Canadian Western Bank Annual Report 2002

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FY2002 Annual Report · Canadian Western Bank

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CONSECUTIVE PROFITABLE QUARTERS
IS NO COINCIDENCE.

So what is it that gives us the edge? STRAIGHTFORWARD
BUSINESS PRACTICES… STRONG LEADERSHIP…
COMPETITIVE PRODUCTS? Well, those are the basics. But
all that just gets you into the game. To achieve a string of 58

winning quarters, you need something extra: A not-so secret

weapon… Powerful, in the way that common sense sometimes hits

you out of the blue, but hardly secret… It’s the people on our team,
WESTERN PEOPLE – staff and clients – who GIVE US THE
EDGE... the THINK WESTERN edge. Sound familiar? It’s the
same tune we’ve been singing for years… and it still rings true…

Five Year Financial Summary

Fold Out

Highlights for 2002

Performance Targets

Message to Shareholders

33 Ways to Think Western

Management’s Discussion and Analysis of Operations
and Financial Condition

Financial Statements

Notes to Consolidated Financial Statements

Corporate Governance

Executive Officers

Board of Directors and Shareholder Information

Inside Back Cover

Branch Offices

BRANCH OFFICES

ALBERTA

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

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

South Edmonton Common
2142 – 99 Street
Edmonton, Alberta T6N 1L2
Telephone: (780) 988-8607
Branch Manager –
Wayne Dosman

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

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

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

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

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

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
Regional Manager – Rod Sorbo

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

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

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

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
Branch Manager – Doug Finnie

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

MANITOBA

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

CANADIAN WESTERN TRUST

BRITISH COLUMBIA
Suite 2200, 666 Burrard Street
Vancouver, B.C. V6C 2X8
Telephone: (604) 685-2081
Toll free: 1-800-663-1124

ALBERTA
2810 – 32nd Avenue N.E.
Calgary, Alberta T1Y 5J4
Telephone: (403) 291-5268
Toll free: 1-888-894-2331

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

COQUITLAM
101 Schoolhouse Street
Coquitlam, B.C. V3K 4X8
Telephone: (604) 540-8829
Branch Manager –
David McCosh

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

Cranbrook Satellite Office
2009 – 5th Street South
Cranbrook, B.C. V1C 1K6
Telephone: (250) 426-1140
Account Manager –
Mike Eckersley

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

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

SURREY
Strawberry Hill
7548 - 120 Street
Surrey, B.C. V3W 3N1
Telephone: (604) 591-1898
Branch Manager –
Richard Howard

Design and Production by Vision Design Communications. www.visiondc.com Photography by Roth & Ramberg Printing by Speedfast Color Press Inc. Printed in Canada

PERFORMANCE TARGETS

9
4
2

3
8
8

0
6
5

4
5
2

0
9
9

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

5
4
1
,
0
3

2
1
6
,
9
2

0
0
9
,
6
2
3 $
5
8
,
9
1

2
1
0
,
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

2003 Target
$ 3,639 million

TOTAL LOANS

2002 Total loans increased to $3,249 million or 13%
year over year almost achieving our target of 14%.
Total assets grew 11.3%.

2003 Our target is for total loan growth of 12%.

2003 Target
$ 34.1 million

NET INCOME

2002 Our target was for growth of 5%. Net income
at $29.6 million decreased 2% from the record $30.1
million earned in fiscal 2001. Net income before income
taxes (teb) increased 3% over fiscal 2001 compared to our
target of 12%. We fell short of our targets due to
the negative impact of the record low interest rate
environment on our net interest margin.

2003 Our target is to grow net income by 15%.

1.0

0.8

0.6

0.4

0.2

0.0

0.30

0.25

0.20

0.15

0.10

0.05

0.00

%
7
9

%
7
8

%
6
9
% 0
1
8

%
3
8

2003 Target
≥ 0.88%

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

%
6
2
.
0

%
3
2
.
0

%
1
2
.
0

%
2
2
.
0

%
8
1
.
0

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

RETURN ON ASSETS

2002 ROA at 0.83% fell short of our target of maintaining
an ROA above 0.90%.

2003 Our target is to achieve an ROA of 0.88% or higher.

2003 Target
≤ 0.25 %

CREDIT RISK

2002 The provision for credit losses as a percentage
of average loans was 0.26%, consistent with our goal
of being 0.25% or less. Based only on net new specific
provisions the ratio was 0.18%.

2003 Our target is to keep this ratio at 0.25% or less.

%
7
.
0
6

%
8
.
9
5

%
3
.
4
5

%
0
.
0
5

%
7
.
0
5

2003 Target
≤ 50%

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

EFFICIENCY RATIO
(expenses to revenues)

2002 The efficiency ratio (teb) was 50.7%, almost
achieving our target of being below 50.0%. Our ratio
remains significantly better than the Canadian banking
industry average of 66.5%.

2003 Our targeted efficiency ratio is 50.0% or less.

140,000

120,000

100,000

80,000

60,000

40,000

20,000

1
2
4
,
3
1
1

9
5
2
,
5
0
1

2
2
6
,
8
8

6
4
7
,
4
7

6
1
9
,
7
6

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

2003 Target
$ 127 – 130 million

TOTAL REVENUES

2002 Total revenues (teb) were $113.4 million,
up almost 8% year over year which surpassed our
target of 5% growth.

2003 Our target is for total revenue growth of 12-15%.

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

35,000

30,000

25,000

20,000

15,000

10,000

5,000

PERFORMANCE TARGETS

9
4
2

3
8
8

0
6
5

4
5
2

0
9
9

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

5
4
1
,
0
3

2
1
6
,
9
2

0
0
9
,
6
2
3 $
5
8
,
9
1

2
1
0
,
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

2003 Target
$ 3,639 million

TOTAL LOANS

2002 Total loans increased to $3,249 million or 13%
year over year almost achieving our target of 14%.
Total assets grew 11.3%.

2003 Our target is for total loan growth of 12%.

2003 Target
$ 34.1 million

NET INCOME

2003 Our target is to grow net income by 15%.

1.0

0.8

0.6

0.4

0.2

0.0

0.30

0.25

0.20

0.15

0.10

0.05

0.00

%
7
9

%
7
8

%
6
9
% 0
1
8

%
3
8

2003 Target
≥ 0.88%

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

%
6
2
.
0

%
3
2
.
0

%
1
2
.
0

%
2
2
.
0

%
8
1
.
0

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

RETURN ON ASSETS

2002 ROA at 0.83% fell short of our target of maintaining
an ROA above 0.90%.

2003 Our target is to achieve an ROA of 0.88% or higher.

2003 Target
≤ 0.25 %

CREDIT RISK

2002 The provision for credit losses as a percentage
of average loans was 0.26%, consistent with our goal
of being 0.25% or less. Based only on net new specific
provisions the ratio was 0.18%.

2003 Our target is to keep this ratio at 0.25% or less.

%
7
.
0
6

%
8
.
9
5

%
3
.
4
5

%
0
.
0
5

%
7
.
0
5

2003 Target
≤ 50%

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

EFFICIENCY RATIO
(expenses to revenues)

2002 The efficiency ratio (teb) was 50.7%, almost
achieving our target of being below 50.0%. Our ratio
remains significantly better than the Canadian banking
industry average of 66.5%.

2003 Our targeted efficiency ratio is 50.0% or less.

140,000

120,000

100,000

80,000

60,000

40,000

20,000

1
2
4
,
3
1
1

9
5
2
,
5
0
1

2
2
6
,
8
8

6
4
7
,
4
7

6
1
9
,
7
6

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

2003 Target
$ 127 – 130 million

TOTAL REVENUES

2002 Total revenues (teb) were $113.4 million,
up almost 8% year over year which surpassed our
target of 5% growth.

2003 Our target is for total revenue growth of 12-15%.

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

35,000

30,000

25,000

20,000

15,000

10,000

5,000

FIVE YEAR FINANCIAL SUMMARY

($ thousands, except per share amounts)

Results of Operations (teb)(1)
Total interest income
Net interest income
Provision for credit losses
Other income
Net income before taxes
Provision for income taxes(2)
Net income from continuing operations
Net income from operations(2)
Net income
Return on common shareholders’ equity(2)
Return on common shareholders’ equity
Return on average total assets(2)
Return on average total assets
Per Common Share
Average common shares outstanding (thousands)
Basic earnings per share

Net income from continuing operations
Net income from operations(2)
Net income

Diluted earnings per share(3)

Net income from continuing operations
Net income from operations(2)
Net income

Dividends(4)
Book value
Market Price

High
Low
Close

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
Net impaired loans as a percentage of total loans
Efficiency ratio
Number of full time equivalent staff
Number of branches

2002

2001

2000

1999

1998

210,904
91,284
7,740
22,136
48,165
18,553
29,612
29,612
29,612

11.2 %
11.2 %
0.83 %
0.83 %

233,893
85,501
6,096
19,758
46,582
15,187
30,145
31,395
30,145

14.0 %
13.5 %
0.97 %
0.93 %

210,282
73,367
5,100
15,255
35,435
5,441
29,394
26,949
26,349

15.0 %
14.7 %
0.95 %
0.93 %

177,013
61,729
3,750
13,017
26,270
3,516
22,754
19,853
19,853

12.8 %
12.8 %
0.81 %
0.81 %

157,966
55,751
4,150
12,165
22,574
1,958
20,616
19,012
19,012

14.0 %
14.0 %
0.87 %
0.87 %

12,629

12,001

11,134

10,153

9,421

2.34
2.34
2.34

2.14
2.14
2.14
0.40
21.97

29.35
23.26
25.75

2.51
2.62
2.51

2.26
2.34
2.26
0.36
20.08

30.50
22.30
26.27

2.65
2.42
2.37

2.41
2.23
2.18
0.34
17.35

24.00
16.25
23.00

2.24
1.96
1.96

1.98
1.76
1.76
0.48
15.68

24.25
17.30
17.60

2.19
2.02
2.02

1.85
1.72
1.72
0.30
15.39

27.00
14.75
17.15

$ 3,828,162
533,496
3,248,747
3,429,071
57,126
278,087
1,166,489

$ 3,439,568
501,228
2,886,640
3,042,307
67,126
252,262
873,538

$ 3,059,540
446,351
2,560,092
2,727,809
67,126
194,595
741,181

$ 2,707,595
375,182
2,253,598
2,371,075
78,691
159,550
559,978

$ 2,409,632
320,405
1,989,656
2,059,545
87,091
145,268
453,058

8.8 %
11.4 %

2.60 %
0.13 %
50.7 %
583
27

9.3 %
12.5 %

2.69 %
0.25 %
50.0 %
548
27

8.1 %
11.6 %

2.64 %
0.17 %
54.3 %
509
25

7.4 %
11.8 %

2.57 %
0.54 %
59.8 %
555
24

7.8 %
11.9 %

2.58 %
0.68 %
60.7 %
522
23

(1) Most banks analyze revenue on a taxable equivalent basis ("teb") to permit uniform measurement and comparison of net interest income. Net interest income (as presented in the
Consolidated Statement of Income) includes tax-exempt income on certain securities. Since this income is not taxable, the rate of interest or dividend received is significantly lower
than would apply to a loan or security of the same amount. The taxable equivalent basis includes an adjustment that increases interest income and the provision for income taxes by
an amount that adjusts the income on the tax-exempt securities to what income would have been had it been taxed at the statutory rate. Prior to fiscal 2002, tax-exempt security
income was insignificant and no taxable equivalent adjustments were made.

(2) These results exclude unusual items related to the write-down of future income tax assets as a result of future tax rate reductions which resulted in additional non-cash tax expense
of $1.25 million in 2001 and $0.6 million in 2000. Management follows the banking industry practice of performing year-over-year comparisons on net income adjusted to exclude
unusual items and on reported net income calculated in accordance with generally accepted accounting principles (GAAP). Readers are cautioned that net income from operations
does not have a standardized meaning under GAAP and may not be comparable to similar terms used by other companies.

(3) Diluted earnings per share for years prior to fiscal 2002 have been restated to reflect the required implementation of the new accounting standard on Earnings per Share (treasury

stock method). See Note 2 to the Consolidated Financial Statements for further details.

(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 unusually 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.

HIGHLIGHTS FOR 2002

FINANCIAL

• 58th consecutive profitable quarter

• best efficiency ratio (expenses to revenues) in the Canadian

• double digit loan growth of 13% year over year

• net income before taxes (teb) increased 3% over last year
reflecting growth offset by the challenges of record low
interest rates which significantly compressed our net
interest margin in the first half of the year

banking industry at 50.7%

• lower cost branch-generated deposits grew by 12% with
an improved component of demand and notice deposits
which grew 23%

• trust assets under administration increased 34% to

• effective tax rate (teb) increased to 39% from 33% last year

$1.2 billion

• net income of $29.9 million, a decrease of only 2% from

• strong capital ratios with Tier 1 capital comprised entirely

our record high of $30.1 million last year

of tangible common equity

• strong credit quality with low net impaired loan formations
and the lowest credit losses (based on annual charges to
income statement) among Canadian banks at 0.26% of
average assets compared to the industry average of
approximately 1.06%

• clean balance sheet with no goodwill or intangibles recorded

and no special purpose entities

OPERATING

• opened our 27th branch (our 5th in Edmonton) in South

• mutual fund sales extended to Manitoba and now licensed

Edmonton Common in November 2001

in all four western provinces

• commenced plans to relocate and expand existing
branches in Red Deer and Grande Prairie, Alberta to new
stand alone premises with our signature Canadian Western
Bank design and visibility

• acquired a loan portfolio from Laurentian Bank comprised
of the majority of the mid-market business loan and
related deposit accounts of their Vancouver Commercial
Banking Centre

• our “Think Western” culture and brand of service has
translated into a competitive advantage in our markets

• Canadian Western Trust appointed by Partners in Planning
Financial Services Ltd. of Regina, Saskatchewan to assume
trustee and back office services for a recently purchased
block of self-directed accounts

• served our communities through corporate donations
and sponsorships and through our employees who
contribute their time, expertise and funds to organizations
that make a difference in their communities

• continued straightforward business practices and strong,

effective corporate governance

FIVE YEAR FINANCIAL SUMMARY

($ thousands, except per share amounts)

Net income from continuing operations
Net income from operations(2)
Net income

Diluted earnings per share(3)

Net income from continuing operations
Net income from operations(2)
Net income

Dividends(4)
Book value
Market Price

High
Low
Close

2002

2001

2000

1999

1998

210,904
91,284
7,740
22,136
48,165
18,553
29,612
29,612
29,612

11.2 %
11.2 %
0.83 %
0.83 %

233,893
85,501
6,096
19,758
46,582
15,187
30,145
31,395
30,145

14.0 %
13.5 %
0.97 %
0.93 %

210,282
73,367
5,100
15,255
35,435
5,441
29,394
26,949
26,349

15.0 %
14.7 %
0.95 %
0.93 %

177,013
61,729
3,750
13,017
26,270
3,516
22,754
19,853
19,853

12.8 %
12.8 %
0.81 %
0.81 %

157,966
55,751
4,150
12,165
22,574
1,958
20,616
19,012
19,012

14.0 %
14.0 %
0.87 %
0.87 %

12,629

12,001

11,134

10,153

9,421

2.34
2.34
2.34

2.14
2.14
2.14
0.40
21.97

29.35
23.26
25.75

2.51
2.62
2.51

2.26
2.34
2.26
0.36
20.08

30.50
22.30
26.27

2.65
2.42
2.37

2.41
2.23
2.18
0.34
17.35

24.00
16.25
23.00

2.24
1.96
1.96

1.98
1.76
1.76
0.48
15.68

24.25
17.30
17.60

2.19
2.02
2.02

1.85
1.72
1.72
0.30
15.39

27.00
14.75
17.15

$ 3,828,162
533,496
3,248,747
3,429,071
57,126
278,087
1,166,489

$ 3,439,568
501,228
2,886,640
3,042,307
67,126
252,262
873,538

$ 3,059,540
446,351
2,560,092
2,727,809
67,126
194,595
741,181

$ 2,707,595
375,182
2,253,598
2,371,075
78,691
159,550
559,978

$ 2,409,632
320,405
1,989,656
2,059,545
87,091
145,268
453,058

8.8 %
11.4 %

2.60 %
0.13 %
50.7 %
583
27

9.3 %
12.5 %

2.69 %
0.25 %
50.0 %
548
27

8.1 %
11.6 %

2.64 %
0.17 %
54.3 %
509
25

7.4 %
11.8 %

2.57 %
0.54 %
59.8 %
555
24

7.8 %
11.9 %

2.58 %
0.68 %
60.7 %
522
23

(3) Diluted earnings per share for years prior to fiscal 2002 have been restated to reflect the required implementation of the new accounting standard on Earnings per Share (treasury

stock method). See Note 2 to the Consolidated Financial Statements for further details.

(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 unusually 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.

HIGHLIGHTS FOR 2002

FINANCIAL

• 58th consecutive profitable quarter

• best efficiency ratio (expenses to revenues) in the Canadian

• double digit loan growth of 13% year over year

banking industry at 50.7%

• lower cost branch-generated deposits grew by 12% with
an improved component of demand and notice deposits
which grew 23%

• trust assets under administration increased 34% to

• effective tax rate (teb) increased to 39% from 33% last year

$1.2 billion

• net income of $29.9 million, a decrease of only 2% from

• strong capital ratios with Tier 1 capital comprised entirely

our record high of $30.1 million last year

of tangible common equity

• clean balance sheet with no goodwill or intangibles recorded

and no special purpose entities

OPERATING

• opened our 27th branch (our 5th in Edmonton) in South

• mutual fund sales extended to Manitoba and now licensed

Edmonton Common in November 2001

in all four western provinces

• commenced plans to relocate and expand existing
branches in Red Deer and Grande Prairie, Alberta to new
stand alone premises with our signature Canadian Western
Bank design and visibility

• acquired a loan portfolio from Laurentian Bank comprised
of the majority of the mid-market business loan and
related deposit accounts of their Vancouver Commercial
Banking Centre

• our “Think Western” culture and brand of service has
translated into a competitive advantage in our markets

• continued straightforward business practices and strong,

effective corporate governance

MESSAGE TO SHAREHOLDERS

We are pleased to report your Bank delivered solid overall
financial results for 2002 and we are proud to have achieved
our 58th consecutive quarter of profitability. Your Bank has
again achieved double digit loan growth while at the same
time limiting loan losses to a quarter of the industry average
and recording an industry leading efficiency ratio. We achieved
near record net earnings in 2002 despite record low interest
rates and a doubling of the income tax burden over the last
two years from 15% to 39% (taxable equivalent basis (“teb”)).
Strong loan growth has translated into strong earnings
growth as over the past two years the Bank’s pretax earnings
(teb) have increased by 36%.

Net income for the year ended October 31, 2002 was $29.6
million, a decrease of 2% from $30.1 million last year. Diluted
earnings per share were $2.14 compared to $2.26 in 2001. Net
income before the provision for income taxes (teb) increased
3% over 2001. This growth in before tax earnings helped to
offset the increase in our effective income tax rate to
approximately 39% in fiscal 2002 from 33% last year.

The rapid decline in short-term interest rates which began in
the fall of 2001 and continued into fiscal 2002 had a
considerable negative effect on growth in net interest income
this year. Our typical expectations would be for double digit
growth in net interest income year over year but growth was
reduced to 7% in fiscal 2002 due to the compression of our
net interest margin.

The low interest rate environment presented challenges but
our 2002 results demonstrate our ability to successfully execute
our business plan. WE FOCUSED ON OUR FUNDAMENTAL
STRENGTHS OF MAINTAINING LOW CREDIT LOSSES,
GROWING OUR CORE BUSINESS IN A COST EFFECTIVE
MANNER AND DIFFERENTIATING OURSELVES WITH OUR
THINK WESTERN BRAND OF SERVICE. WE ALSO
CONFIRMED OUR EMPHASIS ON THE IMPORTANCE OF
STRONG CORPORATE GOVERNANCE.

CWB 2002

LOW CREDIT LOSSES We have over a decade long track
record of low credit losses. The charges to the income
statement for loan losses have averaged 0.28% of average
loans per year over the past ten years. In fiscal 2002 our loan
loss provision was 0.26% which compared very favourably
with the Canadian banking industry average which was
approximately four times higher. Actual loan losses (excluding
increases in the general allowance for credit losses) were only
0.18% of average loans in 2002 and have averaged a low
0.21% over the last ten years. Looking forward into 2003, we
do not anticipate a significant change in overall credit quality
in the markets we serve. Our strong credit discipline ensures
we remain well prepared to deal with changes in the underlying
economies that affect our customers.

GROWING OUR CORE BUSINESS IN A COST EFFECTIVE MANNER

We also have over a decade long record of double digit loan
growth. Total loans increased 13% in fiscal 2002 and our
annual growth rate over the past ten years averaged 23%. A
key factor in our ability to translate asset growth into earnings
growth is our low efficiency ratio, which is a measure of what
it costs to generate each dollar of revenue. At 50.7%, our
ratio continues to be the best in the Canadian banking
industry.

In the fourth quarter of 2002 total loans grew 5%, a strong
indicator of how our regional focus and niche strategy is
being positively accepted by our customers. Our focus
continues to be mid-market lending with concentrated
coverage in the major population-centers in western Canada.
We continue to invest our resources in the western Canadian
markets we know best and to build on our experience lending
to businesses we understand rather than venturing into new
and unknown areas. In 2003, many of the major Canadian
banks will be focused on fixing credit problems and directing
their strategies towards the American market and a renewed
potential for bank mergers. We believe their lack of focus on
the domestic market will present additional growth
opportunities for us in western Canada through both organic
growth and acquisitions. Our strong capital position, with Tier 1
capital comprised entirely of tangible common equity, provides
us with the flexibility to act proactively on opportunities as
they arise.

We have the capacity to absorb more business into our
existing branch infrastructure and in 2003 we will concentrate
on developing and growing our existing branches with a

renewed focus on retail operations. The South Edmonton
Common branch which opened in November 2001 has had a
very successful first year of operations. Plans are well
underway to relocate and significantly expand our branches in
Grande Prairie and Red Deer, Alberta into new, highly visible
premises designed in our stand alone, signature Canadian
Western Bank style. We expect the new premises will be ready
late in 2003 and with this move the Grande Prairie branch will
commence offering our full range of products and services.

Canadian Western Trust continued to expand its operations in
2002 and contributed significantly to the growth of non-

interest revenues in the Bank. The trust company provides a

diverse range of trust and custodial services to personal

financial planners and public and private businesses. Changes

in the past year have included an enhanced corporate and

group trust business line, the partnering with national record

keeping and pension consulting companies and increased

market penetration associated with our western based

locations. The trust also has developed further strategic

partnerships with strong regional players such as Partners in

Planning Financial Services of Regina, Saskatchewan who

appointed the trust to assume trustee and back office

services for a recently purchased block of self-directed

accounts.

THINK WESTERN CULTURE A key factor to our success and
what our customers tell us differentiates us from our

competitors is our Think Western culture. Since the inception
of the Bank in 1984 we have prided ourselves on our Think

Western attitude but it was only recently that we “branded” it.

It has provided a tremendous focus for our marketing

activities and has renewed employees’ commitment to our

tradition of western hospitality and specialty service. Thinking

Western is a reflection of the personality and style of our

organization. It means we apply common sense to the way we

do business and respond to customers and to how we set

policies internally. We work as a team. We talk face to face

with customers – no voice mail – and more importantly we

give our clients and employees time to talk while we listen. We

want to be the bank of choice for small to mid-size businesses

and individual customers in western Canada who want high-

touch, personal service. Our track record of strong, steady,

profitable growth is proof that providing personalized service

to customers is a cost-effective way of growing your business.

CWB 2002

Your Bank is successful because it sticks to a time proven
business plan. Throughout the year our people did a
tremendous job of continuing to do what we do best in
providing friendly, practical and common sense service to our
customers. Thinking Western challenges each of us to do
what’s “right” for our customer.

Committee, and the Conduct Review Committee, are comprised
entirely of independent directors. Indeed, our CEO is the only
inside director on the Board. The Board adapts the corporate
governance policies to meet changing needs and circumstances
with the goal of maintaining high standards and promoting
ongoing improvement in Board effectiveness.

CORPORATE GOVERNANCE High profile corporate failures and
malfeasance dominated the business news during the last
year and raised concerns over the accuracy of published
financial information. Canadian Western Bank has in place a
strong system of internal controls and a diligent and
consistent financial reporting process. Since the inception of
the Bank, the Audit Committee and the Board of Directors
have reviewed quarterly and annual results prior to their
public release and the shareholders’ auditors have been
closely involved in the financial reporting process with the
Audit Committee in their oversight governance role.

Strong and effective corporate governance has always been a
priority for us and in fact we believe it is essential to the long-
term success of the Bank. Our corporate governance policies
are designed to strengthen the ability of the Board to
effectively supervise management and enhance long-term
shareholder value. The Chairman of the Board is independent
of management and three of our committees, the Audit
Committee, the Corporate Governance & Human Resources

As announced in our third quarter report, the Bank will commence

the recognition of compensation expense for stock options
granted after October 31, 2002 as encouraged by the new
Canadian accounting standard (see pages 29 to 30 of

Management’s Discussion and Analysis for further analysis of

the impact of this change).

OUTLOOK Looking into 2003, our objective is to translate our
ongoing focus on cost efficiency, successful risk management

and a targeted portfolio mix into growth in earnings of at least
15%. Our 2003 performance targets will motivate us to ensure

our customers and shareholders are provided with the services

and value they have come to expect from your Bank.

We would like to thank all of our employees for their dedication

and extra efforts this year and our customers for choosing to

bank with us. We trust our shareholders are pleased with the

success of our business plan. We are very optimistic about the
future and we look forward to reporting to you in 2003 – our
20th anniversary year.

Jack C. Donald
Chairman

Larry M. Pollock
President and Chief
Executive Officer

CWB 2002

33 AND ALL OF THEM WORK FOR YOU.

WAYS TO THINK WESTERN

CWB 2002

With the results we continue to produce year after year, it’s clear: We’re at the
top of our game, with the BEST TEAM IN THE COUNTRY… not the biggest,
the best. And, we’re talking the very essence of team here: HONESTY AND
RESPECT, skill and attitude… Our clients notice. More than that, they play a part…
and we play a part on their team… We’re all MOVING TOWARD SIMILAR
GOALS. And... Even though it’s a group effort, everyone gets their own voice.
Listen to the 33 voices in the following pages and you’ll see what we mean…
see where PURELY WESTERN THINKING gets you.

CWB 2002

I’ve probably known Russ for 10 years.
He has a pretty good handle on the
fishing industry. That gives me confidence…
We’re growing, even faster this year than
I anticipated. But the bank has helped us
keep up. For example, we recently found
a property in Campbell River for one of
our pick–up depots and the very next day
Russ was out looking at it… couldn’t ask
for better service than that.

Gerard St. Jean
St. Jean’s Cannery, Nanaimo
1-year CWB Commercial client

CWB 2002

St. Jean’s is a typical grassroots,
west coast industry... family and fish.
The company is firmly rooted in the
values established by Gerard’s father,
hard work and dedication to quality.
Gerard has added the innovation
required to survive in the modern
market place. St. Jean’s might be the
only cannery that hand packs sport-
caught fish for their clients and ships
fresh mushrooms around the world.
I think it is important to support local
industry. In Alberta that often means
real estate or oil and gas. Out here
it’s more diverse. Just ask Trevor.

Russ Burke, Assistant Vice President
and Branch Manager
Nanaimo Branch, 3-year CWB employee

When Larry Pollock visited our
branch recently, Trevor set up a
street hockey match in the parking
lot. We had a penalty box, cheerleaders,
the works. We always try to have as
much fun as possible. And, it’s been
a great year for fun – and business –
our best year for retail banking since
CWB came to Nanaimo. We’ve been
concentrating on making good
connections… referrals, service
groups, even my optometrist…
Dr. Myrfield’s business was seriously
under-serviced until he met Elaine.

Even a turkey can fly in a strong wind.
Most companies can prosper where
the economy is real hot. But our local
economy is different: smaller businesses,
a lot of owner/operators… survivors…
(nice people, and so down-to-earth). In
the industrial financing group, we tend
to have more clients and do a lot more
deals over a given period than the other
lending areas. The dollar value is
probably similar, but it sure makes a
difference in the way we do business…

We like the branches to run like
franchises, instead of cookie–cutter
operations. So, we encourage branch
staff to do the business that is prevalent
in their market. (It’s just common sense,
but it sure works for us.) Because Trevor
moved to Nanaimo from our Edmonton
Westpoint Branch, he’d really appreciate
the difference… I think he likes it out
there, but it’d probably be even better
if there was more hockey. He’s a great
athlete… I used to coach him as a kid…

Trevor Hartel, Account Manager, Industrial Lending
Nanaimo Branch, 5-year CWB employee

Larry Pollock, President
and Chief Executive Officer, Corporate Office
Edmonton, 13-year CWB employee

We sell all kinds of frames and great
lenses, but our product really is peace
of mind… I get the same feeling myself
when I think of our finances. There
are four doctors on staff and all our
business banking is handled by Elaine.
Dr. Kellam and I also have our personal
accounts at CWB. Elaine makes
it so simple. It was never like this
with our other bank…

My husband is a dentist and knows
the orthodontists who share the
building with the main office of Vision
Arts. Great clients; easy to get along
with. And it’s easy for me to go out and
get great clients when I know I have a
team behind me that does an excellent
job of the day-to-day stuff. Our frontline
is the best... like Ray Brittain – he’s so
imaginative.

Marvie Scory, Manager, Personal Lending
Nanaimo Branch, 1-year CWB employee

Dr. Dave Myrfield, Optometrist, Vision Arts
Nanaimo, Ladysmith and Qualicum Beach
2-year CWB client

Elaine Duke, Manager, Personal Banking
Nanaimo Branch, 7-year CWB employee

I get to be creative in a bank. How novel
is that? One of my favourite things is
setting up the weekly ‘Specialty Service’
meetings. We’ve been playing different
types of games lately. It really gets
people going. We’re like the Cheers
of banking… we all know your name,
we all like to have fun in our own way
and the relationships just evolve
from there.

Ray’s a hoot… does a great job
with the ‘Specialty Service’ training.
Laughing together really makes us feel
like a team. And, it doesn’t stop at our
walls: I do locked-in retirement pension
plans and other products only offered
by our trust company, so my team also
includes people at CWT in Vancouver.
I really appreciate their efficiency...

When I’m here, on the 22nd floor of a
Vancouver office tower, and the client
– say John Malyk from Partners in
Planning – is at the counter in Calgary
Chinook branch, teamwork is critical.
Branch staff need to feel they can
depend on us… ask us anything.
So, we do our jobs the best we can;
we make ourselves accessible and
we laugh. Humour is great for building
rapport, it puts people at ease and
gets rid of any dividing lines and
geographic borders.

Ray Brittain, Sales and Service Representative
Nanaimo Branch, 1-year CWB employee

Anita Smith, Manager, Deposit Services
and Mutual Fund Representative
Nanaimo Branch, 5-year CWB employee

Kelly Chaplin, Assistant Manager
Investor Mortgages, Canadian Western Trust
Vancouver, 10-year CWT employee

CWB 2002

I think our fit with the Trust is so good
because we have similar philosophies
and cultures. There’s not a lot of
bureaucracy. We’re both headquartered
in the west and our mission is to find
solutions for investors. We have the
same idea about one-on-one
communications, and we like to have
fun… Plus they’ve got Qtrade (online
trading), and no other trust company
offers that. There is great value in the
relationship and I only see it evolving
in interesting new ways.

John Malyk, Managing Partner
Partners in Planning Financial Services Ltd.
Calgary, 3-year CWT client

CONSECUTIVE YEARS OF DOUBLE DIGIT LOAN GROWTH

That doesn’t happen by accident. For that kind of success you
need a plan. CWB has a plan. A proven, sound business plan
for strong, steady and profitable growth. It works. That’s why
we stick with it. CONSISTENCY IS THE KEY. In performance,
execution and strategy.

global-sized mergers as well as recovering from large loan
losses incurred in the telecom and energy supply sectors, we
are quite content to follow our path of BALANCED AND
RESPONSIBLE GROWTH by focusing on markets we know
and understand. You don’t have to be ‘big’ to be a big success.

The results? Over a decade of consistent growth, 58 consecutive
profitable quarters… that’s a record you can bank on! At CWB,
our consistent approach has earned us the BEST EFFICIENCY
RATIO in the Canadian banking industry. Our effective risk
management is evidenced by strong credit quality and one of
the lowest loan loss ratios among Canadian banks.

Not ones to sit on our laurels… we continue to focus on our
PLANNED, EFFICIENT GROWTH STRATEGIES and on mitigating
risk. We continue to expand our services within our targeted
niche and broaden our lending reach in western Canada.

Size does matter. And we use our size to our advantage. While
the ‘big’ Canadian banks are focused on U.S. expansion and

When it comes to exploring opportunities, OUR APPROACH
IS STRAIGHTFORWARD. They have to fit into our plan and
our comfort zone. Our strong capital base affords us the luxury
to select our opportunities and the flexibility to choose how
big and how fast to grow.

Offering both corporate and wealth management products,
our trust arm, Canadian Western Trust (“CWT”) is the
FASTEST GROWING INTERMEDIARY TRUST COMPANY and
custodian located in western Canada. Large enough to earn
respect on the national stage. Small enough to fit comfortably
into otherwise under-served niches. CWB and CWT share the
same reputation for leadership and commitment to personal
service… that’s the western way!

CWB 2002

Eastern-based banks tend to operate
like big bureaucracies. But Canadian
Western Bank is run more like a
business… a small, local business
where everyone knows me when
I bring in the deposit, or take out
a mortgage… the service is the most
amazing thing. When we needed a
mortgage and financing for the
construction of our new building,
the application went in at 3 pm on
Tuesday and it was approved by
Wednesday afternoon. I’s dotted
T’s crossed. Everything in place....

Bob Brews, President
R.L. Brews Ltd., Calgary
5.5-year CWB Commercial client

CWB 2002

Customer service is not all business.
Besides, chatting with someone like
Bob Brews can be the highlight of
your day. Ask anyone in the branch…

I’ve been with CWB almost two years,
after many years at another bank.
I like it here because I enjoy interacting
with clients… and I get to do a lot of
that. I know talking to people might
seem time-consuming, but 90 percent
of the time everything gets done by
closing time. That’s important
because I also need time for my
grandchildren. I was telling Jillian
about them this morning…

Marion’s a great friend. We share our
work days, lunches, stories about our
kids… She’s like family. That’s the way
it is with Team Chinook. And, if we had
a bright, squeaky-clean young son or
nephew, it would be Jay. We rib him
about girlfriends, hair colour… everything.
But he easily holds his own, and even
though he’s a Manager now in
Commercial Lending, he’s still always
willing to lend a hand anytime we need
it on the frontline.

Shannon Markwart, Sales and Service Representative
Calgary Chinook Branch, 3-year CWB employee

Marion Markovina, Sales and Service Representative
Calgary Chinook Branch, 2-year CWB employee

Jillian Czernick, Administrative Assistant
and Sales and Service Representative,
Calgary Chinook Branch, 6-year CWB employee

It saves time if you’re always honest…
a sign of integrity, helps build trust…
Must be why I like doing business
with Les Willems… He’s well known
because he’s so likeable and does
such a great job… Not a numbers guy,
but a very sharp commercial developer
and businessman… Finds people he
can trust to fill in the areas outside
of his scope of expertise…

I consider myself a basic guy. I know
the ‘physical’ side of development,
but for financing I rely on my people.
Jay is like a part of my team. He looks
after us. Al too; we have quite a history
together. In fact, I first met Al when
I was building his branch (Chinook
Branch) Great location… McLeod Trail
and Glenmore… really what I would
call the heart of Calgary.

Our relationship with Les is typical
for us. There is a good atmosphere
in this branch… and our reputation as
team players has only improved since
Monique got here. We needed someone
like her and she started pitching in
as soon as she arrived. She’s a good
leader… patient… treats people the
way she wants to be treated. That
goes for clients too…

Jay Campbell, Manager, Commercial Banking
Calgary Chinook Branch, 6-year CWB employee

Les Willems, General Manager
Spacemakers, Calgary
4-year CWB client

Brian Sutherland, Senior Manager
Commercial Banking
Calgary Chinook Branch, 5-year CWB employee

My best referrals come from the
commercial lenders… I recently went
with Brian to Priddis Greens. He did
the loan for the golf course, while I
helped them open business accounts,
got to know them a bit and took a
look around the place. It was cool
seeing where they were going to
build. Made me feel like part of it…
With Al as branch manager there’s
a lot of opportunities like that…
Bob Brews calls Al ‘a banker
with imagination.’

Find out what people are good at
and get them doing it… That’s what
happened with Monique, that’s what
we’ve tried to do with everyone
here… Fits well with the bank’s policy
of niche marketing… which we know
a bit about, since we have our own
commercial lending department and
we were the original home of the
industrial financing group in Calgary…
before they moved to Foothills Branch
in southeast Calgary. Michael, formerly
of Team Chinook, is now serving his
industrial clients at Foothills…

I’ve always been impressed with Al’s
‘marketing’ technique for new business
– basically, building relationships…
Seems there’s often an opportunity
when you start with an honest
relationship. For example: We met
Scott Kiser in 1996, when he was a
VP at Southward Energy, a customer
CWB inherited from our North West
Trust acquisition. The relationship
began there, and over the years,
Scott and his companies, (the Caliber
Group), have become one of our most
successful clients.

Monique Winniski, Manager, Retail Banking
Calgary Chinook Branch, 12-year CWB employee

Al Steingart, Assistant Vice President
and Branch Manager
Calgary Chinook Branch, 6-year CWB employee

Michael Docherty, Assistant Vice President
and Manager, Industrial Centre
Calgary Foothills Branch, 12-year CWB employee

CWB 2002

I first talked to CWB in ‘97 about
financing for Caliber. I knew Michael
and I knew they were specialists in
industrial equipment financing. It was
a perfect fit because we run these coil
tubing units… like a glorified service rig
unit that expedites performance: does
a two-day job in a few hours. We rolled
the first truck down the road in ’98
and haven’t looked back... CWB is bar
none the best bank for this type of
financing…

Scott Kiser, President
Caliber Industries Ltd., Calgary
5-year CWB Industrial client

WESTERN PROVINCES

It’s good to have focus. Focus defines your actions. Focus

gives you direction. Focus leads to success. Our focus is on the

West. CWB is the largest Schedule I chartered bank with

headquarters and principal operations in western Canada.
WESTERNERS SERVING WESTERNERS.

We’re western to the core… and at CWB, our core business is
providing FULL-SERVICE COMMERCIAL AND PERSONAL
BANKING to western Canadians. It’s really that simple. Provide
a rapidly growing market segment with a bank they can call

their own.

Our lending is in market segments we know and understand.

Mid-market businesses who fit perfectly into our niche. Agile,

savvy western businesses who know what it takes to survive

and flourish. We know what works for our customers, and we

work hard at doing just that. Call it western hospitality or just

call it exceptional service. Either way, we make a point of
EXCEEDING SERVICE EXPECTATIONS on every level.

We’re focused. We deliberately keep our commercial lending
to four areas… real estate, commercial, energy and industrial
financing and leasing. While we may be a big company, OUR
APPROACH IS VERY PERSONAL. We make the majority of
lending decisions at the local level... because nobody understands
the local economic climate and attitude better than the qualified
professionals who live and work there.

We believe in playing to our strengths. CWB customers enjoy
a solid suite of retail products at very COMPETITIVE RATES…
personal banking, loans, mortgages, telephone and Internet
banking, investment products and mutual funds. And CWT
offers self-directed registered accounts and investment loan
services, geared towards independent financial advisors and
mortgage brokers, as well as corporate and group trust services.

We are in business to serve our customers’ needs, not the
other way around. We keep that our TOP OF MIND priority,
and continue to be an attractive alternative to other financial
institutions.

CWB 2002

In land development you need a
banker who says ‘we want your
business,’ a banker who knows how
to play on the team with landscapers,
fencers and roofers… so they can be
full-fledged stakeholders. CWB holds
up its end of the bargain better than
any bank I’ve known. And I like the
fact that Larry Pollock is a regular
guy… lets his record speak for itself…
makes him a cut above his peers…

David McDougall, President
MLC Land Company Inc., Edmonton
3-year CWB Real Estate client

CWB 2002

David McDougall is relentless in his
pursuit of value. And, he possesses
the rare ability to locate communities
so that everybody benefits… A truly
exceptional residential land developer…
Exactly the type of client we look for:
someone with a clear – FEASIBLE –
vision. Everyone on the team is good
at spotting a visionary. (It just comes
naturally with western-style business).
And there are hundreds of examples
on our books. Don Metz is a visionary
we spotted in the mid-90s…

In ‘94 I bought out my partner
and I needed $1 million in equipment
to secure a multi-million dollar NHL
Club deal. I was fed up with my bank.
So when CWB took an interest in our
business, offering innovative financing
to accommodate our crazy sales
cycles – I was immediately on board.
Derek manages all our banking now.
The guy has such a grasp of our
business. It’s like he has the vision
to see our vision.

Go to an Oilers’ hockey game. Don
orchestrates every bit of Oilers video
that comes out of Skyreach Centre.
Everything on the screen is produced
by Aquila. They are growing like the
bank… and we’re lending them the
operating capital that makes it possible.
Last year they were bought by Insight
Sports Ltd., which is part owner of the
NHL Network. So we’ve helped them
with expansions, equipment financing…
Don has a clear vision that’s easy to
support…

Les Shore, Senior Assistant Vice President
and Branch Manger
Edmonton Main Branch, 1-year CWB employee

Don Metz, President and CEO
Aquila Productions Ltd., Edmonton
7-year CWB client

Derek Calfas, Senior Manager
Commercial Banking
Edmonton Main Branch, 3-year CWB employee

CWB is a local bank. Derek exemplifies
this with his clients. That means being
knowledgeable, active and responsive in
the community and knowing the business
issues our clients face daily. We are
fortunate to be associated with the best
real estate developers in Western Canada
and David McDougall, the MLC Group
team, along with MLC investors are a
great example. They make the banking
relationship successful. Financing Alberta
real estate development can be somewhat
demanding and the process only works
with effective support. Marian combines
a client focus, a Think Western attitude
and the skill to get the job done...

I moved upstairs four months ago – to
real estate from retail banking – I still
help out customers (with details of
their loans), but now my main clients
are the lenders in real estate. Great
to work with… especially Gary.
Unbelievably smart. I’ve already
learned tons from him. He helped me
settle in… Just like when I started on
the frontline: Avery was there alone
with me that first morning. She just
smiled, welcomed me, and showed
me everything.

Sometimes a smile is all you need…
or maybe a chat. Stu, one of my
clients, always has a story or joke
for me. He tells me about his boat
in Victoria. He loves it … ‘looks so
beautiful in the pictures. I know his
voice so well now, I’m comfortable
giving him balances over the phone.
You meet the coolest people on the
frontline. Just ask Laura. We have
a blast.

Gary Comber, Assistant Vice President
Real Estate Lending
Edmonton Main Branch, 5-year CWB employee

Marian Curry, Loan Administrator
Real Estate Lending
Edmonton Main Branch, 1-year CWB employee

Avery Roberts, Sales and Service Representative
Edmonton Main Branch, 2-year CWB employee

Clients wait to see Avery. She loves
talking to them. She knows so much
about their lives. And she gets to see
all the customers' new babies. People
really like her; I do too. We’ve become
friends. This is a great atmosphere for
making friends. Tanis (our boss) has
a lot to do with it. She makes it fun
here. She can take a practical joke,
but she’s learned to lock her door…
And, just for the record, I know
nothing about the air freshener
incident…

At Edmonton Main, the frontline is a
great place to be because… well, you
know what rapport sounds like? It’s
laughter and talking. And getting the
banking done: opening accounts, selling
GICs and RSPs, completing transactions,
double checking the figures… Low
stress/very high productivity. That’s my
team, all 18 (complete with the occasional
misplaced air freshener). The laughter
really keeps us together. Actually, Marcia
and I have had a couple of good giggles
lately, since we’ve been working
together a fair bit.

Laura Ingram, Sales and Service Representative
Edmonton Main Branch, 3-year CWB employee

Tanis Poshtar, Manager, Sales and Service
Edmonton Main Branch, 2-year CWB employee

Tanis and I have been working on a few
projects recently focusing on seniors.
We try to provide an environment that's
easy for them to do in-branch banking.
I believe seniors appreciate our sit-down
banking area. It's just one way we show
that we care… But it certainly doesn't
stop there. We all have causes and
charities that are close to our hearts.
Recently, a bunch of us volunteered
to sell raffle tickets at Fashion With
Compassion (an annual fundraiser
to support patients with breast cancer
and their families who stay at
Compassion House).

Marcia Browton, Assistant Manager
Sales and Service
Edmonton Main Branch, 3-year CWB employee

CWB 2002

CWB has been with us since this house
was just a dream. Larry Pollock counselled
us on how to get the house up and
running and was a key member of the
Capital Campaign Committee. The bank
not only helped as a major donor, but
several of their employees even came
down to volunteer their time at Fashion
With Compassion (our annual fundraiser)…
so warm and giving… They set the
standard and others have come forward
since. So now thousands of northern
Alberta women will have the benefit of
our resources and be welcome to stay
here during treatment for breast cancer.

Elexis Schloss, President
Compassion House, Edmonton
1-year CWB client

BRANCHES, NO CALL CENTRES OR VOICEMAIL

CWB is people. We are accessible. You don’t get that from an
impersonal recording on the end of a line. That’s why you won’t
find voicemail or call centres here. Just person-to-person,
face-to-face, one-on-one communication. THAT’S WESTERN
HOSPITALITY. That’s CWB.

WE’RE OUT TO BE THE BEST rather than the biggest. We
emphasize the ‘personal’ in personal banking. You’ll find our
SERVICE IS ALWAYS FAST AND FRIENDLY… and there are
no line-ups. Thinking Western sets us apart. It’s as simple as
treating people as you would wish to be treated. RESPECT
PLAYS A BIG PART in everything we do. Respect for our fellow
employees and our customers. We’re in the business of
building meaningful relationships… they are, by far, our most
valuable investments.

Small town or big city… community means a great deal in the

West. At CWB, we go beyond the walls of our branches.
WE’RE INVOLVED IN THE COMMUNITY… because we live

there, too. Our employees support the community in many ways

and on many levels. They sit on boards, volunteer for charitable

events and fundraisers, give blood, coach sports teams, and
more. There’s a strong sense of DOING FOR OTHERS. CWB
and its people donate hundreds of hours and thousands of

dollars to local projects every year. And the momentum is

building.

Along with our commitment to our customers and to the
community, we are COMMITTED TO THE FUTURE. CWB recently
made a major 10-year pledge to the University of Alberta for
an aboriginal student scholarship in the School of Business.
This is but one example of funding for scholarships we provide
at western Canadian post-secondary institutions. It doesn't
stop there, we support a variety of worthwhile causes, from
caregiving to the arts. Our corporate culture is a reflection of
our people… good people, caring people, western people.

CWB 2002

25 MANAGEMENT’S DISCUSSION AND ANALYSIS
OF OPERATIONS AND FINANCIAL CONDITION

25 Overview of 2002

26 Quarterly Information

27 Net Interest Income

28 Other Income

28 Non-interest Expenses

30 Taxes

31 Loans

32 Deposits

33 Capital Funds and Adequacy

35 Risk Management
35 Overview

35 Credit Risk Management

39 Liquidity Risk

41 Market Risk

44 Operational Risk

45 Derivative Financial Instruments

45 Trust Assets Under Administration

46 FINANCIAL STATEMENTS
46 Management’s Report

47 Auditors’ Report

48 Consolidated Balance Sheet

49 Consolidated Statement of Income

49 Consolidated Statement of Changes in Shareholders’ Equity

50 Consolidated Statement of Cash Flow

51 Notes to Consolidated Financial Statements

65 CORPORATE GOVERNANCE
65 Introduction

65 The Board and Board Committees

66 Audit Committee

67 Conduct Review Committee

67 Corporate Governance & Human Resources Committee

68 Loans Committee

69 Other Areas of Consideration

69 Conclusion

MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
Key Performance Indicators
($ thousands, except per share amounts)

2002/2001
Increase

Net income before provision for income taxes (teb)(1)
Provision for income taxes (teb), excluding unusual item
Net income from operations
Income tax expense from income tax rate changes
Net income
Earnings per share

Basic
Diluted

Provision for credit losses as a percentage of average loans
Efficiency ratio(2) (expenses to revenues) (teb)
Return on common shareholders' equity
Return on average total assets

(1) See page 26 for a discussion of teb.
(2) A decrease in the ratio reflects improved efficiency.

OVERVIEW OF 2002
The Bank recorded solid overall financial results for 2002.
Double digit loan growth was achieved. Credit quality was
strong and loan losses were a quarter of the industry average.
The efficiency ratio at 50.7% remained the best in the
Canadian banking industry.

Total assets increased by over 11% from one year ago to reach
$3,828 million. Loans increased by $362 million, or 13%. Credit
quality remained very strong. The provision for credit losses as
a percentage of average loans was 0.26% in 2002 and has
averaged 0.22% over the last five years. The total capital
adequacy ratio at October 31, 2002 was 11.4% (2001 – 12.5%)
with a Tier 1 component of 8.8% (2001 – 9.3%).

Net income before provision for income taxes (teb) for the year
ended October 31, 2002 was $48.2 million, an increase of 3%
from $46.6 million reported in 2001. The provision for income
taxes (teb) increased to $18.6 million compared to $15.2 million
last year, excluding the adjustment for rate changes. The
effective annual income tax rate increased to approximately
39% from 33% last year as the remaining unclaimed tax
deductions were largely diminished during 2001.

Reported net income for fiscal 2002 was $29.61 million, down
only 2% from the record $30.15 million earned last year,
despite a significant compression of net interest margin in the
first half of the year and the increased tax rate. The related
diluted earnings per share were $2.14 in 2002 compared to
$2.26 a year ago. Return on shareholders’ equity and return on
assets were 11.2% and 0.83% respectively compared to 13.5%
and 0.93% last year.

$
$
$
$
$

$
$

2002
48,165 $
18,553 $
29,612 $
0 $
29,612 $

2001
46,582 $
15,187 $
31,395 $
1,250 $
30,145 $

2.34 $
2.14 $
0.26%
50.7%
11.2%
0.83%

2.51 $
2.26 $
0.23%
50.0%
13.5%
0.93%

(decrease) % Change

3 %
22 %
(6)%
(100)%
(2)%

(7)%
(5)%

1,583
3,366
(1,783)
(1,250)
(533)

(0.17)
(0.12)
0.03%
0.7%
(2.3)%
(0.10)%

In evaluating the Bank’s performance, management reviews
reported net income (i.e. as reported in the Consolidated
Statement of Income on page 49) as well as net income from
operations which is adjusted to exclude unusual items. Unusual
items that may include non-cash items are viewed by
management as transactions that are not part of the core
business operations or which are somehow unusual in nature.
A comparison of earnings at this level provides a more
meaningful year-over-year comparison. There were no unusual
items in fiscal 2002. Net income from operations in 2001
excludes non-cash tax expense of $1.25 million related to the
write-down of future income tax assets due to future federal
and provincial tax rate reductions. Readers are cautioned that
net income from operations does not have a standardized
meaning under generally accepted accounting principles and
may not be comparable to similar terms used by other
companies.

Net income from operations for the year ended October 31,
2002 was $29.61 million, a decrease of 6% from $31.40 million
in 2001. Diluted earnings per share based on net income from
operations were $2.14 compared to $2.34 last year. Return on
shareholders’ equity and return on assets were 11.2% and 0.83%
for 2002 compared to 14.0% and 0.97% respectively for 2001.

CWB 2002

QUARTERLY INFORMATION
($ thousands, except per share amounts)

Results of operations (teb)(1)

– Reported
Net interest income
Total revenues
Net income before provision

for income taxes

Provision for income taxes
Net income
Return on common

shareholders' equity

Return on average

total assets

Earnings per common share

2002

2001

24,534 $
29,869

24,079 $
29,834

20,677 $
25,809

21,994 $
27,908

22,295 $
27,686

21,563 $
26,805

20,487 $
25,185

21,156
25,583

12,728
5,001
7,727

13,251
5,187
8,064

9,807
3,382
6,425

12,379
4,983
7,396

12,718
4,412
8,306

12,119
3,885
8,234

10,547
3,464
7,083

11,198
4,676
6,522

11.2%

12.0%

10.1%

11.5%

13.3%

13.6%

13.8%

13.1%

0.82%

0.89%

0.76%

0.85%

0.97%

1.00%

0.91%

0.84%

Basic
Diluted

Efficiency ratio

0.61
0.56
50.9%

0.64
0.58
49.1%

0.51
0.47
54.5%

0.59 $
0.53
48.7%

0.66 $
0.60
48.6%

0.66 $
0.59
49.1%

0.61 $
0.54
52.1%

0.58
0.52
50.3%

Results of operations (teb)

– Excluding unusual items(2)
(see explanation below)

Net interest income
Total revenues
Net income before provision

for income taxes

Provision for income taxes
Net income
Return on common

shareholders' equity

Return on average

total assets

Earnings per common share

24,534 $
29,869

24,079 $
29,834

20,677 $
25,809

21,994 $
27,908

22,295 $
27,686

21,563 $
26,805

20,487 $
25,185

21,156
25,583

12,728
5,001
7,727

13,251
5,187
8,064

9,807
3,382
6,425

12,379
4,983
7,396

12,718
4,412
8,306

12,119
3,635
8,484

10,547
3,464
7,083

11,198
3,676
7,522

11.2%

12.0%

10.1%

11.5%

13.2%

13.9%

13.6%

15.1%

0.82%

0.89%

0.76%

0.85%

0.97%

1.03%

0.91%

0.97%

Basic
Diluted

Efficiency ratio

0.61 $
0.56
50.9%

0.64 $
0.58
49.1%

0.51 $
0.47
54.5%

0.59 $
0.53
48.7%

0.66 $
0.60
48.6%

0.68 $
0.61
49.1%

0.61 $
0.54
52.1%

0.67
0.59
50.3%

(1) Most banks analyze revenue on a taxable equivalent basis (“teb”) to permit uniform measurement and comparison of net interest income. Net interest income
(as presented in the Consolidated Statement of Income) includes tax-exempt income on certain securities. Since this income is not taxable, the rate of interest
or dividend received is significantly lower than would apply to a loan or security of the same amount. The taxable equivalent basis includes an adjustment
that increases interest income and the provision for income taxes by an amount that adjusts the income on the tax-exempt securities to what income would
have been had it been taxed at the statutory rate. Prior to fiscal 2002, tax-exempt security income was insignificant and no taxable equivalent adjustments
were made.

(2) Excludes non-cash income tax expense relating to the write-down of future income tax assets as a result of future tax rate reductions which is considered an
unusual item. There were no unusual items in fiscal 2002. In fiscal 2001 there was unusual tax expense of $1,000 in the first quarter and $250 in the third
quarter. Results are presented on this basis in order to provide a more meaningful comparison between periods.

CWB 2002

NET INTEREST INCOME

Table 1 – Net Interest Income (teb)
($ thousands)

2002

2001

Average
Balance

Mix

Interest

Interest
Rate

Average
Balance

Mix

Interest

Interest
Rate

$ 436,589

13% $

16,907

3.87% $ 440,558

14% $

23,225

5.27%

49,647
572,446
2,398,029
3,020,122
3,456,711
48,571
$ 3,505,282

83,715
370,021
2,655,316
3,109,052
68,923
62,959
264,348
$ 3,505,282

2
16
68
86
99
1

1,193
34,907
157,897
193,997
210,904
–
100% $ 210,904

2% $

–
3,522
112,391
115,913
–
3,707
–
100% $ 119,620

11
76
89
2
2
7

37,781
2.40
518,713
6.10
2,127,070
6.58
2,683,564
6.42
3,124,122
6.10
0.00
51,483
6.01% $ 3,175,605

0.00% $
59,261
0.95
294,030
4.23
2,455,504
3.73
2,808,795
0.00
74,071
5.89
67,126
225,613
0.00
3.41% $ 3,175,605

1
16
67
84
98
2

1,719
36,992
171,957
210,668
233,893
–
100% $ 233,893

2% $
9
78
89
2
2
7

–
8,722
135,682
144,404
–
3,988
–
100% $ 148,392

4.55
7.13
8.08
7.85
7.49
0.00
7.36%

0.00%
2.97
5.53
5.14
0.00
5.94
0.00
4.67%

Assets
Securities and deposits with

regulated financial
institutions(1)

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

$ 3,505,282

91,284

2.60% $ 3,175,605

85,501

2.69%

(1) Includes teb adjustment of $2.5 million (2001 – nil). See page 26 for a discussion of the taxable equivalent basis.

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.

In 2002, net interest income increased by $5.8 million, or 7%,
primarily due to:

• an increase of $333 million (11%) in average interest bearing

assets; offset by

• a decrease in net interest spread to 2.60% from 2.69%.

The decrease in net interest spread in 2002 is due to the
negative effect of the record low interest rate environment on
the portfolio. In particular, the rapid decline in short-term rates
compressed net interest margin in the first half of 2002.
Average prime for the year decreased from 6.55% to 4.15%
and prime fell from 5.75% to 3.75% over a four month period
and then recovered to 4.50% due to rate increases in April,
June and July 2002.

The Bank has a positive interest rate gap which tends to lead to
a decrease in net interest income when market interest rates
fall since assets reprice earlier than liabilities. Some of the
impact from the decreased margin this year was offset by the
realization of security gains which are included in other
income. The resulting reinvestment in the securities portfolio
along with the low interest rates contributed to the reduction in
the yield on the portfolio to 3.87% from 5.27% last year.
Another factor contributing to the net interest margin
compression was the fact that the cost of funding prime-based
loans (which customers demonstrated greater preference for
due to record low rates) did not decrease proportionately to the
drop in prime. This was because the cost of notice and demand
deposits reached an interest rate floor and there was greater
reliance on more costly short-term funding for growth in prime-
based loans.

Increases in short-term interest rates in the latter half of the
year resulted in a recovery in the margins due to the positive
gap and because the cost of demand and notice accounts did
not rise as quickly as the yield on floating rate assets.

CWB 2002

In 2003 it is expected that net interest spread for the year will
be comparable to the last half of 2002 with the expectation for
a slight rise in the prime rate in the second half of the year. As
discussed in the Interest Rate Risk section, the portfolio
continues to have a positive gap with maturing assets
exceeding maturing liabilities during the one year time frame.
If short-term market rates increase this would have a positive
impact on spreads.

OTHER INCOME

Table 2 – Other Income
($ thousands)

Credit related
Retail services
Trust services
Gains on security sales, net
Foreign exchange
Other(1)
Total Other Income

2002/2001
Increase (decrease)

2002
11,050 $

3,944
3,206
2,385
1,279
272
22,136 $

2001
10,262 $

3,397
2,252
2,328
1,156
363
19,758 $

$
788
547
954
57
123
(91)
2,378

%
8 %

16
42
2
11
(25)
12 %

(1) Other includes gains/losses on equipment disposals and other miscellaneous non-interest revenues.

Other income, which includes all revenues not classified as net
interest income, was $22.1 million, an increase of $2.4 million
or 12% over 2001. As shown in Table 2, all categories of other
income grew in 2002. Notable changes include:

• an increase of $1.3 million in credit and retail fees due to loan

and deposit growth and increased activity; and

• increased trust services fees in Canadian Western Trust
(“CWT”) due to continued growth (15%) in the number of
self-directed RRSP (registered retirement savings plan) and
RRIF (registered retirement income fund) accounts and an
increased offering of products available.

Other income as a percentage of total revenue (net interest
income and other income) was 20% in 2002, up from 19% in
2001. Gains in the fixed income securities portfolio arose from
the reductions in market interest rates and their realization
helped ease the impact on profitability from the compression in
net interest margin.

In 2003 total other income is expected to show broad-based
growth, with the exception of security gains, with a continued
focus on increasing other income as a percentage of total
revenue.

NON-INTEREST EXPENSES

Non-interest expenses increased 9% to $57.5 million in 2002.
The increase is primarily due to:

• salaries from an increase in full time staff complement to

accommodate growth;

• employee benefits due to increased group plan and provincial
health premiums as well as the increase in staff complement;
and

• premises expenses related to new branch initiatives

completed late in fiscal 2001.

The efficiency ratio increased slightly to 50.7% from 50.0% in
2001 as revenue growth of 8% did not keep pace with expense
growth of 9% due to the compression in net interest margin
which slowed revenue growth. However, the efficiency ratio
continues to compare very positively to the other Canadian
Schedule I banks which averaged 66.5% in fiscal 2002. Non-
interest expenses as a percentage of average assets was 1.64%
in 2002, consistent with 1.66% in 2001.

CWB 2002

Table 3 – Non-interest Expenses and Efficiency Ratio
($ thousands)

Salaries and Employee Benefits

Salaries
Employee benefits

Total
Premises
Rent
Depreciation
Other

Total
Equipment and Furniture

Depreciation
Other

Total
General

Professional fees and services
Capital and business taxes
Marketing and business development
Postage and stationery
Banking charges
Regulatory costs
Travel
Communications
Other

Total
Total Non-interest Expenses
Efficiency Ratio

Net interest income (teb)
Other income
Total revenues

Efficiency ratio (expenses as a percentage of total revenues)

Expectations for 2003 are that:
• the full time staff complement will increase by approximately
8% to accommodate growth in volumes and new branch
initiatives; and

• increases in other non-interest expenses will be primarily

attributable to volume increases from growth.

Capital expenditures of $5.5 million are budgeted for 2003 and
will be funded from general operating revenues. At year end
there were specific commitments of $442,000 for these capital
expenditures.

Stock-Based Compensation
Effective for options granted on or after November 1, 2002, the
Bank will adopt the provisions of Section 3870 of the Canadian
Institute of Chartered Accountants Handbook “Stock-based
Compensation and Other Stock Based Payments”. The Bank has
chosen to account for stock-based compensation using the fair
value method which recognizes the fair value of the
compensation cost in the financial statements.

2002/2001
Increase (decrease)

2002

2001

29,147 $

26,073 $

5,438
34,585

4,396
30,469

4,765
1,064
1,319
7,148

2,046
1,635
3,681

4,415
968
972
6,355

2,118
1,611
3,729

1,954
1,691
1,539
1,440
1,059
923
792
557
2,146
12,101
57,515 $

1,738
2,032
1,521
1,288
990
1,047
839
497
2,076
12,028
52,581 $

91,284 $
22,136

85,501 $
19,758

$ 113,420 $ 105,259 $

50.7%

50.0%

3,074
1,042
4,116

350
96
347
793

(72)
24
(48)

216
(341)
18
152
69
(124)
(47)
60
70
73
4,934

5,783
2,378
8,161

12%
24
14

8
10
36
12

(3)
1
(1)

12
(17)
1
12
7
(12)
(6)
12
3
1
9%

%
7
.
0
6

%
8
.
9
5

%
3
.
4
5

%
0
.
0
5

%
7
.
0
5

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

Efficiency Ratio(1) (expenses to revenues)

(1) A decrease in the ratio reflects improved

efficiency.

CWB 2002

If the Bank had adopted the fair value method of accounting for stock options granted during fiscal 2002, results would have been
affected as follows:

Net income
Earnings per share

Basic
Diluted

As Reported
$

29,612 $

Pro forma(1)
29,225

$
$

2.34
2.14

$
$

2.31
2.11

(1) Compensation expense under the fair value method is recognized over the vesting period of the related stock options. Accordingly, the pro forma results of

applying this method may not be indicative of future amounts.

In determining the pro forma disclosures above, the fair value
of options granted was estimated on the date of grant using
a binomial option pricing model with the following variables
interest rate of 4.8%,
and assumptions: (i) risk-free
(ii) expected option life of 3.5 years, (iii) expected volatility of
23%, and (iv) expected dividends of 1.5%. The estimated fair
value of each option granted was $5.43.

The actual amount of compensation expense recorded in 2003
will depend on the specifics of the actual options granted in
2003 and the variables at the time of the grant(s).

TAXES

The provision for income taxes (teb) was $18.6 million in 2002,
up from $16.4 million (which included tax expense of $1.3
million from future income tax rate changes) in the prior year.
The Bank is now fully taxable although the benefit from
previously unrecognized tax deductions discussed below was
realized in 2002.

During the year confirmation was received that prior year tax
refilings were successful (which effectively
increased
unclaimed deductions for those prior years by approximately
$5 million) and the effective annual tax rate for 2002 reflects
this benefit. Income taxes otherwise payable by the Bank for
the year ended October 31, 2001 were partially eliminated by
utilizing approximately $15.7 million of unclaimed deductions

and tax loss carryforwards. This benefit was partially offset by
a charge of $1.3 million relating to future income tax rate
reductions. At October 31, 2002, there were no unclaimed
deductions available to reduce future years’ income for tax
purposes. Capital losses of $11.8 million (2001 - $11.8 million)
are available to apply against future capital gains and have no
expiry date. The tax benefit of these capital losses has not been
recognized. For the year ended October 31, 2002 the effective
tax rate (teb) was approximately 39% compared to 33%
(excluding tax expense from future tax rate changes) in 2001.
This rate is expected to remain in the 38 – 40% range in 2003.

Future tax assets and liabilities represent the cumulative
amount of tax applicable to temporary differences between the
carrying amount of the assets and liabilities and their values
for tax purposes. The Bank’s significant future income tax asset
relates primarily to the general allowance for credit losses.
Future tax assets and liabilities are measured using enacted or
substantively enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Changes in future income
taxes related to a change in tax rates are recognized in income
in the period of the tax rate change. There were no rate
reductions enacted in 2002. Income tax expense for 2001
includes $1.3 million relating to federal and provincial income
tax rate reductions enacted during that year.

Table 4 – Capital Taxes
($ thousands)

British Columbia
Alberta
Saskatchewan
Manitoba
Total Capital Taxes

Capital
Tax Rate

Capital
Allocation

1.00%
0.00%(1)
0.70%
3.00%

40% $
52%
5%
3%

2002/2001
Increase (decrease)

2002
1,151
–
105
271
1,527 $

2001
1,008
539
92
239
1,878 $

$
143
(539)
13
32
(351)

%
14 %

(100)
14
13
(19)%

(1) Alberta’s capital tax was eliminated on April 1, 2001; prior to that date the rate was 0.70%.

CWB 2002

Capital taxes for 2002 totalled $1.5 million compared
to $1.9 million in 2001. The decrease is attributable to:

• the first full year with no capital tax in Alberta; offset by

• taxes exigible on increased capital due to retention of earnings.

The goods and services tax (GST) carries with it a significant
cost to the Bank, as it does to all financial institutions, to the
extent that GST paid 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 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.

LOANS

Table 5 – Outstanding Loans by Type and by Provincial Location of Branch
($ millions)

October 31, 2002
Loans to Individuals

Residential mortgages(2)
Other

Total
Loans to Businesses(3)

Securities purchased under resale agreements
Commercial
Construction and real estate(4)
Industrial
Energy

Total
Total Loans
Composition Percentage

October 31, 2001
Loans to Individuals

Residential mortgages(2)
Other

Total
Loans to Businesses(3)

Securities purchased under resale agreements
Commercial
Construction and real estate(4)
Industrial
Energy

Total
Total Loans
Composition Percentage

British
Columbia

321 $

42
363

–
331
386
189
–
906
1,269 $
39%

303 $

37
340

–
310
363
184
–
857
1,197 $
41%

Alberta Saskatchewan

Manitoba

Composition
Total(1) Percentage

219
61
280

66
491
445
301
164
1,467
1,747

53%

184
53
237

75
392
322
295
154
1,238
1,475

51%

52 $
14
66

–
16
27
21
–
64

130 $
4%

56 $
13
69

–
20
25
18
–
63

13 $

2
15

–
46
60
11
–
117
132 $
4%

13 $

3
16

–
32
49
12
–
93

132 $
4%

109 $
4%

605
119
724

66
884
918
522
164
2,554
3,278

100%

556
106
662

75
754
759
509
154
2,251
2,913

100%

18 %
4
22

2
27
28
16
5
78
100 %

19 %
4
23

3
26
26
17
5
77
100 %

(1) This table does not include an allocation of the allowance for credit losses and deferred revenue and premiums.
(2) Includes single and multi-unit residential mortgages.
(3) Corporate loans (described on page 32) are included in Loans to Businesses based on the security of the specific loan and the nature of the borrower’s

business.

(4) Includes commercial term mortgages and project (interim) mortgages.

CWB 2002

Loans, as reported on the consolidated balance sheet, totalled
$3,249 million at the end of 2002 compared to $2,887 million at
the end of 2001, an increase of 13%. Highlights of the year-
over-year changes are:

Portfolio
• construction and real estate loans increased $159 million
(21%) and represent 28% of the portfolio versus 26% a year
earlier;

• commercial loans increased $130 million (17%) and
comprise 27% of the portfolio compared to 26% one year
ago; and

• loans to individuals represent 22% of the total portfolio,

compared to 23% in 2001.

Loan growth for the year came primarily from organic growth
as well as a portfolio of $14 million in mid-market business
loans which was acquired from Laurentian Bank of Canada’s
Vancouver Commercial Banking Centre.

Since 1999 the Bank has developed a portfolio of loans,
identified internally as corporate loans, through participation in
selected syndications, the majority of which have been
structured and led by the major Canadian banks. This initiative
has afforded the opportunity to participate in larger,
investment grade credits as well as providing a degree of
geographic diversification. At October 31, 2002 the corporate
loan portfolio totalled $141 million (2001 - $103 million).

Corporate Loans

Commercial

Energy

Industrial

Personal

Securities Purchased Under
Resale Agreements

Real Estate Project Mortgages

Multi-Unit
Residential Mortgages

Real Estate Term Mortgages

5 %

22 %

5 %

11 %

23 %

4 %

2 %

12 %

16 %

Loans by Portfolio

Location
• loan growth of $293 million (17%) in the prairie provinces

(primarily in Alberta);

• loans held at Alberta branches increased to 53% of the total
portfolio at October 31, 2002 from 51% at October 31, 2001
due primarily to strong economic growth in the province; and

• there was a corresponding decrease in the British Columbia

loan portfolio from 41% to 39%.

Consistent and strong loan growth of 13% is expected in 2003.
The Bank continually analyzes external factors which may
impact western Canada and the environments in which the
Bank’s customers operate. One factor that is currently being
monitored is the potential impact of the possible implementation
of the Kyoto accord, which should become more clear in 2003.

DEPOSITS

Table 6 – Deposits
($ 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

CWB 2002

2002

2001

Amount % of Total

$ 169,737
368,764

1,787,391
555,276
523,534
3,404,702
24,369
$ 3,429,071

5% $ 147,770
290,542

52
16
15
99
1

1,592,122
470,242
518,075
3,018,751
23,556
100% $ 3,042,307

52
15
17
99
1
100%

Growth of 13% in deposits was achieved this year. Lower cost
business and personal deposits grew faster than total deposits
and these deposits now account for 16% of total deposits
compared to 15% last year. The focus on increasing lower cost
deposits will continue to be an ongoing priority. Branch
generated deposits grew by 12% this year and account for over
one-half of total deposits.

The source of deposits has remained consistent year over year
and is broken down as follows:

• branches – 53%

• deposit agents – 45%

• wholesale – 2%

CWT deposits are included in the foregoing numbers.
The trust’s growth in low cost notice deposits (primarily cash
balances held in self-directed accounts and corporate trust
deposits) which totaled $89 million at October 31, 2002
(2001 - $70 million) has contributed to the improved mix of
these deposits for the Bank.

CAPITAL FUNDS AND ADEQUACY

Table 7 – Capital Structure and Regulatory Ratios at Year End
($ thousands)

Tier 1 Capital

Retained earnings
Common shares

Total
Tier 2 Capital

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)

Branch generated deposits are generally considered to be more
stable and the Bank will continue to focus on achieving 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.

Branches

Agent

Wholesale

3,500

3,000

2,500

2,000

1,500

1,000

500

7
8

6
7
1
,
1

8
0
1
,
1

9
9
9
1

5
9

7
0
0
,
1

8
5
9

8
9
9
1

2
7

1
1
3

5
4
3
,
1

0
0
0
2

4
5

2
5
5

2
2
8
,
1

8
5

7
5
3

7
2
6
,
1

1
0
0
2

2
0
0
2

Deposits by Source ($ millions)

2002

2001

2002/2001
Increase
(decrease)

$ 132,884 $ 108,320 $

145,203
278,087

143,942
252,262

24,564
1,261
25,825

23,797
57,126
80,923
$ 359,010

21,454
67,126
88,580
$ 340,842 $

2,343
(10,000)
(7,657)
18,168

8.8%
2.6%
11.4%
10.9

9.3%
3.2%
12.5%
10.3

(0.5)%
(0.6)%
(1.1)%
0.6

(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 to a maximum of 0.875% of risk-weighted assets. At October 31, 2002, the Bank’s general allowance represents
0.76% (2001 – 0.79%) 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.

CWB 2002

Table 8 – Risk-weighted Assets
($ 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
Foreign exchange contracts
Equity contracts

Total
Total Risk-weighted Assets

(1) See Note 13 to the Consolidated Financial Statements for further details.
(2) Greater than one year only.
(3) See Note 17 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 weighting of 0% to 100% is assigned. Published
regulatory guidelines require banks to maintain a minimum
ratio of capital to risk-weighted assets and off-balance sheet
items of 8%, of which 4% must be core capital (Tier 1) and the
remainder 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 entirely 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 inclusion of the general allowance in Tier 2A
capital to a maximum of 87.5 basis points of risk-weighted
assets.

Capital funds are managed in accordance with 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 customer
deposits and to provide capacity for internally generated
growth and strategic opportunities that do not otherwise

CWB 2002

2002
Risk-
weighted
Balance

Balance

2001
Risk-
weighted
Balance

Balance

$ 187,877 $
345,619
3,248,747
45,919
$ 3,828,162

37,190
83,871
2,938,787
43,207
3,103,055

$ 232,808 $
268,420
2,886,640
51,700
$3,439,568

46,173
33,657
2,561,083
51,057
2,691,970

57,478
–
57,478

$ 707,000
836
14,225
$ 722,061

42,290
–
42,290

44,006
–
44,006

32,178
–
32,178

1,812
4
272
2,088
$ 3,147,433

$ 372,000
–
9,005
$ 381,005

1,650
–
189
1,839
$ 2,725,987

require accessing the public capital markets, while providing a
satisfactory return on equity for shareholders.

At October 31, 2002 the total capital adequacy ratio was 11.4%
(2001 – 12.5%) of which 8.8% (2001 – 9.3%) was Tier 1 capital.
Total regulatory capital increased $18.2 million over 2001 as a
result of:

• earnings, net of dividends, of $24.6 million;

• share capital of $1.3 million issued upon the exercise of

employee stock options;

• an increase of $2.3 million in the general allowance for credit

losses; offset by

• the redemption of two conventional debentures ($10.0 million).

Subordinated debentures include both convertible ($54.0
million) and conventional ($3.1 million) debentures. The terms
of the conventional debenture were renegotiated during the
year and the amended debenture will reach its five year
anniversary date during fiscal 2007. At the anniversary date, if
the debenture is not redeemed by the Bank or renegotiated,
the interest rate will change from fixed to floating and the
debenture will commence straightline amortization for capital
adequacy purposes over the final five year term to maturity.
During 2002, two conventional debentures were redeemed at
their face value plus accrued interest. Note 9 to the
Consolidated Financial Statements provides more information
on the terms of the debentures.

In each of January and July 2002, semi-annual dividends of
$0.20 per share were paid.

• ensuring that risks other than credit risk are identified and
assessed and appropriate policies are in place and effective;

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 share price appreciation and dividend yield.
Note 10 to the Consolidated Financial Statements details the
number of shares under option outstanding, the weighted
average exercise price and the amounts exercisable at year-
end.

RISK MANAGEMENT

OVERVIEW
Effective risk management is central to the ability to remain
financially sound and profitable and includes identifying,
assessing, managing and monitoring all forms of risk. The Bank
is exposed to several categories of risk including: strategic,
reputation, credit, liquidity, structural (asset/liability), market,
fiduciary and operational.

Senior management is 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 risks and risk
management policies is presented to the Board and/or Board
committees for review and assessment.

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.

The Asset Liability Committee (“ALCO”) provides the
management oversight related to risks other than credit 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

respecting management of risks.

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 CEO and the Audit Committee.

CREDIT RISK MANAGEMENT
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 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;

• delegated lending authorities which are clearly communicated
to personnel engaged in the credit granting process, a defined
approval process for loans in excess of those limits and the
review of larger credits by a senior management group prior
to recommendation to the Loans Committee of the Board;

CWB 2002

Environmental Risk
The operations of the Bank do not have a material effect on the
environment. However, a risk of default may occur if a borrower
is unable to repay loans due to environmental clean up costs.
The Bank may become directly liable for clean up costs when 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 upon quarterly to the Board.

Portfolio Quality
The Bank’s strategy is to 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 to 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. Over the
past several years the Bank has also participated in larger
investment grade credits
through
participation in selected syndications, which are generally led
by the major Canadian banks. In addition to being able to lend
to larger companies, this initiative has also provided a degree
of geographic diversification.

(corporate

loans)

Impaired Loans
Gross impaired loans decreased $0.4 million in 2002, a 1.1%
decrease. As shown in Table 9 gross impaired loans total
$35.1 million and represent 1.08% (2001-1.23%) of total
outstanding loans.

2002/2001
Increase
(decrease)
4,383
(4,170)
(616)
(403)
(0.15)%

2001
31,097 $

9,002
(4,619)
35,480 $
1.23%

2002
35,480
4,832
(5,235)
35,077 $
1.08%

• 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 single-unit residential mortgages);

• quarterly review of risk diversification by geographic area,
industry sector and product measured against assigned
portfolio limits;

• 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;

• independent reviews of credit valuation, risk classification
and credit management procedures by the internal audit
group which includes reporting the results to senior
management, the CEO and the Audit Committee;

• detailed quarterly reviews of accounts rated less than
satisfactory including establishment of an action plan for
each account; and

• completion of a watch list report recording accounts with
evidence of weakness, an impaired loan report covering loans
loss
which show
is possible.

impairment to the point where a

Table 9 – Change in Gross Impaired Loans
($ thousands)

Gross impaired loans, beginning of year
Net additions
Write-offs
Total
Gross Impaired Loans as a Percentage of Total Loans

CWB 2002

Impaired loans net of the allowance for credit losses have
decreased over the past year and represent 0.13% of net loans
outstanding, compared to 0.25% in 2001.

Going forward in 2003, the general trends within the portfolio
are not expected to experience a material adverse change.
Impaired loans will continue to be monitored closely to provide
early identification of any possible adverse trends.

Table 10 shows the year over year change to the allocation of
the allowance for credit losses to specific provisions by
category of impaired loans and to the general allowance for
credit risk.

Table 10 – Allowance for Credit Losses
($ thousands)

Specific Provisions

Consumer and personal
Real estate
Industrial
Other

General Allowance
Total

(1) Recoveries in 2002 totalled $142 (2001 – $19).

Allowance For Credit Losses
The allowance for credit losses consists of $7.2 million in
specific provisions and $23.8 million in the general allowance
for credit risk with the latter now representing 0.73% of gross
outstandings and 0.76% of risk-weighted assets. This compares
favourably with the Bank’s five year loan loss average of 0.22%
(ten year average – 0.28%) which is based 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% (ten year average – 0.21%).
The allowance as a percentage of gross impaired loans
(coverage ratio) has improved to 88.4% (2001 – 79.9%). 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 and ten year loan loss average. In addition, a
method of applying a progressive (increasing with higher risk)
loss ratio range against groups of loans of a common risk rating
is utilized to test the general allowance adequacy. The general

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

%
8
6

%
4
5

8
9
9
1

9
9
9
1

%
5
2

1
0
0
2

%
7
1

0
0
0
2

%
3
1

2
0
0
2

Net Impaired Loans as a Percentage
of Net Loans Outstanding

2001 Write-offs,
Ending
net of
Balance Recoveries(1)

Provision
for Credit
Losses

2002
Ending
Balance

443
2,533
1,816
2,113
21,453
28,358

486 $

1,572
1,798
1,237
–
5,093 $

324
388
2,093
2,591
2,344
7,740

281
1,349
2,111
3,467
23,797
31,005

allowance would be expected to increase in strong economic
times and decrease in weaker economic times as provisions are
allocated to specific credits.

Policies and methodology governing the management of the
general allowance are in place. During fiscal 2002 an expanded
system to risk rate loans was introduced to increase the
number of risk ratings from six to twelve levels and to provide
additional criteria to establish the ratings. The introduction of
the new risk ratings was the start of an ongoing developmental
process to better identify the risks within the loan portfolio and
thus enhance the evaluation of the adequacy of the general
allowance. Early results from the expanded risk rating system
have met expectations. Development of further methodology
to support the testing of the adequacy of the general allowance
will continue during fiscal 2003. A significant change to the
level of the general allowance is not anticipated based on this
expanded methodology, assuming no material change in the
portfolio’s credit quality.

CWB 2002

Provision for Credit Losses
For the year ended October 31, 2002, the provision for credit
losses represented 0.26% of average loans. The provision for
credit losses remains consistent with the five year average of
0.22%, reflecting the strong credit quality of the portfolio. The
industry trend for loan losses was much higher this year. The
Bank has no material exposure outside Canada or in the
telecommunications, high-tech or power generation sectors.

Diversification of Portfolio
Total Advances Based on Location of Borrower (also see Table 5)

The following table illustrates the diversification in lending operations by industry sector.

Table 11 – Total Advances Based on Industry Sector
(%) October 31
Real estate operations
Construction
Consumer loans and residential mortgages(1)
Transportation and storage
Oil and gas (production)
Hotel/motel
Manufacturing
Finance and insurance
Oil and gas (service)
Other services
Logging/forestry
Wholesale trade
Retail trade
Other
Total

(1) Residential mortgages in this table include only single-family properties.

(2) The Bank does not engage in direct lending to the agricultural sector.

%
4

6
8

%
9

9
7

%
4

8
8

100

%
1

8
% 6
7

8
4

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

Allowance for Credit Losses as
a Percentage of Gross Impaired Loans

2002

2001

25%
18
12
8
5
5
4
4
4
3
3
2
2
5
100%

20%
21
14
8
6
5
4
3
3
3
3
2
2
6
100%

CWB 2002

Alberta

British Columbia

Saskatchewan

Manitoba

Other

38 %

50 %

5 %

4 %

3 %

Geographical Distribution of Loans

%
6
2

%
3
2

%
1
2

%
2
2

%
8
1

0.28

0.24

0.20

0.16

0.12

0.08

0.04

0.00

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

Provision for Credit Losses as a Percentage
of Average Loans Outstanding
(5 year average 0.22%; 10 year average 0.28%)

Management of the loan portfolio includes the strategy of
focusing on areas of demonstrated lending expertise and
avoiding high concentrations in one geographic area or
industry sector. The Bank’s portfolio is well diversified with a
mix of corporate and personal business. Industrial lending units
are set up within branches or as stand alone operations, while
oil and gas production lending is conducted by specialists in the
Calgary market. In addition to these areas, the Bank also has
real estate divisions established in the major centres in which it
operates.

LIQUIDITY RISK
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;

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 forward four 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, 2002 is provided in Note 3 to the Consolidated
Financial Statements. A conservative policy is maintained in
this area with:

• nearly 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

• maintenance of a pool of high quality liquid assets;

management of the securities portfolio;

• 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.

• 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.

CWB 2002

Table 12 – Liquid Assets
($ 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

2002
1,928 $

2001
1,945 $

132,038
53,911
187,877

190,978
39,885
232,808

2002/2001
Increase
(decrease)
(17)
(58,940)
14,026
(44,931)

66,431
44,418
123,775
94,610
81,300
410,534

75,000
25,743
58,548
151,292
31,490
342,073

(8,569)
18,675
65,227
(56,682)
49,810
68,461
$ 598,411 $ 574,881 $
23,530
$ 3,828,162 $ 3,439,568 $ 388,594

15.6%

16.7%

(1.1)%

$ 3,429,071 $ 3,042,307 $ 386,764

17.5%

18.9%

(1.4)%

As shown in Table 12, liquid assets comprised of cash, interbank
deposits, items in transit, securities purchased under resale
agreements and marketable securities, totalled $598 million at
October 31, 2002, an increase of $24 million from October 31,
2001. Liquid assets represented 15.6% (2001 – 16.7%) of total
assets and 17.5% (2001 – 18.9%) of total deposit liabilities at
that date.

Highlights of the composition of liquid assets at October 31,
2002 follow:

• maturities within one year total 79% (2001 – 71%) of liquid

assets or $473 million (2001 – $407 million);

• Government of Canada and provincial debt securities made

up 44% (2001 – 41%) of liquid assets;

• deposits with regulated financial institutions including
Bankers’ Acceptances were 22% (2001 – 33%) of liquid
assets; and

• marketable securities now comprise 14% (2001 – 5%) of
liquid assets and have increased in response to the interest
rate environment and the beneficial tax treatment of
dividends on preferred shares.

Included in liquid assets are securities purchased under resale
agreements. These are short-term advances, typically no more
than a few days in duration, to securities dealers and require
the dealer to repurchase the securities comprised of treasury
bills or other high quality liquid securities.

Short-term uncommitted facilities have been arranged with a
number of financial institutions. The expansion of such
facilities will continue to be pursued as an additional liquidity
safeguard. The government insured/guaranteed mortgage and
loan portfolios also represent a potential source of liquidity.

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.

CWB 2002

Table 13 – Deposit Maturities Within One Year
($ millions)

October 31, 2002
Demand deposits
Notice deposits
Deposits payable on a fixed date
Total

October 31, 2001 Total

Table 14 – Total Deposit Maturities
($ millions)

October 31, 2002
Demand deposits
Notice deposits
Deposits payable on a fixed date
Total

October 31, 2001 Total

Within
1 Month

1 to 3
Months

116 $
438
414
968 $

– $
–
274
274

3 Months Cumulative
to 1 Year Within 1 Year
116
– $
438
–
1,679
991
2,233
991

925

202

832 $

1,959

Within
1 Year

116 $
438
1,679
2,233 $

1 to 2
Years

2 to 3
Years

3 to 4
Years

4 to 5
Years

– $
–
551
551 $

– $
–
286
286 $

– $
–
228
228 $

– $

131
131 $

Total
116
438
2,875
3,429

1,959 $

402 $

339 $

156 $

186 $

3,042

A breakdown of deposits by source is provided under the
heading Deposits. Target
limits by source have been
established as part of the overall liquidity policy and are
monitored to ensure an acceptable level of diversification in
sources of funding is maintained. The Bank continues to
aggressively pursue deposits through its branch network as a
core funding source. However, the total dollar value of agent-
generated deposits will likely continue to increase even though
the goal is to decrease funding from this source as a
percentage of total deposit liabilities. CWT raises new deposits
mainly through notice accounts comprised primarily of cash
balances held in self-directed accounts and corporate trust
deposits and through the Bank’s branch network. At October
31, 2002, the trust’s notice account balances totalled $89.0
million (2001 – $70.0 million) and $64.5 million (2001 – $50.0
million) of CWT deposits had been raised via the Bank’s branch
network.

MARKET RISK
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, arbitrage or
proprietary trading. The Bank’s material market risks are
confined to interest rates and foreign exchange as discussed
below.

Interest Rate Risk
Interest rate risk or sensitivity can be defined as the impact on
net interest income, both current and future, resulting from a
change in market interest rates. This risk and potential
variability in earnings arises primarily when cash flows
associated with interest sensitive assets and liabilities have
different repricing dates. The differentials, or interest rate
gaps, arise as a result of the financial intermediation process
and reflect differences in term preferences on the part of
borrowers and depositors.

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 result in 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.

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.

CWB 2002

Exposure to interest rate risk is controlled by managing the
size of the static gap positions between interest sensitive
assets and interest 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 – Asset Liability Gap Positions
($ millions)

Table 15 shows the consolidated gap position at October 31,
2002 for selected time intervals. Comparative summary figures
are given at October 31, 2001. Figures in brackets represent an
excess of liabilities over assets or a negative gap position.

October 31, 2002
Assets
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
Cumulative Gap as a

Percentage of Total Assets

October 31, 2001
Total assets
Total liabilities and equity
Interest Rate Sensitive Gap
Cumulative Gap
Cumulative Gap as a

$
$

1 Year to
5 Years

Over
5 Years

Non-
interest
Sensitive

– $

61 $

Floating Rate
and Within
1 Month

1 to 3
Months

3 Months
to 1 Year

23 $
12
1,697
–
10
1,742

968
–
–
–
721
1,689

49 $
47
146
–
35
277

274
–
–
–
–
274

55 $

161
446
–
405
1,067

991
–
50
–
–
1,041

Total
Within
1 year

127 $
220
2,289
–
450
3,086

2,233
–
50
–
721
3,004

112
979
–
271
1,362

1,196
–
7
–
–
1,203

53 $
53 $

3 $
56 $

26 $
82 $

82 $
82 $

159 $
241 $

Total

188
346
3,249
46
721
4,550

3,429
65
57
278
721
4,550
–
–

13
10
–
–
23

–
–
–
–
–
–
23 $
264 $

1
(29)
46
–
79

–
65
–
278
–
343
(264) $
– $

1.2%

1.8%

5.3%

5.8%

–

1,580 $
1,306

274 $
274 $

216 $
202

14 $
288 $

665 $
845
(180) $
108 $

2,461 $
2,353

108 $
108 $

1,260 $
1,137

123 $
231 $

29 $
–
29 $
260 $

71 $

331
(260) $
– $

3,821
3,821
–
–

Percentage of Total Assets

7.2%

7.5%

2.8%

6.0%

6.8%

–

Notes:
(1) Accrued interest is excluded in calculating interest sensitive assets and liabilities.
(2) 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. 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 measurement of interest
rate sensitive gaps at a specific time. These gaps can change
significantly in a short period of time. The impact of changes in
market interest rates on earnings will depend upon the
magnitude and rate of change in interest rates as well as the
size and maturity structure of the cumulative interest rate gap
position and management of those positions over time.

During the year, the one year and under cumulative gap
decreased from 2.8% to 1.8% and the one month and under
gap decreased from 7.2% to 1.2%. Over the course of the year,
the positive gaps for the periods under one year were reduced
in order to lessen the impact of falling interest rates and the
relatively steep yield curve. Gaps remained positive, however,
and the Bank’s asset/liability position is expected to continue
such that rising interest rates would tend to increase net
interest income.

CWB 2002

Of the $1,679 million in fixed term deposit liabilities maturing
within one year from October 31, 2002, approximately $1,022
million (30% of total deposit liabilities) mature by April 30,
2003. The term in which maturing deposits are retained will
have an impact on the future asset liability structure and hence
interest rate sensitivity. Approximately $138 million of the fixed

term deposit liabilities maturing within one month are floating
rate redeemable deposits with a one year contractual maturity
redeemable without penalty at any time.

The effective interest rates for each class of financial asset and
liability, including off-balance sheet instruments, are shown in
Table 16.

Table 16 – Weighted Average Effective Interest Rates
(%)

October 31, 2002
Assets
Cash resources
Securities
Loans
Off-Balance sheet swaps
Total
Liabilities
Deposits
Debentures
Off–Balance sheet swaps
Total
Interest Rate Sensitive Gap

October 31, 2001
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

2.8%
2.7
5.3
2.6
5.4

1.7
–
2.8
2.2
3.2%

5.2%
2.5
2.7%

2.7%
4.0
4.7
3.6
4.7

3.8
–
–
3.8
0.9%

6.1%
4.8
1.3%

3.1%
4.0
4.9
3.4
4.9

3.8
5.5
–
3.9
1.0%

6.4%
4.9
1.5%

2.9%
3.6
5.1
3.4
5.1

2.9
5.5
2.8
2.9
2.2%

5.6%
3.6
2.0%

–%

5.3
6.5
4.3
6.5

5.0
6.2
–
5.0
1.5%

7.1%
5.5
1.6%

6.3
7.5
–
6.8

–
–
–
–
6.8%

6.6%
–
6.6%

2.9%
4.3
6.2
3.7
5.6

3.6
5.6
2.8
3.5
2.1%

6.1%
4.2
1.9%

The estimated sensitivity of net interest income to a change in
interest rates is presented in Table 17. The amounts represent
the estimated change in net interest income over the time
period shown resulting from a one percentage point change in
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;

• interest rate changes affect interest sensitive assets and
liabilities by the same amount and are applied at the
appropriate repricing dates; and

• no early redemptions.

The interest sensitivity of the portfolio decreased in both
absolute dollar terms and as a percentage of estimated future
net interest income during the year.

CWB 2002

2002
305
1,842

2001
678
2,353

1.8%

2.8%

The Bank’s strategy to minimize and manage operational risk
includes:

• a knowledgeable and experienced management team that is

committed to the risk management policies;

• regular meetings of the Operations Committee, a management
committee made up of supervisory and management personnel
from all operational areas and chaired by a member of senior
management, which is responsible for 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;

• centralized reporting of operating losses for risk assessment;

• 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 shareholders’ auditors report annually on the
internal controls over
efficiency and effectiveness of
significant risk areas and provide their report to the Audit
Committee. The Bank also maintains appropriate insurance
coverage through a financial institution bond policy.

Table 17 – Estimated Sensitivity of Net Interest Income
As a Result of a One Percentage Point Change in Interest Rates
($ thousands)

Period
90 days
1 year
1 year percentage change

It is management’s intention to continue to manage 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
Derivative Financial Instruments). Assets and liabilities having
a term to maturity in excess of five years are subject to specific
review and control. With the exception of the subordinated
debentures, such items were not material as at October 31,
2002. The subordinated debentures are discussed in Note 9 to
the Consolidated Financial Statements.

Foreign Exchange Risk
In providing financial services to its customers, the Bank has
assets and liabilities denominated in U.S. dollars. At October 31,
2002, assets denominated in U.S. dollars were 0.6% (2001
– 0.7%) of total assets and U.S. dollar liabilities were 0.7%
(2001 – 0.8%) of total liabilities. Currencies other than U.S.
dollars are not bought or sold other than to meet specific
customer needs and therefore, the Bank has virtually no
exposure to currencies other than 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.

OPERATIONAL RISK
Operational risk is inherent in all business activities. It is the
potential for loss as a result of external events, human error or
inadequacy or failure of processes, procedures or controls. Its
impact can be financial loss, loss of reputation, loss of
competitive position or regulatory penalties. The Bank is
exposed to operational risk from internal business activities
and from activities that are outsourced. The financial measure
of operational risk is actual losses incurred. No material losses
occurred in 2002 or 2001.

CWB 2002

DERIVATIVE FINANCIAL IINSTRUMENTS

More detailed information on the nature of off-balance sheet derivative financial instruments is shown in Note 17 to the Consolidated
Financial Statements.

Table 18 – Derivative Financial Instruments
($ thousands)

Notional Amounts

Interest rate contracts(1)
Foreign exchange contracts(2)
Equity contracts(3)

Total

2002

2001

$ 707,000
836
14,225
$ 722,061

372,000
–
9,005
$ 381,005

(1) Interest rate swaps are used as hedging devices to control interest rate risk. The outstanding swaps mature between November 2002 and October 2007. The
total gross positive replacement cost of interest rate swaps was $7,476 (2001 – $7,317). This market value represents an unrealized gain, or the payment the
Bank would receive if these contracts were unwound and settled at that date.

(2) 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, 2002

there were US$0.5 million (2001 – nil) forward foreign exchange contracts outstanding which mature in November and December 2002.

(3) 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 March 2007. The total gross positive replacement cost is $223 (2001 – $225).

The use of interest rate contracts has increased in the past
year in an effort to manage the Bank’s short-term positive gap
position and fund the floating rate loans preferred by
customers. Continued use of interest rate swaps or other off-
balance sheet hedging instruments is expected in the future
for the purpose of asset liability structuring and management
of interest rate risk. The Bank only enters into these off-
balance sheet derivative financial instruments for its own
account and does not act as an intermediary in this market.
Transactions are entered into on the basis of industry standard
contracts with approved counterparties subject to periodic and
at least annual review. Policies regarding the use of off-balance
sheet financial instruments are approved, reviewed, and
monitored on a regular basis by ALCO and reviewed and
approved by the Board of Directors at least annually.

TRUST ASSETS UNDER ADMINISTRATION

Trust assets administered by CWT are not reflected in the
(see also Note 14 to
Consolidated Balance Sheet
the Consolidated Financial Statments). They totalled
approximately $1,166 million at October 31, 2002 (2001 – $874
million). These assets are primarily in self-directed RRSPs and
RRIFs. Trust assets under administration are held in 14,674
accounts (2001 – 12,814), an increase of 15% from one year
ago. Assets under administration and the related fee income
are expected to increase in 2003.

4
7
6
,
4
1

4
1
8
,
2
1

8
6
4
,
1
1

15,000

12,000

9,000

6,000

3,000

7
0
0
,

7 9
4
8
,
6

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

Number of Self-directed Accounts

CWB 2002

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 including the requirements of the Bank
issued by the
Act and related rules and regulations
Superintendent of Financial Institutions Canada.

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, assets are safeguarded and 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 shareholders’ 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, including management’s
analysis of operations and
financial condition, and
recommending them to the Board of Directors for approval.
Other key responsibilities of the Audit Committee include
meeting with management, the Chief Inspector and the
shareholders’ auditors to discuss the effectiveness of internal
controls over the financial reporting process and the planning
and results of the external audit. The Committee also meets
regularly with the Chief Inspector and the shareholders’
auditors without management present.

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 independent auditors appointed by
the shareholders of the Bank, have performed an audit of the
consolidated financial statements and their report follows. The
shareholders’ auditors have full and free access to, and meet
periodically with, the Audit Committee to discuss their audit
and matters arising therefrom.

“Larry M. Pollock”

“Tracey C. Ball”

Larry M. Pollock
President and Chief Executive Officer
November 29, 2002

Tracey C. Ball, C.A.
Senior Vice President and Chief Financial Officer

CWB 2002

AUDITORS’ REPORT

TO THE SHAREHOLDERS OF CANADIAN WESTERN BANK
We have audited the Consolidated Balance Sheet of Canadian
Western Bank as at October 31, 2002 and 2001 and the
Consolidated Statements of Income, Changes in Shareholders’
Equity and Cash Flow for the years then ended. These
consolidated financial statements are the responsibility of the
Bank’s management. Our responsibility is to express an opinion
on these consolidated 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, 2002 and 2001 and the results of its
operations and its cash flow for the years then ended in
accordance with Canadian generally accepted accounting
principles including the accounting requirements of the
Superintendent of Financial Institutions Canada.

“Deloitte & Touche LLP”

Deloitte & Touche LLP
Chartered Accountants
Edmonton, Alberta
November 29, 2002

CWB 2002

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 or municipality
Other securities

Loans (net of allowance for credit losses)

Securities purchased under resale agreements
Residential mortgages
Other

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

Total Liabilities and Shareholders’ Equity

2002

2001

1,928 $

132,038
53,911
187,877

174,409
88,394
82,816
345,619

1,945
190,978
39,885
232,808

118,549
117,034
32,837
268,420

66,431
602,107
2,580,209
3,248,747

75,000
552,585
2,259,055
2,886,640

(Note 3)

(Notes 4 & 5)

(Note 6)
(Note 7)

13,749
32,170
45,919

16,014
35,686
51,700
$ 3,828,162 $ 3,439,568

$ 115,783 $
438,231
2,875,057
3,429,071

78,562
370,566
2,593,179
3,042,307

63,878

77,873

3,126
54,000
57,126

13,126
54,000
67,126

145,203
132,884
278,087

143,942
108,320
252,262
$ 3,828,162 $ 3,439,568

(Note 8)
(Note 9)

(Note 10)

“Jack C. Donald”

“Larry M. Pollock”

Jack C. Donald
Chairman

Larry M. Pollock
President and Chief Executive Officer

CWB 2002

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

Earnings Per Common Share

Basic
Diluted

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended October 31
($ thousands)

Capital Stock
Balance at beginning of year
Common shares issued

Balance at end of year
Retained Earnings
Balance at beginning of year

Net income
Dividends
Share issue costs (2001 net of income taxes of $534)

Balance at end of year
Total Shareholders' Equity

2002

2001

$ 193,997 $ 210,668
14,319
8,906
233,893

10,893
3,565
208,455

115,913
3,707
119,620
88,835
7,740
81,095

11,050
3,944
3,206
3,936
22,136
103,231

34,585
10,829
10,574
1,527
57,515
45,716
16,104
29,612 $

144,404
3,988
148,392
85,501
6,096
79,405

10,262
3,397
2,252
3,847
19,758
99,163

30,469
10,084
10,150
1,878
52,581
46,582
16,437
30,145

2.34 $
2.14 $

2.51
2.26

(Note 5)

(Note 11)

(Note 12)

(Note 2)

$
$

2002

2001

(Note 10)

$ 143,942
1,261
145,203

$ 111,342
32,600
143,942

(Note 10)

108,320
29,612
(5,048)
–

132,884
$ 278,087

83,253
30,145
(4,273)
(805)
108,320
$ 252,262

CWB 2002

CONSOLIDATED STATEMENT OF CASH FLOW
For the year ended October 31
($ thousands)

Cash Flows from Operating Activities

Net income
Adjustments to determine net cash flows:

Provision for credit losses
Depreciation and amortization
Future income taxes, net
Gain on sale of securities, net
Accrued interest receivable and payable, net
Current income taxes payable, net
Other items, net

Cash Flows from Financing Activities

Deposits, net
Debenture redemption
Dividends
Common shares issued, net of issue costs

Cash Flows from Investing Activities

Loans, net
Interest bearing deposits with regulated financial institutions, net
Securities, net
Land, buildings and equipment, net

Increase (Decrease) 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 10)

2002

2001

29,612 $

30,145

7,740
3,110
(31)
(2,385)
(5,600)
(5,256)
480
27,670

386,764
(10,000)
(5,048)
1,261
372,977

6,096
3,279
8,126
(2,328)
92
8,027
(5,376)
48,061

314,498
–
(4,273)
31,261
341,486

(369,847)
62,999
(74,814)
(917)
(382,579)
18,068
43,452
61,520 $

(332,644)
(22,441)
(34,676)
(4,354)
(394,115)
(4,568)
48,020
43,452

$ 187,877
126,357
61,520

$ 232,808
189,356
43,452

$ 126,184
21,253
$

$ 146,618
2,190
$

CWB 2002

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2002
($ thousands, unless otherwise stated)

1. SIGNIFICANT ACCOUNTING POLICIES

b) Securities

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
Canadian 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.

The preparation of financial statements in conformity with
Canadian generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses
during the year. Actual results could differ from those
estimates.

a) Basis of Consolidation

The consolidated financial statements include the assets,
liabilities and results of operations of the Bank and all of its
intercompany
subsidiaries, after
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.

the elimination of

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 recorded in other assets.
On November 1, 2001, the accounting for goodwill and other
identifiable intangible assets was changed as required by the
Canadian
Institute of Chartered Accountants revised
accounting standard. Under the new standard, goodwill is no
longer amortized to income over time and is subject to a
periodic impairment review to ensure that the fair value
remains greater than, or equal to, book value. Any excess of
book value over fair value is charged to the Consolidated
Statement of Income in the period in which the impairment
occurred. This standard was adopted prospectively but the
Bank has no recorded goodwill or other identifiable intangible
assets so there was no impact.

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 and preferred shares are stated at amortized
cost and other equity securities are stated at cost or, if the
value is permanently impaired, at net realizable value. Gains
and losses realized on disposal of securities and adjustments to
record any permanent impairment in value are included in
other income. 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) Loans

Loans are stated net of unearned income, unamortized
premiums 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

CWB 2002

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) Allowance for Credit Losses

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 adequacy of the allowance for
credit losses is reviewed at least quarterly. 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 identified
impaired loans required to reduce the carrying value of those
loans to their estimated realizable amount. 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.

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) Securities Purchased Under Resale Agreements

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.

Land, Buildings and Equipment
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.

g) Translation of Foreign Currencies

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) Loan Fees

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.

CWB 2002

Income Taxes
The Bank follows the asset and liability method of accounting
for income taxes whereby current income taxes are recognized
for the estimated income taxes payable for the current year.
Future tax assets and liabilities represent the cumulative
amount of tax applicable to temporary differences between the
carrying amount of the assets and liabilities, and their values
for tax purposes. Future tax assets and liabilities are measured
using enacted or substantively enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Changes in
future income taxes related to a change in tax rates are
recognized in income in the period of the tax rate change. All
future income tax assets are expected to be realized in the
normal course of operations.

Stock Option Plans
The Bank has stock option plans which are described in Note 10.
The Bank currently follows the intrinsic value method of
accounting for stock options and no expense is recognized
when stock options are issued to the employees. Any
consideration paid by employees on exercise of stock options is
credited to share capital on the Consolidated Balance Sheet. All
options granted on or after November 1, 2002 will be
accounted for using the fair value method. The fair value of the
future grants, determined from an option pricing model, will be
recognized over the applicable vesting period as compensation
expense in the Consolidated Statement of Income with an
offsetting credit to shareholders’ equity in the Consolidated
Balance Sheet.

Derivative Financial Instruments
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.
interest receivable/payable and deferred
Net accrued
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) Earnings per Common Share

Basic earnings per common share is calculated based on the
average number of common shares outstanding during the
year. Diluted earnings per share is calculated based on the
treasury stock method which assumes that any proceeds from
the exercise of in-the-money stock options would be used to
purchase the Bank’s common shares at the average market
price during the year. Convertible debentures are assumed to
be converted into common shares at the beginning of the year,
or at the date the debenture was issued if later, and all related
income statement charges are added back to earnings.

m) Employee Future Benefits

All employee future benefits are accounted for on an accrual
basis.

2. CHANGE IN ACCOUNTING POLICY – EARNINGS PER COMMON SHARE
Effective November 1, 2001, the Bank adopted the new
accounting standard on earnings per share as required by the
Canadian Institute of Chartered Accountants and described in
Note 1(k). The new standard requires the use of the treasury
stock method, whereby the proceeds received from the
exercise of stock options are assumed to be used to repurchase
shares. Prior to November 1, 2001, the imputed earnings
method of calculating diluted earnings per share was used
which assumed that exercise proceeds were invested to earn a
return.

The new method was applied retroactively with restatement of
the prior year. Under the previous method, diluted earnings per
share were $0.05 higher for the year ended October 31, 2001.

CWB 2002

3. SECURITIES

The analysis of securities at carrying value, by type and maturity is as follows:

Securities Issued or Guaranteed by:

Canada
A province or municipality

Other Debt Securities
Floating rate notes
Other debt
Equity Securities

Preferred shares
Other equity

Total(1)

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

Maturities

Within
1 Year

Over 1
to 3 Years

Over 3
to 5 Years

Over 5
Years

2002
Total
Book Value

2001
Total
Book Value

$ 131,090 $
37,103

18,833 $
22,776

17,646 $
28,515

6,840 $ 174,409 $ 118,549
117,034
88,394

–

–
14,553

36,175
–

$ 218,921 $

–
–

1,000
–

1,000
14,553

1,000
–

4,632
–
46,241 $

19,346
–
65,507 $

6,594

31,490
347
14,950 $ 345,619 $ 268,420

66,747
516

516(2)

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

2002

2001

Book
Value

Unrealized
Gains

Unrealized
Losses

Estimated
Market
Value

Book
Value

Unrealized
Gains

Unrealized
Losses

Estimated
Market
Value

$ 174,409 $
88,394

1,367 $
1,440

1,000
14,553

66,747
516

$ 345,619 $

–
1

628
70
3,506 $

15 $ 175,761 $ 118,549 $

–
4

268
–

89,831

117,034

1,000
14,550

67,107
586

1,000
–

31,490
347

290 $ 348,835 $ 268,420 $

1,169 $
4,554

1 $ 119,717
121,588
–

–
–

1,000
–

29
26
5,778 $

148
–

31,371
373
149 $ 274,049

Securities Issued or
Guaranteed by:
Canada
A province or municipality

Other Debt Securities
Floating rate notes
Other debt
Equity Securities

Preferred shares
Other equity

Total

4. LOANS

Outstanding gross loans and impaired loans, net of allowances for credit losses, are as follows:

2002

2001

Gross
Amount

Gross
Impaired
Amount

Specific
Allowance

Net
Impaired
Loans

Gross
Amount

Gross
Impaired
Amount

Specific
Allowance

Net
Impaired
Loans

66,431 $

395,900
1,230,756
521,619
1,065,046
$ 3,279,752 $

– $

75,000 $

– $

1,427
6,424
11,459
15,767
35,077 $

281
1,349
2,111
3,467
7,208

401,153
1,003,148
509,640
926,057

1,146
5,075
9,348
12,300
27,869 $ 2,914,998 $
(23,797)

2,369
16,483
6,120
10,508
35,480 $

443
2,533
1,816
2,113
6,905

–
1,926
13,950
4,304
8,395
28,575
(21,453)

4,072

7,122

Securities purchased under

resale agreements
Consumer and personal
Real estate
Industrial
Other
Total
General allowance(1)
Net impaired loans after
general allowance

(1) The general allowance for credit risk is available for the total loan portfolio.
(2) Impaired loans include foreclosed real estate assets held for sale with a gross carrying value of $11 (2001 – $826) and a related specific allowance of nil

(2001 – $146).

CWB 2002

At October 31, 2002 other past due loans totalled $29 (2001 –
$nil). 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 $1,460 (2001 – $1,320).

5. ALLOWANCE FOR CREDIT LOSSES

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

Balance at beginning of year
Provision for credit losses
Write-offs
Recoveries
Balance at end of year

2002
General
Specific Allowance for
Credit Risk

Provisions

6,905 $
5,396
(5,235)
142
7,208 $

21,453 $

2,344
–
–
23,797 $

2001
General
Specific Allowance for
Credit Risk

Provisions

5,947 $
5,558
(4,619)
19
6,905 $

20,915 $
538
–
–
21,453 $

Total
28,358 $

7,740
(5,235)
142
31,005 $

Total
26,862
6,096
(4,619)
19
28,358

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

6. LAND, BUILDINGS AND EQUIPMENT

Land
Buildings
Equipment and furniture
Leasehold improvements
Total

Cost
2,624
3,021
16,685
8,928
31,258

Depreciation and amortization for the year amounted to $3,110 (2001 – $3,085)

Accumulated
Depreciation and
Amortization
–
2,014
11,344
4,151
17,509

2002
Net Book
Value
2,624
1,007
5,341
4,777

13,749 $

2001
Net Book
Value
2,753
1,242
6,467
5,552
16,014

7. OTHER ASSETS

Accrued interest receivable
Future income tax asset
Prepaid expenses
Accounts receivable
Deferred financing costs(1)
Taxes receivable
Other
Total

(Note 11)

2002
13,974
6,669
6,419
2,192
884

–

2,032
32,170

2001
14,938
6,777
6,254
3,389
1,047
1,385
1,896
35,686

(1) The Consolidated Statement of Income includes amortization of deferred financing costs in interest expense of $150 (2001 - $150) and in other expenses of

$13 (2001 – $13).

CWB 2002

8. OTHER LIABILITIES

Accrued interest payable
Taxes payable
Accounts payable
Deferred revenue
Future income tax liability
Other
Total

9. SUBORDINATED DEBENTURES

2002
52,826
5,346
4,345
545
223
593
63,878

2001
59,391
11,987
5,087
708
362
338
77,873

(Note 11)

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)
CIC Industrial Interests Inc.

(an agency of the Province of Saskatchewan)(2)

The Province of Alberta(3)
CLIC Investments (Canada) Inc.(3)

Convertible
5.50% convertible debentures(4)
Crown Life Insurance Company(5)

Total

Interest
Rate

Maturity
Date

2002

2001

6.850% June 30, 2012
6.660% March 31, 2007
6.415% July 31, 2007

5.500% March 31, 2008
5.700% July 31, 2009

3,126 $

-
-

3,126

50,000
4,000
54,000
57,126 $

3,126
5,000
5,000
13,126

50,000
4,000
54,000
67,126

(1) Each of the conventional debentures had an original ten year term with a fixed interest rate for the first five years. Thereafter, unless the terms are amended
or the debenture is redeemed by the Bank, interest will be payable at a rate equal to the Canadian Dollar CDOR 90 day Bankers’ Acceptance Rate plus 1%.
(2) On June 30, 2002, the fixed interest rate was amended to 6.85% from 6.59% effective August 1, 2002 to July 31, 2007 and the term was extended to

June 30, 2012 from June 30, 2007.

(3) During the year, these conventional debentures were redeemed by the Bank, with OSFI’s approval, at face value plus accrued interest on their five year

anniversary.

(4) 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.

(5) 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).

CWB 2002

10. CAPITAL STOCK
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 exercise of options
Issued on equity offering
Outstanding at end of year

On April 3, 2001, the Bank completed an issue of 1,100,000
common shares. Gross cash proceeds totalled $29,425 and
$805 was charged to retained earnings for share issue
expenses, net of future income taxes.

The Bank has subordinated debentures which are convertible to
common shares of the Bank as more fully described in Note 9.

Options
Balance at beginning of year

Granted
Exercised
Forfeited

Balance at end of year

Exercisable at end of year

2002

2001

Number
of Shares

Amount

Number
of Shares

Amount

12,560,348
99,024
–

$ 143,942
1,261
–
12,659,372 $ 145,203

11,216,416 $ 111,342
3,175
29,425
12,560,348 $ 143,942

243,932
1,100,000

The Bank also has authorized 1,167,849 common shares
(2001 – 1,126,873) for issuance under option plans. Of the
amount authorized, options exercisable into 1,129,815 shares
(2001 – 1,077,783) are issued and outstanding. The options
generally vest within two years and 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. All options expire within
ten years of date of grant. Outstanding options expire on dates
ranging from June 2003 to December 2007. The details of and
changes in the issued and outstanding options follow:

2002

2001

Weighted
Average
Exercise
Price
17.56
26.81
12.74
18.59
19.28

Weighted
Average
Exercise
Price
14.28
25.50
13.02
17.94
17.56

Number
of Options
1,039,870
289,445
(243,932)
(7,600)
1,077,783 $

Number
of Options
1,077,783
159,806
(99,024)
(8,750)
1,129,815

658,609 $

15.74

389,669 $

14.67

Further details relating to stock options outstanding and exercisable follow:

Range of exercise prices
$8.73 to $10.25
$12.93 to $16.01
$18.18 to $20.44
$23.43 to $24.79
$26.12 to $28.23

Options Outstanding

Options Exercisable

Weighted
Average
Remaining
Contractual
Life (years)
1.8
3.8
3.7
2.7
3.3
3.2 $

Weighted
Average
Exercise
Price
10.12
13.12
19.00
24.61
26.47
19.28

Weighted
Average
Exercise
Price
10.12
13.12
19.15
24.62
–
15.74

Number of
Options
210,843 $
156,871
180,550
110,345
0

658,609 $

Number of
Options
210,843
156,871
315,700
119,345
327,056
1,129,815

CWB 2002

11. INCOME TAXES

Income taxes consist of the following:

Consolidated Statement of Income

Current
Future

Future federal and provincial tax rate reductions
Provision for income taxes

Shareholders’ Equity

Income tax benefit related to share issue expenses

Total income taxes

2002

2001

16,135
(31)
16,104
–
16,104

8,311
6,876
15,187
1,250
16,437

–
16,104

(534)
15,903

A reconciliation of the 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:

Combined Canadian federal and provincial income taxes

and statutory tax rate

Increase (decrease) arising from:

Unclaimed tax deductions from prior years
Tax-exempt income
Deferred revenue from unclaimed deductions for tax
Large corporations tax

Other

Future federal and provincial tax rate reductions(1)
Provision for income taxes and effective tax rate

2002

2001

18,401

40.3% $

20,341

43.7 %

(2,059)
(1,422)
–

308
876
16,104
–
16,104

(4.5)
(3.1)
–
0.7
1.8
35.2
–
35.2% $

–
(281)
(4,100)
444
(1,217)
15,187
1,250
16,437

–
(0.6)
(8.8)
1.0
(2.6)
32.7
2.7
35.4%

(1) Future federal and provincial tax rate reductions represent the write-down of future income tax assets to reflect corporate income tax rate reductions enacted

for accounting purposes.

Future income tax balances are comprised of the following:

Net Future Income Tax Asset
Allowance for credit losses
Other temporary differences

Net Future Income Tax Liability of Subsidiary

Allowance for credit losses
Other temporary differences

2002

2001

8,577 $
(1,908)
6,669 $

8,122
(1,345)
6,777

(374) $
597
223 $

(288)
650
362

The Bank has approximately $11,840 (2001 - $11,796) of capital losses which are available to apply against future capital gains and
have no expiry date. The tax benefit of these losses has not been recognized in income.

CWB 2002

12. EARNINGS PER COMMON SHARE

The calculation of earnings per common share is as follows:

Numerator

Net income - basic
Dilutive instrument:

Conversion of debentures(1)

Net income - diluted

Denominator

Weighted average number of common shares outstanding - basic
Dilutive instruments:

Conversion of debentures
Employee stock options(2)

Weighted average number of common shares outstanding – diluted

Earnings per Common Share

Basic
Diluted

2002

2001

29,612 $

30,145

2,010

31,622 $

2,036
32,181

(Note 9)

12,628,938

12,000,926

1,799,344
341,075
14,769,357

1,799,344
467,395
14,267,665

$
$

2.34 $
2.14
$

2.51
2.26

(1) Net income is adjusted by the incremental net of tax earnings as if the convertible debentures were converted into common shares at the beginning of the

year.

(2) The denominator excludes those employee stock options where the exercise price is greater than the average market price.

13. CONTINGENT LIABILITIES AND COMMITMENTS

a) Credit Instruments

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

2002

2001

57,478
613,098
$ 670,576

44,006
556,383
$ 600,389

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 includes undrawn availability
under lines of credit and commercial operating loans of $266
million (2001 – $239 million) and recently authorized but
unfunded loan commitments of $347 million (2001 – $317
million). 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 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. 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.

CWB 2002

b) Lease Commitments

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:

2003
2004
2005
2006
2007
2008 and thereafter
Total

4,240
4,162
3,718
3,631
3,327
8,892
27,970

14. TRUST ASSETS UNDER ADMINISTRATION

Trust assets under administration of $1,166,489 (2001 – $873,538) 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.

15. RELATED PARTY TRANSACTIONS

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 $20,969 (2001 – $18,086).

16. FAIR VALUE OF FINANCIAL INSTRUMENTS

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, 2002 and 2001 there were no financial

instruments held for trading purposes.

CWB 2002

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

2002

2001

Book Value

Fair Value

Fair Value
Over(Under)
Book Value

Book Value

Fair Value

Fair Value
Over(Under)
Book Value

(Note 3)

$ 187,877 $ 187,877 $

– $ 232,808 $ 232,808 $

345,619
3,246,033
18,198

348,835
3,258,458
18,198

3,428,634
62,693
57,126

3,472,306
62,693
58,031

3,216
12,425
–

43,672
–
905

268,420
2,882,636
19,474

274,049
2,907,653
19,474

3,042,307
76,610
67,126

3,091,461
76,610
69,729

–
5,629
25,017
–

49,154
–
2,603

Assets

Cash resources
Securities
Loans(1)
Other assets(2)

Liabilities

Deposits(1)
Other liabilities(3)
Subordinated debentures

Derivative Financial Instruments

Net asset

(Note 17)

6,707

6,807

The table does not include assets and liabilities that are not considered financial instruments, such as land, buildings and equipment.
(1) Loans and deposits exclude deferred premiums which are not financial instruments.
(2) Other assets exclude future income tax asset, prepaid expenses, financing costs and other items which are not financial instruments.
(3) Other liabilities exclude future income tax liability, deferred revenue and other items which are not financial instruments.
(4) 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 Discussion and 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 3. 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
is estimated by discounting
the expected future cash flows of these loans at current
market rates for loans with similar terms and risks;

loans, fair value

• 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 terms;
and

• the fair values of subordinated debentures 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.

CWB 2002

17. DERIVATIVE FINANCIAL INSTRUMENTS

The Bank enters into off-balance sheet 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.

2002
Future
Replace-
ment
Credit
Cost Exposure Equivalent

Credit

Risk-
Risk weighted Notional
Balance Amount

Notional
Amount

2001
Future
Replace-
ment
Credit
Cost Exposure Equivalent

Credit

Risk-
Risk weighted
Balance

$707,000 $
14,225

7,476 $ 1,585 $

223

1,138

9,061 $
1,361

1,812 $372,000 $ 7,317 $

272

9,005

225

935 $
720

8,252 $
945

1,650
189

836

$ 722,061 $

8
7,711 $ 2,731 $ 10,442 $

–

2,088 $381,005 $ 7,542 $ 1,655 $

–
9,197 $

–
1,839

Interest Rate Contracts

Interest rate swaps

Equity Contracts
Foreign Exchange

Contracts(1)

Total

(1) The Bank has contracted to deliver United States dollars in exchange for Canadian dollars.

CWB 2002

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).

2002

2001

Favourable Contracts
(Assets)

Unfavourable Contracts
(Liabilities)

Favourable Contracts
(Assets)

Unfavourable Contracts
(Liabilities)

Notional
Amount

Fair
Value

Notional
Amount

Fair
Value

Notional
Amount

Fair
Value

Notional
Amount

Fair
Value

Interest Rate Contracts
Interest rate swaps

Equity Contracts
Foreign Exchange

Contracts

Total

$ 647,000 $
1,610

7,476 $
223

60,000 $
12,615

66 $ 352,000 $

938

1,610

7,317 $
225

20,000 $

7,395

836

$ 649,446 $

12
7,711 $

–
72,615 $

–

1,004 $ 353,610 $

–
7,542 $

–
27,395 $

12
723

–
735

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)

2002
6,020
1,340

$
$

2001
2,925
598

$
$

The following table summarizes maturities of off-balance sheet financial instruments and weighted average interest rates paid and
received on interest rate contracts.

2002
Maturity

2001
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)

Equity Contracts(1)(2)
Foreign Exchange
Contracts(3)

Total

$ 390,000
–

836
$ 390,836

3.13% $ 317,000
14,225

4.45% $ 185,000
–

4.60% $ 187,000
9,005

5.01%

–
$ 331,225

–
$ 185,000

–
$ 196,005

(1) The Bank pays (floating) interest amounts based on the one month (30 day) Canadian Bankers’ Acceptance rate.
(2) The contractual interest rate is not meaningful for equity contracts. The Bank receives amounts based on the increase in an equity index.
(3) The contractual interest rate is not applicable for foreign exchange contracts.

CWB 2002

18. RISK MANAGEMENT

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 35 to 44 of Management’s Discussion and 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 41 to 44 of Management’s Discussion and
Analysis of Operations and Financial Condition.

19. SEGMENTED INFORMATION

The Bank operates principally in personal and commercial banking in Canada. 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 commercial business clients primarily in western Canada.

20. SUBSIDIARIES

Canadian Western Bank Subsidiaries
(annexed in accordance with subsection 308 (3) of the Bank Act)
October 31, 2002

Canadian Western Trust Company

CWB Canadian Western Financial Ltd.

Address of
Head Office
10303 Jasper Avenue
Edmonton, Alberta
10303 Jasper Avenue
Edmonton, Alberta

Carrying Value of
Voting Shares Owned

by the Bank(1)

13,776

Percentage of Issued and
Outstanding Voting
Shares Owned by the Bank
100%

–

100%

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

21. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform with the current year presentation.

CWB 2002

CORPORATE GOVERNANCE
INTRODUCTION

Sound and effective corporate governance has always been a
priority for Canadian Western Bank. The Board of Directors and
management of the Bank are committed to govern and
maintain the Bank’s operations effectively and efficiently
within its regulatory environment. The Bank’s corporate
governance policies are designed to strengthen the ability of
the Board to effectively supervise management and enhance
long-term shareholder value.

The Board’s Corporate Governance & Human Resources
Committee provides direction, monitors compliance and makes
recommendations to the Board on the optimum approach to
governance issues to enhance corporate performance and
promote ongoing improvement in Board effectiveness.

THE BOARD AND BOARD COMMITTEES

The Board is currently comprised of thirteen members. The
number of directors reflects the desire to have the members
represent the geographical jurisdictions in which the Bank
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 “affiliated” (as defined by the affiliation
rules set forth in the Bank Act (the “Act”)) or “unrelated”, as
defined in the Toronto Stock Exchange (“TSX”) guidelines on
corporate governance. As a result of this review, the Board has
determined that one of the directors is affiliated (the CEO) and he
is also the only inside director. All other directors are “unrelated”.

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. Currently the
composition is well within Bank policy as only two board
members are non-resident (15%) and the CEO is the only
employee on the Board. 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 Board. The Board
expects all significant risks and internal controls to be identified
and reported upon by senior management to the Board and/or its
committees. Members of the Board, who are not also employees,
are required to own common shares of the Bank equivalent to
two times their annual retainers.

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.

The Board of Directors as a whole has expressly assumed
responsibility for developing the Bank’s approach to governance
issues although the Corporate Governance & Human Resources
Committee plays a key role by recommending and reporting on
governance issues to the Board. In addition, certain governance
issues have been delegated to other committees of the Board.

The Act contains several sections dealing with the governance of
a bank through its board of directors. These sections prescribe
matters such as limitations on the number of directors who can
be affiliated or non-resident, certain powers that must be
transacted by the full Board, and requirements to establish both
an audit committee and a conduct review committee. The Act
also prescribes certain minimum benchmarks for board and
committee membership, quorums and the transaction of
business by the Board. The three encompassing duties in the Act
that form the basis for the Board’s mandate are:

• to manage or supervise the management of the business and

affairs of the Bank;

• to act honestly and in good faith with a view to the best interests
of the Bank and exercise the care, diligence and skill that a
reasonably prudent person would exercise
in similar
circumstances; and

• to comply with the Act, the regulations, the Bank’s incorporating

instrument and its by-laws.

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. The first
reporting cycle under the revised Standards commenced in July
2002. An annual attestation on adherence to the modernized
Standards (covering the broad areas of Corporate Governance,
Strategic Management, Risk Management, Liquidity and Funding
Management, Capital Management, Control Environment,
Business Conduct and Process to Ensure Control) will be
required.

CWB 2002

The mandate of the Board also specifically includes other
matters which are not necessarily stated in the Act or in the
CDIC standards and they are summarized as follows:

• meet with the shareholders’ auditors to discuss the annual
statements and the returns and transactions referred to
within the mandate;

• approve the annual statement and specified returns, prior to

release to the public or submission to OSFI;

• review and approve the strategic plan, the annual
business plan and accompanying capital plan and financial
operating budget, including capital expenditures;

• declare dividends;

• outline the content and frequency of management reports

on financial operations;

• review and ratify the employment, appointment, grade levels
and compensation of the top five executive employees and
approve all senior officer appointments;

• review succession plans;

• review any

recommendations

regulators or
shareholders’ auditors respecting their assessment of the
effectiveness of the internal controls that come to their
attention in the conduct of their work;

from

• 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.

AUDIT COMMITTEE

Members:

Robert Manning (Chair)
Jordan Golding
Wendy Leaney
Gerald McGavin
Alan Rowe

• meet with the Chief Inspector and management to discuss
reports on internal audit activities and findings and the
effectiveness of the internal control procedures established
for the Bank. Review the mandate and annual plan of the
internal audit department;

• review the quarterly reports to the shareholders, including
the interim unaudited statements, and report thereon to the
directors before approval is given;

• review a quarterly report from the Loans Committee of the
Board, concerning the quality of the loan portfolio, the
adequacy of the allowance for credit losses and accounts
recommended for write-off;

• review a report on adherence to the CDIC Standards of
Sound Business and Financial Practices annually and report
thereon to the directors before approval is given;

• review the terms of the shareholders’ auditors engagement,
their level of compensation, the audit plan, any proposed
changes in accounting policies, their presentation and input
concerning significant risks and key estimates and
judgements of management;

• review the independence of the shareholders’ auditors;

• review correspondence received from regulators concerning
the effectiveness of internal controls within the Bank or
other matters falling within the responsibility of the
Committee, including a review of the shareholders’ auditors’
management letter and OSFI’s annual review letter and
management’s responses thereto;

• review the appointment of the Chief Financial Officer and the

Chief Inspector;

• meet regularly with the internal and shareholders’ auditors

without management present;

This committee is comprised of five outside directors and its
mandate is summarized as follows:

• review and approve any proposed consulting or related work

to be completed by the shareholders’ auditors; and

• as the Committee sees as fit and proper, review other items

or matters that may affect the well-being of the Bank.

• review the annual statement and other required and related
annual public documents and report thereon to the directors
before approval is given;

• review such returns as OSFI may specify;

• require management to implement and maintain appropriate
internal control procedures. Review, evaluate and approve
those procedures;

• review such investments and transactions of the Bank, that
could adversely affect the well-being of the Bank as the
shareholders’ auditors or any officer of the Bank may bring
to the attention of the committee;

CWB 2002

CONDUCT REVIEW COMMITTEE

Members:

Albrecht Bellstedt (Chair)
Charles Allard
Allan Jackson
Arnold Shell

This committee is comprised of four outside directors and its
mandate is summarized as follows:

• establish procedures to ensure disclosure of transactions
with specified related parties of the Bank and, further, to
review any such transactions to ensure compliance with the
Act, either approving or declining the transactions, as
required;

• review and approve internal policies for credit arrangements
and financial services available to employees of the Bank
under the regulations concerning officers and associated
parties;

• monitor aggregate transactions of the Bank with directors as
well as officers and their interests to ensure continued
compliance with the Act with excesses brought to the Board
for consideration;

• review the conduct policy and any other specialized
standards on an annual basis to ensure relevance and
completeness in regard to legislative requirements;

• monitor procedures for conflicts of interest, confidential
information, disclosure of information and handling of
customer complaints, and be satisfied that the procedures
are being adhered to;

• ensure every employee, officer and Board member agrees to
comply, in writing, with annual acknowledgement, with the
Bank’s conduct policy; and

• after each meeting provide a report to the directors on all
transactions and other matters reviewed by the committee.

CORPORATE GOVERNANCE
& HUMAN RESOURCES COMMITTEE

Members:

Jack Donald (Chair)
Albrecht Bellstedt
Allan Jackson
Robert Manning
Robert Phillips
Howard Pechet

This committee is comprised of six outside directors and its
mandate is summarized as follows:

Corporate Governance
• recommend to the Board appropriate structure and process
required to address governance issues and maintain
compliance with all corporate governance guidelines;

• review and monitor compliance with corporate governance
guidelines and follow any issues noted by the members or as
reported to them by management or other directors from
time to time;

• no less than annually, report to the Board on corporate
governance issues and any instances of non-compliance,
together with appropriate recommendations; and

• hire appropriate consultants, or request management to
perform studies and to furnish other information as required;
to review such information and take such actions based
thereon as appropriate.

Executive Employees: Recruitment and Compensation
• review and recommend to the Board the employment and
appointment of the top five executive employees, to establish
their grade levels and compensation, as well as to determine
promotions and to make changes in the level of compensation
and grade of incumbent executive employees and officers;

• review the position descriptions for the top five executive
employees, ensuring such descriptions remain current and
appropriate and, further, to also ensure position descriptions
are in place for all other executive officers;

• establish an executive compensation structure to compensate
all levels of executive employees and, within such compensation
structure as may at that time be in effect, to make adjustments
and annual revisions as necessary;

• ensure an annual performance appraisal is completed for the
CEO and that it is reviewed with him by the Chairman of the
Board;

CWB 2002

• establish, amend and, where appropriate, terminate:

LOANS COMMITTEE

- all programs and other personal benefits granted to executive

Members:

employees;

Allan Jackson (Chair)
Charles Allard
Jack Donald
Wendy Leaney
Gerald McGavin
Howard Pechet
Robert Phillips
Larry Pollock
Arnold Shell

This committee is comprised of nine directors, eight of whom
are unrelated. The CEO, who is an affiliated, inside director,
is a member of this Committee. Its mandate is summarized
as follows:

• establish and approve a lending limit for the Bank and the
CEO within the limits established by the Board and review
such limits at least annually;

• review, approve and/or decline all credit applications for
amounts in excess of delegated limits up to the limit
established, not to exceed ten percent of regulatory capital
and for loans to a foreign country;

• recommend for approval of the full Board, any loan proposals

in excess of the committee’s limit;

• recommend, for approval of the full Board, loan proposals to
directors (must be cash secured), 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/amend 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 required on loans reported by
management to be less than satisfactory.

- incentive compensation plans and other bonus arrangements,
to administer such plans and to make appropriate
interpretations and determinations as required;

- share incentive plans and similar arrangements involving
the grant of share options, or other benefits to employees
attendant upon the issuance of securities, and, in addition,
to make grants of options under any share incentive plan
and generally to administer such plans, subject to
necessary regulatory and shareholder approval; and

- annuity, pension, and retirement programs for executive

employees;

• review the human resource succession plan as prepared by
senior management for all officers and any other senior
position considered critical to operations; and

• review and report to the Board on compensation plans for
senior management and other personnel in order to confirm
they are consistent with the Bank’s sustainable long-term
objectives.

Board Composition and Development
• seek and recommend

individuals to be considered
for Board membership, as required by the Board, and forward
their recommendations to the Board for its consideration;

• review, monitor, and make recommendations regarding new
director orientation and the ongoing development of existing
Board members;

• evaluate, at least bi-annually, Board membership (including
composition and size) and the involvement/performance of
the membership with concerns recorded, and brought to the
attention of the committee chair, who, in conjunction with the
committee, determines if further action is required;

• review and recommend to the Board the fees and other

benefits to be paid to directors; and

• make recommendations to the Board regarding revisions or

additions to the Board of Directors’ Manual.

CWB 2002

OTHER AREAS OF CONSIDERATION

The Bank has not adopted a formalized process of orientation
for new Board members although all directors are provided
with a Directors’ Manual, outlining key governance information
and reference material. It is worthy of note that seven of the
twelve outside directors have served on the Board for thirteen
years or more and there are only two directors that have
served less than five years. There is also a Board and member
review and assessment program whereby every second year,
directors complete a formal assessment of the operations and
effectiveness of the Board and its committees. Every second
year, directors may also complete a formal assessment on
individual directors’ effectiveness. In the current year a formal
assessment of the operations and effectiveness of the Board
and its committees was undertaken.

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.

The Bank is also committed to ensuring quality and timely
information is available to all shareholders. The Bank has
adopted a corporate disclosure (communication) policy which
is reviewed annually. Inquiries and requests for information
from shareholders and potential investors receive prompt
attention from an appropriate officer. The Bank’s quarterly
earnings conference calls with analysts and institutional
investors are broadcast live, via the Internet, and archived
on the Bank’s web site for sixty days. The calls are also
accessible on a live and recorded basis via telephone to
interested retail investors, the media and members of the
public. The Bank also includes all significant disclosure
documents on the investor relations page of its web site at:
www.cwbank.com/investor_info. The 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 TSX 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.

CWB 2002

EXECUTIVE OFFICERS

CHAIRMAN

Jack C. Donald

OFFICE OF THE CHIEF EXECUTIVE OFFICER

Larry M. Pollock
President and
Chief Executive Officer

Allister J. McPherson
Executive Vice President

Jack C. Wright
Vice President

CREDIT RISK MANAGEMENT

Donald C. Kemp
Senior Vice President

Chris H. Fowler
Senior Assistant Vice President

Wally N. Streit
Senior Assistant Vice President

Brad C. Crilly
Assistant Vice President

Dennis M. Crough
Assistant Vice President,
Industrial Credit

Richard R. Gilpin
Assistant Vice President

A. Wayne MacInnes
Assistant Vice President

CORPORATE & STRATEGIC
OPERATIONS

William J. Addington
Executive Vice President

Erwin Granson
Assistant Vice President,
Asset Management

Richard N. Hallson
Assistant Vice President,
Corporate Lending

TREASURY & OPERATIONS

Ricki L. Moffat
Senior Assistant Vice President,
Treasury and Agent Administration

CWB 2002

Michael Vos
Senior Assistant Vice President,
Systems

Gus W. Itzek
Senior Assistant Vice President,
Energy Lending
Main Branch, Calgary

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

INTERNAL AUDIT

David R. Gillespie
Vice President and Chief Inspector

Blair R. Himmelreich
Assistant Vice President

MARKETING AND PRODUCT
DEVELOPMENT

David R. Pogue
Vice President

Peter K. Morrison
Assistant Vice President,
Sales and Product Development

COMMERCIAL BANKING
PRAIRIE REGION

S. Wayne Bamford
Vice President
and Regional Manager

Michael N. Halliwell
Senior Assistant Vice President
Main Branch, Calgary

Robert H. Bean
Assistant Vice President
Winnipeg

M.G. (Glen) Eastwood
Assistant Vice President
Calgary Northeast

J. Richard Ferris
Assistant Vice President
Foothills Branch, Calgary

Doug A. Finnie
Assistant Vice President
Saskatoon

Donald P. Grummett
Assistant Vice President
Lethbridge

Ken R. MacDonald
Assistant Vice President
Regina

Donald J. Odell
Assistant Vice President
Red Deer

Walter Schmidt
Assistant Vice President
Winnipeg

Al Steingart
Assistant Vice President
Chinook Station, Calgary

COMMERCIAL BANKING
NORTHERN ALBERTA REGION

William A. Book
Vice President
and Regional Manager

L.W. (Les) Shore
Senior Assistant Vice President
Main Branch, Edmonton

Ken Arndt
Assistant Vice President
South Edmonton Common

Ron S. Baker
Assistant Vice President
West Point, Edmonton

Gary L. Comber
Assistant Vice President,
Real Estate Lending
Main Branch, Edmonton

Roger J. Delveaux
Assistant Vice President
Main Branch, Edmonton

Wayne C. Dosman
Assistant Vice President
South Edmonton Common

Robert Inkpen
Assistant Vice President,
Real Estate Lending
Main Branch, Edmonton

Heinz H. Kleist
Assistant Vice President
Southside 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
BRITISH COLUMBIA REGION

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

Russ M. Burke
Assistant Vice President
Nanaimo

Bob Duffield
Assistant Vice President
Park Place, Vancouver

Ian G. Graham
Assistant Vice President
Kelowna

Mark R.C. Ireton
Assistant Vice President
Park Place, Vancouver

Gerald W. Laliberte
Assistant Vice President
Victoria

Craig Martin
Assistant Vice President
Langley

Dave McCosh
Assistant Vice President
Coquitlam

REAL ESTATE LENDING
VANCOUVER

Raymond L. Young
Vice President

Robert E. Wigmore
Senior Assistant Vice President

W. Bruce Gibbard
Assistant Vice President

INDUSTRIAL LENDING
AND LEASING

Donald C. Watson
Vice President

James O. Burke
Senior Assistant Vice President
and District Manager
Foothills Branch, Calgary

Dean G. Cudmore
Assistant Vice President
Coquitlam

Michael J. Docherty
Assistant Vice President
Foothills Branch, Calgary

James S. Kitchin
Assistant Vice President
Kelowna Industrial Centre

Taras D. Luciw
Assistant Vice President
West Point, Edmonton

Keith C. MacLellan
Assistant Vice President
Grande Prairie

David B. Subject
Assistant Vice President
Nanaimo

John Van Boeyen
Assistant Vice President
Coquitlam

CANADIAN WESTERN TRUST COMPANY
VANCOUVER

Adrian M. Baker
Vice President
and General Manager

Mario V. Furlan
Assistant Vice President,
Real Estate Lending

Patrick F. Rennison
Assistant Vice President,
Real Estate Lending

OMBUDSMAN

R. Graham Gilbert

CWB 2002

BOARD OF DIRECTORS

CANADIAN WESTERN BANK & TRUST

Charles R. Allard
President
Rosedale Meadows Development Inc.
Edmonton, Alberta

Albrecht W. A. Bellstedt, Q.C.
Executive Vice President
Law and General Counsel
TransCanada PipeLines
Calgary, Alberta

Jack C. Donald
Board Chairman
Parkland Properties Ltd.
Red Deer, Alberta

Jordan L. Golding
Corporate Director and Consultant
Retired Partner
KPMG
Boston, Massachusetts, USA

Allan W. Jackson
President
ARCI Ltd.
Calgary, Alberta

SHAREHOLDER INFORMATION

Canadian Western Bank & Trust
Head Office
Suite 2300,
Canadian Western Bank Place
10303 Jasper Avenue
Edmonton, Alberta T5J 3X6
Telephone: (780) 423-8888
Fax: (780) 423-8897
Website: www.cwbank.com

Subsidiary Regional Office
Canadian Western Trust Company
Suite 2200, 666 Burrard Street
Vancouver, B.C. V6C 2X8
Telephone: (604) 685-2081
Fax: (604) 669-6069
Website: www.cwt.ca

Stock Exchange Listing
The Toronto Stock Exchange
Share Symbol: CWB
Convertible Debenture Symbol:
CWB.DB.A

CWB 2002

Alan M. Rowe, C.A.
Senior Vice President,
Chief Financial Officer and
Corporate Secretary
Crown Life Insurance Company
Regina, Saskatchewan

Arnold J. Shell
President
Arnold J. Shell Consulting Inc.
Calgary, Alberta

DIRECTORS EMERITUS
John Goldberg
Arthur G. Hiller
Peter M.S. Longcroft
Dr. Maurice W. Nicholson
Alma M. McConnell
Eugene I. Pechet
Dr. Maurice M. Pechet
Fred Sparrow

Annual Meeting
The annual meeting of the common
shareholders of Canadian Western
Bank will be held on March 6, 2003 at
The Westin (Manitoba Room), 10135 –
100th Street, Edmonton, Alberta at
2:00 p.m. (MST).

Investor Relations
For further financial information call
Jon Kieran at
Hume, Kieran Inc.
Telephone: (416) 868-1079
Fax: (416) 868-6198
or visit our website at
www.cwbank.com/investor_info.

Wendy A. Leaney
President
Wyoming Associates Ltd.
Toronto, Ontario

Robert A. Manning
President
Cathton Holdings Ltd.
Edmonton, Alberta

Gerald A.B. McGavin, F.C.A., C.M.
President
McGavin Properties Inc.
Vancouver, British Columbia

Howard E. Pechet
President
Mayfield Consulting Inc.
La Jolla, California, USA

Robert L. Phillips
Group President & CEO
BCR Group of Companies
North Vancouver, British Columbia

Larry M. Pollock
President and Chief Executive Officer
Canadian Western Bank & Trust
Edmonton, Alberta

Transfer Agent and Registrar Mailing
Address
Computershare 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

Corporate Secretary
Charles R. Allard
Rosedale Meadows Development Inc.
Edmonton, Alberta

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.