at beginning of year

Issued on conversion of debentures and exercise of options (1)

Shares purchased for cancellation

Outstanding at End of Year

Number

of Shares

10,172,196

1,044,226

–

2000

Amount

98,484

12,858

–

Number

of Shares

1999

Amount

9,441,519

89,595

740,977

(10,300 )

9,069

(180 )

11,216,422

$ 111,342

10,172,196

98,484

(1)

In 2000, $11,565 (1999 - $8,400) of the 6.75% debentures were converted into 925,200 (1999 - 672,000) shares and 119,026 (1999 - 68,977) options were exercised, at a weighted average exercise price of $10.86
(1999 - $9.70).

9 C A P I TA L S T O C K – C o n t i n u e d
The Bank has subordinated debentures which are convertible
to common shares of the Bank as more fully described in Note 8.
On November 30, 1999 the debenture holders converted all of
the outstanding 6.75% convertible debentures, which totalled
$11,565, to common shares resulting in the issuance of 925,200
common shares and a charge to retained earnings of $383 for
share issue expenses, net of deferred income taxes.

The Bank also has authorized 1,107,805 common shares
(1999 - 1,226,831) for issuance under option plans. Of the amount

authorized, options exercisable into 1,039,870 shares are issued
and outstanding (1999 - 1,177,096) and all expire within ten
years of date of grant. The options are exercisable at a fixed
price equal to the average of the market price on the day of
and the four days preceding the grant. Outstanding options
have exercise prices ranging from $8.73 to $20.44. Their weighted
average remaining contractual life is 4.9 years and they expire
on dates ranging from June 2001 to December 2007. The details
of and changes in the issued and outstanding options follow:

2000

1999

Options

Balance at beginning of year

Granted

Exercised

Forfeited
Balance at end of year

Exercisable at end of year

10 I N C O M E TA X E S
The provision for income taxes consists of the following:

Current

Deferred

Total

A reconciliation of the Bank’s statutory tax rates and income tax
that would be payable at these rates to the effective income tax
rates and provision for income taxes that is reported in the
Consolidated Statement of Income is as follows:

Weighted
Average
Exercise
Price

13.96

19.72

10.86

17.62
14.28

13.45

Number
of Options

1,177,096

19,000

(119,026)

(37,200)
1,039,870

427,581

Weighted
Average
Exercise
Price

13.02

18.83

9.70

16.29
13.96

12.60

1999

3,260

256

3,516

Number
of Options

1,101,723

158,050

(68,977)

(13,700)
1,177,096

279,105

2000
5,368

5,441

Combined Canadian federal and provincial income taxes and statutory tax rate

16,017

45.2 % $

11,874

45.2%

2000

1999

(Decrease) increase resulting from:

Utilization of previously unclaimed deductions

Amortization of deferred income tax asset

Large corporations tax

Utilization of loss carryforward

Other

(15,303)

4,156

604

–

(33)

(43.2 )

11.7

1.7

–

0.0

(10,750 )

2,708

552

(430 )

(438 )

Provision for income taxes and effective tax rate

5,441

15.4 % $

3,516

(40.9)

10.3

2.1

(1.6)

(1.7)

13.4%

The deferred income tax asset, included in other assets,
primarily represents the net unamortized balance of the
acquired unclaimed deductions plus accumulated timing
differences relating to claiming deductions for income tax
purposes on a basis different from accounting and relate
mainly to the provision for credit losses. The Bank has reasonable
assurance that its net deferred income tax asset will be realized
through future operations and reversals of timing differences.

At October 31, 2000, the Bank has approximately $14,763
(1999 - $44,733) of unclaimed deductions which are available
to reduce future years’ income for tax purposes. In addition,
$6,916 (1999 - $6,966) of capital losses are available to apply
against future capital gains and have no expiry date. The tax
benefit of these unclaimed deductions and losses has not been
recognized in income.

11 C O N T I N G E N T L I A B I L I T I E S A N D C O M M I T M E N T S

a ) O ff - B a l a n c e S h e e t I n s t r u m e n t s

In the normal course of business, the Bank enters into various
commitments and has contingent liabilities which are not
reflected in the Consolidated Balance Sheet. These items are
reported below and are expressed in terms of the contractual
amount of the related commitment.

Credit Instruments

Guarantees and standby letters of credit

Commitments to extend credit

Total

Guarantees and standby letters of credit are issued on
behalf of clients to third party beneficiaries as part of normal
business operations. In the event of a call on any of these
instruments, the Bank has recourse against its client. Issuance
of guarantees and standby letters of credit is subject to the
same credit assessment, approval, monitoring and control
procedures as the extension of direct loans. Losses, if any,
resulting from these transactions are not expected to be
material.

Commitments to extend credit to customers also arise in the
normal course of business and include recently authorized
credit facilities not yet drawn down or credit facilities
available on a revolving basis. In the majority of instances,
availability of undrawn commercial commitments is subject
to the borrower meeting specified financial tests or other
covenants regarding completion or satisfaction of certain

b ) L e a s e C o m m i t m e n t s

The Bank has obligations under long-term non-cancellable
leases for the rental of premises and office equipment.
Minimum future lease commitments for each of the five
succeeding years and thereafter are as follows:

2001

2002

2003

2004

2005

2006 and thereafter

Total

12 T R U S T A S S E T S U N D E R A D M I N I S T R AT I O N
Trust assets under administration of $741,181 (1999 - $559,978)
represent assets held for personal and corporate clients,
administered by a subsidiary, and are kept separate from
the subsidiary’s own assets. Trust assets under administration
are not reflected in the Consolidated Balance Sheet.

13 R E L AT E D PA RT Y T R A N S A C T I O N S
The Bank makes loans, primarily residential mortgages, to its
officers and employees at various preferred rates and terms.
The total amounts outstanding for these type of loans are
$17,577 (1999 - $17,429).

2000

1999

42,489

27,479

442,667

366,229

$ 485,156

$ 393,708

conditions precedent. It is also usual practice to include
the right to review and withhold funding in the event of
a material adverse change in the financial condition of the
borrower. Given that undrawn credit authorizations arise out
of approvals granted through the normal credit assessment
process, such commitments bear virtually the same credit risk
as fully advanced loan assets. From a liquidity perspective,
undrawn credit authorizations will be funded over time with
draws in many cases extending over a period of months.
In some instances authorizations are never advanced or may
be reduced because of changing requirements. The balance
of commitments to extend credit shown in the table above
does not account for principal drawdowns or paybacks that
occur in the normal course of operations. Revolving credit
authorizations are subject to repayment which on a pooled
basis also decreases liquidity risk.

3,988

4,078

4,063

3,777

3,345

12,078

31,329

14 FA I R VA L U E O F F I N A N C I A L I N S T R U M E N T S
Fair value represents the estimated consideration that would be
agreed upon in a current transaction between knowledgeable,
willing parties who are under no compulsion to act. The best
evidence of fair value is a quoted market price. However, most
of the Bank’s financial instruments lack an available trading
market as they are not typically exchanged. Therefore, these
instruments have been valued assuming they will not be sold,
using present value or other suitable techniques and are not
necessarily representative of the amounts realizable in an
immediate settlement of the instrument.

Changes in interest rates are the main cause of changes in the
fair value of the Bank’s financial instruments. The carrying value
of the majority of the financial instruments is not adjusted to
reflect increases or decreases in fair value due to interest rate
changes as the Bank’s intention is to realize their value over
time by holding them to maturity. The carrying value of financial
instruments held for trading purposes would be continually
adjusted to reflect fair value. At October 31, 2000 and 1999
there were no financial instruments held for trading purposes.

The table below sets out the fair values of on-balance sheet
financial instruments and derivative instruments using the
valuation methods and assumptions referred to below the table.

2000

Fair Value

Over (Under)

1999

Fair Value

Over (Under)

Assets

Cash resources

Securities (Note 2)
Loans

Other assets (1)

Liabilities

Deposits

Other liabilities

Subordinated debentures

Off-Balance Sheet Derivative

Financial Instruments

Net asset (Note 15)

Book Value

Fair Value

Book Value

Fair Value

Book Value

$ 214,935

–

$ 169,990

–

231,416
2,560,092

23,720

230,520
2,545,864

23,720

2,727,809

2,732,003

65,473

67,126

65,473

66,620

(896 )
(14,228 )

–

4,194

–

(506 )

205,192
2,253,598

37,601

204,290
2,232,876

37,601

2,371,075

2,353,937

83,066

78,691

83,066

77,548

(902 )
(20,722 )

–

(17,138 )

–

(1,143 )

455

(569 )

The table does not include assets and liabilities that are not considered financial instruments, such as land, buildings and equipment.

(1) Other assets exclude goodwill and deferred income tax assets which are not financial instruments.
(2)

For further commentary on interest rates associated with financial assets and liabilities, including off-balance sheet instruments, refer to the Market Risk section of Management’s Analysis of Operations and Financial
Condition which includes the asset liability gap position and effective interest rates.

The methods and assumptions used to estimate the fair values
of on-balance sheet financial instruments are as follows:

•

cash resources, other assets and other liabilities are assumed
to approximate their carrying values, due to their short-term
nature;

securities are assumed to be equal to the estimated market
value of securities provided in Note 2. These values are based
on quoted market prices, if available. Where a quoted market
price is not readily available, other valuation techniques are
used to estimate fair value;

loans reflect changes in the general level of interest rates
which have occurred since the loans were originated and are
net of the allowance for credit losses. For floating rate loans,
fair value is assumed to be equal to book value as the interest
rates on these loans automatically reprice to market.
For all other loans, fair value is estimated by discounting
the expected future cash flows of these loans at current
market rates for loans with similar terms and risks;

• deposits with no stated maturity are assumed to be equal to
their carrying values. The estimated fair values of fixed rate
deposits are determined by discounting the contractual cash
flows at current market rates for deposits of similar original
terms; and

•

the fair values of subordinated debentures and liabilities of
subsidiaries, other than deposits included in other liabilities
are determined by reference to current market prices for
debt with similar terms and risks.

Fair values are based on management’s best estimates based on
market conditions and pricing policies at a certain point in time.
The estimates are subjective and involve particular assumptions
and matters of judgement and as such may not be reflective of
future fair values.

15 D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S
The Bank enters into derivative financial instruments for risk
management purposes.

Interest rate swaps and interest rate floors (or caps) are used as
hedging devices to control interest rate risk. The Bank only enters
into these interest rate derivative instruments for its own account
and does not act as an intermediary in this market. The credit risk
is limited to the amount of any adverse change in interest rates
applied on the notional contract amount should the counterparty
default. Equity contracts are used to offset the return paid to
depositors on certain deposit products where the return is linked
to a stock index. The credit risk is limited to the average return
on an equity index applied on the notional contract amount
should the counterparty default. The principal amounts are not
exchanged and hence are not at risk. Approved counterparties
and maximum notional limits are established and monitored by
the Asset Liability Committee of the Bank.

At the present time it is policy to undertake foreign exchange
transactions only for the purposes of meeting needs of clients
and of day to day business. Foreign exchange markets are not
speculated in by taking a trading position in currencies. Maximum
exposure limits are established and monitored by the Asset

Liability Committee and are defined by allowable unhedged
amounts. The position is managed within the allowable target
range by spot and forward transactions or other hedging
techniques. Exposure to foreign exchange risk is not material
to the Bank’s overall position.

The following table summarizes the off-balance sheet financial
instrument portfolio and the related credit risk. Notional amounts
represent the amount to which a rate or price is applied in order
to calculate the exchange of cash flows. The notional amounts
are not recorded on the Consolidated Balance Sheet.
They represent the volume of outstanding transactions and
do not represent the potential gain or loss associated with the
market risk or credit risk of such instruments. The replacement
cost represents the cost of replacing, at current market rates,
all contracts with a positive fair value. The future credit exposure
represents the potential for future changes in value and is based
on a formula prescribed by OSFI. The credit risk equivalent is the
sum of the future credit exposure and the replacement cost.
The risk-weighted balance represents the credit risk equivalent
weighted according to the credit worthiness of the counterparty
as prescribed by OSFI.

Notional

Amount

Replace-

ment

Cost

2000
Future

Credit

Risk-

Risk

weighted

Exposure

Equivalent

Balance

Notional

Amount

Replace-

ment

Cost

1999

Future

Credit

Risk-

Risk

weighted

Exposure

Equivalent

Balance

Interest Rate Contracts

Interest rate swaps

$ 269,000

Equity Contracts

Total

3,535

$ 272,535

359

538

897

320

283

603

679

821

1,500

136

164

300

$ 269,000

2,200

$ 271,200

227

244

170

176

346

397

193

590

119

The following table shows the off-balance sheet financial
instruments split between those contracts that have a positive
fair value (favourable contracts) and those that have a negative
fair value (unfavourable contracts).

2000

1999

Favourable Contracts

Unfavourable Contracts

Favourable Contracts

Unfavourable Contracts

(Assets)

(Liabilities)

(Assets)

(Liabilities)

Notional

Amount

Interest Rate Contracts

Interest rate swaps

$ 170,000

Equity Contracts

Total

3,410

$ 173,410

Fair

Value

359

538

897

Notional

Amount

99,000

125

99,125

Fair

Value

440

442

Notional

Amount

$ 155,000

1,200

$ 156,200

Fair

Value

227

244

Notional

Amount

$ 114,000

1,000

$ 115,000

The aggregate contractual or notional amount of the off-balance
sheet financial instruments on hand, the extent to which
instruments are favourable or unfavourable and, thus,
the aggregate fair values of these financial assets and liabilities
can fluctuate significantly from time to time. The average fair
values of the off-balance sheet financial instruments on hand
during the year are set out in the following table.

Favourable off-balance sheet financial instruments (assets)

Unfavourable off-balance sheet financial instruments (liabilities)

2000
842

748

Fair

Value

735

813

1999

299

338

15 D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S – C o n t i n u e d
The following table summarizes maturities of off-balance sheet
financial instruments and weighted average interest rates paid
and received on interest rate contracts.

2000
Maturity

1999

Maturity

1 year or less

Over 1 to 5 years

1 year or less

Over 1 to 5 years

Notional

Amount

Contractual

Interest

Rate

Notional

Amount

Contractual

Interest

Rate

Notional

Amount

Contractual

Interest

Rate

Notional

Amount

Contractual

Interest

Rate

Interest Rate Contracts

Interest rate swaps –

receive fixed

amounts (1)

$ 205,000

6.02 % $

64,000

5.90 % $ 230,000

5.27 % $

39,000

5.67 %

Equity Contracts (1) (2)

–

Total

$ 205,000

3,535

67,535

–

$ 230,000

2,200

41,200

(1)
(2)

The Bank pays (floating) interest amounts based on the one month (30 day) Canadian bankers’ acceptance rate.
The contractual interest rate is not meaningful for equity contracts. The Bank receives amounts based on the increase in an equity index.

16 R I S K M A N A G E M E N T
As part of the Bank’s risk management practices, the risks that
are significant to our business are identified, monitored and
controlled. These risks include credit risk, liquidity risk, market
risk, and operational risk. Descriptions of the nature of these risks
and how they are managed is provided in the commentary on
pages 36 to 45 of Management’s Analysis of Operations and
Financial Condition.

Information on specific measures of risk included in the
consolidated financial statements is included in these notes for
the allowance for credit losses, derivative financial instruments
and fair value of financial instruments. Additional information
on interest rate sensitivity and the effective interest rates
on financial instruments is provided on pages 42 to 45 of
Management’s Analysis of Operations and Financial Condition.

17 D I S C O N T I N U E D O P E R AT I O N S
On December 21, 1999 the Bank announced that it would sell
its brokerage subsidiary, Canadian Western Capital Limited
(“CWC”), to Goepel McDermid Inc. of Vancouver. The sale closed
February 16, 2000 for cash proceeds of $1.9 million and was
reflected in the Bank’s financial statements for the quarter ended
January 31, 2000.

An after tax loss of $3,045 was charged to discontinued
operations in the first quarter. For reporting purposes the results
of operations of CWC and the loss on disposal are disclosed
separately from continuing operations and the comparative
balances have been restated. The results of discontinued
operations are as follows:

Operating loss

Estimated loss on disposal net of income taxes of $2,074

Total

Selected information regarding discontinued operations is as follows:

Underwriting fees and commissions on security transactions

Cash resources and securities

Other assets

Other liabilities

2000
1,071

1,974

3,045

2000
1,821

–

1999

2,901

–

2,901

1999

6,788

14,601

16,911

30,707

18 S E G M E N T E D I N F O R M AT I O N
The Bank operates principally in personal and commercial
banking in Canada. Previously the Bank’s financial results
were reported on the basis of two industry segments but the
operations of the subsidiary offering wealth management services
were discontinued in 2000 (Note 17). Personal and commercial

banking includes the operations of the Bank and its trust
subsidiary which provides a wide range of banking and trust
services to retail and personal clients and small to medium-size
commercial business clients primarily in western Canada.

19 D I F F E R E N C E F R O M G E N E R A L LY A C C E P T E D A C C O U N T I N G P R I N C I P L E S
The consolidated financial statements of the Bank are prepared
in accordance with Canadian generally accepted accounting
principles (“GAAP”), other than the accounting for the general
allowance for credit risk at October 31, 1999 which is in
accordance with the accounting requirements of OSFI. In fiscal
1999 the Bank increased its general allowance for credit risk.
In accordance with the guidance provided by OSFI, this one-time
adjustment was charged to retained earnings. The adjustment
does not comply with GAAP.

However, had the Bank not departed from GAAP to conform
to the guidance provided by OSFI in 1999, loans would have
increased by $11,694, deferred income taxes included in “Other
assets” would have declined by $5,185 and retained earnings
would have increased by $6,509. There was no other impact
on the consolidated financial statements of the Bank.

20 S U B S I D I A R I E S

Canadian Western Bank Subsidiaries

(annexed in accordance with subsection 308 (3) of the Bank Act)

October 31, 2000

Canadian Western Trust Company

CWB Canadian Western Financial Ltd.

Address of

Head Office

666 Burrard Street

Vancouver, British Columbia

10303 Jasper Avenue

Edmonton, Alberta

(1)

The carrying value of voting shares is stated at the Bank’s equity in the investments.

Carrying Value of

Percentage of Issued and

Voting Shares Owned

Outstanding Voting

by the Bank (1)

Shares Owned by the Bank

19,213

–

100%

21 C O M PA R AT I V E F I G U R E S
Certain comparative figures have been reclassified to conform with the current year presentation.

Corporate Governance

Introduction

The Board of Directors and management
of the Bank are committed to govern
and manage the Bank’s operations
effectively and efficiently, within its
regulatory environment.

The Corporate Governance & Human Resources

Committee (a subcommittee of the Board) provides

direction to the Board, monitors compliance and

deals with governance issues in a manner that will

enhance corporate performance.

The Board and Board Committees

The Bank is a federally regulated Schedule I bank.

result of this review, the Board has determined

Pursuant to the current Bank Act (the “Act”),

that two of the directors are affiliated (the

no one shareholder, or shareholders acting in

President and CEO and an Executive Vice

concert, can own more than ten percent of any

President); they are also the only inside directors.

class of shares of a Schedule I bank. Therefore,

All other directors are “unrelated”.

the Bank has no shareholders holding more than

ten percent of common shares. Legislative changes

were tabled in June 2000 which would allow the

elimination of the current ownership restriction

for small banks such as our Bank. However,

the status of the legislation is uncertain at this

time as it was not passed prior to the November

2000 federal election.

At the time of appointment to the Board, at least

75 percent of the board members must be resident

Canadians and no more than four members may

be employees of the Bank. The Chairman is an

independent director and is appointed annually

by the members of the Board. Responsibilities

not delegated to senior management or to a

committee of the Board remain those of the full

The Board is currently comprised of twelve

Board. The Board expects all significant risks and

members. The number of directors reflects the

internal controls to be identified and reported

desire to have the members represent the

upon by senior management to the Board and/or

geographical jurisdictions in which the Bank

its committees.

operates and the need to fill the memberships

of the two required committees, the Audit and

Conduct Review Committees, and the other board

committees which are the Loans Committee and

the Corporate Governance & Human Resources

Committee. The Board has reviewed the status of

each of its directors and determined if they are

The Board holds four regular meetings each year,

as well as additional meetings as required.

Most committees meet quarterly and all meet

annually at a minimum. A meeting agenda matrix

is issued to ensure meetings of the Board and its

committees are efficient and complete.

“affiliated” (as defined by the affiliation rules set

The Board of Directors as a whole has expressly

forth in the Act) or “unrelated”, as defined in the

assumed responsibility for developing the Bank’s

TSE guidelines on corporate governance. As a

approach to governance issues although the

The
Corporate
Governance
& Human
Resources
Committee
plays a key
role in
developing the Bank’s

approach to
governance
issues.

Corporate Governance & Human Resources

The areas of real estate appraisals and credit risk

Committee plays a key role by recommending

management have been delegated to the Loans

and reporting on governance issues to the Board.

Committee of the Board.

In addition, certain governance issues have been

delegated to other committees of the Board.

The mandate of the Board also specifically includes

other matters which are not necessarily stated in

The Act contains several sections dealing with

the Act or in the CDIC standards and they are

the governance of a bank through its board of

summarized as follows:

directors. These sections prescribe matters such as

• approve the annual statement and specified

limitations on the number of directors who can be

returns, prior to release to the public or

affiliated or non-resident, certain powers that must

submission to OSFI;

be transacted by the full Board, and requirements

•

review and approve the annual strategic

to establish both an audit committee and a

business plan and accompanying capital plan

conduct review committee. The Act also prescribes

and financial operating budget, including

certain minimum benchmarks for board and

capital expenditures;

committee membership, quorums and the

• declare dividends;

transaction of business by the Board. The three

• outline the content and frequency of

encompassing duties in the Act that form the basis

management reports on financial operations;

for the Board’s mandate are:

•

review and ratify the employment,

•

to manage or supervise the management of the

appointment, grade levels and compensation of

business and affairs of the Bank;

the top five executive employees and approve

•

to act honestly and in good faith with a view

all senior officer appointments;

to the best interests of the Bank and exercise

the care, diligence and skill that a reasonably

•

review succession plans;

review any recommendations from regulators

prudent person would exercise in similar

or external auditors respecting their assessment

circumstances; and

of the effectiveness of the internal controls

•

to comply with the Act, the regulations, the

that come to their attention in the conduct

Bank’s incorporating instrument and its by-laws.

of their work;

The Board’s
mandate
complies with

all requirements of

the Bank Act,

CDIC standards and

TSE guidelines.

• ensure an independent audit/inspection

function is in place to monitor the effectiveness

of organizational and procedural controls;

•

review and accept reports from the Audit,

Conduct Review and Corporate Governance &

Human Resources Committees; and

• approve loan write-offs.

The mandate of the Board also includes references

to compliance with the Canada Deposit Insurance

Corporation’s (“CDIC”) Standards of Sound

Business and Financial Practices. CDIC is in the

process of modernizing the standards in

consultation with Canadian Bankers Association.

Generally speaking, the current practices and

related standards cover all major risk areas of a

bank and call for the Board at least annually to

approve the policies and review the management

programs associated with:

•

interest rate risk management;

securities portfolio management;

liquidity and funding management;

foreign exchange risk management;

capital management;

internal controls;

real estate appraisals; and

credit risk management.

Audit Committee

Jordan L. Golding

This committee is comprised of four outside

•

review the interim unaudited statements,

directors and its mandate is summarized as follows:

as well as other related public information,

•

review the annual statement and report thereon

before public disclosure;

Robert A. Manning, Chair

to the directors before approval is given;

•

review a report from the Loans Committee of

Gerald A.B. McGavin

•

review such returns as required by OSFI and

the Board, including recommendations on the

Alan M. Rowe

report thereon to the directors before approval

adequacy of loan loss provisions and write-offs;

is given;

•

review the CDIC Standards Assessment and

•

require management to implement and

Reporting Program (SARP) annually and report

maintain appropriate internal control

thereon to the directors before approval

procedures. Review, evaluate and approve those

is given;

procedures;

•

review the terms of the external auditors’

•

review such investments and transactions of the

engagement, their level of compensation,

Bank, that could adversely affect its well-being,

the audit plan, any proposed changes in

as are brought to the committee’s attention by

accounting policies, their presentation and

the auditors, or an officer of the Bank or other

input concerning significant risks and key

estimates and judgements of management; and

• meet regularly with the internal and external

auditors without management present.

committee of the Board;

•

review the annual statement and any specified
return or other transactions with the Bank’s

auditors, ensuring any items of concern are duly

considered;

• annually review the mandate of the internal

audit department. Discuss the adequacy/

effectiveness of the internal control procedures

with the Vice President and Chief Inspector and

review any significant findings with senior

management;

Conduct Review Committee

This committee is comprised of four outside

•

review the conduct policy on an annual basis to

Conduct Review

directors and its mandate is summarized as follows:

ensure relevance and completeness in regard to

Committee

Charles R. Allard

• establish procedures to ensure disclosure of

legislative requirements;

transactions with specified related parties of

• monitor procedures for conflicts of interest,

Albrecht W.A. Bellstedt,

the Bank and, further, to review any such

confidential information, disclosure of

Chair

Allan W. Jackson

Arnold J. Shell

transactions to ensure compliance with the Act,

information and handling of customer

either approving or declining the transactions,

complaints, and be satisfied that the procedures

as required;

are being adhered to;

•

review and approve internal policies for credit

• ensure every employee, officer and Board

arrangements and financial services available to

member agrees to comply, in writing, with

employees of the Bank under the regulations

annual acknowledgement, with the Bank’s

concerning officers and associated parties;

conduct policy; and

• monitor aggregate transactions of the Bank

• after each meeting provide a report to the

with directors as well as officers and their

directors on all transactions and other matters

interests to ensure continued compliance with

reviewed by the committee.

the Act with excesses brought to the Board for

consideration;

Corporate Governance & Human Resources Committee

This committee is comprised of five outside

• establish, amend and, where appropriate,

directors and its mandate is summarized as follows:

terminate:

•

recommend to the Board appropriate structure

- programs and other personal benefits granted

and process required to address governance

to executive employees;

issues and maintain compliance with all

- incentive compensation plans and other bonus

corporate governance guidelines;

arrangements, to administer such plans and

•

review and monitor compliance with corporate

to make appropriate interpretations and

governance guidelines and follow any issues

determinations as required;

noted by the members or as reported to them

- share incentive plans and similar

Corporate Governance

& Human Resources

by management or other directors from time

arrangements involving the grant of share

Committee

to time;

options, or other benefits to employees

Albrecht W.A. Bellstedt,

• no less than annually, report to the Board on

attendant upon the issuance of securities, and,

Chair

corporate governance issues and any instances

in addition, to make grants of options under

Jack C. Donald

of non-compliance, together with appropriate

any share incentive plan and generally to

Allan W. Jackson

recommendations;

administer such plans, subject to necessary

Robert A. Manning

• hire appropriate consultants, or request

regulatory and shareholder approval; and

Howard E. Pechet

management to perform studies and to furnish
other information as required; to review such

- annuity, pension, and retirement programs

for executive employees;

information and take such actions based

•

review the human resource succession plan as

thereon as appropriate;

prepared by senior management for all officers

•

review and recommend to the Board the

and any other senior position considered critical

employment and appointment of the top five

to operations;

executive employees, to establish their grade

•

seek and recommend individuals to be

levels and compensation, as well as to

considered for Board membership, as required

determine promotions and to make changes

by the Board, and forward their

in the level of compensation and grade of

recommendations with written rationale,

incumbent executive employees and officers;

compared against published terms of reference,

•

review the position descriptions for the top

to the Board for their consideration;

five executive employees, ensuring they rema

•

review, monitor, and make recommendations

in current and accurate and, further, to also

regarding new director orientation and the

ensure position descriptions are in place for

ongoing development of existing Board

all other executive officers;

members;

• establish an executive compensation structure

• evaluate, at least bi-annually, Board

to compensate all levels of executive employees

membership (including composition and size)

and, within such compensation structure as may

and the involvement/performance of the

at that time be in effect, to make adjustments

membership with concerns recorded, and

and annual revisions as necessary;

brought to the attention of the committee

• ensure an annual performance appraisal is

chair, who, in conjunction with the committee,

completed for the President and CEO and that

determines if further action is required;

it is reviewed with him by the Chairman of the

•

review and recommend to the Board the fees

Board;

and other benefits to be paid to directors; and

• make recommendations to the Board regarding

revisions or additions to the Board of Directors

Manual.

Loans Committee

Other Areas of Consideration

This committee is comprised of eight directors,

The Bank has not adopted a formalized process of

six of whom are unrelated. The President and CEO

orientation for new Board members although all

and an Executive Vice President, who are affiliated,

directors are provided with a Directors’ Manual,

inside directors, are also members. Its mandate is

outlining key governance information and

summarized as follows:

reference material. It is worthy of note that seven

• establish and approve a lending limit for the

of the ten outside directors have served on the

Bank and the President and CEO within the

Board for eleven years or more. There is also

limits established by the Board and review such

a Board and member review and assessment

limits at least annually;

program whereby every second year, directors

•

review, approve and/or decline all credit

complete a formal assessment of the operations

applications for amounts in excess of delegated

and effectiveness of the Board and its committees.

limits up to the limit established, not to exceed

Every second year, directors may complete a formal

ten percent of regulatory capital;

assessment on individual directors’ effectiveness.

•

recommend for approval of the full Board,

In the current year a formal assessment of the

any loan proposals in excess of the Bank’s limit;

operations and effectiveness of the Board and its

•

recommend for approval of the full Board loan

committees was undertaken and the results are

proposals to directors, related entities and Bank
subsidiaries;

• annually review and approve the credit risk

management program and policies, including

management’s real estate appraisal policies and

procedures, to ensure they are sound, prudent

and in accordance with CDIC standards;

•

review management’s recommendations for

loan loss provisions and loan write-offs and

recommend acceptance to the Audit Committee

for their presentation to the Board; and

• provide direction with respect to the

identification criteria, procedure and action

currently being compiled.

In order to carry out its responsibilities the Board

must have timely access to information which is

available via discussions with the Bank’s senior

management and through a comprehensive

information package sent out prior to each board

meeting which includes the agenda, minutes of

previous meetings and supporting documentation

for specific agenda items. The Board has also put

in place a policy providing for individual directors

to engage outside advisors if the circumstances are

warranted.

required on loans reported by management

The Bank is also committed to ensuring quality and

to be less than satisfactory.

timely information is available to all shareholders.

Loans Committee

Charles R. Allard

Douglas R. Dalgetty

Jack C. Donald

Allan W. Jackson, Chair

Gerald A.B. McGavin

Howard E. Pechet

Larry M. Pollock

Arnold J. Shell

(Robert A. Manning,

alternate)

Inquiries and requests for information from

shareholders and potential investors receive

prompt attention from an appropriate officer.

The President and CEO and other members of

senior management also meet periodically with

financial analysts and institutional investors.

The Bank has engaged an independent

Ombudsman to receive complaints from banking

clients who are unable to obtain satisfaction from

the internal complaint handling process.

Conclusion

The Bank’s corporate governance approach is

in compliance with the TSE guidelines. It will

continue to develop over time with the Corporate

Governance & Human Resources Committee

playing a key role in monitoring, developing and

recommending to the Board on governance issues

as warranted.

TREASURY & OPERATIONS

Ricki L. Moffat

Senior Assistant Vice President,

Treasury and Agent

Administration

MARKETING & PRODUCT
DEVELOPMENT

R. Graham J. Gilbert

Vice President

COMMERCIAL BANKING
NORTHERN ALBERTA
REGION

Jack C. Wright

Vice President

and Regional Manager

Executive Officers

C H A I R M A N

Jack C. Donald

OFFICE OF THE
CHIEF EXECUTIVE OFFICER

Larry M. Pollock

President and Chief Executive

Officer

Douglas R. Dalgetty

Executive Vice President

Allister J. McPherson

Executive Vice President

CREDIT RISK MANAGEMENT

Donald C. Kemp

Vice President

Chris H. Fowler

Senior Assistant Vice President

Wally N. Streit

Senior Assistant Vice President

Dennis M. Crough

Assistant Vice President

A. Wayne MacInnes

Assistant Vice President

Ken W. Stewart

Assistant Vice President

Michael Vos

Senior Assistant

Vice President, Systems

M. Wayne Bond

Assistant Vice President,

Corporate Administration

Roger J. Pogue

Assistant Vice President,

Operations

FINANCE

Tracey C. Ball, C.A.

Senior Vice President

and Chief Financial Officer

Diane M. Davies, C.A.

Senior Assistant Vice President

and Chief Accountant

Carolyn J. Graham, C.A.

Assistant Vice President

HUMAN RESOURCES

Uve Knaak

Senior Assistant Vice President

CORPORATE & STRATEGIC
OPERATIONS

William J. Addington

Senior Vice President

INTERNAL AUDIT

David R. Gillespie

Vice President

and Chief Inspector

William A. Book

Vice President

Main Branch, Edmonton

Ron S. Baker

Assistant Vice President

West Point, Edmonton

David M. Castell

Assistant Vice President
Main Branch, Edmonton

Wayne C. Dosman

Assistant Vice President,

Personal Banking

Main Branch, Edmonton

Gary R. Mitchell

Assistant Vice President

103rd Street, Edmonton

Jake G. Muntain

Assistant Vice President

103rd Street, Edmonton

Garnett J. Way

Assistant Vice President,

Real Estate Lending

Main Branch, Edmonton

COMMERCIAL BANKING
PRAIRIE REGION

S. Wayne Bamford

Vice President

and Regional Manager

Michael N. Halliwell

Senior Assistant Vice President

Main Branch, Calgary

Gus W. Itzek

Senior Assistant Vice President,

Energy Lending

Main Branch, Calgary

Robert H. Bean

Assistant Vice President

Winnipeg

Richard Brodeur

Assistant Vice President

Calgary Northeast

Doug A. Finnie

Assistant Vice President

Saskatoon

Ken R. MacDonald

Assistant Vice President

Regina

Donald J. Odell

Assistant Vice President

Red Deer

Dean F. Rhoden

Erwin Granson

Assistant Vice President,

Asset Management

Ed E. Rudzitis

Assistant Vice President,

Corporate Lending

Lars K. Christensen

Assistant Vice President

Saskatoon

Al Steingart

Assistant Vice President

Chinook Station, Calgary

Executive Officers continued

COMMERCIAL BANKING

BRITISH COLUMBIA REGION

REAL ESTATE LENDING
VANCOUVER

INDUSTRIAL LENDING
AND LEASING

CANADIAN WESTERN TRUST
COMPANY – VANCOUVER

Rod W. Sorbo

Vice President

and Regional Manager

Serge Biln

Senior Assistant Vice President

Park Place, Vancouver

Robert G.P. Berzins

Assistant Vice President

Granville & 13th, Vancouver

Raymond L. Young

Vice President

Donald C. Watson

Vice President

Adrian M. Baker

Vice President

and General Manager

Robert E. Wigmore

James O. Burke

Senior Assistant Vice President

Assistant Vice President

Mario V. Furlan

W. Bruce Gibbard

Assistant Vice President

and District Manager

Assistant Vice President,

Foothills Branch, Calgary

Real Estate Lending

Jack B. Harms

Assistant Vice President

Assistant Vice President,

Assistant Vice President

Guildford, Surrey

Real Estate Lending

Dean G. Cudmore

Patrick F. Rennison

Russ M. Burke

Assistant Vice President

Nanaimo

Ian G. Graham

Assistant Vice President

Kelowna

Gerald W. Laliberte

Assistant Vice President

Victoria

Craig Martin

Assistant Vice President

Langley

James S. Kitchin

Assistant Vice President

Kelowna Industrial Centre

OMBUDSMAN

W. Paul Lefaivre

Keith C. MacLellan

Assistant Vice President

Grande Prairie

David B. Subject

Assistant Vice President

Nanaimo

John Van Boeyen

Assistant Vice President

Langley

Board of Directors

CANADIAN WESTERN
BANK & TRUST

Charles R. Allard 2,3

President

Rosedale Meadows

Development Inc.

Edmonton, Alberta

Albrecht W. A. Bellstedt, Q.C. 3,4

Executive Vice President,

Law and General Counsel

TransCanada Pipelines

Calgary, Alberta

Douglas R. Dalgetty 2

Executive Vice President

Canadian Western Bank
Vancouver, British Columbia

Jack C. Donald 2,4

President

Parkland Industries Ltd.

Red Deer, Alberta

Jordan L. Golding 1

Corporate Director

and Consultant

Retired Partner

KPMG

Boston, Massachusetts, USA

Larry M. Pollock 2

President and

Chief Executive Officer

DIRECTORS EMERITUS

John Goldberg

Arthur G. Hiller

Canadian Western Bank

Peter M.S. Longcroft

Edmonton, Alberta

Dr. Maurice W. Nicholson

Alan M. Rowe, C.A. 1

Alma M. McConnell

Eugene I. Pechet

Allan W. Jackson 2,3,4

Senior Vice President,

Dr. Maurice M. Pechet

President

ARCI Ltd.

Chief Financial Officer and

Fred Sparrow

Corporate Secretary

Calgary, Alberta

Crown Life Insurance Company

Canadian Western Bank would

Regina, Saskatchewan

like to thank Douglas R. Dalgetty

Robert A. Manning 1,2,4

President

Arnold J. Shell 2,3

Cathton Holdings Ltd.

President

for his years of dedicated service.

Mr. Dalgetty will be retiring in

March 2001 after fifteen years

Edmonton, Alberta

Arnold J. Shell Consulting Inc.

as Executive Vice President

Gerald A.B. McGavin, F.C.A., C.M. 1,2

President

McGavin Properties Ltd.

Vancouver, British Columbia

Calgary, Alberta

1
2
3
4

Audit Committee Member
Loans Committee Member
Conduct Review Committee Member
Corporate Governance & Human Resources
Committee Member

and eight years on the Board
of Directors.

Howard E. Pechet 2,4

President

Mayfield Consulting Inc.

La Jolla, California, USA

Shareholder Information

HEAD OFFICE

Suite 2300,

STOCK EXCHANGE LISTING

CORPORATE SECRETARY

ANNUAL MEETING

Canadian Western Bank Place

Share Symbol: CWB

Rosedale Meadows

10303 Jasper Avenue

Convertible Debenture Symbol:

Development Inc.

The Toronto Stock Exchange

Charles R. Allard

The annual meeting of

the common shareholders

of Canadian Western Bank

Edmonton, Alberta T5J 3X6

CWB.DB.A

Edmonton, Alberta

will be held on March 8, 2001

Telephone: (780) 423-8888

Fax: (780) 423-8897

Website: www.cwbank.com

TRANSFER AGENT
AND REGISTRAR
MAILING ADDRESS

SUBSIDIARY HEAD OFFICE

Computershare Investor Services

Canadian Western

Trust Company

22nd Floor, 666 Burrard Street

Vancouver, B.C. V6C 2X8

Telephone: (604) 669-0081

Fax: (604) 685-9997

Website: www.cwt.ca

(formerly Montreal Trust

Company of Canada)

Suite 970,

Canadian Western Bank Place

10303 Jasper Avenue

Edmonton, Alberta T5J 3N6

Telephone: (780) 448-7598

Fax: (780) 426-4032

INQUIRIES FROM
SHAREHOLDERS

Any notification regarding

change of address or change

in registration of shares should

be directed to the Transfer

Agent. Any inquiries other

than change of address or

change in registration may be

directed to the President and

Chief Executive Officer.

at The Westin (Manitoba Room),

10135 - 100th Street, Edmonton,

Alberta at 2:00 p.m. (MST).

INVESTOR RELATIONS

For further financial information

call Jon W. Kieran at

Hume, Kieran Inc.

(416) 868-1079,

or fax (416) 868-6198,

or visit our website at

www.cwbank.com/investor_info.

Banking Offices

Alberta

EDMONTON
Edmonton Main Branch
11350 Jasper Avenue
Edmonton, Alberta T5K 0L8
Telephone: (780) 424-4846
Branch Manager – Bill Book

103rd Street Branch
Canadian Western Bank Place
10303 Jasper Avenue
Edmonton, Alberta T5J 3N6
Telephone: (780) 423-8801
Branch Manager – Jake Muntain

Southside Branch
7933 - 104 Street
Edmonton, Alberta T6E 4C9
Telephone: (780) 433-4286
Branch Manager – Heinz Kleist

West Point Branch
17603 - 100 Avenue
Edmonton, Alberta T5S 2M1
Telephone: (780) 484-7407
Branch Manager – Ron Baker

RSP Administration/
Agent Processing Centre
Suite 2200, 10303 Jasper Avenue
Edmonton, Alberta T5J 3X6
Telephone: (780) 423-8888
Branch Manager – Lina Langford

CALGARY
Calgary Main Branch
606 - 4th Street S.W.
Calgary, Alberta T2P 1T1
Telephone: (403) 262-8700
Branch Manager –
Michael Halliwell

Calgary Northeast Branch
2810 - 32nd Avenue N.E.
Calgary, Alberta T1Y 5J4
Telephone: (403) 250-8838
Branch Manager –
Richard Brodeur

Chinook Station
6606 Macleod Trail S.W.
Calgary, Alberta T2H 0K6
Telephone: (403) 252-2299
Branch Manager – Al Steingart

Foothills Branch
6127 Barlow Trail S.E.
Calgary, Alberta T2C 4W8
Telephone: (403) 269-9882
Branch Manager – Rick Ferris

CAMROSE
4895 - 50th Street
Camrose, Alberta T4V 1P6
Telephone: (780) 672-7769
Branch Manager –
Kevin MacMillen

RED DEER
5013 - 49 Avenue
Red Deer, Alberta T4N 3X1
Telephone: (403) 341- 4000
Branch Manager – Don Odell

LETHBRIDGE
744 - 4th Avenue South
Lethbridge, Alberta T1J 0N8
Telephone: (403) 328-9199
Branch Manager –
Donald Grummett

GRANDE PRAIRIE
INDUSTRIAL LENDING
CENTRE
5th Floor, 214 Place
9909 - 102 Street
Grande Prairie, Alberta T8V 2V4
Telephone: (780) 831-1888
Branch Manager –
Keith MacLellan

British Columbia

VANCOUVER
Regional Office
22nd Floor, 666 Burrard Street
Vancouver, B.C. V6C 2X8
Telephone: (604) 669-0081

Granville & 13th Branch
2899 Granville Street
Vancouver, B.C. V6H 3J4
Telephone: (604) 730-8818
Branch Manager – Rob Berzins

Park Place Branch
666 Burrard Street
Vancouver, B.C. V6C 2X8
Telephone: (604) 688-8711
Branch Manager – Serge Biln

RSP Administration/
Agent Processing Centre
22nd Floor, 666 Burrard Street
Vancouver, B.C. V6C 2X8
Telephone: (604) 443-5175
Toll free: 1-800-663-1000
Branch Manager –
Huguette Holmes

COURTENAY
470 Puntledge Road
Courtenay, B.C. V9N 3R1
Telephone: (250) 334-8888
Branch Manager – Alan Dafoe

KELOWNA
Kelowna
1674 Bertram Street
Kelowna, B.C. V1Y 9G4
Telephone: (250) 862-8008
Branch Manager – Ian Graham

Kelowna Industrial Centre
(Opening February 2001)
#101 - 1505 Harvey Avenue
Kelowna, B.C. V1Y 6G1
Telephone: (250) 860-0088
Branch Manager –
James Kitchin

LANGLEY
19915 - 64th Avenue
Langley, B.C. V2Y 1G9
Telephone: (604) 539-5088
Branch Manager – Craig Martin

Saskatchewan

REGINA
1881 Scarth Street
Mccallum Hill Centre II
Regina, Saskatchewan S4P 4K9
Telephone: (306) 757-8888
Branch Manager –
Ken Macdonald

SASKATOON
244 - 2nd Avenue S.
Saskatoon, Saskatchewan S7K 1K9
Telephone: (306) 477-8888
Acting Branch Manager –
Doug Finnie

YORKTON
#45, 277 Broadway Street E.
Yorkton, Saskatchewan S3N 3G7
Telephone: (306) 782-1002
Branch Manager – Barb Apps

Manitoba

NANAIMO
6475 Metral Drive
Nanaimo, B.C. V9T 2L9
Telephone: (250) 390-0088
Branch Manager – Russ Burke

WINNIPEG
234 Portage Avenue
Winnipeg, Manitoba R3C 0B1
Telephone: (204) 956-4669
Branch Manager – Robert Bean

Canadian
Western Trust

HEAD OFFICE
22nd Floor, 666 Burrard Street
Vancouver, B.C. V6C 2X8
Telephone: (604) 669-0081

ALBERTA
2810 - 32nd Avenue N.E.
Calgary, Alberta T1Y 5J4
Telephone: (403) 250-8838

VICTORIA
1201 Douglas Street
Victoria, B.C. V8W 2E6
Telephone: (250) 383-1206
Branch Manager –
Gerry Laliberte

SURREY
Guildford Industrial
Lending Centre
401, 15127 - 100 Avenue
Surrey, B.C. V3R 0N9
Telephone: (604) 583-7500
Branch Manager –
Dean Cudmore

Strawberry Hill Branch
(Opening March 2001)
7538 - 120 Street
Surrey, B.C. V3W 3N1
Telephone: (604) 591-1898
Branch Manager –
Bob Bonenfant

Designed and produced by Vision Design Communications. www.visiondc.com

Photography by Tina Chang

Printed in Canada.

Canadian Western Bank Place
Suite 2300, 10303 Jasper Avenue
Edmonton, Alberta T5J 3X6