Canadian Western Bank Annual Report 2003

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FY2003 Annual Report · Canadian Western Bank

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20TH ANNUAL REPORT 2003

WHAT KIND OF A BANK
CAN YOU BUILD IN
20 YEARS?

A BANK BUILT ON
RELATIONSHIPS.

C
A
N
A
D
A
N
W
E
S
T
E
R
N
B
A
N
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A
N
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U
A
L

R
E
P
O
R
T

2
0
0
3

WHAT KIND OF A BANK
CAN YOU BUILD IN
20 YEARS?

THIS IS THE WEST… the perennial land of opportunity.
You can build almost any kind of bank you want… so we did.
WE WANTED A BANK BASED IN THE WEST that served
the needs of westerners. OUR CUSTOMERS WANTED A BANK
BUILT ON RELATIONSHIPS and strongly rooted in western
values. And our shareholders wanted to see consistent growth
and profitability. We built that bank… your bank…
Canadian Western Bank.

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

St. Albert
300 – 700 St. Albert Road

St. Albert, Alberta T8N 7A5

Opening Spring 2004

West Point
17603 – 100 Avenue

Edmonton, Alberta T5S 2M1

Telephone: (780) 484-7407

Branch Manager – Ron Baker

Calgary Northeast
2810 – 32nd Avenue N.E.

Calgary, Alberta T1Y 5J4

Vancouver Deposit
Processing Centre
Suite 2368, 666 Burrard Street

Surrey
Strawberry Hill

7548 – 120 Street

Telephone: (403) 250-8838

Vancouver, B.C. V6C 2X8

Surrey, B.C. V3W 3N1

Branch Manager – Glen Eastwood

Telephone: (604) 443-5175

Telephone: (604) 591-1898

Toll free: 1-800-663-1000

Branch Manager – Rick Howard

Chinook Station
6606 MacLeod Trail S.W.

Calgary, Alberta T2H 0K6

Telephone: (403) 252-2299

Branch Manager – Lew Christie

Foothills
6127 Barlow Trail S.E.

Calgary, Alberta T2C 4W8
Telephone: (403) 269-9882

Acting Branch Manager –

Michael Docherty

Red Deer
4822 – 51 Avenue

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

Red Deer, Alberta T4N 3H3

Telephone: (403) 341-4000

Branch Manager – Don Odell

Kelowna
Kelowna
1674 Bertram Street

Lethbridge
744 – 4th Avenue South

Lethbridge, Alberta T1J 0N8

Telephone: (403) 328-9199

Branch Manager – Don Grummett

Grande Prairie
11226 – 100 Avenue

Grande Prairie, Alberta T8V 7L2

Telephone: (780) 831-1888

Branch Manager – Keith MacLellan

BRITISH COLUMBIA

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 – Jim Kitchin

Cranbrook Satellite Office
2009 – 5th Street South

Cranbrook, B.C. V1C 1K6

Telephone: (250) 426-1140

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 – Trent Bobinski

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
230 Portage Avenue

Winnipeg, Manitoba R3C 0B1

Five Year Financial Summary

Fold Out

Highlights for 2003

Performance Targets

1 Message to Shareholders

4 What Kind of Bank Can You Build in 20 Years?

23 Management’s Discussion and Analysis of Operations

and Financial Condition

Corporate Governance

Financial Statements

Notes to Consolidated Financial Statements

Senior Officers

Board of Directors

Shareholder Information

Inside
Back Cover

Branch Offices

Edmonton Deposit
Processing Centre
Suite 2200, 10303 Jasper Avenue

Edmonton, Alberta T5J 3X6

Telephone: (780) 423-8888

Vancouver
Regional Office
22nd Floor, 666 Burrard Street

Vancouver, B.C. V6C 2X8

Telephone: (604) 669-0081

Branch Manager – Lina Langford

Regional Manager – Rod Sorbo

Calgary
Calgary Main
606 – 4th Street S.W.

Calgary, Alberta T2P 1T1

Telephone: (403) 262-8700

Branch Manager – Doug Crook

West Broadway
1333 West Broadway

Vancouver, B.C. V6H 4C1

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

Account Manager – Mike Eckersley

Telephone: (204) 956-4669

Kamloops Satellite Office
2224 Crescent Drive

Kamloops, B.C. V2C 4J6

Telephone: (250) 828-1070

Manager – Hugh Sutherland

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

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
200, 606 – 4th Street S.W.

Calgary, Alberta T2P 1T1

Telephone: (403) 717-3145

Toll free: 1-888-894-2331

Design and Production by Vision Design Communications www.visiondc.com Printed by Speedfast Color Press Inc. Printed in Canada

PERFORMANCE TARGETS

3
9
1
,
8
3
$

5
4
1

0
3
$

2
1
6
9
2
$

9
4
3
6
2
$

3
5
8
9
1
$

1999 2000 2001 2002 2003 2004

2004 Target
$44 Million

NET INCOME

2003 Results - Net income increased 29% in the year, almost
doubling our target of 15%. Diluted earnings per share
increased 26%. The significant increases were the result of
strong organic loan growth, an improved net interest margin,
increased fee income and excellent efficiency.

2004 Target - Net income growth of at least 15%.

1
8
9
,
2
3
1
$

0
2
4
,
3
1
1
$

9
5
2
,
5
0
1
$

2
2
6
,
8
8
$

6
4
7
,
4
7
$

}

2004 Target
$149-$153 Million

TOTAL REVENUES

2003 Results - Total revenues (teb) were $133 million, an
increase of 17%, exceeding our target range of 12 - 15%
growth.

2004 Target - Our target range is for total revenue growth
of 12 - 15%.

1999 2000 2001 2002 2003 2004

1
0
6
,
3
$

9
4
2
,
3
$

7
8
8
,
2
$

0
6
5
,
2
$

4
5
2
,
2
$

1999 2000 2001 2002 2003 2004

%
6
2
.
0

%
5
2
.
0

%
3
2
.
0

%
1
2
.
0

%
8
1
.
0

1999 2000 2001 2002 2003 2004

2004 Target
$4,033 Million

TOTAL LOANS

2003 Results - Total loans increased to $3,601 million or 11%
year over year, slightly less than our target of 12%. However,
the average loan balance for 2003 increased 14% over the
average balance for 2002.

2004 Target - Total loan growth of 12%; maintaining our long
term trend of double digit loan growth.

2004 Target
maintain 0.25%

CREDIT RISK

2003 Results - The provision for credit losses as a percentage
of average loans was 0.25%, consistent with our target.
Based only on net new specific provisions, credit losses
represented 0.14% of average loans.

2004 Target - Maintain provisioning at 0.25% of average loans.

50,000

40,000

30,000

20,000

10,000

200,000

150,000

100,000

50,000

5,000

4,000

3,000

2,000

1,000

0.30

0.25

0.20

0.15

0.10

0.05

1.00

0.75

0.50

%
8
9
5

%
3
4
5

%
0
0
5

%
7
0
5

%
3
.
6
4

2004 Target
46% or less

1999 2000 2001 2002 2003 2004

%
7
.
4
1

%
5
.
3
1

%
8
.
2
1

%
9
.
2
1

%
2
.
1
1

2004 Target
13-15%

}

EFFICIENCY RATIO
(expenses to revenues)

2003 Results - Our efficiency ratio (teb), which continues to
lead the Canadian banking industry, was 46.3% surpassing our
target of 50% or less.

2004 Target - Efficiency ratio (teb) of 46.0% or less. A
significant branch development program was commenced in
2003 with completion expected in spring 2004. This program
will provide future benefits by supporting loan and deposit
growth as well as retail initiatives, but it is expected to slow
improvement in our efficiency ratio in 2004 as compared
to the improvement in 2003.

RETURN ON EQUITY

2003 Results - ROE was 12.9%. No specific target was
developed for 2003. The successful issue of non-dilutive
subordinated debt in 2003, which improves our capital mix,
makes a target for 2004 appropriate.

2004 Target - ROE of 13 to 15%.

1999 2000 2001 2002 2003 2004

%
5
9
.
0

%
3
8
.
0

%
4
8
.
0

2004 Target
0.98% or higher

1999 2000 2001 2002 2003 2004

RETURN ON ASSETS

2003 Results - ROA of 0.95% surpassed our target of greater
than 0.88%.

2004 Target - ROA of 0.98% or higher.

PERFORMANCE TARGETS

3
9
1
,
8
3
$

5
4
1

0
3
$

2
1
6
9
2
$

9
4
3
6
2
$

3
5
8
9
1
$

1999 2000 2001 2002 2003 2004

2004 Target
$44 Million

NET INCOME

2004 Target - Net income growth of at least 15%.

1
8
9
,
2
3
1
$

0
2
4
,
3
1
1
$

9
5
2
,
5
0
1
$

2
2
6
,
8
8
$

6
4
7
,
4
7
$

}

2004 Target
$149-$153 Million

TOTAL REVENUES

2003 Results - Total revenues (teb) were $133 million, an
increase of 17%, exceeding our target range of 12 - 15%
growth.

2004 Target - Our target range is for total revenue growth
of 12 - 15%.

1999 2000 2001 2002 2003 2004

1
0
6
,
3
$

9
4
2
,
3
$

7
8
8
,
2
$

0
6
5
,
2
$

4
5
2
,
2
$

1999 2000 2001 2002 2003 2004

%
6
2
.
0

%
5
2
.
0

%
3
2
.
0

%
1
2
.
0

%
8
1
.
0

1999 2000 2001 2002 2003 2004

2004 Target
$4,033 Million

TOTAL LOANS

2004 Target - Total loan growth of 12%; maintaining our long
term trend of double digit loan growth.

2004 Target
maintain 0.25%

CREDIT RISK

2004 Target - Maintain provisioning at 0.25% of average loans.

50,000

40,000

30,000

20,000

10,000

200,000

150,000

100,000

50,000

5,000

4,000

3,000

2,000

1,000

0.30

0.25

0.20

0.15

0.10

0.05

1.00

0.75

0.50

%
8
9
5

%
3
4
5

%
0
0
5

%
7
0
5

%
3
.
6
4

2004 Target
46% or less

1999 2000 2001 2002 2003 2004

%
7
.
4
1

%
5
.
3
1

%
8
.
2
1

%
9
.
2
1

%
2
.
1
1

2004 Target
13-15%

}

EFFICIENCY RATIO
(expenses to revenues)

2003 Results - Our efficiency ratio (teb), which continues to
lead the Canadian banking industry, was 46.3% surpassing our
target of 50% or less.

RETURN ON EQUITY

2004 Target - ROE of 13 to 15%.

1999 2000 2001 2002 2003 2004

%
5
9
.
0

%
3
8
.
0

%
4
8
.
0

2004 Target
0.98% or higher

1999 2000 2001 2002 2003 2004

RETURN ON ASSETS

2003 Results - ROA of 0.95% surpassed our target of greater
than 0.88%.

2004 Target - ROA of 0.98% or higher.

FIVE YEAR FINANCIAL SUMMARY

($ thousands, except per share amounts)

Results of Operations
Net interest income (teb)(1)
Less teb adjustment
Net interest income
Total revenues (teb)
Total revenues
Net income from continuing operations(2)
Net income
Return on common shareholders' equity
Return on average total assets
Per Common Share
Average common shares outstanding (thousands)
Basic earnings per share

Net income from continuing operations
Net income

Diluted earnings per share

Net income from continuing operations
Net income

Dividends(3)
Book value
Market price

High
Low
Close

Balance Sheet and Off-Balance Sheet Summary
Assets
Cash resources and securities
Loans
Deposits
Subordinated debentures
Shareholders' equity
Assets under administration
Capital Adequacy
Tangible common equity to risk-weighted assets
Tier 1 ratio
Total ratio
Other Information
Efficiency ratio (teb)
Efficiency ratio
Net interest margin (teb)
Net interest margin
Provision for credit losses

as a percentage of average loans

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

2003

107,655
2,992
104,663
132,981
129,989
38,193
38,193

2002

2001

2000

1999

91,284
2,449
88,835
113,420
110,971
29,612
29,612

85,501
–
85,501
105,259
105,259
30,145
30,145

73,367
–
73,367
88,622
88,622
29,394
26,349

61,729
–
61,729
74,746
74,746
22,754
19,853

12.9 %
0.95 %

11.2 %
0.84 %

13.5 %
0.95 %

14.7 %
0.95 %

12.8 %
0.83 %

HIGHLIGHTS FOR 2003

Financial

12,808

12,629

12,001

11,134

10,153

• Achieved record net income of $38.2 million, an increase

2.98
2.98

2.34
2.34

2.51
2.51

2.65
2.37

2.69
2.69
0.46
24.32

40.00
23.25
39.95

2.14
2.14
0.40
21.97

29.35
23.26
25.75

2.26
2.26
0.36
20.08

30.50
22.30
26.27

2.41
2.18
0.34
17.35

24.00
16.25
23.00

2.24
1.96

1.98
1.76
0.48
15.68

24.25
17.30
17.60

$ 4,343,972
694,699
3,601,003
3,819,750
121,951
316,231
1,474,964

$ 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

8.9 %
8.9 %
13.1 %

46.3 %
47.4 %
2.68 %
2.60 %

0.25 %
(0.36)%
632
27

8.8 %
8.8 %
11.4 %

50.7 %
51.8 %
2.60 %
2.53 %

0.26 %
0.13 %
583
27

9.3 %
9.3 %
12.5 %

50.0 %
50.0 %
2.69 %
2.69 %

0.23 %
0.25 %
548
27

8.1 %
8.1 %
11.6 %

54.3 %
54.3 %
2.64 %
2.64 %

0.21 %
0.17 %
509
25

7.4 %
7.4 %
11.8 %

59.8 %
59.8 %
2.57 %
2.57 %

0.18 %
0.54 %
555
24

of 29% over 2002

• Recorded 62nd consecutive quarter of profitability

• Surpassed $4 billion in total assets, a doubling in asset size

in just over five years

• Grew loans by 11% – our fourteenth consecutive year of

double-digit loan growth

• Demonstrated continued strong credit quality, with an
annual provision for credit losses of 0.25% of average loans

• Continued to lead the Canadian banking industry in
productivity as reflected by our efficiency ratio (expenses to
revenues) (teb) of 46.3%

• Grew average lower cost demand and notice deposit
balances by 23%, a key factor in leveraging our core
profitability

• Reached almost $1.5 billion

in trust assets under

administration, an increase of 26%

• Strengthened our total capital ratio to 13.1%, and
maintained a strong Tier 1 ratio of 8.9% (comprised entirely
of tangible common equity)

• Issued $65 million of non-dilutive subordinated debentures,

improving our mix of regulatory capital

• Announced anticipated change to quarterly dividend

declarations in 2004

Operating

• Commenced the relocation and significant upgrading of our
existing Vancouver West Broadway, Winnipeg, Grande Prairie
and Red Deer branches to new highly visible locations
opening between November 2003 and January 2004

• Finalized plans for our 28th branch to be opened in St.

Albert, Alberta in spring 2004

• Commenced the expansion of our Calgary Main branch and
the development of a specialized industrial lending office in
Prince George, British Columbia

• Further developed programs and products to generate

lower cost branch deposits

• Enhanced our product line with the launch of both personal
and business Think Western® MasterCards® through an
agreement with MBNA Canada Bank

• Provided trust services, through our subsidiary Canadian
Western Trust, to a growing number of mutual fund dealers
and financial advisors as well as other financial institutions

• Reinforced our Think Western® culture and brand of service,
which continues to translate into a competitive advantage in
our markets

• Identified as having one of the top corporate boards in a

survey published by Canadian Business magazine

• Recognized by our peers as one of Alberta’s three most
respected corporations in the category of corporate
performance of public companies in a poll conducted by
Alberta Venture magazine

• Continued our emphasis on straightforward business

practices and strong, effective corporate governance

(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 adjustment to taxable equivalent basis increases interest
income and the provision for income taxes to what they would have been had the tax-exempt securities been taxed at the statutory rate. Prior to fiscal 2002,
tax-exempt security income was insignificant and no taxable equivalent adjustments were made. The taxable equivalent basis does not have a standardized
meaning prescribed by generally accepted accounting principles and therefore may not be comparable to similar measures presented by other banks.

(2) The sale of our brokerage subsidiary closed February 16, 2000. The results of operations and the loss on disposal have been disclosed separately from

continuing operations.

(3) 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.

FIVE YEAR FINANCIAL SUMMARY

($ thousands, except per share amounts)

Net income from continuing operations
Net income

Diluted earnings per share

Net income from continuing operations
Net income

Dividends(3)
Book value
Market price

High
Low
Close

as a percentage of average loans

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

2003

107,655
2,992
104,663
132,981
129,989
38,193
38,193

2002

2001

2000

1999

91,284
2,449
88,835
113,420
110,971
29,612
29,612

85,501
–
85,501
105,259
105,259
30,145
30,145

73,367
–
73,367
88,622
88,622
29,394
26,349

61,729
–
61,729
74,746
74,746
22,754
19,853

12.9 %
0.95 %

11.2 %
0.84 %

13.5 %
0.95 %

14.7 %
0.95 %

12.8 %
0.83 %

HIGHLIGHTS FOR 2003

Financial

12,808

12,629

12,001

11,134

10,153

• Achieved record net income of $38.2 million, an increase

2.98
2.98

2.34
2.34

2.51
2.51

2.65
2.37

2.69
2.69
0.46
24.32

40.00
23.25
39.95

2.14
2.14
0.40
21.97

29.35
23.26
25.75

2.26
2.26
0.36
20.08

30.50
22.30
26.27

2.41
2.18
0.34
17.35

24.00
16.25
23.00

2.24
1.96

1.98
1.76
0.48
15.68

24.25
17.30
17.60

$ 4,343,972
694,699
3,601,003
3,819,750
121,951
316,231
1,474,964

$ 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

8.9 %
8.9 %
13.1 %

46.3 %
47.4 %
2.68 %
2.60 %

0.25 %
(0.36)%
632
27

8.8 %
8.8 %
11.4 %

50.7 %
51.8 %
2.60 %
2.53 %

0.26 %
0.13 %
583
27

9.3 %
9.3 %
12.5 %

50.0 %
50.0 %
2.69 %
2.69 %

0.23 %
0.25 %
548
27

8.1 %
8.1 %
11.6 %

54.3 %
54.3 %
2.64 %
2.64 %

0.21 %
0.17 %
509
25

7.4 %
7.4 %
11.8 %

59.8 %
59.8 %
2.57 %
2.57 %

0.18 %
0.54 %
555
24

of 29% over 2002

• Recorded 62nd consecutive quarter of profitability

• Surpassed $4 billion in total assets, a doubling in asset size

in just over five years

• Grew loans by 11% – our fourteenth consecutive year of

double-digit loan growth

• Demonstrated continued strong credit quality, with an
annual provision for credit losses of 0.25% of average loans

• Continued to lead the Canadian banking industry in
productivity as reflected by our efficiency ratio (expenses to
revenues) (teb) of 46.3%

• Grew average lower cost demand and notice deposit
balances by 23%, a key factor in leveraging our core
profitability

• Reached almost $1.5 billion

in trust assets under

administration, an increase of 26%

• Strengthened our total capital ratio to 13.1%, and
maintained a strong Tier 1 ratio of 8.9% (comprised entirely
of tangible common equity)

• Issued $65 million of non-dilutive subordinated debentures,

improving our mix of regulatory capital

• Announced anticipated change to quarterly dividend

declarations in 2004

Operating

• Finalized plans for our 28th branch to be opened in St.

Albert, Alberta in spring 2004

• Commenced the expansion of our Calgary Main branch and
the development of a specialized industrial lending office in
Prince George, British Columbia

• Further developed programs and products to generate

lower cost branch deposits

• Enhanced our product line with the launch of both personal
and business Think Western® MasterCards® through an
agreement with MBNA Canada Bank

• Provided trust services, through our subsidiary Canadian
Western Trust, to a growing number of mutual fund dealers
and financial advisors as well as other financial institutions

• Reinforced our Think Western® culture and brand of service,
which continues to translate into a competitive advantage in
our markets

• Identified as having one of the top corporate boards in a

survey published by Canadian Business magazine

• Recognized by our peers as one of Alberta’s three most
respected corporations in the category of corporate
performance of public companies in a poll conducted by
Alberta Venture magazine

• Continued our emphasis on straightforward business

practices and strong, effective corporate governance

(1) Most banks analyze revenue on a taxable equivalent basis (teb) to permit uniform measurement and comparison of net interest income. Net interest income

(2) The sale of our brokerage subsidiary closed February 16, 2000. The results of operations and the loss on disposal have been disclosed separately from

continuing operations.

(3) 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.

MESSAGE TO SHAREHOLDERS

IT IS A PLEASURE TO REPORT ON THE BEST YEAR IN YOUR BANK’S HISTORY;
A YEAR MARKED WITH RECORD FINANCIAL ACHIEVEMENTS.

Our total revenues grew 17% over the previous year,
while net income finished at an all time high of $38.2
million, up 29% over last year – almost double our
growth target. As well, diluted earnings per share
increased 26% to $2.69.

The achievement of record earnings and our sixty-
second consecutive quarter of profitability is even
more satisfying as we are about to celebrate our
20th anniversary. Reflecting over the past two
decades, we have developed a record of strong,
steady, profitable growth by staying focused on our
business plan and committed to our Think Western®
culture. This focus and commitment helped us reach
a new milestone of $4 billion in total assets in 2003,
which represents a doubling in asset size in just over
five years.

During 2003, there was strong appreciation in our
share price, which reached a record high and resulted
in a shareholder return that outpaced the increase in
both the S&P/TSX composite index and the Banks &
Trust index.

Our peers also recognized our continued success in
2003. In a poll of the Alberta business community
conducted by Alberta Venture magazine, Canadian
Western Bank was named one of the province’s three
most respected corporations in terms of corporate
performance. Performance was measured by the

ability to sustain fiscal success, maintain or build
market share and perform well in the public markets.

Growing our Core Business in a Cost Effective Manner

We are very proud of our long-term trend of double-
digit annual loan growth, which averaged 13% over
the past five years. This continues to be a strong
indicator of how well our regional focus and niche
strategy are being accepted by our customers. It is
our ability to operate in a cost effective manner that
further drives our profitability. In the financial
industry, this ability is reflected in the efficiency
ratio, which measures what it costs to generate each
dollar of revenue. This year, we achieved a new record
efficiency ratio (teb) of 46.3%, which leads the
Canadian banking industry by a wide margin.

Canadian Western Trust is a key component of our
core business. Trust operations provide a growing
contribution to non-interest revenues and lower cost
deposits. In 2003, trust service fees grew 25% to $4
million and lower cost notice deposits increased
37%. A majority of the growth came from western
Canadian mutual fund dealers and financial advisors
who, in increasing numbers, are recognizing the
Trust’s service advantage. The Trust has also been
successful in developing relationships with and
providing services to other financial institutions,
including ATB Investor Services (a subsidiary of ATB
Financial) and Vancouver City Savings Credit Union.

CWB TWENTIETH ANNUAL REPORT

Strong Credit Quality

For more than a decade we have had strong credit
quality and low loan losses. The charge to income
for loan losses was 25 basis points of average loans
this year, consistent with our average over the past
10 years of 26 basis points. Our loan loss experience
continues to compare favourably to the Canadian
banking industry, both in terms of levels of losses
and stability. A strong credit discipline ensures that
we remain well prepared to deal with changes in the
underlying economies that affect our customers.

Investing in Our Future

We undertook a number of new initiatives this year
that build upon the strong foundation we have
established. Strategically, we placed $65 million
institutional
of subordinated debentures with
investors, which improved our capital mix and allows
us to pursue growth opportunities without dilution
to common shareholders. Operational initiatives
included an increased emphasis on retail services
and development of our branch network.

The emphasis on retail operations carries with it the
objective of leveraging core profitability by growing
lower cost branch-generated deposits. Retail initiatives
to date have included product enhancements,
awareness advertising and targeted training for our
employees. We are especially pleased with the
launch of new personal and business Think Western®
MasterCards®, which are offered through an
agreement with MBNA Canada Bank. These credit
cards fit well with our existing product offerings and
improve our ability to serve customers, a top-of-
mind priority.

Further development of our branch network is also
key, including the relocation and significant upgrading
of our Grande Prairie, Red Deer, Winnipeg and
Vancouver West Broadway branches which are
scheduled to open between November 2003 and
January 2004. We are also constructing our twenty-
eighth branch, which is scheduled to open in

St. Albert, Alberta in Spring 2004. These new, highly
visible premises will offer a full range of products
and services in our refreshing Think Western® style.
In addition, we are expanding our Calgary Main
branch and pursuing a specialized industrial lending
office for Prince George, British Columbia.

Think Western®

Canadian Western Bank embraces the Think
Western® philosophy – we don’t just talk about it.
Since the inception of the Bank in 1984, this is what
our customers tell us differentiates us from our
competitors. Thinking Western is a commitment to
western hospitality and specialty service, and is a
reflection of the personality and style of our
organization. It means we apply common sense to
the way we do business, how we respond to
customers and how we set policies. We work as a
team. We talk face-to-face with customers, no voice
mail. Most importantly – 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 our business.

Corporate Governance

There continues to be a significant focus on
corporate governance issues. We have always made
strong and effective corporate governance a
priority, as we believe it is essential to long-term
success. Our governance policies are designed to
strengthen the ability of the Board of Directors to
effectively supervise management and enhance
shareholder value. The Board adapts
the
governance policies to meet changing needs and
circumstances with the goal of maintaining high
standards and improving effectiveness. Ongoing
corporate accountability reforms and governance
best practices are monitored in order that we may
further refine our processes and policies.

CWB TWENTIETH ANNUAL REPORT

We were pleased when Canadian Business magazine
recognized Canadian Western Bank as having one of
the top corporate boards in Canada. The survey,
which included all Canadian public companies listed
on the TSX, placed our board in a tie for second
place. Companies were ranked on board composition,
board performance and disclosure, responsiveness to
shareholders and stock performance.

Outlook

In 2003 we undertook many initiatives that are
expected to take Canadian Western Bank to the next
level of financial performance and market acceptance.
Overall, there is a growing feeling of excitement that
we are on the right track. A strong sense of pride has
developed – showcased in our premises and reflected
in customers and staff embracing “their bank”. The
Board and management also take satisfaction in the
ability to increase dividends and raise subordinated
debt to support future asset growth, as it underscores
the Bank’s development and increasing market
recognition.

On the front cover, the question is asked, “what kind
of a bank can you build in 20 years?” Throughout
this report, we are certain you will find the answer.
Our Bank was built on relationships. Relationships
that create value for every person we deal with –
each and every day. We sincerely thank those who
helped build our Bank over the past 20 years – our
employees for their dedication and extra efforts, and
our customers for choosing to bank with us.

In 2004 we will be celebrating our 20th anniversary.
We will continue to focus on our business plan and
fundamental strengths, while looking for new growth
opportunities that will enhance our core business
and increase shareholder return. Our key financial
targets for 2004 include return on equity of 13-15%
and net income growth of at least 15%. We trust our
shareholders are pleased with our success and we
remain committed to taking Canadian Western Bank
to even higher levels of performance.

Jack C. Donald
Chairman

Larry M. Pollock
President and CEO

“The major Canadian banks are moving away from the core business of banking… but we’re not. We are in the
business of evaluating risk – making loans and investing people’s money – and we concentrate all our efforts
on getting it right.”

Jack C. Donald, with CWB Board 20 years
Chairman of the Board

“When I joined CWB, the potential was mind boggling. We were a $3 to $4 hundred million bank – with the vision
of someday becoming a $5 billion bank… At the rate we’re growing, we might just get there in ‘04. And, when
we arrive, it will be as the most efficient and cost effective bank in the country.”

Larry M. Pollock, with CWB 14 years
President and CEO

CWB TWENTIETH ANNUAL REPORT

With a clear VISION, strong NICHE, focus on
GROWTH and a commitment to RELATIONSHIPS…
you can build a special kind of bank in 20 years…
Canadian Western Bank… and this is our story.

Focused, straightforward and truly western…
that is our VISION.

$36 MILLION

1984
2003
$4.3BILLION

ASSETS

BE TRUE TO YOUR VISION
CWB TURNS 20

BACK IN 1984, WHEN THE BANK WAS FOUNDED, WE HAD A DREAM, A VISION…
AND NOT MUCH ELSE. AS IT TURNS OUT, THAT WAS MORE THAN ENOUGH.

Just two decades ago the world got its first look at
the Apple computer and Ghost Busters. Clara Peller
asked “Where’s the Beef?” and we launched Canadian
Western Bank. Back then it was a little bank with a
big vision. But it was also a bank with the resolve to
stick to that vision.

Canadian Western Bank came to life in 1984 when
the late Dr. Charles A. Allard pursued his vision of a
bank for westerners, based here in Western Canada.
With hard work and commitment from dedicated
founders, employees, and all those who followed, this
vision became a reality – a very successful reality.

Now, with over $4.3 billion in assets and 27 branches
in the four western provinces, we are the largest
publicly-traded Schedule I chartered bank with its
headquarters and principal operations in Western
Canada. At 20 years of age, our little bank that
could has done just that, and in a big way.

From the initial Bank of Alberta Charter in 1984 and
the amalgamation with Western & Pacific Bank of

Canada in 1988 and North West Trust Company in
1994, to the acquisition of Aetna Trust in 1996 (now
Canadian Western Trust), CWB has continued to
grow at a steady pace. We have consistently acquired
assets and businesses and expanded our service
offerings to fuel our vision of providing the highest
quality financial services in our chosen niches.

Over the last two decades, CWB has distinguished
itself as a business leader. We’ve delivered on our
promise of full service banking and high touch,
personalized service for western Canadians. And we’ve
enjoyed a long list of cumulative successes: 62
consecutive profitable quarters… fourteen consecutive
years of double-digit loan growth… And, even during
our most exciting periods of growth, we’ve never
lost sight of the vision. It has never been about
becoming the biggest, it is about being the best at
what we do.

“My father originally wanted a western institution that would provide a reliable, responsive alternative to the big
eastern banks. And, he was ultimately concerned for the security of the people who deposit money with us.
He took that responsibility very seriously...and it remains a priority today. You can see it in our loan loss
experience...among the lowest in the country again this year.”

Charles R. Allard, with CWB Board 18 years
Director

“Back in the 70s, my father always felt like he was going cap in hand for financing to the east. He built hotels
in the west… in places bankers in the east had never heard of. And it was a constant barrier. So my father’s
dream for CWB originally was for a stable bank that understood the western economy. We are now a full
fledged Schedule I bank…a completely western Canadian institution… and we are here to stay.”

Howard E. Pechet, with CWB Board 20 years
Director

CWB TWENTIETH ANNUAL REPORT

We charted our course, chose our NICHE…
that’s our advantage.

$36 MILLION

1984
2003
$500 MILLION

MARKET CAPITALIZATION

STICK TO YOUR NICHE
DO WHAT YOU’RE GOOD AT

WHEN YOU KNOW WHAT YOU’RE GOOD AT, YOU STICK WITH IT.
WE UNDERSTAND WESTERN BUSINESS BECAUSE WE ARE WESTERN BUSINESS.

Canadian Western Bank was founded to serve the west,
and that’s what we do. British Columbia, Alberta,
Saskatchewan and Manitoba – it’s the market we
know. We specialize in commercial lending, real estate
financing, industrial equipment financing and energy
lending.

You can tell a lot about a bank by the company it
keeps. For us, those companies are mid-market
businesses that have what it takes to grow and
prosper in an evolving marketplace. For two decades,
we’ve built our business by helping them to grow
theirs. We don’t believe that having a big bureaucracy
makes you better. Far from it. Local businesses need
local solutions. It’s on this level where we get down
to business – important decisions involve local
managers who know and understand
their
customers. We do not make decisions based strictly
on numerical formulas, we understand the value of
personal judgement.

Since the inception of the Bank, we have prided
ourselves on our Think Western® approach to customer
service. This approach not only gives us an advantage

in mid-market lending, but it also continues to
deliver growth and service differentiation in retail
banking. CWB provides full service personal banking
through a competitive range of deposit accounts,
investment products, mortgages, personal loans
and credit cards as well as other banking services.
Fast and friendly. It’s the way we do business.

We provide trust services through Canadian Western
Trust. Our niche is delivering value propositions such as
partnering with independently-minded leaders in
the investment industry, identifying service gaps in
the trust industry and delivering results.

We give our customers what they want: a preferred
alternative to bigger banks… a regional bank that is
agile, aware and focused on the client. Our
approach is straightforward. We’ve adopted a
service standard that differentiates us from all others.
It’s what we call thinking western. We believe in and
practice high touch personalized service. Every day.
Every customer. Their business matters to us, and
they know it.

“CWB has earned our loyalty through their steadfast support and personal attention. They believed in us from
the beginning and we have grown together. Other banks are interested in us but they have no any idea of the
strength of our relationship, or they wouldn’t be asking.”

Jim Ross, CWB client for 13 years
President and CEO, Steeplejack Industrial Group Inc.

CWB TWENTIETH ANNUAL REPORT

Real GROWTH requires a plan…
and the conviction to see it through.

$715 THOUSAND

1984
2003
$38MILLION

NET INCOME

FOCUS ON GROWTH
MAINTAIN A STEADY COURSE

WE WEREN’T HANDED THIS SUCCESS. WE EARNED IT. THE APPLICATION OF PROVEN METHODS,
CONSISTENT APPROACHES, RESPONSIBLE STEWARDSHIP AND WESTERN THINKING – HAS MADE CWB
THE SUCCESSFUL FINANCIAL INSTITUTION IT IS TODAY.

At Canadian Western Bank, we believe in a course of
steady and responsible growth. And our people
have achieved it, delivering over a decade of
double-digit loan growth in a constantly fluctuating
world.

The key to this growth is consistency. Since the
earliest days, we have practiced a philosophy and
leadership style that has resulted in dynamic growth
and profitability.

Back in 1984, our initial market capitalization and
total assets were only $36 million. We’ve come a
long way with market capitalization of more than
$500 million and total assets of over $4.3 billion.

This year, we celebrated our 62nd consecutive profitable
quarter as well as a record year for net income. Our
credit quality remains strong, with one of the lowest

loan loss provisions and the best efficiency ratio in
the Canadian banking industry.

The theme of consistency is carried through to our
approach to customer relations. We believe in open,
honest communication that’s rooted in respect.
That’s how we’ve always done business… and it
continues to work for us and for our customers.
Our ever-expanding full service personal banking
line is a result of this two-way communication with
our customers.

Sound and effective corporate governance is also a
priority at Canadian Western Bank. In fact, Canadian
Western Bank was recently recognized by Canadian
Business magazine as having one of the top
corporate boards in the country.

“I was there in the beginning. At first we worked out of a boardroom at the Mayfield Inn because our sponsoring

shareholders, the Pechets, were good enough to let us do business there until we received our licence to operate.
In the boardroom we had 3 desks, 3 phones and a typewriter. That was it. But I loved coming to work. It was so
exciting. We were building a bank.”

Esther Edwards, CWB’s first employee and with CWB 20 years
Executive Assistant to President and CEO

CWB TWENTIETH ANNUAL REPORT

Our RELATIONSHIPS with employees, customers
and shareholders have taken us to new heights.

1984
110%
2003
110%

COMMITMENT TO PEOPLE

BUILD RELATIONSHIPS
BE A GOOD NEIGHBOUR

FROM DAY ONE, THE FOCUS HAS BEEN ON BUILDING RELATIONSHIPS WITH EMPLOYEES, CUSTOMERS,
SHAREHOLDERS AND THE COMMUNITY. THE RESULTS FOR ALL STAKEHOLDERS ARE BETTER WHEN YOU
WORK WITH A TEAM YOU TRUST.

People are by far the most valuable asset of any
organization. At CWB, we’ve built a team that you
can bank on… a winning team… champions of
common sense, western ways and values.

Relationships are the very foundation of CWB. We
want to know our customers, and we want them to
know us. When you care about the people you
serve, and those you work with, it raises customer
service to a whole new level.

We treat our customers the same way we would like
to be treated: with respect, honesty and simple
courtesy. We don’t believe that’s a lot to ask. That’s
just a little thing we call thinking western – and it’s
what sets us apart.

We don’t believe in voicemail, or call centres. That’s
far too impersonal – not our style. And we don’t care

for long lineups, either. We realize your time is
valuable, so we go out of our way to get the job done.

The western tradition of doing for others is deeply
ingrained in all of us at CWB. We proudly support
the communities we serve… giving to a number of
worthwhile causes from caregiving, to education, to
the arts. Call it community spirit. Call it western
hospitality. We call it good business.

Our relationships don’t end at the bank door. We
take that community-minded attitude home with
us… to the neighbourhoods where we live… where
our families live. We’re not just bankers, we’re
parents, volunteers, soccer coaches, dance
teachers, board members, and more. You’ll find over
600 of our employees throughout the West. Just
down the street. Around the corner. Or across the
way. We’re the ones with the friendly smile.

“The bank is completely within my comfort zone. There’s a friendly atmosphere about it, and in 18 years I have never
had a negative experience. CWB understands the ups and downs of our economy. They’ve always had a group of
mature individuals working on the commercial side… Not a lot of turnover in personnel… makes for great continuity
and very comfortable banking…”

Bob Rowe, CWB client for 18 years
General Manager, Phoenix Fence Inc.

“My eventual successor will believe in our Think Western® culture or I’ll stay on ‘til I’m 90.”

Larry Pollock, with CWB 14 years
President and CEO

CWB TWENTIETH ANNUAL REPORT

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

23 Quarterly Information

24 Overview of 2003

24 Critical Accounting Policies

25 Business Profile, Strategy and Outlook

26 Growth of the Core Business
26 Net Interest Income
27 Other Income
28 Loans
29 Deposits
30 Trust Operations

31 Cost Control

31 Non-interest Expenses
32 Taxes
33 Capital Expenditures

33 Credit Quality

33 Impaired Loans
34 Allowance for Credit Losses
35 Provision for Credit Losses
35 Diversification of Portfolio

36 Balance Sheet and Capital Management

36 Liquidity
38 Derivative Financial Instruments
38 Capital Funds and Adequacy

40 Risk Management
40 Overview
41 Credit Risk Management
41 Liquidity Risk
42 Market Risk
43 Operational Risk

43 Updated Share Information

44 CORPORATE GOVERNANCE
44 Introduction

44 The Board and Board Committees

45 Audit Committee

46 Conduct Review Committee

46 Corporate Governance & Human Resources Committee

47 Loans Committee

47 Other Areas of Consideration

47 Conclusion

48 FINANCIAL STATEMENTS
48 Management’s Report

49 Auditors’ Report

50 Consolidated Balance Sheet

51 Consolidated Statement of Income

51 Consolidated Statement of Changes in Shareholders’ Equity

52 Consolidated Statement of Cash Flow

53 Notes to Consolidated Financial Statements

MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION

Quarterly Information
($ thousands, except per share amounts)

Results of operations

2003
Q3

2002

Net interest income (teb)(1)

27,500

28,369

25,953 $

25,833 $

24,534 $

24,079 $

20,677 $

21,994

Less teb adjustment

Net interest income

per financial statements

Total revenues (teb)

Total revenues

Net income

Return on common

559

906

685

842

710

693

596

450

26,941

33,858

33,299

9,604

27,463

34,785

33,879

10,375

25,268

32,125

31,440

8,868

24,991

32,213

31,371

9,346

23,824

29,869

29,159

7,727

23,386

29,834

29,141

8,064

20,081

25,809

25,213

6,425

21,544

27,908

27,458

7,396

shareholders' equity (ROE)

12.2%

13.7%

12.5%

13.2%

11.2%

12.0%

10.1%

11.5%

Return on average total

assets (ROA)

Earnings per common share

Basic

Diluted

Efficiency ratio (teb)

Efficiency ratio

Net interest margin (teb)

Net interest margin

Provision for credit losses as a

0.91%

1.00%

0.92%

0.97%

0.83%

0.91%

0.77%

0.87%

0.74

0.81

0.70

0.74

0.67

46.9%

47.4%

2.60%

2.55%

0.72

44.5%

45.7%

2.73%

2.65%

0.63

47.8%

48.9%

2.69%

2.62%

0.67

46.0%

47.3%

2.68%

2.60%

0.61

0.56

50.9%

52.1%

2.64%

2.57%

0.64

0.58

49.1%

50.3%

2.72%

2.64%

0.51

0.47

54.5%

55.8%

2.47%

2.39%

0.59

0.53

48.7%

49.5%

2.58%

2.52%

percentage of average loans

0.25%

0.24%

0.26%

0.27%

(1) Most banks analyze revenue on a taxable equivalent basis to permit uniform measurement and comparison of net interest income. Net interest income (as
presented in the consolidated statement of income) includes tax-exempt income on certain securities. Since this income is not taxable, the rate of interest
or dividend received is significantly lower than would apply to a loan or security of the same amount. The adjustment to taxable equivalent basis of $3.0
million (2002 – $2.5 million) increases interest income and the provision for income taxes to what they would have been had the tax-exempt securities been
taxed at the statutory rate. The taxable equivalent basis does not have a standardized meaning prescribed by generally accepted accounting principles and
therefore may not be comparable to similar measures presented by other banks.

Canadian Banking Industry

Comparative performance indicators of the Canadian banking
industry referred to in this document are obtained from the
published results of the other publicly-traded Schedule I banks
(Bank of Montreal, Canadian Imperial Bank of Commerce,
Laurentian Bank of Canada, National Bank of Canada, Royal Bank
Financial Group, Scotiabank and TD Bank Financial Group).
Readers are cautioned that the banks in this industry group have
operations and asset size that may not be directly comparable to
each other or to Canadian Western Bank.

Forward-looking Statements

From time to time we make written and verbal forward-looking
statements about our objectives and strategies, operations and
targeted financial results. These may be included in our Annual

Reports, regulatory filings, reports to shareholders, press
releases, corporate presentations and other communications.
These forward-looking statements are inherently subject to risks
and uncertainties beyond the Bank’s control, including, but not
limited to, fluctuations in interest rates and currency values,
changes in economic and political conditions, legislative or
regulatory developments, technological developments and
competition. These and other factors may cause the Bank’s actual
performance to differ materially from that contemplated by
forward-looking statements and the reader is therefore cautioned
not to place undue reliance on these statements. We do not
undertake to update any forward-looking statement, whether
written or verbal, that may be made from time to time by us or on
our behalf.

CWB TWENTIETH ANNUAL REPORT

Overview of 2003

Key Performance Indicators
($ thousands, except per share amounts)

Net income
Earnings per share

Basic
Diluted

Provision for credit losses as a percentage of average loans
Efficiency ratio(1) (expenses to revenues) (teb)(2)
Efficiency ratio
Return on common shareholders’ equity
Return on average total assets

(1) A decrease in the ratio reflects improved efficiency.
(2) See page 23 for a discussion of teb.

The Bank achieved record earnings of $38.2 million in 2003, an
increase of 29% over 2002. The increase was due to strong growth
in total revenues and excellent efficiency. The efficiency ratio (teb)
at 46.3% remained the best in the Canadian banking industry.
Credit quality remained strong and stable. The provision for credit
losses as a percentage of average loans was 0.25% in 2003 and
has averaged 0.23% over the last five years.

Diluted earnings per share were $2.69 in 2003 compared to $2.14
a year ago, an increase of 26%. Return on shareholders’ equity and
return on assets were 12.9% and 0.95% respectively compared to
11.2% and 0.84% last year.

Total assets increased 13% from one year ago to reach $4,344
million. Loans increased by $352 million, or 11% as the Bank’s long
history of double digit annual loan growth continued. Branch
generated deposits increased 14% in the year and account for
over one half of total deposits.

The Bank raised $65 million in conventional subordinated
debentures which improved the mix of regulatory capital because
growth is supported without dilution of common shareholders.
The total capital adequacy ratio at October 31, 2003 was 13.1%
(2002 – 11.4%) with a Tier 1 component of 8.9% (2002 – 8.8%).

Critical Accounting Policies

The Bank’s significant accounting policies are outlined in Note 1 of
the consolidated financial statements. The policies discussed
below are considered particularly important as they require
management to make significant estimates or judgements, some
of which may relate to matters that are inherently uncertain.

$
$

2003
38,193 $

2002
29,612 $

Change
from
2002
8,581

2.98 $
2.69 $
0.25%
46.3%
47.4%
12.9%
0.95%

2.34 $
2.14 $
0.26%
50.7%
51.8%
11.2%
0.84%

0.64
0.55
(0.01)%
(4.4)%
(4.4)%
1.7 %
0.11 %

% Change

29%

27%
26%

Allowance for Credit Losses

The allowance for credit losses reflects management’s estimate of
probable losses in the Bank’s loan portfolio at the balance sheet
date. In assessing existing credit losses, management must rely on
estimates and exercise judgement regarding matters for which the
ultimate outcome is unknown. These matters include economic
factors, developments affecting particular industries and specific
issues with respect to single borrowers. Changes in circumstances
may cause future assessments of credit risk to be significantly
different than current assessments and may require an increase or
decrease in the allowance for credit losses. Additional information
on the process and methodology for determining the allowance
for credit losses can be found in the discussion of credit quality on
page 34 of Management’s Discussion and Analysis of Operations
and Financial Condition and Note 1(e) to the consolidated
financial statements.

Income Taxes

The provision for income taxes is calculated based on the expected
tax treatment of transactions. In determining both the current and
future components of the provision for income taxes, management
must interpret tax legislation and make assumptions about the
expected timing of the reversal of future tax assets and liabilities. If
the Bank’s interpretations differ from those of tax authorities or if
the timing of reversals is not as anticipated, the provision for
income taxes could increase or decrease in future periods.

CWB TWENTIETH ANNUAL REPORT

Business Profile, Strategy and Outlook

Business Profile

Canadian Western Bank (CWB) commenced operations in 1984
and today serves many thousands of small to medium sized
businesses and individuals across the four western Canadian
provinces. With a focus on mid-market commercial lending, real
estate financing, industrial equipment financing and energy
lending, the Bank has built strong customer relationships and
provides value-added services to businesses in key sectors across
the west. CWB also delivers a wide variety of financial products
and services including deposit accounts, investment products,
credit and debit cards, personal loans and mortgages. Customer
accessibility is provided though a network of twenty-seven
customer focused branches as well as via the Internet and
telephone banking. Personal and corporate trust services are
provided through a wholly-owned subsidiary, Canadian Western
Trust (CWT).

Strategy and Strengths

The year 2004 will see the Bank celebrate its 20th anniversary.
Upon reflection, CWB’s business plan has not strayed far from its
roots. Rather, it has been an evolution based on strong
fundamentals, values and focus.

financial services, delivered

Canadian Western Bank’s mission is to be known and respected as
Canada’s western bank, providing western Canadians and other
selected markets with a preferred source of individual and
commercial
its signature
Think Western® style. The fundamental objectives are to provide
shareholders with a sound and profitable return, provide clients
with value, service and stability, provide employees with a positive
and rewarding work environment and contribute to the
communities in which CWB operates.

The Bank plans to achieve its mission through the following

strategic priorities:

• Build upon the Think Western® brand of service by ensuring

CWB employees continue to manage customer relationships in
the responsive and friendly CWB manner. CWB believes that
experienced, knowledgeable and dedicated employees with a
Think Western® attitude are critical to building customer loyalty.

• Ensure growth is focused, strategic and ultimately enhances

shareholder value.

• Reinforce industry leadership in cost efficiency, return on assets
and credit losses by maintaining low cost delivery capabilities,
mitigating risks and ensuring continued rigorous credit risk
management.

• Leverage core profitability by the generation of lower cost

deposits through the branch network and CWT.

• Grow non-interest revenues from a continued emphasis on
retail products and services and by ensuring appropriate
resources are allocated to CWT to support corporate and
personal trust services.

• Increase ROE further by improving the mix of regulatory capital

and through potential new business opportunities.

• Maintain and reinforce CWB’s reputation and public confidence

through enhanced communication, diligence in corporate
governance practices and high standards in corporate
reporting and accountability.

Outlook

Overall, the Bank expects continued strong financial performance in 2004, stable or improving economic conditions in Western Canada and
stable to modestly rising interest rates. The recent and expected strength in the Canadian dollar will affect some borrowing customers
positively and others negatively, but overall it is not expected to have a significant impact on the Bank’s credit quality or growth strategy.
An increased emphasis on retail initiatives, together with the significant branch development projects that will be completed in fiscal 2004,
are expected to further strengthen the Bank’s ability to drive core business growth and increase market recognition. Targets established for
2004 include net income growth of at least 15%, ROE of 13 to 15% and ROA of 0.98% or higher.

The impact of potential big bank mergers on the Canadian financial industry is difficult to predict. It is generally felt that there would be
additional growth opportunities for smaller financial institutions like CWB because of possible location duplication, customer interruption
and more narrowly focused business strategies of the merged institutions, should mergers be allowed and indeed, if they occur.

The balance of management’s discussion focuses on the following
areas which form the financial basis of the Bank’s business plan
and which management considers critical to long-term success:

• Growth of the core business

• Cost control

• Credit quality

• Balance sheet and capital management

• Risk management

CWB TWENTIETH ANNUAL REPORT

Growth of the Core Business

Highlights of 2003

• Total revenues increased 17%

• Net interest income increased 18% as a result of strong loan growth and an improved net interest margin

• Other income increased 14% with strong growth in all operational areas

• Loans increased 11%

• Lower cost notice and demand deposits increased 18%

• Trust operations, through Canadian Western Trust, continued to expand with the number of self-directed accounts up 15%

Net Interest Income

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.

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

2003

2002

Average
Balance

Mix

Interest

Interest
Rate

Average
Balance

Mix

Interest

Interest
Rate

Assets
Securities and deposits

with regulated financial
institutions

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

$ 526,489

13% $

19,319

3.67% $ 436,589

13% $

16,907

3.87%

61,468
631,511
2,756,634
3,449,613
3,976,102
45,810
$4,021,912

$ 115,392
444,778
3,014,956
3,575,126
83,700
67,372
295,714
$4,021,912

1
16
69
86
99
1

1,807
37,435
180,801
220,043
239,362
–
100% $ 239,362

3% $

–
6,245
121,521
127,766
–
3,941
–
100% $ 131,707

11
75
89
2
2
7

49,647
2.94
572,446
5.93
2,398,029
6.56
3,020,122
6.38
3,456,711
6.02
0.00
48,571
5.95% $3,505,282

83,715
0.00% $
370,021
1.40
2,655,316
4.03
3,109,052
3.57
68,923
0.00
62,959
5.85
0.00
264,348
3.27% $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

2.40
6.10
6.58
6.42
6.10
0.00
6.01%

0.00%
0.95
4.23
3.73
0.00
5.89
0.00
3.41%

$4,021,912

$ 107,655

2.68% $3,505,282

91,284

2.60%

(1) See page 23 for a discussion of teb.

CWB TWENTIETH ANNUAL REPORT

In 2003, net interest income increased by $16.4 million, or 18%,
primarily due to an increase of $519 million (15%) in average
interest bearing assets and an increase in the net interest margin
to 2.68% from 2.60%.

the first half of 2002. The prime rate for the year averaged 4.69%
in 2003 compared to 4.15% last year. The 2003 net interest margin
of 2.68% was consistent with the margin of 2.69% achieved in
2001 prior to the fall in interest rates.

The increase in net interest margin in 2003 reflects the recovery of
rates from the record low interest rate environment experienced in

Outlook

In 2004, net interest income is expected to increase in response to the targeted loan growth of 12%. In addition, a continued emphasis on
generating lower cost deposits will allow the Bank to gain leverage from core profitability. The Bank consistently maintains a positive interest
rate gap with maturing assets exceeding maturing liabilities during the one year time frame. As a result of this positive interest rate gap, an
increase in short term market rates would have a positive impact on margins, while a decrease would have the opposite impact. Overall, net
interest margin is expected to be comparable to 2003 based on relatively stable interest rates with modest increases expected in late spring.

Other Income

Other income includes all revenues not classified as net interest
income.

Table 2 – Other Income
($ thousands)

Credit related
Retail services
Trust services
Gains on sale of securities
Foreign exchange
Other (1)
Total Other Income

Change from 2002

2003
13,099 $

4,679
4,017
2,095
1,279
157

2002
11,050 $
3,944
3,206
2,385
1,280
271

25,326 $ 22,136 $

$
2,049
735
811
(290)
(1)
(114)
3,190

19%
19
25
(12)
(0)
(42)
14%

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

Other income was $25.3 million, an increase of $3.2 million or 14%
over 2002. Notable changes include:

• an increase of $2.0 million (19%) in credit fees due

RRSP (registered retirement savings plan) and RRIF (registered
retirement income fund) accounts and an increased offering of
products available; and

to loan growth;

• a decrease in gains on securities sales.

• an increase of $735,000 (19%) in retail fees as a result of

volume growth and ongoing retail initiatives;

• increased trust services fees in Canadian Western Trust (CWT)
due to continued growth (15%) in the number of self-directed

Other income as a percentage of total revenue (net interest
income and other income) was 19% in 2003, down slightly from
20% in 2002 primarily as a result of the increase in net interest
income generated from the increased net interest margin.

Outlook

Other income is expected to increase 12 – 15% in 2004, with growth in all areas except securities gains. The enhancement of retail operations
will continue to be a focus in 2004, with the objective of increasing fee income through expanded product offerings, additional transactional
deposit accounts and the generation of new business, all supported by the development of the Bank’s branch network.

CWB TWENTIETH ANNUAL REPORT

Loans

Loans, as reported on the consolidated balance sheet, totalled
$3,601 million at the end of 2003 compared to $3,249 million at
the end of 2002, an increase of 11%.

Table 3 – Outstanding Loans by Type and by Provincial Location of Security
($ millions)

October 31, 2003
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, 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

British
Columbia

Alberta Saskatchewan Manitoba

Other
Provinces

Composition
Total(1) Percentage

326 $
42
368

246
61
307

62 $
13
75

17 $
3
20

–
351
355
234
–
940
1,308 $
36%

72
471
585
325
165
1,618
1,925

53%

312 $
43
355

220
59
279

–
330
294
202
–
826
1,181 $
36%

66
452
491
272
160
1,441
1,720

52%

–
13
41
19
4
77
152 $
4%

–
63
63
8
–
134
154 $
4%

52 $
14
66

12 $
3
15

–
20
44
20
4
88
154 $
5%

–
50
61
9
–
120
135 $
4%

14 $
–
14

–
56
5
21
–
82
96 $
3%

10 $
–
10

–
46
13
19
–
78
88 $
3%

665
119
784

72
954
1,049
607
169
2,851
3,635

100%

606
119
725

66
898
903
522
164
2,553
3,278

100%

18%
3
21

2
26
29
17
5
79
100%

18%
4
22

2
27
28
16
5
78
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 29) 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 TWENTIETH ANNUAL REPORT

Highlights of the year-over-year changes in loans by type include:

• the mix of loan type has remained relatively consistent;

• construction and real estate loans increased $146 million (16%)
and represent 29% of the portfolio versus 28% a year earlier;

• commercial loans increased $56 million (6%) and comprise

is selective about the loans it participates in and had a net
reduction of $25 million in these loans during the year. Without
this reduction in corporate loans, total loan growth for the year
would have been 1% higher. At October 31, 2003 the corporate
loan portfolio totalled $116 million (2002 – $141 million).

26%, versus 27% one year ago; and

Loans by Portfolio

• loans to individuals represent 21% of the total portfolio,

compared to 22% in 2002.

Highlights of the year-over-year changes in location of loan
security were:

• mix of location of security has remained relatively consistent;

• loan growth of $222 million (11%) in the prairie provinces

(primarily in Alberta); and

• loans based in British Columbia increased $127 million (11%)

and were consistent at 36% of the total portfolio.

Loan growth for the year was entirely organic.

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. The Bank

Outlook

Corporate
Loans

Repurchase
Agreements

Personal
Loans

Residential
Mortgages

Multi-unit
Residential

Oil & Gas
Production

General
Commercial

23%

Industrial
Financing
& Leasing

17%

Commercial
Mortgages
Real Estate

23%

Commercial
Project Loans
Real Estate

12%

Consistent and strong loan growth of 12% is targeted for 2004, supported by the continuing development of the branch network.

Deposits

Table 4 – 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

Growth in deposits of 11% was achieved this year. Lower cost
business and personal deposits had strong growth of 18% and
account for 16% of total deposits consistent with last year. The
focus on increasing lower cost deposits is an ongoing priority
due to the positive impact on earnings. Branch generated
deposits grew by 14% this year and account for over one-half of
total deposits.

2003
Amount % of Total

2002

Amount

% of Total

$ 206,710
431,218

2,020,207
601,215
533,647
3,792,997
26,753
$3,819,750

5% $ 169,737
368,764

53
16
14
99
1

1,787,391
555,276
523,534
3,404,702
24,369
100% $3,429,071

52
16
15
99
1
100%

All sources of deposits increased in real dollar terms over the year
but the percentage of deposits raised by branches increased to
54% of the total. Branch generated deposits are generally
considered to be more stable and the Bank will continue to focus
on achieving further growth in this area as the capacity for
additional growth exists in our network. 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.

CWB TWENTIETH ANNUAL REPORT

Deposits by Source
($ millions)

6
7

8
6
6
,
1

6
7
0
,
2

4
5

3
5
5
1

2
2
8
1

8
5

7
5
3
1

7
2
6
1

2
7

1
1
3
1

5
4
3
1

7
8

6
7
1
1

8
0
1
1

1999

2000

2001

2002 2003

5,000

4,000

3,000

2,000

1,000

Outlook

Deposits by Source
(as a % of total deposits)

Wholesale
Agent
Branches

Branches
Deposit Agents
Wholesale

1999

2000

47%
49%
4%

49%
48%
3%

2001
53%
45%
2%

2002 2003
54%
44%
2%

53%
45%
2%

In 2004, increasing branch raised deposits (including through CWT) will continue to be a focus of ongoing retail initiatives. Particular
emphasis will be placed on the lower cost notice and demand component which has associated transactional fee income and provides
leverage to core profitability from margin expansion.

Trust Operations

CWT delivers value to customers through partnerships with
leaders in the investment and benefits industry, identifying service
gaps and providing knowledgeable and customer service oriented
results. CWT had a very strong year in 2003.

Total deposits raised through trust operations increased 37% to
total $121.6 million at October 31, 2003 with growth in both
personal and corporate trust deposits. Trust assets under
administration, which are not reflected in the consolidated balance
sheet (see also Note 16 to the consolidated financial statements),
totalled approximately $1,475 million at October 31, 2003, an
increase of 26% over the prior year. These assets are primarily held
in self-directed RRSPs and RRIFs accounts which totalled 16,823
(2002 – 14,674), an increase of 15% from one year ago.

Trust customers may hold and effect transactions in cash, mutual
funds, term deposits, equities, bonds, arms-length mortgages and
private company shares in registered and non-registered
accounts. Corporate and group services include retirement
compensation agreements, individual pension plans, registered
pension plan, group RRSP and share purchase plan administration.

Number of
Self-directed Accounts

3
2
8
,
6
1

4
7
6
,
4
1

4
1
8
,
2
1

8
6
4
,
1
1

20,000

15,000

10,000

7
0
0
,
9

5,000

1999

2000

2001

2002 2003

Growth in the current year primarily came from organic growth
through the existing network of financial planners and benefit
consultants. CWT also arranged to provide RRSP and RRIF trustee
and administrative support to approximately 500 members of
Vancouver City Savings Credit Union and was appointed as bare
trustee to ATB Investor Services (a subsidiary of ATB Financial).

Outlook

Assets under administration and the related fee income are expected to show continued strong growth in 2004 with targeted increases of 35% and
15%, respectively. A more modest target of 5% growth has been established for deposits raised through trust operations as balances were unusually
high at year-end and fluctuate as customers reinvest funds in the market place. An investment in system software will be made in 2004 to allow
CWT to more efficiently manage future growth.

CWB TWENTIETH ANNUAL REPORT

Cost Control

Highlights of 2003

Growing in a cost-effective manner is a key strength of the Bank. The efficiency ratio (teb), a measure of the cost to generate each dollar of
revenue, improved to a record low of 46.3% and leads the Canadian banking industry. Overall, non-interest expenses increased 7% over 2002.

Non-interest Expenses

Table 5 – 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

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

Total
Total Non-interest Expenses
Efficiency Ratio

Net interest income (teb)
Other income
Total revenues

Change from 2002

2003

2002

31,916 $

5,764
37,680

29,147 $
5,438
34,585

2,769
326
3,095

4,985
1,084
1,212
7,281

2,004
1,749
3,753

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

2,046
1,635
3,681

1,935
1,885
1,796
1,435
1,074
899
758
552
2,518
12,852
61,566 $

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

220
20
(107)
133

(42)
114
72

396
194
(158)
(5)
15
107
(165)
(5)
372
751
4,051

$ 107,655 $
25,326

91,284 $
22,136

$ 132,981 $ 113,420 $

16,371
3,190
19,561

10%
6
9

5
2
(8)
2

(2)
7
2

26
11
(8)
(0)
1
14
(18)
(1)
17
6
7%

18%
14%
17%

Efficiency Ratio (expenses as a percentage of total revenues) (teb)

46.3%

50.7%

Non-interest expenses increased 7% to $61.6 million in 2003
primarily due to an increase in salary costs. The increase in salary
costs related to annual salary adjustments and higher staffing
levels that resulted from increased business activity. Also
contributing to the increase was additional marketing and
business development initiatives.

The efficiency ratio (teb) improved to 46.3% from 50.7% in 2002 as
revenue growth of 17% surpassed expense growth of 7%. The
efficiency ratio continues to compare very positively to the other
Canadian Schedule I banks which averaged 66.9% in fiscal 2003.
Non-interest expenses as a percentage of average assets was
1.53% in 2003, down from 1.64% in 2002.

CWB TWENTIETH ANNUAL REPORT

Efficiency Ratio(1)
(expenses to revenues)

%
8
9
5

%
3
4
5

%
0
0
5

%
7
0
5

%
3
.
6
4

1999

2000

2001

2002 2003

(1) A decrease in the ratio

reflects improved efficiency.

Stock-Based Compensation

Effective for stock options granted after October 31, 2002, the Bank
adopted 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. Compensation expense recognized in 2003 related to
options granted this year totalled $252. The actual amount of
compensation expense recorded in future years will depend on the
specifics of the actual options granted in those periods and the
variables at the time of the grant(s).

Outlook

The target for 2004 is to achieve an efficiency ratio (teb) of 46.0% or less. A significant branch development program was commenced in 2003
with completion expected in the spring of 2004. Non-interest expenses are expected to increase approximately 4% in 2004 due to these
developments alone. The branch development program will provide future benefits by supporting loan and deposit growth as well as retail
initiatives, but is expected to slow improvement in the efficiency ratio in 2004 as compared to the improvement in 2003.

Taxes

The provision for income taxes (teb) was $24.6 million in 2003, up
from $18.6 million with the increase due to the increase in
earnings. For the year ended October 31, 2003 the effective tax
rate (teb) was approximately 39%, consistent with the prior year.

Capital losses of $11.9 million (2002 – $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.

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 significant rate reductions enacted in 2003.

Table 6 – Capital Taxes
($ thousands)

British Columbia
Alberta
Saskatchewan
Manitoba
Total Capital Taxes

Capital
Tax Rate

Capital
Allocation

1.00%
n/a
0.70%
3.00%

39% $
54%
4%
3%

2003

1,289 $
–
131
288
1,708 $

2002
1,151 $

–

105
271
1,527 $

Change from 2002

138

–
26
17
181

%
12%
–
25
6
12%

Capital taxes for 2003 totalled $1.7 million compared to $1.5
million in 2002. The increase is primarily attributable to 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, 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.

Outlook

The effective tax rate is expected to decrease to the range of 35 – 37% in 2004, reflecting the announced federal income tax and large
corporation tax rate reductions. Provincial capital tax is expected to increase by 12% in 2004 due to the retention of earnings.

CWB TWENTIETH ANNUAL REPORT

Capital Expenditures

In 2003 the Bank invested $2.4 million in capital expenditures.
Significant expenditures
the
related
Bank’s branch network ($1.0 million) and further investment in
computer equipment ($1.2 million) including customer service
enhancements to the banking system.

to development of

The Bank is investing in the future with the relocation and significant
upgrading of its existing Grande Prairie, Red Deer, Winnipeg and
Vancouver West Broadway branches, which are scheduled to open
between November 2003 and January 2004. A new branch, the
Bank’s twenty-eighth branch, is currently under construction in
St. Albert, Alberta and scheduled to open in Spring 2004.

Outlook

Capital expenditures of $5.7 million, to be funded from general operating revenues, are expected in 2004 as the Bank continues to invest
in the future. At year end there were specific commitments of $2.6 million for capital expenditures primarily related to the new St. Albert
branch and the relocation and significant upgrading of four other branches.

Credit Quality

Highlights of 2003

• Credit quality remained strong

• Provision for credit losses was stable at 0.25% of average loans

• Gross impaired loans decreased $12.8 million and are at the low end of the expected range

• Total allowance for credit losses represented 159% of gross impaired loans at year end

Impaired Loans

Gross impaired loans decreased $12.8 million or 37% in 2003. As
shown in Table 7 gross impaired loans totalled $22.2 million and
represented 0.62% (2002 – 1.08%) of outstanding loans. During the

year, the Bank successfully resolved a number of situations to
produce a historically low level of gross impaired loans at October
31, 2003.

Table 7 – Change in Gross Impaired Loans
($ thousands)

Gross impaired loans, beginning of year
Net new formations (reductions)
Write-offs, net of recoveries
Total
Gross Impaired Loans as a Percentage of Total Loans

2003
35,077 $
(8,596)
(4,240)
22,241 $
0.62%

Change from
2002
2002
(403)
35,480 $
(13,286)
4,690
(5,093)
853
35,077 $ (12,836)
1.08%

(0.46)%

The combination of an increase in the allowance for credit losses
and a decrease in impaired loans has resulted in the total allowance
now exceeding gross impaired loans by $13.1 million, representing
negative 0.36% of net loans outstanding. In 2002, impaired loans
exceeded the allowance for credit losses by $4.1 million and
represented 0.13% of net loans outstanding (see graph to right).

The portfolio is reviewed regularly with credit decisions
undertaken on a case by case basis to provide early identification
of possible adverse trends. Loans that have become impaired are
monitored closely with regular quarterly, or more frequent, review
of each loan and the realization plan.

Table 8 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.

Net Impaired Loans as
a Percentage of Net Loans
Outstanding

%
4
5
.
0

%
5
2
.
0

%
7
1
.
0

%
3
1
.
0

)

%
6
3
0

(

1999

2000

2001

2002

2003

1.00

0.75

0.50

0.25

0.00

(0.25)

(0.50)

CWB TWENTIETH ANNUAL REPORT

Outlook

The dollar level of gross impaired loans is expected to fluctuate over time within the Bank’s range of acceptable levels as loans become impaired
and are subsequently resolved. The overall outlook for 2004 remains consistent with the 2003 experience with no expectation of adverse change
in the general trend of the portfolio.

Allowance for Credit Losses

Table 8 – Allowance for Credit Losses
($ thousands)

Specific Provisions

Consumer and personal
Real estate
Industrial
Other

General Allowance
Total

(1) Recoveries in 2003 totalled $87 (2002 – $142).

The allowance for credit losses is maintained to absorb losses in
the loan portfolio and consists of $7.8 million in specific
allowances and $27.6 million in the general allowance for credit
risk. Specific allowances include the accumulated allowances 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 allowances for future
losses inherent in the portfolio that are not presently identifiable
on an account by account basis. The general allowance represents
0.77% of gross outstanding loans (0.73% in 2002) and 0.78% of
risk-weighted assets (0.76% in 2002). This compares favourably
with the Bank’s five year loan loss average of 0.23% (ten year
average – 0.26%) 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 – 0.18%). The allowance as a percentage of gross
impaired loans (coverage ratio) has improved to 159% (2002 –
88%). An assessment of the adequacy of the general allowance is
conducted quarterly and measured against the five and ten year
loan loss averages. 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 allowance is expected to
increase in strong economic times and decrease in weaker
economic times as allowances are allocated to specific credits.

Outlook

2002 Write-offs,
net of
Recoveries(1)

Ending
Balance

Provision
for Credit
Losses

2003
Ending
Balance

281 $

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

418 $
651
881
2,290
–
4,240 $

503
640 $
840
142
2,850
1,620
3,614
2,437
27,558
3,761
8,600 $ 35,365

Policies and methodology governing the management of the
general allowance are in place. The loan portfolio is delineated
through the assignment of internal risk ratings to each borrower.
The rating is based on assessments of key evaluation factors for the
nature of the exposure applied on a consistent basis across the
portfolio. The rating system is based on twelve levels and is updated
at least annually for all loans, with the exception of consumer loans
and single-unit residential mortgages.

Allowance for Credit Losses
as a Percentage of Gross
Impaired Loans

%
9
5
1

%
6
8

%
0
8

%
8
8

%
8
6

1999

2000

2001

2002

2003

200

150

100

Further development of methodology to support the testing of the adequacy of the general allowance will continue during fiscal 2004.
Significant change to the level of the general allowance is not anticipated based on expanded methodology, assuming no material change
in the portfolio’s credit quality.

CWB TWENTIETH ANNUAL REPORT

Provision for Credit Losses

The provision for credit losses represented 0.25% of average loans
in 2003, consistent with the five year average of 0.23% reflecting the
strong credit quality of the portfolio. The Bank continues to report
lower loan losses than the balance of the industry. The Bank has no
material exposure outside Canada and does not underwrite direct
agricultural risk. There has been no material portfolio deterioration
due to the bovine spongiform encephalopathy issue in western
Canada or the forest fires in British Columbia. External factors which
may impact western Canada and the environments in which the
Bank’s customers operate are continually analyzed. One particular
factor that continues to be monitored is the potential impact of the
possible implementation of the Kyoto accord.

Provision for Credit Losses as
a Percentage of Average Loans
Outstanding
(5 year average 0.23%;
10 year average 0.26%)

0.30

%
8
1
0

0.20

%
3
2
0

%
1
2
0

%
6
2
0

%
5
2
.
0

0.10

0.00

1999

2000

2001

2002

2003

Outlook

The provision for credit losses is expected to be consistent at 0.25% of average loans in 2004.

Diversification of Portfolio

Total Advances Based on Location of Security (also see Table 3)

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

Table 9 – Total Advances Based on Industry Sector

Geographical Distribution of Loans(1)

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

2003 2002
25%
25%
18
19
12
10
8
8
5
6
5
5
4
4
4
4
3
3
4
3
3
3
2
3
2
2
5
5

100% 100%

(1) Residential mortgages in this table include only single-family properties.
(2) The Bank does not engage in direct lending to the agricultural sector.

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
portfolio is well diversified with a mix of corporate and personal
business. Industrial lending units are set up within branches or as

British
Columbia

38%

Alberta

51%

Saskatchewan

Manitoba

Other

(1) Includes undrawn lines of credit and excludes securities

purchased under resale agreements.

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.

CWB TWENTIETH ANNUAL REPORT

Balance Sheet and Capital Management

Highlights of 2003

• Issue of $65 million of non-dilutive subordinated debentures which improved the mix of regulatory capital

• Strong total capital ratio of 13.1%, and Tier 1 ratio of 8.9% comprised entirely of common shareholders’ equity

• Two semi-annual dividends of $0.23 per share were paid in fiscal 2003, an increase of 15%

• Semi-annual dividend of $0.30 per share declared in December 2003, an increase of 30%

Liquidity

A schedule outlining the consolidated securities portfolio at
October 31, 2003 is provided in Note 3 to the consolidated financial
statements. A conservative policy is maintained in this area with:

• all investments, other than those securities categorized as

“other marketable securities”, are limited to high quality debt
securities and short-term money market instruments to meet
objectives of liquidity management and to provide an
appropriate return;

• specific investment criteria and procedures for purposes

of management of the securities portfolio;

• regular review, monitoring and approval by the Asset Liability

Committee (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.

Table 10 – Liquid Assets
($ thousands)

Cash
Deposits with regulated financial institutions
Cheques in transit(1)
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

2003
1,951
279,921
–
281,872

72,000
119,982
167,607
49,589
75,133
484,311
$
766,183
$ 4,343,972

2002
1,928
132,038
53,911
187,877

66,431
44,418
123,775
94,610
81,300
410,534
$ 598,411
$ 3,828,162

17.6%

15.6%

$ 3,819,750

$ 3,429,071

20.1%

17.5%

Change from
2002
23
147,883
(53,911)
93,995

5,569
75,564
43,832
(45,021)
(6,167)
73,777
167,772
515,810

2.0%

390,679

2.6%

$
$

(1) An operational change was implemented in 2003 to record cheques and other items cleared on the last day of the month in individual customer accounts
on the same date. Prior to this change, items cleared on the last day of the month did not affect individual customer accounts until the first day of the
following month. The financial statement impact of the change is that Cash Resources no longer includes cheques and other items in transit and customer
notice and demand deposit accounts have been reduced by the last day of the month clearing.

CWB TWENTIETH ANNUAL REPORT

• deposits with regulated financial institutions including Bankers'

Acceptances increased to 37% (2002 – 22%) of liquid assets; and

• other marketable securities decreased to 10% (2002 – 14%)

of liquid assets but are expected to increase in amount in 2004
as additional preferred share investments are made.

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 government insured/guaranteed
mortgage 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 11 and 12.

Within
1 Month
137
520
457
1,114 $

1 to 3
Months

– $
–
386
386 $

3 Months Cumulative
to 1 Year Within 1 Year
137
520
1,885
2,542

– $
–
1,042
1,042 $

968 $

274 $

991 $

2,233

As shown in Table 10, liquid assets comprised of cash, interbank
deposits, securities purchased under resale agreements and
marketable securities, totalled $766 million at October 31, 2003,
an increase of $168 million from October 31, 2002. Liquid assets
represented 17.6% (2002 – 15.6%) of total assets and 20.1%
(2002 – 17.5%) of total deposit liabilities at that date.

Highlights of the composition of liquid assets at October 31,
2003 were as follows:

• maturities within one year represent 88% (2002 – 79%) of liquid
assets or $671 million (2002 – $473 million) partially reflecting
higher liquidity balances at October 31, 2003 that were invested
short term as well as lower balances invested in bonds with
maturities exceeding one year resulting from the strategic
realization of gains;

• Government of Canada and provincial debt securities remained

consistent at 44% (2002 – 44%) of liquid assets;

Table 11 – Deposit Maturities Within One Year
($ millions)

October 31, 2003
Demand deposits
Notice deposits
Deposits payable on a fixed date
Total

October 31, 2002 Total

Table 12 - Total Deposit Maturities
($ millions)

October 31, 2003
Demand deposits
Notice deposits
Deposits payable on a fixed date
Total

October 31, 2002 Total

Within
1 Year

137 $
520
1,885
2,542 $

1 to 2
Years

2 to 3
Years

3 to 4
Years

4 to 5
Years

– $
–
453
453 $

– $
–
469
469 $

– $
–
224
224 $

– $
–
132
132 $

Total
137
520
3,163
3,820

2,233 $

551 $

286 $

228 $

131 $

3,429

A breakdown of deposits by source is provided under the heading
Deposits on page 30. 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 the
core funding source. However, the total dollar value of agent-
generated deposits will likely increase even though the goal is to

decrease funding from this source as a percentage of total deposit
liabilities. CWT raises 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, 2003, the trust’s notice account
balances totalled $122 million (2002 – $89 million) and $72 million
(2002 – $65 million) of CWT fixed term deposits had been raised
through the Bank’s branch network.

CWB TWENTIETH ANNUAL REPORT

Derivative Financial Instruments

More detailed information on the nature of off-balance sheet
derivative financial instruments is shown in Note 20 to the
consolidated financial statements.

Table 13 – Derivative Financial Instruments
($ thousands)

Notional Amounts

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

Total

2003

2002

819,500
86
15,825

835,411 $

707,000
836
14,225
722,061

(1) Interest rate contracts are used as hedging devices to manage interest rate risk. The outstanding contracts mature between November 2003 and October
2007. The total gross positive replacement cost of interest rate contracts was $4,581 (2002 – $7,476). 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, 2003

there were US$60 (2002 – US$500) forward foreign exchange contracts outstanding which mature in November 2003.

(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 2008. The total gross positive replacement cost is $24 (2002 – $223).

The active use of interest rate contracts continues to be an
integral part of the management of the Bank’s short-term positive
gap position. 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.

Capital Funds and Adequacy

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. As a simple example, a loan that is fully
insured by the Canadian Mortgage & Housing Corporation is
applied a risk weighting of 0% as the Bank’s risk of loss is nil, while
uninsured commercial loans are assigned a risk weighting of 100%
to reflect the higher level of risk associated with this type of asset.
The ratio of regulatory capital to risk-weighted assets is
calculated and compared to OSFI’s standards for well-capitalized
financial institutions. Off-balance sheet assets, such as derivatives,
are included in the calculation of risk-weighted assets and both
the credit risk equivalent and the risk weight calculations are
prescribed by OSFI.

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%. The Bank’s 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 Bank’s general allowance in Tier 2A capital to a maximum
of 87.5 basis points of risk-weighted assets.

OSFI has been working with other international regulators to
develop a new Basel Capital Accord, which would result in some
significant changes to the risk-weighting of assets and calculation
of regulatory capital. Changes are not expected to affect the
Canadian banking industry until at least 2007. No significant
impact on the Bank’s required level of regulatory capital is
expected as a result of the Accord, although there are still some
major areas within the Accord that have not yet been fully
developed.

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

CWB TWENTIETH ANNUAL REPORT

Table 14 – Capital Structure and Regulatory Ratios at Year End
($ thousands)

Tier 1 Capital

Common shares
Contributed surplus
Retained earnings

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

2003

Change from
2002

2002

$ 150,782 $ 145,203 $

252
165,197
316,231

–
132,884
278,087

5,579
252
32,313
38,144

27,558
121,951
149,509

3,761
64,825
68,586
$ 465,740 $ 359,010 $ 106,730

23,797
57,126
80,923

Tier 1 capital
Tier 2 capital

0.1%
1.6%
1.7%
Total Regulatory Capital Adequacy Ratio
Assets to Regulatory Capital Multiple(2)
(1.4)
(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

8.9%
4.2%
13.1%
9.5

8.8%
2.6%
11.4%
10.9

been granted an inclusion rate to a maximum of 0.875% of risk-weighted assets. At October 31, 2003, the Bank’s general allowance represents 0.78%
(2002 – 0.76%) 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.

Table 15 – 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 15 to the consolidated financial statements for further details.
(2) Greater than one year only.
(3) See Note 20 to the consolidated financial statements for further details.

2003
Risk-
weighted
Balance

Balance

$ 281,872 $
412,827
3,601,003
48,270
$ 4,343,972

55,984 $ 187,877 $
75,648
3,274,694
46,100

345,619
3,248,747
45,919
3,452,426 $3,828,162

2002
Risk-
weighted
Balance

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

64,413
93,868
$ 158,281

$ 819,500
86
15,825
$ 835,411

48,312 $
46,934
95,246 $

57,478

42,290

–

57,478

42,290

1,415 $ 707,000
836
14,225
1,673 $ 722,061

–
258

$3,549,345

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

At October 31, 2003 the total capital adequacy ratio was 13.1%
(2002 – 11.4%) of which 8.9% (2002 – 8.8%) was Tier 1 capital. Total
regulatory capital increased $106.7 million over 2002 as a result of:

• share capital of $5.6 million issued primarily upon the exercise

of employee stock options; and

• an increase of $3.8 million in the general allowance for credit

• the issuance of $65.0 million of subordinated debentures;

losses.

• earnings, net of dividends, of $32.3 million;

CWB TWENTIETH ANNUAL REPORT

The private placement of $65 million of subordinated debentures
significantly improved the Bank’s capital mix and will allow growth to
be pursued without dilution to common shareholders.

At year-end, subordinated debentures include both convertible
($53.8 million; 2002 – $54.0 million) and conventional ($68.1 million;
2002 – $3.1 million) debentures. The Bank currently has the ability to
specify a date and force the conversion of the publicly-traded
debentures. The terms of the conventional debentures are for a ten
year period. After the first five years, if the debenture is not
redeemed by the Bank or renegotiated, the interest rates change
from fixed to floating and the debentures will commence straightline
amortization for capital adequacy purposes over the final five year
term to maturity. Note 10 to the consolidated financial statements
provides more information on the terms of the debentures.

Outlook

Two semi-annual dividends of $0.23 per share were paid in fiscal
2003, an increase of 15% over the prior year. A semi-annual dividend
of $0.30 per share was declared on December 4, 2003, an increase
of 30%. The Bank also announced that it anticipates moving to
quarterly dividend declarations in 2004.

The Bank has stock 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 12 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.

The Bank expects to remain well-capitalized in 2004. The current capital mix allows new opportunities or greater than anticipated organic
growth to be funded through the issuance of additional subordinated debt. Tier 1 capital can be strengthened at any time by the forced
conversion of the outstanding publicly-traded convertible debentures. A move to quarterly dividend declarations is anticipated in 2004.
Derivative financial instruments will continue to be used for the purpose of asset liability structuring and management of interest rate risk.

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;

• the review and approval of 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:

• ensuring that risks other than credit risk are identified and

assessed and appropriate policies are in place and effective;

• 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.

CWB TWENTIETH ANNUAL REPORT

Credit Risk Management

Environmental Risk

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 common equity plus retained earnings.

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 approval 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;

• 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;

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 (corporate loans)
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.

• a standardized credit risk rating classification established for all

Liquidity Risk

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
which show impairment to the point where a loss is possible.

Liquidity risk is the risk that the Bank will not have sufficient cash
to meet its obligations as they become due. This risk arises from
fluctuations in cash flows from lending, deposit taking, investing
and other activities. Effective liquidity management ensures that
adequate cash is available to honour all cash outflow obligations.
Maintenance of a prudent liquidity base also provides flexibility to
fund loan growth and to react to other market opportunities.

The Bank’s liquidity policy includes:

• measurement and forecast of cash flows;

• maintenance of a pool of high quality liquid assets;

• a stable base of core deposits from retail and commercial

customers;

• limits on single deposits and sources of deposits;

• diversification of funding sources; and

• an approved contingency plan.

CWB TWENTIETH ANNUAL REPORT

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.

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.

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. Note 18 to the consolidated financial
statements shows the consolidated gap position at October 31,
2003 for selected time intervals.

The gap analysis in Note 18 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 increased
from 1.8% to 2.5% and the one month and under gap increased
from 1.2% to 3.6%. Gaps remained positive and the Bank’s
asset/liability position is expected to continue such that rising
interest rates would tend to increase net interest income.

Of the $1,885 million in fixed term deposit liabilities maturing
within one year from October 31, 2003 (as shown in table 11),
approximately $1,409 million (37% of total deposit liabilities)
mature by April 30, 2004. The term in which maturing deposits are
retained will have an impact on the future asset liability structure
and hence interest rate sensitivity. Approximately $198 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 estimated sensitivity of net interest income to a change in
interest rates is presented in Table 16. 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 increased in both absolute
dollar terms and as a percentage of estimated future net interest
income during the year.

CWB TWENTIETH ANNUAL REPORT

Table 16 – 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, 2003. The subordinated debentures
are discussed in Note 10 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, 2003,
assets denominated in U.S. dollars were 0.7% (2002 – 0.6%) of total
assets and U.S. dollar liabilities were 0.7% (2002 – 0.7%) 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 2003 or 2002.

2003
508
2,110

2002
305
1,842

2.0%

1.8%

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

Updated Share Information

As at November 30, 2003 the Bank had 13,014,399 common
shares outstanding. In addition, there were two outstanding
debentures with a combined principal amount of $53.8 million that
are convertible into a total of 1,793,113 common shares and
employee stock options that have been issued which are or will be
exercisable into 1,142,149 common shares (1,181,548 authorized)
for proceeds of $27.5 million.

Dated as of December 4, 2003.

CWB TWENTIETH ANNUAL REPORT

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 reviewed regularly for improvement and 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 to enhance corporate performance
and promote ongoing improvement in Board effectiveness.

The Board and Board Committees

The Board is currently comprised of twelve 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 these requirements as only one board member is non-
resident (8%) 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 identified and
assessed and the internal controls to deal with them 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. At the end of every regularly scheduled
Board meeting a session is held without any management,
including the CEO, present.

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 including ethical conduct to the Board. In
addition, certain governance issues have been delegated to other
committees of the Board.

The Bank Act (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. An annual
attestation on adherence to the CDIC 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 is completed.

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:

• approve the annual and quarterly financial statements 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;

CWB TWENTIETH ANNUAL REPORT

• review any recommendations from regulators or shareholders’

• review a quarterly report from the Loans Committee of the

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

Board, concerning the quality of the loan portfolio, the
adequacy of the allowance for credit losses and accounts
recommended for write-off;

• ensure an independent audit/inspection function is in place to
monitor the effectiveness of organizational and procedural
controls;

• 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 and accept reports from the Audit, Conduct Review and
Corporate Governance & Human Resources Committees; and

• recommend to the Board the appointment of the shareholders’

auditors;

• approve loan write-offs.

Audit Committee

Members:

Robert Manning (Chair)
Wendy Leaney
Gerald McGavin
Alan Rowe

This committee is comprised of four financially literate, outside
directors and includes at least one financial expert. Its mandate is
summarized as follows:

• review the annual financial statements 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;

• meet with the shareholders’ auditors to discuss the annual

statements and the returns and transactions referred to within
the mandate and receive the auditors’ reports thereon;

• 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 earnings reports to the shareholders,

including the interim unaudited statements, and report thereon
to the directors before approval is given and information is
disclosed publicly;

• 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 (CFO)

and the Chief Inspector;

• meet regularly with the Chief Inspector and shareholders’

auditors without management present;

• review and approve the policy for non-audit services that can
be carried out by the shareholders’ auditors including pre-
approval for all but de minimis engagements;

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

matters that may affect the well-being of the Bank;

• establish procedures for the receipt and handling of complaints
received by the Bank regarding accounting, internal accounting
controls, or auditing matters, and establish procedures for the
confidential, anonymous submission by employees of the Bank
of concerns regarding questionable accounting or auditing
matters;

• review and approve the Bank’s hiring policies regarding

employees and former employees of the present and former
external auditors of the Bank;

• engage independent counsel or advisors and fix their

remuneration as the Committee deems appropriate; and

• review periodically the Code of Conduct for senior financial

officers.

CWB TWENTIETH ANNUAL REPORT

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:

• 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.

• establish procedures to ensure disclosure of transactions with

Executive Employees: Recruitment and Compensation

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 over permitted limits
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
Howard Pechet
Robert Phillips

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;

• 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;

• establish, amend and, where appropriate, terminate:

- all programs and other personal benefits granted to

executive employees;

- 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.

CWB TWENTIETH ANNUAL REPORT

Board Composition and Development

• provide direction with respect to the identification criteria,

• 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 bi-annually, Board effectiveness including membership
criteria, composition structure and size and, on alternate years,
the involvement and contribution of the individual members
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.

Loans Committee

Members:

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 loans
to a foreign country and for amounts in excess of delegated
limits up to the limit established, not to exceed ten percent of
common equity plus retained earnings or eleven percent for
sovereign, provincial or major municipalities;

• 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

procedure and action required on loans reported by
management to be less than satisfactory.

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. 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. On every alternate year, directors
complete a formal assessment of individual directors’ effectiveness
including committee and board chairs. In the current year a formal
assessment of individual directors’ effectiveness was completed.

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 as well as a policy to handle complaints or concerns
regarding accounting, internal accounting controls or auditing
matters. 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_relations/default.asp. The CEO, CFO
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 TWENTIETH ANNUAL REPORT

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 Act and related rules and regulations
issued by the 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 fairly presented and
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.

report,

financial

statements and annual

The Audit Committee, appointed by the Board of Directors, is
comprised entirely of independent directors who are not officers or
employees of the Bank. The committee is responsible for reviewing
the
including
management’s discussion and 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
President and Chief Executive Officer

December 1, 2003

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

CWB TWENTIETH ANNUAL REPORT

FINANCIAL STATEMENTS

Auditors’ Report

To The Shareholders of Canadian Western Bank

We have audited the Consolidated Balance Sheet of Canadian
Western Bank as at October 31, 2003 and 2002 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 audits.

We conducted our audits 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, 2003 and 2002 and the results of its operations and
its cash flow for the years then ended in accordance with Canadian
generally accepted accounting principles.

Deloitte & Touche LLP
Chartered Accountants
Edmonton, Alberta
December 1, 2003

CWB TWENTIETH ANNUAL REPORT

CONSOLIDATED BALANCE SHEET

As at October 31
($ thousands)

Assets
Cash Resources

Cash
Deposits with regulated financial institutions
Cheques and other items in transit

Securities

Issued or guaranteed by Canada
Issued or guaranteed by a province or municipality
Other securities

Loans

Securities purchased under resale agreements
Residential mortgages
Other

Allowance for credit losses

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

Cheques and other items in transit
Other liabilities

Subordinated Debentures

Conventional
Convertible

Shareholders’ Equity

Capital stock
Contributed surplus
Retained earnings

Total Liabilities and Shareholders’ Equity

2003

2002

1,951 $

279,921
–
281,872

241,352
95,826
75,649
412,827

72,000
662,825
2,901,543
3,636,368
(35,365)
3,601,003

1,928
132,038
53,911
187,877

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

66,431
605,582
2,607,739
3,279,752
(31,005)
3,248,747

13,019
35,251
48,270
4,343,972 $

13,749
32,170
45,919
3,828,162

136,874 $
519,560
3,163,316
3,819,750

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

17,477
68,563
86,040

68,126
53,825
121,951

–

63,878
63,878

3,126
54,000
57,126

150,782
252
165,197
316,231
4,343,972 $

145,203

–

132,884
278,087
3,828,162

(Note 3)

(Note 4)

(Note 5)

(Note 6)
(Note 7)

(Note 8)

(Note 9)

(Note 10)

(Note 11)

Jack C. Donald
Chairman

Larry M. Pollock
President and Chief Executive Officer

CWB TWENTIETH ANNUAL REPORT

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
Gains on sale of securities
Foreign exchange gains and 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

(Note 5)

(Note 13)

(Note 14)

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

For the year ended October 31
($ thousands)

Capital Stock
Balance at beginning of year

Issued on exercise of employee stock options
Issued on debenture conversions

Balance at end of year
Contributed Surplus
Balance at beginning of year

Amortization of fair value of employee stock options

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

Net income
Dividends

Balance at end of year
Total Shareholders' Equity

(Note 11)

(Note 2)

2003

220,043 $

2002

193,997
10,893
3,565
208,455

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

11,050
3,944
3,206
2,385
1,551
22,136
103,231

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

11,900
4,427
236,370

127,766
3,941
131,707
104,663
8,600
96,063

13,099
4,679
4,017
2,095
1,436
25,326
121,389

37,680
11,034
11,144
1,708
61,566
59,823
21,630
38,193 $

2.98 $
2.69

2.34
2.14

2003

2002

145,203 $
5,404
175
150,782

143,942
1,261

–

145,203

–
252
252

–
–
–

132,884
38,193
(5,880)
165,197
316,231 $

108,320
29,612
(5,048)
132,884
278,087

CWB TWENTIETH ANNUAL REPORT

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
Common shares issued
Dividends
Debentures issued
Debentures redeemed

Cash Flows from Investing Activities

Loans, net
Interest bearing deposits with regulated financial institutions, net
Securities, purchased
Securities, sales proceeds
Securities, maturities
Land, buildings and equipment, net

(Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year *
* Represented by:
Cash resources
Non-operating, interest bearing deposits with regulated financial institutions
Cheques in transit

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 11)

(Note 10)

2003

2002

38,193 $

29,612

8,600
3,088
(1,581)
(2,095)
5,043
37
(3,750)
47,535

390,679
5,404
(5,880)
65,000
–
455,203

(360,856)
(117,516)
(1,012,656)
99,828
849,846
(2,382)
(543,736)
(40,998)
61,520
20,522 $

7,740
3,110
(31)
(2,385)
(5,600)
(5,256)
2,152
29,342

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

(369,847)
62,999
(992,091)
302,814
612,791
(917)
(384,251)
18,068
43,452
61,520

281,872 $
(243,873)
(17,477)
20,522 $

187,877
(126,357)

–
61,520

127,247 $
23,174 $

126,184
21,253

$
$

CWB TWENTIETH ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2003
($ thousands, except per share amounts)

1. Significant Accounting Policies

b) Cash Resources

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. These accounting policies conform, in all
material respects, to Canadian generally accepted accounting
principles (GAAP).

The preparation of financial statements in conformity with
Canadian GAAP 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.

Basis of Consolidation

The consolidated financial statements include the assets, liabilities
and results of operations of the Bank and all of its subsidiaries,
after the elimination of intercompany transactions and balances.
Subsidiaries are defined as corporations whose operations are
controlled by the Bank and are corporations in which the Bank
owns more than fifty percent of the voting shares. See Note 23 for
details of the subsidiaries.

Business acquisitions are accounted for using the purchase
method. The difference between the acquisition cost of an
investment and the fair value of the net identifiable assets
acquired, including identifiable intangible assets, represents
goodwill. Other intangibles with a finite life are amortized to
income over their expected life. Goodwill and other intangibles
with an indefinite life are not amortized. Goodwill and other
intangibles are subject to a fair value impairment test at least
annually. Any excess of book value over fair value is charged to
income in the period of impairment.

Cash resources includes cash and cash equivalents represented by
cash and highly liquid deposits with the Bank of Canada and non-
interest-bearing deposits with other banks less cheques in transit.

Securities

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 an impairment in value is other than
temporary, at net realizable value. Gains and losses realized on
disposal of securities and adjustments to record any other than
temporary 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.

Loans

Loans are stated net of unearned income, unamortized premiums
and an allowance for credit losses (Note 1(e)).

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.

CWB TWENTIETH ANNUAL REPORT

1. Significant Accounting Policies (continued)

Loans (continued)

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

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. Premiums paid on the acquisition of loan portfolios
are amortized to interest income over the expected term of the loans.

e) 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.

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.

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.

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 year of disposal.

h) Deferred Financing Costs

Deferred financing costs relating to the issuance of debentures are
amortized on a straight-line basis over the life of the related
debenture.

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.

CWB TWENTIETH ANNUAL REPORT

1. Significant Accounting Policies (continued)

Stock Option Plans

The fair value based method has been adopted to account for
stock options granted to employees on or after November 1, 2002.
The estimated fair value is recognized over the applicable vesting
period as an increase to both salary expense and contributed
surplus. When options granted on or after November 1, 2002 are
exercised, the proceeds received and the applicable amount in
contributed surplus will be credited to capital stock. In accordance
with GAAP, no expense is recognized for options granted prior to
November 1, 2002. When these options are exercised, the
proceeds received are credited to capital stock.

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.

Derivative Financial Instruments

Interest rate, foreign exchange and equity contracts such as
futures, options, swaps and floors are entered into for risk
management purposes in accordance with the Bank’s asset liability
management policies. It is the Bank’s policy not to utilize derivative
financial instruments for trading or speculative purposes. Interest
rate swaps and floors are used to reduce the impact of fluctuating
interest rates. Equity contracts are used to offset the return paid to
depositors on certain deposit products that are linked to a stock
index. Foreign exchange contracts are only used for the purposes
of meeting needs of clients or day to day business.

The Bank designates each derivative financial instrument as a
hedge of identified assets and liabilities, firm commitments or
forecasted transactions. On an ongoing basis the Bank assesses
whether the derivatives that are used in hedging transactions are
effective in offsetting changes in fair values or cash flows of the
hedged items. Derivatives that qualify for hedge accounting are

accounted for on the accrual basis. Interest income received or
interest expense paid is recognized as interest income or expense,
as appropriate, over the term of the hedge contract. Premiums on
purchased contracts are amortized to interest expense over the
term of the contract. Accrued interest receivable and payable and
deferred gains and losses for these contracts are recorded in other
assets or liabilities as appropriate. Realized and unrealized gains or
losses associated with derivative instruments, which have been
terminated or cease to be effective prior to maturity, are deferred
under other assets or other liabilities, as appropriate, and
amortized into income over the original hedged period. In the
event a designated hedged item is terminated or eliminated prior
to the termination of the related derivative instrument, any realized
or unrealized gain or loss on such derivative instrument is
recognized in income.

m) Employee Future Benefits

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

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.

2. Change in Accounting Policy – Stock-Based

Compensation

Effective November 1, 2002, the Bank adopted the requirements
of the Canadian Institute of Chartered Accountants (CICA)
accounting standard on stock-based compensation as described in
Note 1(j). Salary expense of $252 (2002 – nil) has been recognized
relating to the estimated fair value of options granted in the year
with an offsetting credit to Contributed Surplus.

CWB TWENTIETH ANNUAL REPORT

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)

Maturities

Within
1 Year

Over 1
to 3 Years

Over 3
to 5 Years

2003
Total
Years Book Value

Over 5

2002
Total
Book Value

$ 226,475 $
62,611

4,998 $

25,274

9,879 $
7,941

– $ 241,352 $ 174,409
88,394
–

95,826

–
3,236

–
–

–
3,236

1,000
14,553

24,573
–

16,113
–

6,278
–

$ 316,895 $

46,385 $

24,098 $

24,933
516(2)

66,747
516
25,449 $ 412,827 $ 345,619

71,897
516

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

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

2003

2002

Book Unrealized Unrealized
Losses
Gains
Value

Estimated
Market
Value

Book
Value

Unrealized
Gains

Unrealized
Losses

Estimated
Market
Value

$ 241,352 $

765 $

41 $ 242,076 $ 174,409 $

1,367 $

15 $ 175,761

95,826

430

96,213

88,394

1,440

–
3,236

71,897
516

–
–

1,176
618
2,989 $

–
1

224
–

–
3,235

72,849
1,134

1,000
14,553

66,747
516

309 $ 415,507 $ 345,619 $

–
4

89,831

1,000
14,550

–
1

628
70
3,506 $

268
–

67,107
586
290 $ 348,835

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

$ 412,827 $

CWB TWENTIETH ANNUAL REPORT

Loans

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

2003

Gross
Amount

Gross
Impaired
Amount

Specific
Allowance

Net
Impaired
Loans

Gross
Amount

2002

Gross
Impaired
Amount

Specific
Allowance

Net
Impaired
Loans

72,000 $

388,516
1,442,271
609,951
1,123,630
$3,636,368 $

– $

66,431 $

– $

–

2,421
3,376
7,276
9,168
22,241 $

503
841
2,849
3,614
7,807

1,918
2,535
4,427
5,554

395,900
1,230,756
521,619
1,065,046

14,434 $3,279,752 $
(27,558)

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

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

1,146
5,075
9,348
12,300
27,869
(23,797)

$ (13,124)

4,072

Securities purchased under

resale agreements

Consumer and personal
Real estate
Industrial
Other
Totals
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 $nil (2002 – $11) and a related specific allowance of $nil

(2002 – $nil).

At October 31, 2003 other past due loans totalled $nil (2002 – $29). 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 $2,063 (2002 – $1,460).

5. Allowance for Credit Losses

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

2003

General

2002
General

Specific Allowance for

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

Provisions

Credit Risk

Total
7,208 $ 23,797 $ 31,005
8,600
3,761
4,839
(4,327)
–
(4,327)
87
–
87
7,807 $ 27,558 $ 35,365 $

Provisions

Credit Risk

21,453 $

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

Total
28,358
7,740
(5,235)
142
7,208 $ 23,797 $ 31,005

2,344
–
–

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

Land, Buildings and Equipment

Land
Buildings
Computer equipment
Office equipment and furniture
Leasehold improvements
Total

2,935 $
3,156
11,117
6,903
9,050
33,161 $

Depreciation and amortization for the year amounted to $3,088 (2002 – $3,110).

Accumulated
Depreciation
and
Cost Amortization

– $

2003
2002
Net Book
Net Book
Value
Value
2,624
2,935 $
1,007
1,064
3,095
3,008
2,246
1,863
4,777
4,149
20,142 $ 13,019 $ 13,749

2,092
8,109
5,040
4,901

CWB TWENTIETH ANNUAL REPORT

7. Other Assets

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

(1) Amortization for the year amounted to $178 (2002 – $163)

(Note 13)

2003
13,391 $

2002
13,974
6,419
6,669
2,192
884
2,032
35,251 $ 32,170

8,749
8,262
1,924
1,394
1,531

Business and
Individuals Government
$

8,162 $ 128,712 $

199,886
2,598,171

319,674
540,048

$2,806,219 $ 988,434 $

Financial
Institutions

2003
Total
– $ 136,874
519,560
–
25,097
3,163,316
25,097 $3,819,750

Business and
Individuals Government

Financial
Institutions

5,910 $ 109,873 $

164,579
2,402,050

273,652
469,736

$2,572,539 $ 853,261 $

2002
Total
– $ 115,783
438,231
–
3,271
2,875,057
3,271 $3,429,071

2003
57,286 $

5,383
4,082
537
235
1,040

68,563 $

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

(Note 13)

8. Deposits

Payable on demand
Payable after notice
Payable on a fixed date
Total

9. Other Liabilities

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

CWB TWENTIETH ANNUAL REPORT

10. Subordinated Debentures

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 CICA 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.

Maturity Date

June 30, 2012
July 7, 2013
October 24, 2013

Earliest Date
Redeemable or
Convertible by CWB

June 30, 2007
July 7, 2008
October 24, 2008

March 31, 2008
July 31, 2009

March 31, 2003
July 31, 2004

Interest Rate
Conventional
6.85% (1)
5.66% (2)
5.96% (2)

Convertible
5.50% (3)
5.70% (4)

Total

2003

2002

3,126 $

3,126

30,000
35,000
68,126

–
–

3,126

49,825
4,000
53,825
$ 121,951 $

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

(1) This conventional debenture has a 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 100 basis points.
(2) These conventional debentures have a ten year term with a fixed interest rate for the first five years. Thereafter, the interest rate will be reset quarterly

to the Canadian Dollar CDOR 90 day Bankers’ Acceptance rate plus 175 basis points.

(3) 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 (1,633,603 shares, 2002 – 1,639,344 shares). Since March 31, 2003, the Bank has had
the ability to specify a date for conversion of the debentures. During the year, convertible debentures of $175 (2002 – nil) were converted by the holders
into 5,736 common shares.

(4) 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).

11. 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 conversion of debentures

Outstanding at end of year

2003

Number
of Shares

Amount

2002

Number
of Shares

Amount

12,659,372 $ 145,203 12,560,348
99,024
–

$ 143,942
1,261
–
13,002,066 $ 150,782 12,659,372 $ 145,203

336,958
5,736

5,404
175

The Bank has subordinated debentures which are convertible to common shares of the Bank as more fully described in Note 10.

The Bank is prohibited by the Bank Act from declaring any dividends on common shares when the Bank is or would be placed, as a result
of the declaration, in contravention of the capital adequacy and liquidity regulations or any regulatory directives issued under the Act. These
limitations do not currently restrict the payment of dividends.

CWB TWENTIETH ANNUAL REPORT

12. Stock Option Plans

The Bank has authorized 1,193,391(1) common shares (2002 – 1,167,849) for issuance under stock option plans. Of the amount authorized,
options exercisable into 1,153,992 shares (2002 – 1,129,815) are issued and outstanding. The options generally vest within three 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 2004 to November 2008. The details of
and changes in the issued and outstanding options follow:

Options
Balance at beginning of year
Granted
Exercised
Forfeited
Balance at end of year

Exercisable at end of year

2003

2002

Weighted
Average
Exercise
Price
19.28
31.26
16.04
25.48
24.02

Number
of Options
1,129,815 $
371,235
(336,958)
(10,100)
1,153,992 $

(1)

Weighted
Average
Exercise
Price
17.56
26.81
12.74
18.59
19.28

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

637,957 $

19.26

658,609 $

15.74

(1) Of this amount, 257,500 options are subject to shareholder and Toronto Stock Exchange approval.

further details relating to stock options outstanding and exercisable follow:

Range of exercise prices
$8.73 to $12.93
$14.00 to $19.11
$19.50 to $26.12
$26.40 to $26.91
$27.38 to $33.32

Options Outstanding
Weighted
Average
Remaining
Contractual
Life (years)
2.1
3.0
1.8
3.5
4.8
3.1

Weighted
Average
Exercise
Price
11.42
18.47
25.47
26.60
32.94
24.02

Options Exercisable

Weighted
Average
Exercise
Price
11.42
18.47
25.59
26.87
28.23
19.26

Number of
Options
188,758
195,048
235,495
16,656
2,000
637,957

Number of
Options
188,758
195,048
262,730
228,956
278,500
1,153,992

Salary expense of $252 has been recognized relating to the estimated fair value of options granted in the year. The fair value of options granted
was estimated using a binomial option pricing model with the following variables and assumptions: (i) risk-free interest rate of 4.1%, (ii) expected
option life of 3.9 years, (iii) expected volatility of 21%, and (iv) expected dividends of 1.5%. The weighted average fair value of options granted
was estimated at $5.59 per share.

CWB TWENTIETH ANNUAL REPORT

13. Income Taxes

The provision for income taxes consists of the following:

Current
Future
Provision for income taxes

2003
23,211 $
(1,581)
21,630 $

2002
16,135
(31)
16,104

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:

Tax-exempt income
Large corporations tax
Unclaimed tax deductions from prior years
Other

Provision for income taxes and effective tax rate

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

2003

2002

$ 22,584

37.8% $ 18,401

40.3%

(1,887)
358

–

575
$ 21,630

(3.2)
0.6

(1,422)
308
(2,059)
876
36.2% $ 16,104

–
1.0

2003

9,613 $
(1,351)
8,262 $

(415) $
650
235 $

The Bank has approximately $11,851 (2002 – $11,840) 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 the consolidated financial statements.

(3.1)
0.7
(4.5)
1.8
35.2%

2002

8,577
(1,908)
6,669

(374)
597
223

CWB TWENTIETH ANNUAL REPORT

14. Earnings per Common Share

The calculation of earnings per common share is as follows:

Numerator

Net income – basic
Dilutive instruments:

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

2003

2002

38,193 $

29,612

1,947
40,140 $

2,010
31,622

12,808,335

12,628,938

(Note 10)

1,798,578
329,782
14,936,695

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

$
$

2.98 $
2.69 $

2.34
2.14

(1) Net income is adjusted by the potential impact on earnings 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.

15. Contingent Liabilities and Commitments

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.

2003

2002

Credit Instruments

Guarantees and standby letters of credit
Commitments to extend credit

Total

64,413 $

57,478
613,098
$ 876,495 $ 670,576

812,082

Guarantees and standby letters of credit represent the Bank’s obligation to make payments to third parties when a customer is unable to
make required payments or meet other contractual obligations. These instruments carry the same credit risk, recourse and collateral security
requirements as loans extended to customers and generally have a term that does not exceed one year. Losses, if any, resulting from these
transactions are not expected to be material.

Commitments to extend credit to customers also arise in the normal course of business and include undrawn availability under lines of credit
and commercial operating loans of $294 million (2002 – $266 million) and recently authorized but unfunded loan commitments of $518
million (2002 – $347 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 TWENTIETH ANNUAL REPORT

15. Contingent Liabilities and Commitments (continued)

Lease Commitments

The Bank has obligations under long-term non-cancellable operating 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:

2004
2005
2006
2007
2008
2009 and thereafter
Total

c) Guarantees

4,714
4,469
4,454
4,084
3,259
13,314
34,294

The Bank has adopted the requirements of a new CICA accounting guideline that expands the definition of a guarantee and requires
additional disclosure in respect of guarantees. Under the new guideline, a guarantee is defined as a contract that contingently requires the
guarantor to make payments to a third party based on i) changes in an underlying economic characteristic that is related to an asset, liability
or equity security of the guaranteed party, ii) failure of another party to perform under an obligating agreement, or iii) failure of another third
party to pay indebtedness when due.

Significant guarantees provided to third parties include guarantees and standby letters of credit as discussed above.

In the ordinary course of business, the Bank enters into contractual arrangements under which the Bank may agree to indemnify the other
party. Under these agreements, the Bank may be required to compensate counterparties for costs incurred as a result of various
contingencies such as changes in laws and regulations and litigation claims. A maximum potential liability cannot be identified as the terms
of these arrangements vary and generally no pre-determined amounts or limits are identified. The likelihood of occurrence of contingent
events that would trigger payment under these arrangements is either remote or difficult to predict and in the past payments under these
arrangements have been insignificant.

The Bank issues personal and business credit cards through an agreement with a third party card issuer. The Bank has indemnified the card
issuer from loss if there is a default on the issuer’s collection of the business credit card balances. The Bank has provided no indemnification
relating to the personal or travel reward credit card balances. The issuance of business credit cards and establishment of business credit card
limits are approved by the Bank and subject to the same credit assessment, approval and monitoring as the extension of direct loans. The
total approved business credit card limit at October 31, 2003 was $114 and the balance outstanding was $6. No balances were in arrears
and no payments have been made to date under the indemnity.

No amounts are reflected in the consolidated financial statements related to these guarantees and indemnifications.

16. Trust Assets Under Administration

Trust assets under administration of $1,474,964 (2002 – $1,166,489) 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.

17. 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 $21,319 (2002 – $20,969).

CWB TWENTIETH ANNUAL REPORT

18. Interest Rate Sensitivity

The Bank is exposed to interest rate risk as a result of a difference, or gap, between the maturity or repricing date of interest sensitive assets
and liabilities. The following table shows the gap position at October 31, for selected time intervals. Figures in brackets represent an excess
of liabilities over assets or a negative gap position.

Asset Liability Gap Positions
($ millions)

Floating Rate
and Within
1 Month

1 to 3

Months

3 Months
to 1 Year

1 Year to
5 Years

Over
5 Years

Non-
interest

Sensitive

– $

83 $
8
1,968
–
25
2,084

1,114
–
–
–
785
1,899

100 $
100
141
–
80
421

386
–
–
–
–
386

61 $

208
364
–
319
952

1,042
–
4
–
–
1,046

Total
Within
1 Year

244 $
316
2,473
–
424
3,457

2,542
–
4
–
785
3,331

72
1,147
–
361
1,580

1,278
–
118
–
–
1,396

185 $
185 $

35 $
220 $

(94) $
126 $

126 $
126 $

184 $
310 $

Total

282
413
3,601
48
785
5,129

3,820
86
122
316
785
5,129
–
–

38 $
–
(34)
48
–
52

–
86
–
316
–
402
(350) $
– $

25
15
–
–
40

–
–
–
–
–
–
40 $
350 $

October 31, 2003
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

3.6%

4.3%

2.5%

6.0%

6.8%

–

October 31, 2002
Total assets
Total liabilities and equity
Interest Rate Sensitive Gap $
Cumulative Gap
$
Cumulative Gap as a

1,742 $
1,689

53 $
53 $

277 $
274

3 $
56 $

1,067 $
1,041

26 $
82 $

3,086 $
3,004

82 $
82 $

1,362 $
1,203

159 $
241 $

23 $
–
23 $
264 $

79 $

343
(264) $
– $

4,550
4,550
–
–

Percentage of Total Assets

1.2%

1.8%

5.3%

5.8%

–

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.

CWB TWENTIETH ANNUAL REPORT

18. Interest Rate Sensitivity (continued)

The effective weighted average interest rates for each class of financial asset and liability, including off-balance sheet instruments, are
shown below.

Weighted Average Effective Interest Rates
(%)

October 31, 2003
Assets

Cash resources
Securities
Loans
Off-Balance sheet swaps

Total
Liabilities
Deposits
Debentures
Off-Balance sheet swaps

Total
Interest Rate Sensitive Gap

October 31, 2002
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

2.4%
2.7
5.5
2.9
5.4

1.9
–
2.7
2.2
3.2%

5.4%
2.2
3.2%

2.7%
3.2
5.8
3.5
4.0

3.4
–
–
3.4
0.6%

4.7%
3.8
0.9%

3.0%
3.4
6.7
3.5
4.7

3.9
5.7
–
3.9
0.8%

4.9%
3.9
1.0%

2.7%
3.3
5.7
3.5
5.0

2.9
5.7
2.7
2.9
2.1%

5.1%
2.9
2.2%

– %

4.9
6.8
3.8
6.0

4.4
5.7
–
4.5
1.5%

6.5%
5.0
1.5%

7.7
6.2
–
7.1

–
–
–
–
7.1%

6.8%
–
6.8%

2.7%
3.9
6.0
3.6
5.3

3.4
5.7
2.7
3.4
1.9%

5.6%
3.5
2.1%

19. 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, 2003 and 2002 there were no financial instruments held for trading purposes.

CWB TWENTIETH ANNUAL REPORT

19. Fair Value of Financial Instruments (continued)

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. The table does not include assets and liabilities that are not considered
financial instruments.

(Note 3)

Assets

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

Liabilities

Deposits(1)
Other liabilities(3)
Subordinated debentures

Derivative Financial Instruments

Net asset

(Note 20)

2003

Fair Value

Over (Under)

2002

Fair Value

Over (Under)

Book Value

Fair Value

Book Value

Fair Value

Book Value

$ 281,872 $ 281,872 $

– $ 187,877 $ 187,877 $

412,827
3,599,008
16,846

415,507
3,608,566
16,846

2,680
9,558
–

345,619
3,246,033
18,198

348,835
3,258,458
18,198

3,819,536
84,228
121,951

3,853,955
84,228
124,938

34,419
–
2,987

3,428,634
62,693
57,126

3,472,306
62,693
58,031

–
3,216
12,425
–

43,672
–
905

3,560

6,707

(1) Loans and deposits exclude deferred premiums which are not financial instruments.
(2) Other assets exclude land, buildings and equipment, 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 information on interest rates associated with financial assets and liabilities, including off-balance sheet instruments, refer to Note 18.

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 loans, fair value is estimated by discounting the expected future cash flows of these loans at current market
rates for loans with similar terms and risks;

• deposits with no stated maturity are assumed to be equal to their carrying values. The estimated fair values of fixed rate deposits are

determined by discounting the contractual cash flows at current market rates for deposits of similar 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 TWENTIETH ANNUAL REPORT

20. 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 (ALCO) of the Bank.

Foreign exchange transactions are undertaken 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 ALCO 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.
Additional discussion of OSFI’s capital adequacy requirements is provided on page 38 of Management’s Discussion and Analysis of Operations
and Financial Condition.

Notional

Amount

Replace-

ment

Cost

2003
Future

Credit

Risk-

Risk

weighted

Exposure

Equivalent

Balance

2002

Notional

Amount

Replace-

ment

Cost

Future

Credit

Risk-

Risk weighted

Exposure

Equivalent

Balance

Interest rate contracts

Interest rate swaps

$ 769,500 $

4,524 $

2,462 $

6,986 $

1,404 $

707,000

7,476

1,585

9,061

1,812

Interest rate floor

Equity contracts

Foreign exchange

50,000

15,825

contracts(1)

–

1,266

1,290

258

–

14,225

–

223

–

1,138

1,361

–

272

–

836

Total

$ 835,411 $

4,605 $

3,760 $

8,365

1,673 $ 722,061 $

7,711 $

2,731 $ 10,442 $ 2,088

(1) The Bank has contracted to deliver Canadian dollars in exchange for United States dollars (2002 – deliver United States dollars in exchange for Canadian dollars).

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).

2003

2002

Favourable Contracts
Fair
Notional
Value
Amount

Unfavourable Contracts
Fair
Notional
Value
Amount

Favourable Contracts
Fair
Notional
Value
Amount

Unfavourable Contracts
Fair
Notional
Value
Amount

Interest rate contracts
Interest rate swaps
Interest rate floor

Equity contracts
Foreign exchange

contracts

Total

$ 607,500 $
50,000
1,600

–

57
24

–

4,524 $ 162,000 $

(514) $ 647,000 $

–
14,225

–
(525)

–

1,610

7,476 $
–

60,000 $

–

223

12,615

(66)

–

(938)

$ 659,100 $

4,605 $ 176,311 $

(1,045) $ 649,446 $

7,711 $ 72,615 $

(6)

836

–

–
(1,004)

CWB TWENTIETH ANNUAL REPORT

20. Derivative Financial Instruments (continued)

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)

2003

$
$

6,306 $
$

976

2002
6,020
1,340

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

2003
Maturity

2002
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)
Interest rate floor(2)

Equity contracts(3)
Foreign exchange
contracts(4)

Total

$ 271,000
50,000
–

86
$ 321,086

3.07% $ 498,500
–
3.00%
15,825

3.90% $ 390,000
–
–

–

3.13% $ 317,000
–
14,225

–

4.45%
–

–
$ 514,325

836
$ 390,836

–
$ 331,225

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

21. Risk Management

As part of the Bank’s risk management practices, the risks that are significant to the business are identified, monitored and controlled. These
risks include credit risk, liquidity risk, market risk and operational risk. The nature of these risks and how they are managed is provided in
the commentary on pages 40 to 43 of Management’s Discussion and Analysis of Operations and Financial Condition.

Information on specific measures of risk including the allowance for credit losses, derivative financial instruments, interest rate sensitivity and
fair value of financial instruments are included in the notes to the consolidated financial statements.

22. Segmented Information

The Bank operates principally in personal and commercial banking in Canada and management has identified banking operations as the only
business segment. Personal and commercial banking includes the operations of the Bank and its trust subsidiary which together provide a
wide range of banking and trust services to retail and personal clients and commercial business clients primarily in western Canada.

CWB TWENTIETH ANNUAL REPORT

23. Subsidiaries

Canadian Western Bank Subsidiaries
(annexed in accordance with subsection 308 (3) of the Bank Act)
October 31, 2003

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)
13,018
$

Percentage of Issued and
Outstanding Voting
Shares Owned by the Bank

100%

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

24. Future Accounting Changes

Hedging Relationships

The CICA has issued an accounting guideline for hedging relationships that establishes certain requirements for the application of hedge
accounting. Effective November 1, 2003 derivatives that do not qualify for hedge accounting are recorded at fair value. The Bank enters into
derivative financial instruments for risk management purposes as described in Note 20. The implementation of this guideline is not expected
to have a significant impact on the Bank’s financial results.

Consolidation of Variable Interest Entities (VIEs)

The CICA has issued an accounting guideline that will become effective November 1, 2004. This guideline provides a framework for
identifying VIEs and requires the consolidation of VIEs if the company absorbs a majority of the VIE’s expected losses or receives a majority
of the VIE’s expected residual returns, or both. The Bank has no significant VIEs that would require consolidation.

25. Comparative Figures

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

CWB TWENTIETH ANNUAL REPORT

SENIOR OFFICERS

Chairman
Jack C. Donald

MARKETING AND PRODUCT
DEVELOPMENT

COMMERCIAL BANKING
NORTHERN ALBERTA REGION

OFFICE OF THE CEO

Larry M. Pollock
President and Chief Executive Officer

David R. Pogue
Vice President

TREASURY AND OPERATIONS

Ricki L. Moffat
Treasurer

Michael Vos
Chief Technology Officer

M. Wayne Bond
Assistant Vice President,
Corporate Administration

Roger J. Pogue
Assistant Vice President,
Operations

COMMERCIAL BANKING
PRAIRIE REGION

S. Wayne Bamford
Vice President
and Regional Manager

Michael N. Halliwell
Vice President
and Regional Manager
(Regional Manager effective
March 1, 2004)

Douglas R. Crook
Senior Assistant Vice President
Main Branch, Calgary

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

Allister J. McPherson
Executive Vice President

Jack C. Wright
Vice President

CREDIT RISK MANAGEMENT

Donald C. Kemp
Senior Vice President

Chris H. Fowler
Vice President

Wally N. Streit
Senior Assistant Vice President

CORPORATE AND STRATEGIC
OPERATIONS

William J. Addington
Executive Vice President

FINANCE

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

Darin R. Coutu, CA
Senior Assistant Vice President
and Chief Accountant

HUMAN RESOURCES

Uve Knaak
Vice President

INTERNAL AUDIT

David R. Gillespie
Vice President and Chief Inspector

William A. Book
Vice President
and Regional Manager

L.W. (Les) Shore
Senior Assistant Vice President
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

REAL ESTATE LENDING
VANCOUVER

Raymond L. Young
Vice President

Robert E. Wigmore
Senior Assistant Vice President

INDUSTRIAL LENDING AND LEASING

James O. Burke
General Manager

CANADIAN WESTERN TRUST COMPANY
VANCOUVER

Adrian M. Baker
Vice President
and General Manager

Cathy L. Phillips
Managing Director,
Fiduciary Operations and
Risk Management

Robert D. Nakoneshny
Managing Director,
Strategic and Business Development

OMBUDSMAN

R. Graham Gilbert

CWB TWENTIETH ANNUAL REPORT

DIRECTORS EMERITUS

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

BOARD OF DIRECTORS

CANADIAN WESTERN
BANK & TRUST

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

Albrecht W. A. Bellstedt, QC
Executive Vice President
Law and General Counsel
TransCanada Corporation
Calgary, Alberta

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

Allan W. Jackson
President
ARCI Ltd.
Calgary, Alberta

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

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

Gerald A.B. McGavin, FCA, CM
President
McGavin Properties Inc.
Vancouver, British Columbia

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

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

Larry M. Pollock
President and CEO
Canadian Western Bank & Trust
Edmonton, Alberta

Alan M. Rowe, CA
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

AWARDS OF EXCELLENCE*

2000

Terra Fuessel
Theresa Howard
Carl Knowler
Cathy Phillips
Sharon Thompson

2001

Brunella Bertucci
Theresa Gromnisky
Roy Jefferson
Leslie John
Marlene Serediuk

2002

Adele Carson
Leon Chow
Jodi Dull
Trenna Guglich
Kelly Howell
Sandra Irvine
Renai Jackle
Nancy Staley

2003

Sonia Atkin
Charmaine Barclay
Marie Barwick
Allison Betton
Libei Cheng
Bev Foord
Theresa Howard
Jim Kitchin
Kim Newall
Heather Sanregret
Jessica Sheppard

*Awards of Excellence recognize employees who display qualities for which CWB is known and which are inherent under the brand Think Western®.

CWB TWENTIETH ANNUAL REPORT

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

Transfer Agent and Registrar Mailing
Address
Computershare Trust Company of Canada
Suite 600, 530 – 8th Avenue SW
Calgary, Alberta T2P 3S8
Telephone: (800) 564-6253
Fax: (403) 267-6529

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.

Annual Meeting
The annual meeting of the common
shareholders of Canadian Western Bank
will be held on March 4, 2004 at the Hyatt
Regency (Regency Ballrooms A and B),
655 Burrard Street, Vancouver, British
Columbia at 3:00 p.m. (PST).

Investor Relations
For further financial information contact:
Vicki Warwaruk
Senior Manager,
Investor and Public Relations
Canadian Western Bank
Telephone: (780) 423-8865
Fax: (780) 423-8899
E-mail: InvestorRelations@cwbank.com

or visit our website at www.cwbank.com

Online Investor Information
Additional investor information including
supplemental financial information and a
corporate presentation is available on our
website at www.cwbank.com

Complaints or Concerns regarding
Accounting, Internal Accounting Controls
or Auditing Matters
Please contact either:
Tracey C. Ball
Senior Vice President and
Chief Financial Officer
Canadian Western Bank
Telephone: (780) 423-8855
Fax: (780) 423-8899
E-mail: tracey.ball@cwbank.com
or
Robert A. Manning
Chairman of the Audit Committee
c/o 210 – 5324 Calgary Trail
Edmonton, AB T6H 4J8
Telephone: (780) 438-2626
Fax: (780) 438-2632
E-mail: rmanning@shawbiz.ca

CWB TWENTIETH ANNUAL REPORT

WHAT KIND OF A BANK
CAN YOU BUILD IN
20 YEARS?

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

St. Albert
300 – 700 St. Albert Road

St. Albert, Alberta T8N 7A5

Opening Spring 2004

West Point
17603 – 100 Avenue

Edmonton, Alberta T5S 2M1

Telephone: (780) 484-7407

Branch Manager – Ron Baker

Calgary Northeast
2810 – 32nd Avenue N.E.

Calgary, Alberta T1Y 5J4

Vancouver Deposit
Processing Centre
Suite 2368, 666 Burrard Street

Surrey
Strawberry Hill

7548 – 120 Street

Telephone: (403) 250-8838

Vancouver, B.C. V6C 2X8

Surrey, B.C. V3W 3N1

Branch Manager – Glen Eastwood

Telephone: (604) 443-5175

Telephone: (604) 591-1898

Toll free: 1-800-663-1000

Branch Manager – Rick Howard

Chinook Station
6606 MacLeod Trail S.W.

Calgary, Alberta T2H 0K6

Telephone: (403) 252-2299

Branch Manager – Lew Christie

Foothills
6127 Barlow Trail S.E.

Calgary, Alberta T2C 4W8
Telephone: (403) 269-9882

Acting Branch Manager –

Michael Docherty

Red Deer
4822 – 51 Avenue

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

Red Deer, Alberta T4N 3H3

Telephone: (403) 341-4000

Branch Manager – Don Odell

Kelowna
Kelowna
1674 Bertram Street

Lethbridge
744 – 4th Avenue South

Lethbridge, Alberta T1J 0N8

Telephone: (403) 328-9199

Branch Manager – Don Grummett

Grande Prairie
11226 – 100 Avenue

Grande Prairie, Alberta T8V 7L2

Telephone: (780) 831-1888

Branch Manager – Keith MacLellan

BRITISH COLUMBIA

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 – Jim Kitchin

Cranbrook Satellite Office
2009 – 5th Street South

Cranbrook, B.C. V1C 1K6

Telephone: (250) 426-1140

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 – Trent Bobinski

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
230 Portage Avenue

Winnipeg, Manitoba R3C 0B1

Five Year Financial Summary

Fold Out

Highlights for 2003

Performance Targets

1 Message to Shareholders

4 What Kind of Bank Can You Build in 20 Years?

23 Management’s Discussion and Analysis of Operations

and Financial Condition

Corporate Governance

Financial Statements

Notes to Consolidated Financial Statements

Senior Officers

Board of Directors

Shareholder Information

Inside
Back Cover

Branch Offices

Edmonton Deposit
Processing Centre
Suite 2200, 10303 Jasper Avenue

Edmonton, Alberta T5J 3X6

Telephone: (780) 423-8888

Vancouver
Regional Office
22nd Floor, 666 Burrard Street

Vancouver, B.C. V6C 2X8

Telephone: (604) 669-0081

Branch Manager – Lina Langford

Regional Manager – Rod Sorbo

Calgary
Calgary Main
606 – 4th Street S.W.

Calgary, Alberta T2P 1T1

Telephone: (403) 262-8700

Branch Manager – Doug Crook

West Broadway
1333 West Broadway

Vancouver, B.C. V6H 4C1

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

Account Manager – Mike Eckersley

Telephone: (204) 956-4669

Kamloops Satellite Office
2224 Crescent Drive

Kamloops, B.C. V2C 4J6

Telephone: (250) 828-1070

Manager – Hugh Sutherland

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

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
200, 606 – 4th Street S.W.

Calgary, Alberta T2P 1T1

Telephone: (403) 717-3145

Toll free: 1-888-894-2331

Design and Production by Vision Design Communications www.visiondc.com Printed by Speedfast Color Press Inc. Printed in Canada

20TH ANNUAL REPORT 2003

WHAT KIND OF A BANK
CAN YOU BUILD IN
20 YEARS?

A BANK BUILT ON
RELATIONSHIPS.

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