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Press release from CNW Group

CWB reports strong financial performance as total assets surpass $17 billion

Thursday, March 07, 2013

CWB reports strong financial performance as total assets surpass $17 billion08:30 EST Thursday, March 07, 2013Solid loan growth of 2% in the quarter and 12% over the past yearQuarterly dividend declared of $0.17 per CWB common shareQuarterly dividend declared on CWB preferred sharesFirst Quarter 2013 Highlights1 (compared to the same period in the prior year)Net income available to common shareholders of $45.5 million, up 10%.Diluted earnings per common share of $0.57, up 6%; adjusted cash earnings per common share of $0.58, up 2%.Total revenues, on a taxable equivalent basis (teb), of $137.1 million, up 9%.Total assets surpassed $17 billion based on strong loan growth of 12% over the past twelve months.Basel III regulatory capital position using the Standardized approach for calculating risk-weighted assets: 8.0% common equity Tier 1 (CET1) ratio, 9.7% Tier 1 ratio and 14.2% total capital ratio.Issued $250 million of subordinated debentures to support future growth and utilize a Basel III transition allowance.Completed the expansion of branch premises in St. Albert, Alberta and Regina, Saskatchewan to accommodate business growth.Obtained initial credit ratings of "R1 (low)" on short-term debt and "Pfd-3 (High)" on preferred shares from DBRS Limited, both with stable trends.On March 6, declared a quarterly dividend of $0.17 per CWB common share, unchanged from the prior quarter and up 13% over the quarterly dividend declared a year earlier.  (1) Highlights include certain non-IFRS measures - refer to definitions following the table of Selected Financial Highlights on page 4.EDMONTON, March 7, 2013 /CNW/ - Canadian Western Bank (TSX: CWB) (CWB or the Bank) today announced strong financial performance marking the Bank's 99th consecutive profitable quarter, a period of almost 25 years. Net income available to common shareholders of $45.5 million increased 10% compared to the same quarter last year while adjusted cash earnings per common share reached $0.58, up 2%. Total revenues (teb) of $137.1 million represented a 9% increase over a year earlier reflecting the positive impact of solid loan growth and 19% ($3.6 million) higher other income, partially offset by an 11 basis point lower net interest margin (teb).Compared to last quarter, net income available to common shareholders was 6% higher reflecting strong growth in other income, slightly higher net interest income (teb) and stable non-interest expenses. Adjusted cash earnings per common share increased 4%."Our 99th consecutive profitable quarter was marked by strong results that have CWB Group well positioned in relation to our 2013 performance targets," said Chris Fowler, President and COO. "Overall lending activity remains solid and we are optimistic that our growing market presence and continued economic growth in Western Canada will support another year of double-digit loan growth. We were pleased to see some stabilization in net interest margin this quarter, excluding the impact of our subordinated debt issue completed in December, but we expect the current interest rate environment and increased competition will lead to continued pressure on this measure across the banking industry.""As we officially transition to new leadership following Larry Pollock's extraordinary 23 year tenure as President and CEO, I am personally very excited to have this opportunity to lead our team and build on CWB Group's incredible track record," continued Mr. Fowler. "As always, our formula to deliver growth and performance for CWB shareholders is based on providing superior service and value for our clients. We plan to achieve this by continuing to refine and execute on our strategies to be seen as crucial to our clients.""As I step away, I am leaving our shareholders with a dedicated and highly competent management team overseeing an exceptional group of employees, a proven business model and a rock solid balance sheet," said Larry Pollock, CEO. "CWB has faced several economic cycles and numerous other challenges over the years and we have always succeeded by meeting these head on; never accepting the view that something couldn't be done. Today, this same approach is shared across our organization, and at the end of my final quarter as CEO, I'm proud to say that the outlook for CWB Group has never been brighter."On March 6, 2013, CWB's Board of Directors declared a cash dividend of $0.17 per common share, payable on March 28, 2013 to shareholders of record on March 21, 2013. This quarterly dividend was unchanged from the previous quarter and 13% higher than the quarterly dividend declared one year ago. The Board of Directors also declared a cash dividend of $0.453125 per Series 3 Preferred Share payable on April 30, 2013 to shareholders of record on April 18, 2013.Fiscal 2013 Minimum Performance Targets and OutlookThe minimum performance targets established for the 2013 fiscal year together with CWB's actual year-to-date performance are presented in the table below: 2013 Year-to-date Performance 2013MinimumTargetsNet income available to common shareholders growth(1)10%8%Total revenue (teb) growth(1)9%8%Loan growth(2)12%10%Provision for credit losses as a percentage of average loans(3)0.18%0.18% - 0.23%Efficiency ratio (teb)(4)45.3%46%Return on common shareholders' equity(5)14.2%14%Return on assets(6)1.06%1.05% (1) Year-to-date performance for earnings and revenue growth is the current year results over the same period in the prior year. (2) Loan growth is the increase over the past twelve months. (3)Year-to-date provision for credit losses, annualized, divided by average total loans. (4)Efficiency ratio (teb) calculated as non-interest expenses divided by total revenues (teb). (5) Return on common shareholders' equity calculated as annualized net income available to common shareholders divided by average common shareholders' equity. (6)Return on assets calculated as annualized net income available to common shareholders divided by average total assets.Strong results through the first quarter have CWB well positioned to meet all of its 2013 minimum performance targets. Growth in net income available to common shareholders was driven by the combined benefit of solid loan growth, strong other income and the elimination of accounting charges related to contingent consideration. While total revenue growth was constrained by a lower net interest margin, the decrease compared to the previous quarter mainly resulted from higher average liquidity and a slight increase in overall funding costs attributed to the Bank's mid-December issuance of subordinated debentures. While lower average liquidity will likely help to offset margin pressure in future quarters, net interest margin will continue to be pressured by very low interest rates, a relatively flat interest rate curve and ongoing competitive factors. Continued loan growth will have a positive impact on net interest income in the future. A strategic focus on the Bank's higher yielding lending portfolios such as alternative mortgages and equipment financing should also contribute positively. The 2013 target for the efficiency ratio is expected to be achieved as expected revenue growth offsets the impact of higher non-interest expense from increased staff complement and ongoing investment to support business growth. Overall credit quality remains satisfactory and, based on our current view, we believe the annual provision for credit losses will remain at the low end of the 2013 target range.General economic activity remains consistent with expectations for modest growth in Canada and comparatively stronger performance within the Bank's key western Canadian markets. Changes in mortgage industry lending guidelines have created business opportunities for the Bank's broker-sourced mortgage division, Optimum Mortgage. However, moderated construction and sales activity in certain Canadian residential real estate markets is expected to soften growth opportunities within other lending sectors. Ongoing improvements in the United States housing market appear to be driving a gradual recovery of this important economy, with positive implications for Canada's economic outlook. Although global economic growth is expected to remain subdued, risks of a significant global downturn appear to be somewhat diminished compared to prior periods. The Canadian economy is expected to grow modestly in 2013 and we are optimistic about continued growth opportunities for CWB Group.About Canadian Western Bank GroupCanadian Western Bank offers a full range of business and personal banking services across the four western provinces and is the largest publicly traded Canadian bank headquartered in Western Canada. The Bank, along with its operating affiliates, National Leasing Group Inc., Canadian Western Trust Company, Canadian Direct Insurance Incorporated, Valiant Trust Company, Adroit Investment Management Ltd. and Canadian Western Financial Ltd., collectively offer a diversified range of financial services across Canada and are together known as the Canadian Western Bank Group. The common shares of Canadian Western Bank are listed on the Toronto Stock Exchange under the trading symbol "CWB". The Bank's Series 3 Preferred Shares trade on the Toronto Stock Exchange under the trading symbol "CWB.PR.A". Refer to www.cwbankgroup.com for additional information.Fiscal 2013 First Quarter Results Conference Call CWB's first quarter results conference call is scheduled for Thursday, March 7, 2013 at 1:30 p.m. ET (11:30 a.m. MT). The Bank's executives will comment on financial results and respond to questions from analysts and institutional investors.The conference call may be accessed on a listen-only basis by dialing 647-427-7450 or toll-free 1-888-231-8191. The call will also be webcast live on the Bank's website:www.cwbankgroup.com/investor_relations/webcast_events.htm.A replay of the conference call will be available until March 21, 2013 by dialing 416-849-0833 (Toronto) or 1-855-859-2056 (toll-free) and entering passcode 95951376.Selected Financial Highlights   For the three months endedChange from (unaudited)  January 31   October 31  January 31 January 31 ($ thousands, except per share amounts)  2013  2012  2012 2012 Results of Operations             Net interest income (teb - see below) $114,749 $113,246 $107,509 7% Less teb adjustment  1,915  1,979  2,620 (27)  Net interest income per financial statements  112,834  111,267  104,889 8  Other income  22,379  19,932  18,791 19  Total revenues (teb)  137,128  133,178  126,300 9  Total revenues  135,213  131,199  123,680 9  Net income available to common shareholders  45,482  43,046  41,478 10  Earnings per common share               Basic(1)  0.58  0.55  0.55 5    Diluted(2)  0.57  0.55  0.54 6    Adjusted cash(3)  0.58  0.56  0.57 2  Return on common shareholders' equity(4)  14.2% 13.8% 15.5%(130)bp(5) Return on assets(6)  1.06  1.03  1.07 (1)  Efficiency ratio (teb)(7)  45.3  46.7  43.7 160  Efficiency ratio  45.9  47.4  44.6 130  Net interest margin (teb)(8)  2.66  2.71  2.77 (11)  Net interest margin  2.62  2.67  2.70 (8)  Provision for credit losses as a percentage of average loans  0.18  0.17  0.20 (2) Per Common Share             Cash dividends $0.17 $0.16 $0.15 13% Book value  16.42  15.94  14.36 14  Closing market value  30.84  29.56  26.47 17  Common shares outstanding (thousands)  78,992  78,743  75,694 4 Balance Sheet and Off-BalanceSheet Summary             Assets $17,161,437 $16,873,269 $15,484,048 11  Loans  14,299,112  13,953,686  12,744,891 12  Deposits  14,141,439  14,144,837  12,960,929 9  Debt  860,661  634,273  685,049 26  Shareholders' equity  1,506,438  1,464,981  1,296,634 16  Assets under administration  7,306,557  7,171,826  6,912,244 6  Assets under management  882,213  855,333  843,648 5 Capital Adequacy(9)             Common equity Tier 1 ratio  8.0% n/a  n/a n/a  Tier 1 ratio  9.7  10.6% 10.2%n/a  Total ratio  14.2  13.8  14.6 n/a  n/a - not applicable  (1)Basic earnings per common share (EPS) is calculated as net income available to common shareholders divided by the average number of common shares outstanding.(2)Diluted EPS is calculated as net income available to common shareholders divided by the average number of common shares outstanding adjusted for the dilutive effects of stock options.(3)Adjusted cash EPS is diluted EPS excluding the after-tax amortization of acquisition-related intangible assets and the non-tax deductible change in fair value of contingent consideration. These exclusions represent non-cash charges mainly related to the acquisition of National Leasing Group Inc. and are not considered indicative of ongoing business performance. The effect of the non-tax deductible change in the fair value of contingent consideration was eliminated in the third quarter of 2012 on the settlement of such consideration.  The Bank believes the adjusted results provide the reader with a better understanding about how management views CWB's performance.(4)Return on common shareholders' equity is calculated as annualized net income available to common shareholders divided by average common shareholders' equity.(5)bp - basis point change.(6)Return on assets is calculated as annualized net income available to common shareholders divided by average total assets.(7)Efficiency ratio is calculated as non-interest expenses divided by total revenues excluding the non-tax deductible change in fair value of contingent consideration.(8)Net interest margin is calculated as annualized net interest income divided by average total assets.(9)As of January 1, 2013, the Office of the Superintendent of Financial Institutions Canada (OSFI) adopted a new capital management framework called Basel III and capital is managed and reported in accordance with those requirements. Capital ratios prior to fiscal 2013 have been calculated using the previous framework, Basel II. Capital ratios calculated under Basel III are not directly comparable to the equivalent Basel II measures.Taxable Equivalent Basis (teb)Most banks analyze revenue on a taxable equivalent basis to permit uniform measurement and comparison of net interest income. Net interest income (as presented in the consolidated statement of income) includes tax-exempt income on certain securities. Since this income is not taxable, the rate of interest or dividends received is significantly lower than would apply to a loan or security of the same amount. The adjustment to taxable equivalent basis increases interest income and the provision for income taxes to what they would have been had the tax-exempt securities been taxed at the statutory rate. The taxable equivalent basis does not have a standardized meaning prescribed by International Financial Reporting Standards (IFRS) and, therefore, may not be comparable to similar measures presented by other banks. Total revenues, net interest income and income taxes are discussed on a taxable equivalent basis throughout this quarterly report to shareholders.Non-IFRS MeasuresTaxable equivalent basis, adjusted cash earnings per common share, return on common shareholders' equity, return on assets, efficiency ratio, net interest margin, common equity Tier 1, Tier 1 and total capital adequacy ratios, average balances, claims loss ratio, expense ratio and combined ratio do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures presented by other banks.Management's Discussion and AnalysisThis management's discussion and analysis (MD&A), dated March 6, 2013, should be read in conjunction with Canadian Western Bank's (CWB or the Bank) unaudited condensed interim consolidated financial statements for the period ended January 31, 2013, and the audited consolidated financial statements and MD&A for the year ended October 31, 2012, available on SEDAR at www.sedar.com and the Bank's website at www.cwbankgroup.com.OverviewCWB is pleased to report strong financial performance for its 99th consecutive profitable quarter, a period spanning nearly 25 years. Net income available to common shareholders of $45.5 million represented growth of 10% ($4.0 million) compared to the same quarter last year. Total revenues, on a taxable equivalent basis (teb), grew 9% ($10.8 million), mainly reflecting the positive impact of strong 12% loan growth and 19% higher other income. Loan growth also led to total assets surpassing $17 billion. The provision for credit losses measured as a percentage of average loans of 18 basis points decreased two basis points compared to the same period in 2012. Diluted earnings per common share increased 6% to $0.57 while adjusted cash earnings per common share was up 2% to $0.58. The difference in the rate of growth between diluted and adjusted cash earnings per share relates to the exclusion in adjusted cash earnings per share of the non-tax deductible change in fair value of contingent consideration. While the change in fair value of contingent consideration was eliminated in May 2012, it reduced other income in the first quarter of last year by $1.2 million. The lower growth rate of adjusted cash earnings per share compared with growth in net income available to common shareholders reflects the issuance of CWB common shares to settle the contingent consideration.Compared to the previous quarter, net income available to common shareholders grew 6% ($2.4 million) as the combined benefit of 12% ($2.4 million) higher other income, 2% quarterly loan growth and stable non-interest expenses was partially offset by the impact of a five basis point reduction in net interest margin. The change in net interest margin largely reflects higher average liquidity and an increase in funding costs attributed to the Bank's mid-December subordinated debenture issue.The quarterly return on common shareholders' equity (ROE) of 14.2% was down 130 basis points from the same quarter in 2012, but up 40 basis points compared to the prior quarter. The decline in ROE year-over-year mainly reflects the combined impact of constrained profitability from margin pressure and additional CWB common shares outstanding. First quarter return on assets of 1.06% compares to 1.07% a year earlier and 1.03% last quarter.Total Revenues (teb)Total revenues, comprising both net interest income and other income, reached $137.1 million for the quarter, up 9% ($10.8 million) compared to a year earlier. Growth in net interest income of 7% ($7.2 million) reflects the positive impact of strong 12% loan growth, partially offset by an 11 basis point reduction in net interest margin. Other income increased 19% ($3.6 million) largely resulting from the elimination of the contingent consideration fair value change, a gain on the sale of an insured residential mortgage portfolio, higher net insurance revenues and an increase in net gains on securities.Total revenues were up 3% ($4.0 million) compared to the previous quarter as higher net insurance revenues and an increase in the 'other' category of other income more than offset the impact of lower net gains on securities and a modest decline in net interest margin.Net Interest Income (teb)Net interest income of $114.7 million grew 7% ($7.2 million) over the same quarter last year as the benefit of strong loan growth was partially offset by an 11 basis point reduction in net interest margin to 2.66%. The lower net interest margin was mainly attributed to reduced yields on loans and securities reflecting the combined impact of the sustained very low interest rate environment and flat interest rate curve, as well as ongoing competitive pressures. Downward pressure on net interest margin from lower yields was partially offset by more favourable fixed term deposit and subordinated debenture costs.Compared to the previous quarter, net interest income was up 1% ($1.5 million) as the benefit of solid loan growth was moderated by a five basis point decline in net interest margin. The reduction in net interest margin in the quarter substantially resulted from higher average liquidity and increased funding costs attributable to the debenture issue. The quarterly impact on margin from lower yields on loans and securities was offset by comparable reductions in overall deposit costs.Expected lower average liquidity related to the absorption of the debenture issue will likely result in modest improvement in net interest margin in future quarters. However, this key measure will continue to be constrained by very low interest rates, a relatively flat interest rate curve and ongoing competitive pressures. In the absence of increases in the prime lending interest rate and/or a significant steepening of the interest rate curve, net interest margin is likely to fluctuate close to the levels achieved in the past two quarters.Note 14 to the unaudited interim consolidated financial statements summarizes the Bank's exposure to interest rate risk as at January 31, 2013. The estimated sensitivity of net interest income to a change in interest rates is presented in the table below. The amounts represent the estimated change in net interest income that would result over the following twelve months from a one-percentage point change in interest rates. The January 31, 2013 estimates are based on a number of assumptions and factors, which include:a constant structure in the interest sensitive asset and liability portfolios;floor levels for various deposit liabilities;interest rate changes affecting interest sensitive assets and liabilities by proportionally the same amount and applied at the appropriate repricing dates; and,no early redemptions.  January 31   October 31  January 31 ($ thousands) 2013  2012  2012           Estimated impact on net interest income of a 1% increase in interest rates          1 year$13,916 $15,086 $13,519  1 year percentage change 3.4% 3.8% 3.7%          Estimated impact on net interest income of a 1% decrease in interest rates          1 year$(21,386) $(21,534) $(16,549)  1 year percentage change (5.3)% (5.4)% (4.5)%           It is estimated that a one-percentage point increase in all interest rates at January 31, 2013 would decrease unrealized gains related to available-for-sale securities and the fair value of interest rate swaps designated as hedges, and result in a reduction in other comprehensive income of approximately $11.7 million, net of tax (January 31, 2012 - $10.1 million); it is estimated that a one-percentage point decrease in all interest rates at January 31, 2013 would result in a higher level of unrealized gains related to available-for-sale securities and increase the fair value of interest rate swaps designated as hedges, which would increase other comprehensive income by approximately $11.7 million, net of tax (January 31, 2012 - $10.1 million).Management will continue to manage the asset liability structure and interest rate sensitivity within the Bank's established policies through pricing and product initiatives, as well as the use of interest rate swaps and other appropriate strategies.Other IncomeFirst quarter other income of $22.4 million increased 19% ($3.6 million) compared to the same quarter last year mainly reflecting the elimination of contingent consideration fair value changes (the fair value change in the first quarter of 2012 reduced other income by $1.2 million) and a $1.0 million contribution from the sale of a $28 million insured residential mortgage portfolio within Optimum Mortgage. Net insurance revenues increased $0.8 million resulting from growth in net earned premiums and relatively stable claims experience. Gains on securities were $0.7 million (37%) higher reflecting favourable market opportunities and the ongoing strategic repositioning of the securities portfolio. Credit related fee income increased $0.5 million (9%), while trust and wealth management services revenues were up $0.3 million (6%). The 'other' component of other income increased $0.2 million (20%) as the positive contribution from the previously mentioned portfolio sale was partially offset by the expiry of a lease servicing contract in the first quarter of 2012.Compared to the previous quarter, other income was up 12% ($2.4 million) as a $4.3 million increase in net insurance revenues and a $0.8 million increase in the 'other' component of other income was partially offset by a $2.8 million reduction in net gains on securities. Following severe August hail storms in Alberta, net claims expense for insurance operations was abnormally high during the fourth quarter of 2012. More normalized claims experience in the current quarter was the main factor contributing to the significant increase in net insurance revenues. Other income also benefited from a combined $0.7 million increase in trust and wealth management services, retail services and credit related fee income. Based on the current composition of the securities portfolio, management believes net gains on securities will continue to provide a source of revenue for the remainder of the year, however, at a lower level compared to that achieved in the current quarter.Credit QualityStrong overall credit quality reflects sound underwriting practices and a relatively solid level of economic activity in Western Canada despite slow growth in the global economy and low prices for natural gas. Gross impaired loans at January 31, 2013 were $55.7 million, compared to $66.8 million last quarter and $90.9 million a year earlier. This represented the 11th consecutive quarterly decrease in the dollar level of gross impaired loans. Management expects the dollar level of gross impaired loans to increase from the current very low level reflecting normal fluctuations through the credit cycle. Although the total number of accounts classified as impaired was up 8% compared to the previous quarter, new formations were smaller in magnitude, totaling $15.0 million, versus $18.8 million last quarter. The total number of accounts classified as impaired was down 3% compared to a year earlier. For the three months endedChange from (unaudited) January 31  October 31  January 31 January 31 ($ thousands) 2013   2012   2012  2012  Gross impaired loans, beginning of period$66,840 $70,241 $97,258 (31)% New formations 14,972  18,782  18,928 (21)  Reductions, impaired accounts paid down or returned to performing status (12,906)  (17,561)  (20,787) (38)  Write-offs (13,172)  (4,622)  (4,542) 190 Total(1)$55,734 $66,840 $90,857 (39)%            Balance of the ten largest impaired accounts$23,833 $35,034 $44,252 (46)%Total number of accounts classified as impaired 135  125  139 (3) Gross impaired loans as a percentage of total loans(3) 0.39% 0.48% 0.71%32bp(2)(1)Gross impaired loans includes foreclosed assets held for sale with a carrying value of $9,160 (October 31, 2012 - $10,462 and January 31, 2012 - $4,683).(2)bp - basis point change.(3)Total loans do not include an allocation for credit losses or deferred revenue and premiums.  The dollar level of gross impaired loans represented 0.39% of total loans at quarter end, compared to 0.48% last quarter and 0.71% one year ago. As at January 31, 2013, the collective allowance for credit losses exceeded the balance of impaired loans, net of specific allowances. Net impaired loans after adjusting for the collective allowance for credit losses represented -0.14% of total loans, compared to -0.11% last quarter and +0.13% a year earlier. The dollar level of gross impaired loans goes up and down as loans become impaired and are subsequently resolved, and does not directly reflect the dollar value of expected write-offs given tangible security held against the Bank's lending positions. Specific allowances for expected write-offs are established through detailed analyses of both the overall quality and ultimate marketability of the security held against impaired accounts. More than half of the higher-than-average first quarter write-offs were attributed to three accounts, including two oil and gas production loans. The overall level of direct exposure to oil and gas production loans is low and actual credit losses are expected to remain within the Bank's historical range of acceptable levels.The provision for credit losses measured against average loans was 18 basis points this quarter. Based on the current environment and expectations for credit quality looking forward, management believes the annual provision for credit losses will remain at the low end of the 2013 target range of 18 to 23 basis points.The total allowance for credit losses (collective and specific) represented 137% of gross impaired loans at quarter end, compared to 122% last quarter and 82% one year ago. The total allowance for credit losses was $76.4 million at January 31, 2013, compared to $81.7 million last quarter and $74.6 million a year earlier. The increase in the total allowance for credit losses compared to the same period last year was mainly attributed to a higher collective allowance to support ongoing loan growth. The collective allowance was $69.7 million at January 31, 2013, compared to $67.3 million last quarter and $62.7 million a year earlier.Non-interest ExpensesOne of management's key priorities is to maintain effective control of costs while ensuring the Bank is positioned to deliver strong growth over the long term. Effective execution of CWB's strategic plan will continue to require increased investment in certain areas. Significant anticipated expenditures relate to additional staff complement as well as expanded infrastructure and further investment in technology. This strategy is aligned with the Bank's commitment to maximize shareholder value and is expected to provide material benefits in future periods. A major program to implement a new core banking system was formally initiated during the quarter. Preliminary timelines anticipate implementation of the new system in 2015 with an initial estimated budget of $50 million. Expansions of existing branch premises in St. Albert, Alberta and Regina, Saskatchewan were completed in the first quarter. Upgrades and expansion of other branch infrastructure is underway and potential locations for additional new branches are under consideration. Compliance with an increasing level of regulatory rules and oversight for all Canadian banks requires the investment of both time and resources, which further contributes to higher non-interest expenses.Compared to the same quarter last year, non-interest expenses of $62.1 million were up $6.4 million (11%). Salary and benefit costs increased $4.9 million (14%), premises and equipment expenses were up $0.8 million (9%), while other expenses increased $0.6 million (6%). The change in salary and benefit costs was driven by a combination of a higher staff complement to support ongoing growth and annual salary increments. The increase in premises and equipment relates to ongoing expansion, such as the new full-service branch in Winnipeg, Manitoba, opened in October 2012, as well as expenses related to investment in technology and infrastructure. Higher general expenses include marketing and business development costs related to initiatives to enhance awareness of CWB's brand and product offerings.Compared to the previous quarter, non-interest expenses were down $0.1 million (0.2%) as $1.5 million (4%) higher salary and benefit costs were offset by reductions in other categories. General expenses were down $1.5 million (13%), including a $1.3 million reduction in advertising costs attributed to the timing of certain external awareness initiatives. Salary and benefit costs were higher mainly driven by annual salary increments and additional staff complement to facilitate business growth.The first quarter efficiency ratio (teb), which measures non-interest expenses as a percentage of total revenues (teb), was 45.3%, compared to 43.7% last year and 46.7% in the previous quarter. In consideration of expected revenues and planned expenditures, management believes the 2013 target for the efficiency ratio of 46% or better will be achieved.Income TaxesThe first quarter effective income tax rate (teb) was 25.7%, compared to 26.7% in the same quarter last year. The reduced tax rate mainly reflects a 150 basis point decrease in the basic federal income tax rate effective on January 1, 2012.Comprehensive IncomeComprehensive income is comprised of net income and other comprehensive income (OCI), all net of income taxes, and totaled $54.6 million for the first quarter, compared to $52.9 million in the same period last year. The net increase in comprehensive income was driven by 9% ($4.0 million) higher net income, offset by lower changes in fair value, net of taxes, on available-for-sale securities. While the combined dollar investment in preferred shares and common equities is relatively small in relation to total liquid assets, it increases the potential for comparatively larger fluctuations in OCI.Balance SheetTotal assets of $17,161 million surpassed $17 billion on growth of 2% ($288 million) in the quarter and 11% ($1,677 million) in the past year. Cash and SecuritiesCash, securities and securities purchased under resale agreements totaled $2,517 million at January 31, 2013, compared to $2,573 million last quarter and $2,429 million one year ago (refer to the Treasury Management section of this MD&A for additional details). Net unrealized gains recorded on the balance sheet of $16.0 million compares to $11.3 million last quarter, with the difference mainly reflecting increased market values of both preferred and common equities. Net unrealized gains were down $2.8 million from a year earlier, largely resulting from net gains realized on disposition of preferred equities throughout the year. The securities portfolio is primarily comprised of high quality debt instruments, preferred shares and common shares that are not held for trading purposes and, where applicable, are typically held until maturity. Fluctuations in value are generally attributed to changes in interest rates, movements in market credit spreads and shifts in the interest rate curve. Volatility in equity markets also leads to fluctuations in value, particularly for common shares.Net realized gains on securities in the first quarter of $2.7 million compares to $1.9 million in the same period last year and $5.4 million in the previous quarter. Net gains compared to the first quarter of 2012 reflect favourable market opportunities and the ongoing strategic repositioning of the securities portfolio. Based on the current composition of the securities portfolio, management believes net gains on securities will continue to provide a source of revenue for the remainder of the year, however, at a lower level of contribution than the current quarter. The Bank has no direct investment in any non-Canadian sovereign debt or other securities issued outside of Canada or the United States.Treasury ManagementHigher average liquidity compared to the previous quarter mainly resulted from the mid-December issue of subordinated debentures. The corresponding increase in cash balances and low yielding government securities had a negative influence on net interest margin, and, on a net basis, accounted for much of the five basis point decline compared to last quarter. Average liquidity remained below the relatively high level maintained in the first quarter of 2012, when global macroeconomic risks were elevated. Management will continue to closely monitor macroeconomic events and the outlook for domestic economic growth, and adjust its liquidity strategy accordingly. Subsequent to quarter end, average liquidity has returned to levels consistent with expectations for a relatively normal operating environment.DBRS Limited maintains published credit ratings on the Bank's senior debt (deposits), short term debt, subordinated debentures and preferred shares of "A (low)", "R1 (low)", "BBB (high)", and "Pfd-3 (high)", respectively, all with stable outlooks. DBRS ratings on short-term debt and preferred shares were initiated during the first quarter. Credit ratings do not comment on market price or suitability of any financial instrument for a particular investor and are not recommendations to purchase, sell or hold securities. Ratings are subject to revision or withdrawal at any time by the rating organization. Management believes the ratings widen the base of clients and investors who can participate in CWB's deposit and debt offerings, while also lowering overall funding costs and the cost of capital.The Basel Committee on Banking Supervision (the Basel Committee) has issued a framework document outlining two new liquidity standards. The document prescribes the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) as minimum regulatory standards effective January 1, 2015 and January 1, 2018, respectively. The LCR establishes a common measure of liquidity risk and requires institutions to maintain sufficient liquid assets to cover a minimum of 30 days of cash flow requirements in a stressed situation. The NSFR describes a second common measure of liquidity establishing a minimum acceptable amount of stable funding based on the liquidity characteristics of a financial institution's assets and activities over a one-year horizon. This quarter, the Basel Committee issued additional guidance expanding the asset classes to be considered liquid assets, and allowing supervisors the ability to reduce the liquidity requirements for certain deposits. The Basel Committee has introduced a phase-in period for compliance with LCR guidelines beginning in 2015. It is anticipated that Canadian banks will be required to fully comply with the LCR regulations in 2015 with no phase-in. Although the rules are not yet finalized, CWB believes it is well positioned to comply with the new requirements.Loans Total loans grew 2% ($345 million) in the quarter and 12% ($1,554 million) in the past twelve months to reach $14,299 million. Compared to a year earlier, double-digit growth is apparent across almost all lending sectors and each geographic market. The strongest year-over-year growth was in equipment financing and leasing, up 21% ($442 million), followed closely by 16% ($435 million) growth in general commercial loans. Based on the current outlook for new loans, management believes ongoing activity within these sectors will continue to provide the strongest overall growth contribution for fiscal 2013. Looking forward, a relatively slower level of growth is expected in real estate project loans, commercial mortgages and oil and gas production loans.  The level of quarterly growth by sector was led by activity in real estate project loans ($157 million), equipment financing and leasing ($96 million) and commercial mortgages ($64 million). Net of the sale of a $28 million residential mortgage portfolio, personal loans and mortgages were up $24 million. First quarter increases in general commercial and corporate loans were $42 million and $16 million, respectively. Oil and gas production loans decreased $59 million driven by a combination of fewer new lending opportunities, payouts and write-offs. While all provinces delivered positive loan growth, lending activity in British Columbia contributed the highest percentage increase in the quarter.(unaudited) January 31  October 31   January 31 ($ millions) 2013   2012    2012  General commercial loans$3,221 $3,179  $2,786 Commercial mortgages 2,852  2,788   2,702 Equipment financing and leasing 2,594  2,498   2,152 Personal loans and mortgages 2,316  2,292   2,095 Real estate project loans 2,181  2,024   1,962 Corporate loans(1) 928  912   761 Oil and gas production loans 283  342   361 Total loans outstanding (2)$14,375 $14,035  $12,819 (1)     Corporate loans represent a diversified portfolio that is centrally sourced and administered through a designated lending group located in Edmonton. These loans include participation in select syndications that are structured and led primarily by the major Canadian banks, but exclude participation in various other syndicated facilities sourced through relationships developed at CWB branches.(2)     Loans by lending sector exclude the allowance for credit losses.  While elevated competition continues across most lending areas, management believes market share will be gained from the combined positive influences of an expanded market presence, increased brand awareness in core geographic markets and effective execution of CWB's strategic plan focused on further enhancing existing competitive advantages in business banking.Following a slowdown in the second half of 2012, growth in Canada's domestic economy is expected to improve modestly in 2013. The Bank's key markets in Western Canada are generally expected to perform better relative to the rest of Canada. While strong competition from domestic banks and other financial services firms is expected to persist, the current overall outlook for generating new business opportunities continues to be positive.Affordability in most Canadian residential real estate markets remains within historical ranges largely reflecting very low interest rates; however, the combination of high price levels, particularly in certain geographical areas, relatively high levels of Canadian consumer debt and the potential for increasing interest rates in the future could slow construction and other related lending activity. Low natural gas prices and a shortfall in pipeline capacity have adversely impacted the financial flexibility and cash flows of many exploration and production companies. These circumstances have also contributed to reduced overall investment in the resource sector and led to a lower level of drilling activity in Western Canada. While the Bank's direct exposure to the resource sector remains low, and fallout from a sustained period of low natural gas prices is not expected to materially impact overall portfolio quality, related growth opportunities will continue to be constrained. Despite these challenges, management believes the current level of overall activity and a relatively positive economic outlook within the Bank's key markets will support the achievement of the 10% minimum loan growth target for 2013.Total loans within Optimum Mortgage reached $1,103 million on growth of 1% ($13 million) in the quarter and 11% ($108 million) over the past year. Adjusting for the $28 million insured residential mortgage portfolio sold during this quarter, quarterly loan growth within Optimum was 3%, driven almost exclusively by alternative mortgages secured via conventional residential first mortgages carrying a weighted average loan-to-value ratio at initiation of approximately 70%. The book value of alternative mortgages represented approximately 74% of Optimum's total portfolio at quarter end. Recent regulatory changes, including more stringent residential mortgage underwriting criteria, have resulted in a more favourable competitive environment for Optimum in the short term, but the long-term impacts of these changes remain unknown.Securitized leases are reported on-balance sheet as part of total loans. The gross amount of securitized leases at January 31, 2013 totaled $214 million, compared to $238 million last quarter and $150 million one year ago. There were no leases securitized during the first quarter.Residential Mortgage ExposureIn accordance with OSFI Guideline B20 - Residential Mortgage Underwriting Practices and Procedures, commencing this quarter, additional information is provided regarding CWB's residential mortgage exposure. This exposure, including home equity lines of credit (HELOCs), is sourced through Optimum Mortgage's third-party channels and CWB branches. Canadian bank and trust companies are restricted to providing residential real estate loans of no more than 80% of the collateral value. Advances exceeding 80% loan-to-value (LTV) require mortgage insurance. Although mortgage insurance protects the Bank from losses resulting from mortgagor default, it does not replace prudent lending practices, including the making of and administration of insured loans, the collection of payments and the protection of the loan security.A geographic breakdown of insured and uninsured loans secured by residential property, including HELOCs, outstanding at January 31, 2013 is included in the following table:(unaudited)       ($ thousands)InsuredUninsured         % of Total     % of Total    Provincial % Province Balance Balance  Balance  Balance  Total Balance of Total Alberta$217,655 26%$618,818  74%$836,473 42%British Columbia 112,837 16  608,468  84  721,305 37 Manitoba 9,333 16  49,597  84  58,930 3 Ontario 15,818 7  195,941  93  211,759 11 Saskatchewan 29,432 21  107,689  79  137,121 7 Other 113 45  140  55  253 0  $385,188 20%$1,580,653  80%$1,965,841 100%                 The approximate average LTV ratios for newly originated and acquired uninsured residential mortgages and HELOCs during the quarter ending January 31, 2013 are included in the following table:  Alberta BritishColumbia Manitoba Ontario Saskatchewan Other Total Uninsured 64% 62% 71% 71% 60% 74% 65%                 The Bank's loans secured by residential property, including HELOCs, outstanding at January 31, 2013, categorized by amortization period are included in the following table:(unaudited)     % of Total ($ thousands)  Balance  Balance Amortization (Years)       5 or less $34,005  2%> 5 to 10  21,613  1 > 10 to 15  49,075  3 > 15 to 20  140,272  7 > 20 to 25  929,582  47 > 25 to 30  602,102  31 > 30 to 35  185,207  9 > 35  3,985  0   $1,965,841  100%        In the event of an economic downturn the potential impact on CWB's residential mortgage portfolio is considered moderate as the total residential mortgage portfolio is well secured with an average LTV of less than 65%.DepositsTotal deposits at quarter end were $14,141 million, unchanged from the previous quarter and up 9% ($1,181 million) over the past year. Personal deposits represented 63% of total deposits at January 31, 2013, unchanged from October 31, 2012 and down from 65% one year ago.One of management's strategic objectives is to increase the level of personal and business deposits raised within the branch network, trust companies and Canadian Direct Financial, the Internet-based division of the Bank. Specific emphasis is placed on growing deposit classes that are lower cost, provide associated transactional fee income and receive favourable treatment under the proposed Basel III LCR and NSFR liquidity requirements. One specific initiative to support the Bank's focus on growing branch-raised deposits includes meaningful enhancements to CWB's cash management offerings. The recently launched product bundle combines a competitive business demand account with online banking and other cash management products and services to better meet the banking needs of business clients. CWB's expanding market presence, including ongoing expansion and upgrades to existing branches and the recent opening of a second full-service branch in Winnipeg, Manitoba, also supports objectives to generate branch-raised deposits.Management remains committed to further enhance and diversify all funding sources to support ongoing growth while maintaining acceptable net interest margins. The deposit broker network remains a valued source for raising insured fixed term retail deposits and has proven to be an extremely effective and efficient way to access funding and liquidity over a wide geographic base. Selectively utilizing the debt capital markets is also part of management's strategy to further diversify the funding base over time. On December 7, 2012, DBRS Limited initiated a rating of "R-1 (low)" on CWB's short term instruments, with a stable trend. This credit rating will enable CWB to access an additional source of funding through the potential issuance of bearer deposit notes. Management continues to evaluate the funding potential available through securitization of portfolios such as equipment financing and residential mortgages.Other Assets and Other LiabilitiesOther assets at January 31, 2013 totaled $345 million, compared to $347 million last quarter and $310 million one year ago. Other liabilities at quarter end were $548 million, compared to $524 million the previous quarter and $436 million a year earlier.Off-Balance SheetOff-balance sheet items include assets under administration and assets under management. Total assets under administration, which are comprised of trust assets under administration and third-party leases and mortgages under service agreements totaled $7,307 million at January 31, 2013, compared to $7,172 million last quarter and $6,912 million one year ago. Assets under management were $882 million at quarter end, compared to $855 million last quarter and $844 million one year ago.Other off-balance sheet items are comprised of standard industry credit instruments (guarantees, standby letters of credit and commitments to extend credit). CWB does not utilize, nor does it have exposure to, collateralized debt obligations or credit default swaps. For additional information regarding other off-balance sheet items refer to Note 12 of the unaudited interim consolidated financial statements for the period ended January 31, 2013, as well as Notes 11 and 20 of the audited consolidated financial statements on pages 81 and 91, respectively, in the Bank's 2012 Annual Report.Capital ManagementEffective January 1, 2013, the Office of the Superintendent of Financial Institutions Canada (OSFI) requires Canadian financial institutions to manage and report regulatory capital in accordance with a new capital management framework, commonly referred to as Basel III. The required minimum regulatory capital ratios, including a 250 basis point capital conservation buffer, are 7.0% common equity Tier 1 (CET1) effective Q1 2013, and 8.5% Tier 1 and 10.5% total capital effective Q1 2014. The Basel III rules provide for transitional adjustments whereby certain aspects of the new rules will be phased in between 2013 and 2019. The only available transition allowance in the Basel III capital standards permitted by OSFI for Canadian banks relates to the multi-year phase out of non-qualifying capital instruments.At January 31, 2013, the Bank's capital ratios were 8.0% CET1, 9.7% Tier 1 and14.2% total capital. This compares to the Bank's Basel III October 31, 2012 pro forma ratios of 8.1% CET1, 9.9% Tier 1 and 13.1% total capital. Further details regarding CWB's regulatory capital and capital adequacy ratios are included in the following table:  As at  As at  As at (unaudited) January 31  October 31  January 31 ($ millions) 2013(1)    2012(2)  2012(2)  Regulatory capital          CET1 capital before deductions$1,294 $n/a $n/a  Net CET1 deductions (101)  n/a  n/a  CET1 capital 1,193  n/a  n/a  Tier 1 capital before deductions 1,476  1,561  1,388  Net deductions (26)  (100)  (98)  Tier 1 capital 1,450  1,461  1,290  Total capital before deductions 2,128  1,959  1,908  Net deductions (9)  (55)  (53)  Total capital$2,119 $1,904 $1,855 Risk-Weighted Assets$14,927 $13,775 $12,667 Capital Adequacy Ratios           CET1 8.0% n/a% n/a%  Tier 1 9.7  10.6  10.2   Total 14.2  13.8  14.6 n/a -not applicable(1)      Basel III capital balances at January 31, 2013 exclude 10% of existing non-common equity instruments that do not include non-viability contingent capital clauses. At January 31, 2013, a combined $31 million of outstanding Innovative Tier 1 capital (disclosed in non-controlling interest) and preferred shares, as well as $68 million of outstanding subordinated debentures were excluded from Basel III regulatory capital.(2)      Capital is managed and reported in accordance with the new capital management framework called Basel III, which was adopted by OSFI on January 1, 2013. Capital ratios prior to fiscal 2013 have been calculated using the previous framework, Basel II. Capital ratios calculated under Basel III are not directly comparable to the equivalent Basel II measures.   The mid-December issue of $250 million of subordinated debentures strengthened total capital compared to prior periods and qualifies for the Basel III transition allowance applicable for Canadian banks. Capital ratios exceed the Basel III targets established through CWB's Internal Capital Adequacy Assessment Process (ICAAP) and are supportive of CWB Group's growth expectations and strategic priorities. The ongoing retention of earnings should support capital requirements associated with the anticipated achievement of the 2013 minimum performance targets.CWB currently reports its regulatory capital ratios using the Standardized approach for calculating risk-weighted assets. Management believes this approach requires the Bank to carry significantly more capital for certain credit exposures compared to requirements under the Advanced Internal Ratings Based (AIRB) methodology used by many other financial institutions. For this reason, regulatory capital ratios of banks that utilize the Standardized approach versus the AIRB methodology are not directly comparable. Required resources, costs and potential timelines related to the Bank's possible transition to an AIRB methodology for managing credit risk and calculating risk-weighted assets are still being evaluated. Preliminary analysis confirms a multi-year timeframe would be required. CWB's new core banking system, expected to be implemented in 2015, is a critical component for a number of requirements necessary for AIRB compliance, including the collection and analysis of certain types of data.Further information relating to the Bank's capital position is provided in Note 15 of the unaudited interim consolidated financial statements as well as the audited consolidated financial statements and MD&A for the year ended October 31, 2012.Book value per common share at January 31, 2013 was $16.42, compared to $15.94 last quarter and $14.36 one year ago.Common shareholders received a quarterly cash dividend of $0.17 per common share on January 4, 2013. On March 6, 2013, CWB's Board of Directors declared a cash dividend of $0.17 per common share, payable on March 28, 2013 to shareholders of record on March 21, 2013. This quarterly dividend was unchanged from the previous quarter and 13% higher than the quarterly dividend declared one year ago. The Board of Directors also declared a cash dividend of $0.453125 per Series 3 Preferred Share payable on April 30, 2013 to shareholders of record on April 18, 2013.Changes in Accounting PoliciesThere were no new significant accounting policies adopted during the quarter for purposes of presenting the Bank's financial statements under International Financial Reporting Standards (IFRS).Future Accounting ChangesA number of standards and amendments have been issued by the International Accounting Standards Board (IASB) and are noted on page 51 of the 2012 Annual Report. There have been no changes to these items during the first quarter of 2013. The standards and amendments may impact the Bank's future financial statements, and CWB is currently reviewing these changes to determine the impact, if any, on the financial statements.CWB continues to monitor activities of the IASB as well as proposed changes to IFRS. Several accounting standards that are in the process of being amended by the IASB (i.e. loan impairment, leases and insurance) may have a significant impact on the Bank's future consolidated financial statements.Controls and ProceduresThere were no changes in the Bank's internal controls over financial reporting that occurred during the quarter ended January 31, 2013 that have materially affected, or are reasonably likely to materially affect, the Bank's internal controls over financial reporting.Prior to its release, this quarterly report to shareholders was reviewed by the Audit Committee and, on the Audit Committee's recommendation, approved by the Board of Directors of Canadian Western Bank.Updated Share InformationAs at March 1, 2013, there were 79,023,342 CWB common shares outstanding. Also outstanding were employee stock options, which are or will be exercisable for up to 3,786,946 common shares for maximum proceeds of $97 million.Dividend Reinvestment PlanCWB common shares (TSX: CWB) and preferred shares (TSX: CWB.PR.A) are deemed eligible to participate in the Bank's dividend reinvestment plan (the Plan). The Plan provides holders of eligible shares the opportunity to direct cash dividends toward the purchase of CWB common shares. Further details for the Plan are available on the Bank's website at www.cwbankgroup.com/investor_relations/drip. At the current time, for the purposes of the Plan, the Bank has elected to issue common shares from treasury at a 2% discount from the average market price (as defined in the Plan).Normal Course Issuer BidOn February 27, 2013, CWB received approval from the Toronto Stock Exchange for a Normal Course Issuer Bid (NCIB) to purchase, for cancellation, up to up to 826,120 Non-Cumulative 5-Year Rate Reset Preferred Shares Series 3 ("preferred shares"). The NCIB commenced March 1, 2013 and will expire February 28, 2014. To date, no preferred shares have been purchased or cancelled under the NCIB. Security holders may contact the Bank to obtain, without charge, a copy of the notice filed with the TSX. Additionally, a copy of the news release is available on the Bank's website and on SEDAR at www.sedar.com.Summary of Quarterly Financial Information    201320122011($ thousands) Q1  Q4 Q3  Q2 Q1  Q4 Q3  Q2Total revenues (teb)$137,128 $133,178$138,150 $127,854$126,300 $119,673$122,753 $119,766Total revenues 135,213  131,199 136,064  125,396 123,680  116,540 119,956  117,381Net income 51,062  48,616 53,578  45,212 47,051  41,474 44,393  42,440Net income available to common shareholders 45,482  43,046 48,004  39,669 41,478  35,921 38,824  36,941Earnings per common share                     Basic 0.58  0.55 0.62  0.52 0.55  0.48 0.52  0.52 Diluted 0.57  0.55 0.61  0.52 0.54  0.47 0.50  0.48 Adjusted cash 0.58  0.56 0.63  0.55 0.57  0.53 0.54  0.55Total assets ($ millions) 17,161  16,873 16,033  15,713 15,484  14,849 14,097  13,726                     The financial results for each of the last eight quarters are summarized above. In general, CWB's performance reflects a relatively consistent trend although the second quarter contains three fewer revenue earning days, or two fewer days in a leap year such as 2012.The Bank's quarterly financial results are subject to some fluctuation due to its exposure to property and casualty insurance. Insurance operations, which are primarily reflected in other income, are subject to seasonal weather conditions, cyclical patterns of the industry and natural catastrophes. Mandatory participation in the Alberta auto risk sharing pools can also result in unpredictable quarterly fluctuations.Among other things, quarterly results can also fluctuate from the recognition of periodic income tax items.For additional details on variations between the prior quarters, refer to the summary of quarterly results section of the Bank's MD&A for the year ended October 31, 2012 and the individual quarterly reports to shareholders which are available on SEDAR at www.sedar.com and on CWB's website at www.cwbankgroup.com.Taxable Equivalent Basis (teb)Most banks analyze revenue on a taxable equivalent basis to permit uniform measurement and comparison of net interest income. Net interest income (as presented in the consolidated statement of income) includes tax-exempt income on certain securities. Since this income is not taxable, the rate of interest or dividends received is significantly lower than would apply to a loan or security of the same amount. The adjustment to taxable equivalent basis increases interest income and the provision for income taxes to what they would have been had the tax-exempt securities been taxed at the statutory rate. The taxable equivalent basis does not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other banks. Total revenues, net interest income and income taxes are discussed on a taxable equivalent basis throughout this quarterly report to shareholders.Non-IFRS MeasuresTaxable equivalent basis, adjusted cash earnings per common share, return on common shareholders' equity, return on assets, efficiency ratio, net interest margin, common equity Tier 1, Tier 1 and total capital adequacy ratios, and average balances do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures presented by other financial institutions. The non-IFRS measures used in this MD&A are calculated as follows:taxable equivalent basis - described above;adjusted cash earnings per common share - diluted earnings per common share excluding the after-tax amortization of acquisition-related intangible assets and the non-tax deductible change in fair value of contingent consideration. These exclusions represent non-cash charges mainly related to the acquisition of National Leasing Group Inc. and are not considered to be indicative of ongoing business performance;return on common shareholders' equity - annualized net income available to common shareholders divided by average common shareholders' equity;return on assets - annualized net income available to common shareholders divided by average total assets;efficiency ratio - non-interest expenses divided by total revenues excluding the non-tax deductible change in fair value of contingent consideration;net interest margin - net interest income divided by average total assets;Basel II Tier 1 and total capital adequacy ratios - in accordance with guidelines issued by OSFI;Basel III common equity Tier 1, Tier 1 and total capital ratios - in accordance with guidelines issued by OSFI; andaverage balances - average daily balances.Forward-looking StatementsFrom time to time, Canadian Western Bank (the Bank) makes written and verbal forward-looking statements. Statements of this type are included in the Annual Report and reports to shareholders and may be included in filings with Canadian securities regulators or in other communications such as press releases and corporate presentations. Forward-looking statements include, but are not limited to, statements about the Bank's objectives and strategies, targeted and expected financial results and the outlook for the Bank's businesses or for the Canadian economy. Forward-looking statements are typically identified by the words "believe", "expect", "anticipate", "intend", "estimate", "may increase", "may impact" and other similar expressions, or future or conditional verbs such as "will", "should", "would" and "could."By their very nature, forward-looking statements involve numerous assumptions. A variety of factors, many of which are beyond the Bank's control, may cause actual results to differ materially from the expectations expressed in the forward-looking statements. These factors include, but are not limited to, general business and economic conditions in Canada including the volatility and lack of liquidity in financial markets, fluctuations in interest rates and currency values, changes in monetary policy, changes in economic and political conditions, regulatory and legal developments, the level of competition in the Bank's markets, the occurrence of weather-related and other natural catastrophes, changes in accounting standards and policies, the accuracy of and completeness of information the Bank receives about customers and counterparties, the ability to attract and retain key personnel, the ability to complete and integrate acquisitions, reliance on third parties to provide components of the Bank's business infrastructure, changes in tax laws, technological developments, unexpected changes in consumer spending and saving habits, timely development and introduction of new products, and management's ability to anticipate and manage the risks associated with these factors. It is important to note that the preceding list is not exhaustive of possible factors.These and other factors should be considered carefully and readers are cautioned not to place undue reliance on these forward-looking statements as a number of important factors could cause the Bank's actual results to differ materially from the expectations expressed in such forward looking statements. Unless required by securities law, the Bank does not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time by it or on its behalf.Assumptions about the performance of the Canadian economy in 2013 and how it will affect CWB's businesses are material factors the Bank considers when setting its objectives. In setting minimum performance targets for fiscal 2013, management's assumptions included: modest economic growth in Canada aided by positive relative performance in the four western provinces; relatively stable energy and other commodity prices; sound credit quality with actual losses remaining within the Bank's historical range of acceptable levels; and, a lower net interest margin attributed to expectations for a prolonged period of very low interest rates due to uncertainties about the strength of global economic recovery and global macroeconomic uncertainty. Management's assumptions at the end of the first quarter remained relatively unchanged compared to those at the 2012 fiscal year end.Potential risks that would have a material adverse impact on the Bank's economic expectations and forecasts include a global economic recession spurred by unfavourable developments in the euro zone, a recession in the United States, a meaningful slowdown in China's economic growth, or a significant and sustained deterioration in Canadian residential real estate prices. At the end of the first quarter, management's expectations and view of the potential risks were relatively consistent with the fiscal year end. However, significant and ongoing oil price differentials owing to capacity challenges for exporting Canadian crude oil may have a greater than expected impact on both the overall level of capital investment and government fiscal flexibility.Consolidated Balance Sheets   As at  As at  As at  Change from (unaudited)  January 31  October 31  January 31  January 31 ($ thousands)  2013  2012  2012  2012 Assets             Cash Resources              Cash and non-interest bearing deposits with financial institutions $36,298 $33,690 $44,745  (19)% Interest bearing deposits with regulated financial institutions(Note 4)  170,998  177,028  182,427  (6)  Cheques and other items in transit  229  26,265  1,792  (87)    207,525  236,983  228,964  (9) Securities(Note 4)              Issued or guaranteed by Canada  881,434  980,200  680,933  29  Issued or guaranteed by a province or municipality  537,782  478,622  415,166  30  Other securities  890,209  877,278  983,692  (10)    2,309,425  2,336,100  2,079,791  11 Securities Purchased Under Resale Agreements  -  -  119,999  nm Loans(Notes 5 and 7)              Personal  2,315,616  2,292,388  2,095,429  11  Business  12,059,864  11,743,021  10,724,018  12    14,375,480  14,035,409  12,819,447  12  Allowance for credit losses     (Note 6)  (76,368)  (81,723)  (74,556)  2    14,299,112  13,953,686  12,744,891  12 Other              Property and equipment  63,915  68,938  61,274  4  Goodwill  45,536  45,536  45,691  -  Intangible assets  50,608  49,959  46,296  9  Insurance related  60,259  57,650  56,058  7  Derivative related(Note 8)  2,776  1,951  -  nm  Other assets  122,281  122,466  101,084  21    345,375  346,500  310,403  11 Total Assets $17,161,437 $16,873,269 $15,484,048  11%               Liabilities and Shareholders' Equity             Deposits              Personal $8,968,461 $8,960,118 $8,476,551  6% Business and government  5,172,978  5,184,719  4,484,378  15    14,141,439  14,144,837  12,960,929  9 Other              Cheques and other items in transit  43,479  54,030  32,874  32  Insurance related  154,606  160,302  144,468  7  Derivative related(Note 8)  14  10  539  (97)  Securities sold under repurchase agreements  125,075  70,089  -  nm  Other liabilities  224,498  239,503  258,330  (13)    547,672  523,934  436,211  26 Debt              Debt securities  185,661  209,273  140,049  33  Subordinated debentures(Note 9)  675,000  425,000  545,000  24    860,661  634,273  685,049  26 Equity                 Preferred shares(Note 10)  209,750  209,750  209,750  -  Common shares(Note 10)  495,587  490,218  412,120  20  Retained earnings  765,392  733,298  639,004  20  Share-based payment reserve  22,943  22,468  22,079  4  Other reserves  12,766  9,247  13,681  (7) Total Shareholders' Equity  1,506,438  1,464,981  1,296,634  16  Non-controlling interests  105,227  105,244  105,225  0 Total Equity  1,611,665  1,570,225  1,401,859  15 Total Liabilities and Equity $17,161,437 $16,873,269 $15,484,048  11%nm - not meaningfulThe accompanying notes are an integral part of the interim consolidated financial statements.Consolidated Statements of Income For the three months endedChange from (unaudited) January 31  October 31  January 31 January 31 ($ thousands, except per share amounts) 2013  2012  2012 2012 Interest Income            Loans$179,041 $177,191 $166,300 8% Securities 11,224  10,135  11,821 (5)  Deposits with regulated financial institutions 437  567  1,025 (57)   190,702  187,893  179,146 6 Interest Expense            Deposits 70,215  70,022  66,255 6  Debt 7,653  6,604  8,002 (4)   77,868  76,626  74,257 5 Net Interest Income 112,834  111,267  104,889 8 Provision for Credit Losses         (Note 6) 6,327  5,962  6,429 (2) Net Interest Income after Provision for Credit Losses 106,507  105,305  98,460 8 Other Income            Credit related 5,434  5,284  4,967 9  Insurance, net    (Note 3) 5,202  946  4,402 18  Trust and wealth management services 5,043  4,725  4,769 6  Gains on securities, net 2,662  5,433  1,938 37  Retail services 2,468  2,310  2,356 5  Foreign exchange gains 502  965  669 (25)  Contingent consideration fair value change   -  -  (1,200) nm  Other 1,068  269  890 20   22,379  19,932  18,791 19 Net Interest and Other Income 128,886  125,237  117,251 10 Non-Interest Expenses            Salaries and employee benefits 41,355  39,826  36,407 14  Premises and equipment 10,254  10,404  9,433 9  Other expenses 10,278  11,790  9,702 6  Provincial capital taxes 180  156  125 44   62,067  62,176  55,667 11 Net Income before Income Taxes 66,819  63,061  61,584 9 Income Taxes 15,757  14,445  14,533 8 Net Income$51,062 $48,616 $47,051 9%Net Income Attributable to Non-Controlling Interests 1,778  1,768  1,771 - Net Income Attributable to Shareholders of the Bank$49,284 $46,848 $45,280 9%Preferred share dividends        (Note 10) 3,802  3,802  3,802 - Net Income Available to Common Shareholders$45,482 $43,046 $41,478 10% Average number of common shares (in thousands) 78,801  78,506  75,528 4  Average number of diluted common shares (in thousands) 79,266  78,911  76,288 4 Earnings Per Common Share            Basic$0.58 $0.55 $0.55 5% Diluted 0.57  0.55  0.54 6 nm - not meaningfulThe accompanying notes are an integral part of the interim consolidated financial statements.Consolidated Statements of Comprehensive Income For the three months ended(unaudited) January 31 January 31($ thousands) 2013 2012Net Income $51,062$47,051Other Comprehensive Income (Loss), net of tax     Available-for-sale securities:     Gains (losses) from change in fair value(1) 5,324 7,355 Reclassification to net income(2) (1,942) (1,424)  3,382 5,931 Derivatives designated as cash flow hedges:     Gains (losses) from change in fair value(3) 618 (395) Reclassification to net income(4) (481) 296  137 (99)  3,519 5,832Comprehensive Income for the Period$54,581$52,883      Comprehensive income for the period attributable to:     Shareholders of the Bank$52,803$51,112 Non-controlling interests 1,778 1,771Comprehensive Income for the Period$54,581$52,883(1)Net of income tax of $1,989 (2012 - $2,610).(2)Net of income tax of $720 (2012 - $514).(3)Net of income tax of $207 (2012 - $138).(4)Net of income tax of $161 (2012 - $104). All items presented in other comprehensive income will be reclassified to the Consolidated Statement of Income in subsequent periods.The accompanying notes are an integral part of the interim consolidated financial statements.Consolidated Statements of Changes in Equity For the three months ended(unaudited) January 31  January 31($ thousands) 2013 2012Retained Earnings     Balance at beginning of period$733,298$608,848 Net income attributable to shareholders of the Bank 49,284 45,280 Dividends  - Preferred shares (3,802) (3,802) - Common shares (13,388) (11,322) Balance at end of period 765,392 639,004Other Reserves     Balance at beginning of period 9,247 7,849 Changes in available-for-sale securities 3,382 5,931 Changes in derivatives designated as cash flow hedges 137 (99) Balance at end of period 12,766 13,681Preferred Shares  (Note 10)     Balance at beginning and end of period  209,750 209,750Common Shares (Note 10)     Balance at beginning of period  490,218 408,282 Issued under dividend reinvestment plan    3,761 2,492 Transferred from share-based payment reserve on the exercise or exchange of options 983 967 Issued on exercise of options    625 379 Balance at end of period  495,587 412,120Share-based Payment Reserve     Balance at beginning of period 22,468 21,884 Amortization of fair value of options(Note 11) 1,458 1,162 Transferred to common shares on the exercise or exchange of options (983) (967) Balance at end of period 22,943 22,079Total Shareholders' Equity 1,506,438 1,296,634Non-Controlling Interests     Balance at beginning of period 105,244 105,225 Net income attributable to non-controlling interests 1,778 1,771 Dividends to non-controlling interests (1,795) (1,771) Balance at end of period 105,227 105,225Total Equity$1,611,665$1,401,859The accompanying notes are an integral part of the interim consolidated financial statements.Consolidated Statements of Cash Flow For the three months ended(unaudited) January 31  January 31($ thousands) 2013 2012Cash Flows from Operating Activities          Net income$51,062$47,051      Adjustments to determine net cash flows:      Provision for credit losses 6,327 6,429  Depreciation and amortization 5,159 4,941  Current income taxes receivable and payable (9,521) 509  Amortization of fair value of employee stock options(Note 11) 1,458 1,162  Accrued interest receivable and payable, net (1,118) (931)  Deferred income taxes, net (354) 37  Gain on securities, net (2,662) (1,938)      Change in operating assets and liabilities:      Deposits, net (3,398) 566,240  Loans, net (351,753) (458,038)       Securities sold under repurchase agreements, net 54,986 -  Securities purchased under resale agreements, net - (119,999)  Other items, net (11,446) (9,957)  (261,260) 35,506Cash Flows from Financing Activities     Common shares issued(Note 10) 4,386 2,871 Debentures issued   250,000 - Debt securities issued - 86,550      Debt securities repaid (23,611)        (36,379)  Dividends (17,190) (15,124) Distributions to non-controlling interests (1,795) (1,771)  211,790 36,147Cash Flows from Investing Activities     Interest bearing deposits with regulated financial institutions, net 6,025 51,655 Securities, purchased (1,703,525) (1,018,273) Securities, sale proceeds 1,228,771 298,641 Securities, matured 507,020 579,603 Property, equipment and software costs (1,699) (2,001)  36,592 (90,375)Change in Cash and Cash Equivalents (12,878) (18,722)Cash and Cash Equivalents at Beginning of Period 5,926 32,385Cash and Cash Equivalents at End of Period *$(6,952)$13,663* Represented by:       Cash and non-interest bearing deposits with financial institutions$36,298$44,745   Cheques and other items in transit (included in Cash Resources) 229 1,792   Cheques and other items in transit (included in Other Liabilities) (43,479) (32,874)Cash and Cash Equivalents at End of Period$(6,952)$13,663          Supplemental Disclosure of Cash Flow Information       Interest and dividends received$199,621$183,805   Interest paid 81,726 75,591   Income taxes paid 25,481 13,926      The accompanying notes are an integral part of the interim consolidated financial statements.Notes to Interim Consolidated Financial Statements(unaudited)($ thousands, except per share amounts)1. Basis of Presentation and Significant Accounting PoliciesThese unaudited condensed interim consolidated financial statements of Canadian Western Bank (CWB or the Bank) have been prepared in accordance with International Accounting Standard (IAS) 34 - Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) using the same accounting policies as the audited consolidated financial statements for the year ended October 31, 2012. These interim consolidated financial statements of CWB, domiciled in Canada, have been prepared in accordance with subsection 308 (4) of the Bank Act and the accounting requirements of the Office of the Superintendent of Financial Institutions Canada (OSFI). Under IFRS, additional disclosures are required in annual financial statements and accordingly, these unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended October 31, 2012 as set out on pages 64 to 109 of the Bank's 2012 Annual Report.The interim consolidated financial statements were authorized for issue by the Board of Directors on March 6, 2013.2. Future Accounting ChangesCWB continues to monitor the IASB's proposed changes to accounting standards. Although not expected to materially impact the Bank's 2013 consolidated financial statements, these proposed changes may have a significant impact on future financial statements. Additional discussion on certain accounting standards that may impact the Bank is included in the audited consolidated financial statements within the Bank's 2012 Annual Report.3. Insurance Revenues, NetInsurance revenues, net, as reported in other income on the consolidated statement of income are presented net of net claims and adjustment expenses, and policy acquisition costs. For the three months ended  January 31 October 31 January 31  2013 2012 2012 Net earned premiums$31,495$31,239$30,454Commissions and processing fees 437 433 455Net claims and adjustment expenses (20,685) (24,849) (20,327)Policy acquisition costs (6,045) (5,877) (6,180)Total, net$5,202$946$4,402       4. SecuritiesNet unrealized gains (losses) reflected on the balance sheet follow:  As at  As at As at  January 31  October 31 January 31  2013 2012 2012Interest bearing deposits with regulated financial institutions$471$482$477Securities issued or guaranteed by            Canada 157 176 (210)      A province or municipality (60) (67) (82)Other debt securities 1,605 1,637 1,588Equity securities            Preferred shares 8,411 6,971 16,091      Common shares 5,422 2,114 892Unrealized gains, net$16,006$11,313$18,756       The securities portfolio is primarily comprised of high quality debt instruments, preferred shares and common shares that are not held for trading purposes and, where applicable, are typically held until maturity. Fluctuations in value are generally attributed to changes in interest rates, market credit spreads and shifts in the interest rate curve. Volatility in equity markets also leads to fluctuations in value, particularly for common shares. The Bank has assessed the securities with unrealized losses and, based on available objective evidence, no impairment charges (2012 - nil) were included in gains on securities, net.5. LoansThe composition of the Bank's loan portfolio by geographic region and industry sector follows:                      Composition Percentage                      January 31 October 31   January 31 ($ millions) BC  AB  ON  SK  MB  Other  Total 2013 2012 2012                             Personal$810 $985 $301$ 154 $65 $1 $2,316 16%16%16%                            Business                            Commercial 1,272  1,858  414  189  93  104  3,930 28 28 26  Construction and real estate 2,313  2,144  310  329  108  22  5,226 36 36 38  Equipment financing and energy(1) 496  1,321  500  218  92  276  2,903 20 20 20   4,081  5,323  1,224  736  293  402  12,059 84 84 84 Total Loans(2)$4,891 $6,308 $1,525$ 890 $358 $403 $14,375 100%100%100%Composition Percentage                            January 31, 2013 34% 44% 11% 6% 2% 3% 100%       October 31, 2012 33% 45% 10% 6% 3% 3% 100%       January 31, 2012 33% 46% 10% 6% 3% 2% 100%      (1)Includes securitized leases reported on-balance sheet of $214 (October 31, 2012 - $238; January 31, 2012 - $150).(2)This table does not include an allocation for credit losses.  6. Allowance for Credit LossesThe following table shows the changes in the allowance for credit losses: For the three months ended January 31, 2013For the three months endedOctober 31, 2012  Specific Allowance Collective Allowance for Credit Losses Total SpecificAllowance CollectiveAllowance forCredit Losses TotalBalance at beginning of period$14,379$67,344$81,723$12,762$67,033$79,795Provision for credit losses 3,970 2,357 6,327 5,651 311 5,962Write-offs (13,172) - (13,172) (4,622) - (4,622)Recoveries 1,490 - 1,490 588 - 588Balance at end of period$6,667$69,701$76,368$14,379$67,344$81,723               For the three months endedJanuary 31, 2012   SpecificAllowance CollectiveAllowance forCredit Losses TotalBalance at beginning of period $10,650$61,330$71,980Provision for credit losses  5,088 1,341 6,429Write-offs  (4,524) - (4,524)Recoveries  671 - 671Balance at end of period $11,885$62,671$74,556        7. Impaired and Past Due Loans Outstanding gross loans and impaired loans, net of allowance for credit losses, by loan type, are as follows: As at January 31, 2013As at October 31, 2012  Gross Amount Gross Impaired Amount Specific Allowance Net Impaired Loans GrossAmount GrossImpairedAmount SpecificAllowance NetImpairedLoansPersonal$2,315,616$14,999$530$14,469$2,292,388$13,404$459$12,945Business                 Real estate(1)  5,226,547 16,954 1,253 15,701 5,001,041 23,022 2,605 20,417 Equipment financing and energy 2,903,173 8,683 3,879 4,804 2,874,423 8,133 3,570 4,563 Commercial 3,930,144 15,098 1,005 14,093 3,867,557 22,281 7,745 14,536Total(2)$14,375,480$55,734$6,667 49,067$14,035,409$66,840$14,379 52,461Collective allowance(3)       (69,701)       (67,344)Net impaired loans after collective allowance      $(20,634)      $(14,883)                   As at January 31, 2012   GrossAmount GrossImpairedAmount SpecificAllowance NetImpairedLoansPersonal $2,095,429$19,924$1,206$18,718Business          Real estate(1)   4,809,796 44,221 3,130 41,091 Equipment financing and energy  2,549,898 10,851 4,551 6,300 Commercial  3,364,324 15,861 2,998 12,863Total(2) $12,819,447$90,857$11,885 78,972Collective allowance(3)        (62,671)Net impaired loans after collective allowance       $16,301(1)Multi-family residential mortgages are included in real estate loans.(2)Gross impaired loans include foreclosed assets with a carrying value of $9,160 (October 31, 2012 - $10,462 and January 31, 2012 - $4,683) which are held for sale. The Bank pursues timely realization on foreclosed assets and does not use the assets for its own operations.(3)The collective allowance for credit risk is not allocated by loan type.  Outstanding impaired loans, net of allowance for credit losses, by provincial location of security, are as follows: As at January 31, 2013As at October 31, 2012 Gross ImpairedAmountSpecificAllowanceNet Impaired Loans  GrossImpairedAmountSpecificAllowance NetImpairedLoansAlberta$23,576$3,159$20,417$36,769$9,711$27,058British Columbia 23,576 848 22,728 22,629 2,190 20,439Ontario 4,672 1,347 3,325 3,081 1,167 1,914Saskatchewan 1,877 455 1,422 2,309 456 1,853Manitoba 463 205 258 615 203 412Other 1,570 653 917 1,437 652 785Total$55,734$6,667 49,067$66,840$14,379 52,461Collective allowance(1)     (69,701)     (67,344)Net impaired loans after collective allowance    $(20,634)    $(14,883)               As at January 31, 2012  GrossImpairedAmountSpecificAllowance NetImpairedLoansAlberta $45,362$6,150$39,212British Columbia  38,434 2,199 36,235Ontario  2,282 1,439 843Saskatchewan  2,545 760 1,785Manitoba  845 265 580Other  1,389 1,072 317Total $90,857$11,885 78,972Collective allowance(1)      (62,671)Net impaired loans after collective allowance     $16,301(1)The collective allowance for credit risk is not allocated by province.  Gross impaired loans exclude certain past due loans where payment of interest or principal is contractually in arrears. Details of such past due loans that have not been included in the gross impaired amount are as follows: As at January 31, 2013 1 - 30 days31 - 60 days61 - 90 daysMore than90 days TotalPersonal$11,833$8,360$2,111$1,003$23,307Business 19,026 17,980 2,618 10,910 50,534 $30,859$26,340$4,729$11,913$73,841           Total as at October 31, 2012$25,849$27,799$4,194$375$58,217Total as at January 31, 2012$30,069$34,320$4,301$620$69,310           8. Derivative Financial InstrumentsThe Bank designates certain derivative financial instruments as either a hedge of the fair value of recognized assets or liabilities or firm commitments (fair value hedges), or a hedge of highly probable future cash flows attributable to a recognized asset or liability or a forecasted transaction (cash flow hedges). On an ongoing basis, the derivatives used in hedging transactions are assessed to determine whether they are effective in offsetting changes in fair values or cash flows of the hedged items. If a hedging transaction becomes ineffective or if the derivative is not designated as a cash flow hedge, any subsequent change in the fair value of the hedging instrument is recognized in net income.For the three months ended January 31, 2013, $618 of net unrealized after tax gains (2012 - $395 after tax losses) were recorded in other comprehensive income for changes in fair value of the effective portion of equity and interest rate swap derivatives designated as cash flow hedges, and no amounts (2012 - nil) were recorded in other income for changes in fair value of the ineffective portion of derivatives classified as cash flow hedges. Amounts accumulated in other comprehensive income are reclassified to net income in the same period that the hedged items affects income. For the three months ended January 31, 2013, $481 of net gains after tax (2012 - $296 net losses after tax) were reclassified to net income.The following table shows the notional value outstanding for derivative financial instruments and the related fair value: As at January 31, 2013As at October 31, 2012  Notional Amount Positive Fair Value Negative Fair Value NotionalAmount PositiveFair Value NegativeFair ValueInterest rate swaps designated as hedges(1)$350,000$147$(7)$225,000$154$-Equity swaps designated as hedges(2) 15,445 2,610 - 15,445 1,778 -Foreign exchange contracts(3) 3,746 19 (7) 2,450 19 (10)Derivative related amounts$369,191$2,776$(14)$242,895$1,951$(10)               As at January 31, 2012   NotionalAmount PositiveFair Value NegativeFair ValueInterest rate swaps designated as hedges $-$-$-Equity swaps designated as hedges   14,214 - (533)Foreign exchange contracts  3,517 - (6)Derivative related amounts $17,731$-$(539)(1)Interest rate swaps designated as hedges outstanding at January 31, 2013 mature between March 2013 and January 2014.(2)Equity swaps designated as hedges outstanding at January 31, 2013 mature between June 2013 and June 2015. Equity swaps are used to reduce the earnings volatility from restricted share units linked to the Bank's common share price.(3)Foreign exchange contracts outstanding at January 31, 2013 mature between February and September 2013.  There were no forecasted transactions that failed to occur during the three months ended January 31, 2013.9. Subordinated DebenturesOn December 17, 2012, the Bank issued $250,000 of subordinated debentures with a fixed interest rate of 3.463% until December 17, 2019. Thereafter, the rate will be set quarterly at the 3-month Canadian dollar CDOR rate plus 160 basis points until maturity on December 17, 2024. The Debentures are redeemable by the Bank on or after December 17, 2019, subject to the prior written consent of OSFI.10. Capital StockShare Capital For the three months ended January 31, 2013January 31, 2012  Number ofShares Amount Number ofShares AmountPreferred Shares - Series 3           Outstanding at beginning and end of period(1) 8,390,000$209,750 8,390,000$209,750 Common Shares           Outstanding at beginning of period 78,742,812 490,218 75,461,981 408,282   Issued under dividend reinvestment plan(2) 133,439 3,761 97,693 2,492   Issued on exercise or exchange of options 115,645 625 134,116 379   Transferred from contributed surplus on exercise or exchange of options - 983 - 967   Outstanding at end of period 78,991,896 495,587 75,693,790 412,120Share Capital  $705,337  $621,870(1)Holders of the Preferred Shares - Series 3 are entitled to receive non-cumulative quarterly fixed dividends for the initial five-year period ending April 30, 2014 of 7.25% per annum, payable quarterly, as and when declared. For further information on dividend rates after April 30, 2014, refer to Note 17 of the audited consolidated financial statements for the year ended October 31, 2012 (see page 87 of the 2012 Annual Report).(2)Shares were issued at a 2% discount from the average closing price of the five trading days preceding the dividend payment date.  Preferred Share Normal Course Issuer BidOn February 27, 2013, CWB received approval from the Toronto Stock Exchange for a Normal Course Issuer Bid (NCIB) to purchase, for cancellation, up to up to 826,120 Non-Cumulative 5-Year Rate Reset Preferred Shares Series 3 ("preferred shares"). The NCIB commenced March 1, 2013 and will expire February 28, 2014. To date, no preferred shares have been purchased or cancelled under the NCIB.11. Share-based PaymentsStock Options For the three months ended January 31, 2013 January 31, 2012 Number ofOptions WeightedAverageExercisePrice Number ofOptions WeightedAverageExercisePriceOptions         Balance at beginning of period3,441,100$24.51 3,542,072$21.36  Granted824,667 28.09 729,830 25.46  Exercised or exchanged(236,526) 18.19 (326,880) 16.70  Expired(162,075) 31.18 - -  Forfeited(9,852) 27.88 (25,574) 23.49Balance at end of period3,857,314$25.37 3,919,448$22.50        The terms of the share incentive plan allow the holders of vested options a cashless settlement alternative whereby the option holder can either (i) elect to receive shares by delivering cash to the Bank in the amount of the option exercise price or (ii) elect to receive the number of shares equivalent to the excess of the market value of the shares under option, determined at the exercise date, over the exercise price. Of the 236,526 (2012 - 326,880) options exercised or exchanged in the three months ended January 31, 2013, option holders exchanged the rights to 203,281 (2012 - 300,580) options and received 82,400 (2012 - 107,816) shares in return under the cashless settlement alternative.For the three months ended January 31, 2013, salary expense of $1,458 (2012 - $1,162) was recognized relating to the estimated fair value of options granted.  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 1.4% (2012 - 1.1%), (ii) expected option life of 4.0 (2012 - 4.0) years, (iii) expected annual volatility of 25% (2012 - 31%), and (iv) expected annual dividends of 2.5% (2012 - 2.4%). The weighted average fair value of options granted was estimated at $4.61 (2012 - $4.70) per share.Further details relating to stock options outstanding and exercisable at January 31, 2013 follow: Options OutstandingOptions Exercisable Number ofOptionsWeightedAverageRemainingContractualLife (years) WeightedAverageExercisePriceNumber ofOptions WeightedAverageExercisePrice$  8.58 to $11.76193,5400.9$11.70193,540$11.70$16.89 to $21.45249,2001.4 16.94249,200 16.94$22.09 to $26.401,881,6113.3 24.93377,013 22.84$28.09 to $30.761,532,9633.8 29.02- -Total3,857,3143.3$25.37819,753$18.42        Restricted Share UnitsFor the three months ended January 31, 2013, salary expense of $2,182 (2012 - $1,275) was recognized related to the Restricted Share Units (RSUs). As at January 31, 2013, the liability for the RSUs held under this plan was $11,719 (2012 - $10,064). At the end of each period, the liability and salary expense are adjusted to reflect changes in the fair value of the RSUs. As at January 31, 2013, 591,196 RSUs were outstanding (2012 - 535,014).Deferred Share UnitsFor the three months ended January 31, 2013, non-interest expenses "other expenses" included $303 (2012 - $90 recovery) related to the Deferred Share Units (DSUs).  As at January 31, 2013, the liability for DSUs held under this plan was $2,454 (2012 - $1,377). At the end of each period, the liability and expense are adjusted to reflect changes in the fair value of the DSUs. As at January 31, 2013, 79,556 DSUs were outstanding (2012 - 51,745).12. Contingent Liabilities and CommitmentsIn the normal course of business, the Bank enters into various commitments and has contingent liabilities, which are not reflected in the consolidated balance sheets. At January 31, 2013, these items include guarantees and standby letters of credit of $290,538 (October 31, 2012 - $286,676). Significant contingent liabilities and commitments, including guarantees provided to third parties, are discussed in Note 20 of the Bank's audited consolidated financial statements for the year ended October 31, 2012 (see page 91 of the 2012 Annual Report).In the ordinary course of business, the Bank and its subsidiaries are party to legal proceedings. Based on current knowledge, CWB does not expect the outcome of any of these proceedings to have a material effect on the consolidated financial position or results of operations.13. Fair Value of Financial InstrumentsThe Bank categorizes its fair value measurements of financial instruments recorded on the consolidated balance sheets according to a three-level hierarchy. Level 1 fair value measurements reflect published market prices quoted in active markets.  Level 2 fair value measurements were estimated using a valuation technique based on observable market data. Level 3 fair value measurements were determined using a valuation technique based on unobservable market data.Further information on how the fair value of financial instruments is determined is included in Note 29 of the October 31, 2012 consolidated audited financial statements (see page 99 of the 2012 Annual Report).The following table presents the Bank's financial assets and liabilities that are carried at fair value, categorized by level under the fair value hierarchy:   Valuation TechniqueAs at January 31, 2013 Fair Value Level 1 Level 2 Level 3Financial assets          Cash resources$207,525$207,525$-$-   Securities 2,309,425 2,309,425 - -  Derivative related 2,776 - 2,776 - $2,519,726$2,516,950$2,776$-         Financial liabilities          Securities sold under repurchase agreements$125,075$-$125,075$-  Derivative related 14 - 14 - $125,089$-$125,089$-            Valuation TechniqueAs at October 31, 2012 Fair Value Level 1 Level 2 Level 3Financial assets          Cash resources$236,983$236,983$-$-  Securities 2,336,100 2,336,100 - -  Derivative related 1,951 - 1,951 - $2,575,034$2,573,083$1,951$-         Financial liabilities          Derivative related$10$-$10$-            Valuation TechniqueAs at January 31, 2012 Fair Value Level 1 Level 2 Level 3Financial assets          Cash resources$228,964$206,883$22,081$-  Securities 2,079,791 2,079,791 - -  Securities purchased under resale agreements 119,999 - 119,999 - $2,428,754$2,286,674$142,080$-         Financial liabilities          Other liability$62,211$-$-$62,211  Derivative related 539 - 539 - $62,750$-$539$62,211         14. Interest Rate SensitivityThe Bank's exposure to interest rate risk as a result of a difference or gap between the maturity or repricing behavior of interest sensitive assets and liabilities, including derivative financial instruments, is discussed in Note 28 of the audited consolidated financial statements for the year ended October 31, 2012 (see page 98 of the 2012 Annual Report). The following table shows the gap position for selected time intervals.Asset Liability Gap Positions($ millions) FloatingRate andWithin 1Month  1 to 3Months  3 Monthsto 1 Year  TotalWithin 1Year  1 Year to5 Years  More  than5 Years  Non-interestSensitive  Total January 31, 2013                        Assets                        Cash resources and securities$290 $569 $843 $1,702 $555 $163 $97 $2,517 Loans 6,648  703  1,767  9,118  5,173  76  (68)  14,299 Other assets -  -  -  -  -  -  345  345 Derivative financial instruments(1) -  50  307  357  8  -  4  369 Total 6,938  1,322  2,917  11,177  5,736  239  378  17,530 Liabilities and Equity                        Deposits 5,053  1,432  3,123  9,608  4,549  -  (16)  14,141 Other liabilities 129  6  29  164  39  9  336  548 Debt 5  14  109  128  482  250  -  860 Equity -  -  -  -  105  -  1,507  1,612 Derivative financial instruments(1) 365  -  -  365  -  -  4  369 Total 5,552  1,452  3,261  10,265  5,175  259  1,831  17,530 Interest Rate Sensitive Gap$1,386 $(130) $(344) $912 $561 $(20) $(1,453) $- Cumulative Gap$1,386 $1,256 $912 $912 $1,473 $1,453 $- $- Cumulative Gap as a Percentage of Total Assets 7.9% 7.2% 5.2% 5.2% 8.4% 8.3% -% -%                         October 31, 2012                        Cumulative Gap$1,560 $1,586 $773 $773 $1,211 $1,437 $- $- Cumulative Gap as aPercentage of Total Assets 9.1% 9.3% 4.5% 4.5% 7.1% 8.4% -% -%                         January 31, 2012                        Cumulative Gap$1,381 $1,717 $490 $490 $1,174 $1,300 $- $- Cumulative Gap as a    Percentage of Total Assets 8.9% 11.1% 3.2% 3.2% 7.6% 8.4% -% -%(1)Derivative financial instruments are included in this table at the notional amount.(2)Accrued interest is excluded in calculating interest sensitive assets and liabilities.(3)Potential prepayments of fixed rate loans and early redemption of redeemable fixed term deposits have not been estimated. Redemptions of fixed term deposits where depositors have this option are not expected to be material. The majority of fixed rate loans, mortgages and leases are either closed or carry prepayment penalties.  The effective, weighted average interest rates of financial assets and liabilities are shown below:January 31, 2013FloatingRate andWithin 1Month  1 to 3Months  3 Monthsto 1 Year  TotalWithin 1Year  1 Year to5 Years  More than5 Years  Total Total assets3.8% 2.5% 3.7% 3.6% 5.0% 5.0% 4.0%Total liabilities1.3  2.0  2.3  1.7  2.5  3.3  2.0 Interest rate sensitive gap2.5% 0.5% 1.4% 1.9% 2.5% 1.7% 2.0%                     October 31, 2012                    Total assets3.8% 2.7% 3.7% 3.6% 5.0% 5.0% 4.1%Total liabilities1.3  2.1  2.3  1.7  2.5  -  2.0 Interest rate sensitive gap2.5% 0.6% 1.4% 1.9% 2.5% 5.0% 2.1%                     January 31, 2012                    Total assets3.9% 2.4% 4.5% 3.8% 5.3% 5.3% 4.3%Total liabilities1.2  2.4  2.4  1.7  2.7  5.0  2.1 Interest rate sensitive gap2.7% -% 2.1% 2.1% 2.6% 0.3% 2.2%                     Based on the current interest rate gap position, it is estimated that a one-percentage point increase in all interest rates would increase net interest income by approximately 3.4% or $13,916 (October 31, 2012 - 3.8% or $15,086) and decrease other comprehensive income $11,674 (October 31, 2012 - $12,594) net of tax, respectively over the following twelve months. A one-percentage point decrease in all interest rates would decrease net interest income by approximately 5.3% or $21,386 (October 31, 2012 - 5.4% or $21,534) and increase other comprehensive income $11,674 (October 31, 2012 - $12,594) net of tax.15. Capital ManagementBeginning this quarter, capital for Canadian financial institutions is managed and reported in accordance with a capital management framework specified by OSFI commonly called Basel III. Further details are available in the Capital Management section in the Q1 2013 Management's Discussion and Analysis.Capital funds are managed in accordance with policies and plans that are regularly reviewed and approved by the Board of Directors and take into account forecasted capital needs and markets. The goal is to maintain adequate regulatory capital to be considered well capitalized, protect customer deposits and provide capacity for internally generated growth and strategic opportunities that do not otherwise require accessing the public capital markets, all while providing a satisfactory return for shareholders.Additional information about the Bank's capital management practices is provided in Note 31 to the fiscal 2012 audited consolidated financial statements within 2012 Annual Report.Capital Structure and Regulatory Ratios  As at January 31 2013  As atOctober 312012(1)  As atJanuary 312012(1) Regulatory capital, net of deductions           Common equity Tier 1$1,192,981 $n/a $n/a   Tier 1 1,450,377  1,460,776  1,289,705   Total 2,118,614  1,903,790  1,854,871 Capital ratios           Common equity Tier 1 8.0% n/a  n/a   Tier 1 9.7  10.6% 10.2%  Total 14.2  13.8  14.6 Asset to capital multiple 7.9x 8.8x 8.3x(1)Capital ratios prior to fiscal 2013 have been calculated using the previous capital framework, Basel II. Capital ratios calculated under Basel III are not directly comparable to the equivalent Basel II measures.  During the quarter ended January 31, 2013, the Bank complied with all internal and external capital requirements.During the quarter, the Bank issued $250 million of conventional subordinated debentures which qualify as Total capital (refer to Note 9), subject to a transitional allowance.16. Comparative FiguresCertain comparative figures have been reclassified to conform to the current period's presentation.Shareholder Information Head Office  Canadian Western Bank & TrustSuite 3000, Canadian Western Bank Place10303 Jasper AvenueEdmonton, AB T5J 3X6Telephone: (780) 423-8888Fax: (780) 423-8897www.cwbankgroup.com Subsidiary Offices  National Leasing Group Inc.1525 Buffalo PlaceWinnipeg, MB R3T 1L9Toll-free: 1-800-665-1326Toll-free fax: 1-866-408-0729www.nationalleasing.com Canadian Western Trust CompanySuite 600, 750 Cambie StreetVancouver, BC V6B 0A2Toll-free: 1-800-663-1124Fax: (604) 669-6069www.cwt.ca Valiant Trust CompanySuite 310, 606 - 4th Street S.W.Calgary, AB T2P 1T1Toll-free: 1-866-313-1872Fax: (403) 233-2857www.valianttrust.comCanadian Direct Insurance IncorporatedSuite 600, 750 Cambie StreetVancouver, BC V6B 0A2Telephone: (604) 699-3678Fax: (604) 699-3851www.canadiandirect.com Adroit Investment Management Ltd.Suite 1250, Canadian Western Bank Place10303 Jasper AvenueEdmonton, AB T5J 3N6Telephone: (780) 429-3500Fax: (780) 429-9680www.adroitinvestments.ca Stock Exchange Listings   The Toronto Stock ExchangeCommon Shares: CWBSeries 3 Preferred Shares: CWB.PR.ATransfer Agent and RegistrarValiant Trust CompanySuite 310, 606 - 4th Street S.W.Calgary, AB T2P 1T1Telephone: (403) 233-2801Fax: (403) 233-2857Website: www.valianttrust.comEmail: inquiries@valianttrust.comEligible Dividends DesignationCWB designates all dividends for both common andpreferred shares paid to Canadian residents as"eligible dividends", as defined in the Income Tax Act(Canada), unless otherwise noted.Dividend Reinvestment Plan CWB's dividend reinvestment plan allows commonand preferred shareholders to purchase additionalcommon shares by reinvesting their cash dividendwithout incurring brokerage and commission fees.For information about participation in the plan,please contact the Transfer Agent and Registrar orvisit www.cwbankgroup.com.Investor Relations Investor & Public RelationsCanadian Western BankTelephone: (780) 441-3770Toll-free: 1-800-836-1886Fax: (780) 969-8326Email: InvestorRelations@cwbank.comOnline Investor Information Additional investor information includingsupplemental financial information and corporatepresentations are available on CWB's website atwww.cwbankgroup.com. Quarterly Conference Call and WebcastCWB's quarterly conference call and live audiowebcast will take place on March 7, 2013 at 1:30p.m. ET (11:30 a.m. MT). The webcast will bearchived on the Bank's website atwww.cwbankgroup.com for sixty days. A replay ofthe conference call will be available until March 21,2013 by dialing (416) 849-0833 or toll-free (855)859-2056 and entering passcode 95951376.         SOURCE: Canadian Western BankFor further information: Chris Fowler President and Chief Operating Officer Canadian Western Bank Phone: (780) 423-8888 Kirby Hill, CFA Director, Strategy and Communications Canadian Western Bank Phone: (780) 441-3770 Email: kirby.hill@cwbank.com