EDMONTON, ALBERTA--(Marketwired - March 2, 2017) - Canadian Western Bank (TSX:CWB) -

"CWB is off to a great start this year. Strong first quarter financial performance included 12% annual growth of pre-tax, pre-provision income and record total revenues. We also delivered positive operating leverage and strong credit quality reflected in stable loan impairments and a provision for credit losses consistent with our expectations," said Chris Fowler, President and CEO. "I am pleased to report that our first quarter net interest margin was stable compared to the same quarter last year, and significantly higher than last quarter. It's too early to say if we've turned the corner on this key metric, but the immediate positive impact of higher margin on CWB's earnings is notable."

"Our businesses in Ontario continue to deliver strong loan growth, while growth within the western part of our geographic footprint has been more constrained. Overall net loan growth was flat this quarter as new loan originations were offset by higher than expected payouts in Alberta, British Columbia and Saskatchewan. Payouts in Alberta and Saskatchewan increased as certain clients have chosen to prudently direct cash flows to repayment of debt in view of the lagging impacts of the 2015 - 2016 recession. Net contraction within British Columbia this quarter reflects different factors. Included here is the relatively short duration of our real estate project loan portfolio, combined with the fact that we, and our experienced clients, have been cautious with new opportunities in this space. Certain real estate clients have also chosen to realize gains and pay back mortgage loans early as demand for Greater Vancouver commercial properties has increased. Both of these dynamics relate to the current environment of very high prices and the uncertain impact of recent regulatory and tax changes. We expect the impact on CWB's growth in British Columbia to be temporary as the market adjusts to new regulations. With respect to Alberta and Saskatchewan, we fully expected a slowdown in regions affected by the recession, and that is just what has occurred. However, there is no doubt that sentiment has started to improve in those provinces. We remain committed to our objective to deliver double-digit annual loan growth whenever prudent. While we expect overall loan growth to accelerate with an improving economic backdrop in the second half of 2017, it will likely be challenging to deliver double-digit growth this year."

"Our strategic objectives are clear. They include strong, balanced growth of both loans and funding sources, progress toward a more balanced geographic footprint and broader diversification within targeted sectors of Canada's commercial banking industry," continued Mr. Fowler. "In support of these objectives, the 2016 additions of CWB Maxium and CWB Franchise Finance fully align with our core mid-market commercial business. They have already increased CWB's earnings power and made strong contributions to our continued growth. Just as important, we knew these were attractive acquisitions because their clients and their teams have so much in common with ours. Like National Leasing and CWB Optimum Mortgage before them, these new segments provide CWB with seasoned, motivated and highly respected management groups with established track records in their targeted markets."

"CWB is operating from a very strong capital position. Our capital base will fully support ongoing strong growth delivered through our unique approach to the market. We continue to support our people with better tools and more effective business processes as we leverage our new banking system to deliver on the high quality growth opportunities in front of us. Our dedicated, caring teams across the organization are excited about the future, and ready to help our clients grow."

First Quarter 2017 Highlights¹ (compared to the same period in the prior year)

• Strong core operating performance including pre-tax, pre-provision income of $94.9 million, up 12%, with positive operating leverage.
• Common shareholders' net income of $49.5 million, down 5% as strong 11% revenue growth was more than offset by increased non-interest expenses, higher provisions for credit losses, acquisition-related fair value changes, and higher preferred share dividends.
• Diluted earnings per common share of $0.56 and adjusted cash earnings per common share of $0.61, down 14% and 8%, respectively. Changes reflect the factors noted above and the 2016 issuance of common shares.
• Loan growth of 7% based on quarter-end balances, with average balances 10% higher.
• Deposit growth of 4%, including 8% growth of branch-raised deposits and very strong 11% growth of lower-cost demand and notice deposits.
• Net interest margin (teb) of 2.47%, relatively stable compared to the first quarter last year and 11 basis points higher than the prior quarter.
• Provision for credit losses of 27 basis points, consistent with expectations. Up from 18 basis points last year and 24 basis points last quarter. The full year 2016 provision was 38 basis points of average loans.
• Gross impaired loans as a percentage of total loans were stable at 0.57%, compared to 0.55% last year and 0.58% last quarter.
• Very strong Basel III regulatory capital ratios under the Standardized approach for calculating risk-weighted assets of 9.5% common equity Tier 1 (CET1), 10.8% Tier 1 and 13.0% Total capital.

1. Highlights include certain non-IFRS measures - refer to definitions following the table of Selected Financial Highlights on page 20.

Canadian Western Bank (CWB) today announced strong core operating performance for the first quarter, including a 12% increase in pre-tax, pre-provision income compared to the same quarter last year. Strong 11% year-over-year growth of total revenues was comprised of a 9% increase in net interest income (teb) and higher non-interest income. Common shareholders' net income of $49.5 million was down 5% from last year. The strong increase in total revenues was more than offset by increased non-interest expenses, higher provisions for credit losses, acquisition-related fair value changes, and higher preferred share dividends. Average loan balances were up 10% from last year, while the quarter-end total loan balance increased 7%. Net interest margin (teb) of 2.47% was relatively stable. Diluted earnings per common share of $0.56 and adjusted cash earnings per common share of $0.61 were down 14% and 8%, respectively, with changes reflecting the factors noted above and the 2016 issuance of common shares.

Compared to the prior quarter, pre-tax, pre-provision income increased 6% and common shareholders' net income growth was very strong at 4%. While the balance of total loans at January 31 was relatively flat compared to the prior quarter, net interest income was 4% higher as net interest margin was up 11 basis points. Diluted and adjusted cash earnings per common share increased 4% and 3%, respectively.

Strong year-over-year loan growth with strategic diversification and strong branch-raised deposit growth

Total loans at January 31, 2017 were up 7% from the first quarter last year, while average balances increased 10%. Total loans were relatively flat compared to the prior quarter, as new originations and renewals were more than offset by higher than expected payouts. Annual loan growth by portfolio segment and geography was generally consistent with our expectations. Strong 14% year-over-year growth within general commercial loans includes the contributions of CWB Maxium and the CWB Franchise Finance portfolio, both acquired last year. The 17% increase in personal loans and mortgages compared to last year was driven by ongoing strong performance from CWB Optimum Mortgage. As expected, the trend of higher relative contributions from non-oil producing provinces across CWB's growing geographic footprint has continued, with 39% annual growth in Ontario and 10% growth in BC, compared to a 6% year-over-year contraction of outstanding balances in Alberta and 1% growth in Saskatchewan. Annual growth in BC was mainly driven by originations within the real estate project loan category in the Lower Mainland early in fiscal 2016. CWB will continue to pursue opportunities to service high quality borrowers operating within our targeted industry segments.

Over the medium-term, our key strategic objectives include ongoing strong, balanced growth of both loans and funding sources, along with further geographic and business sector diversification within targeted segments of Canada's commercial banking industry. We remain committed to our objective to deliver double-digit annual loan growth whenever prudent, and will continue to focus on growth of secured loans that offer an appropriate return and acceptable risk profile. Loan growth within Alberta and Saskatchewan is expected to remain challenging, particularly in the first half of 2017, due to the lagging impact of the 2015 - 2016 regional recession. While we expect overall loan growth to accelerate in the second half of 2017 with an improving economic backdrop and continued strong performance from CWB's business lines with a national footprint, it will likely be challenging to deliver double-digit growth this year.

A key strategic objective, supported by CWB's investment in the new core banking system, is to increase the level of branch-raised deposits. These core funding products are typically lower cost than non-branch-raised sources. Branch-raised deposit products include business savings, cash management, high interest savings and bare trustee accounts. With the exception of bare trustee accounts, these are tools which help our banking clients conveniently manage their business and personal finances, and we consider growth within these product categories to demonstrate success in strengthening key, multi-product client relationships. First quarter branch-raised deposits were up 8% from the same period last year, and 2% lower than the prior quarter. The year-over-year increase in branch-raised deposits included strong 11% growth of lower-cost demand and notice deposits.

Stable impaired loans and provisions for credit losses consistent with expectations

Overall credit quality is consistent with expectations and continues to reflect CWB's secured lending business model, disciplined underwriting practices and proactive loan management. Gross impaired loans totaled $124.4 million and represented 0.57% of total loans, compared to $111.5 million or 0.55% last year, and down from $127.2 million or 0.58% last quarter. The first quarter provision for credit losses of 27 basis points of average loans was consistent with expectations for the annual provision to fall in a range between 25 and 35 basis points, and compares to 18 basis points in the same quarter last year and 24 basis points in the prior quarter. Of the $15.0 million of first quarter provisions, $6.5 million related to a single loan and $4.4 million comprised an increase to the collective allowance.

We continue to carefully monitor the loan portfolio for signs of weakness resulting from the lagging impact of the 2015 - 2016 regional recession. While Alberta-based loans represent 36% of CWB's overall portfolio, gross impaired loans within Alberta of $51.4 million represent 41% of total impairments at January 31, 2017. The level of impaired loans in Alberta as a percentage of impairments was unchanged from 12 months ago, and down from 51% last quarter. Although we expect periodic increases in the balance of impaired loans across the portfolio, we remain confident that our combination of disciplined underwriting, secured lending practices and proactive account management will continue to mitigate the financial impacts of further increases in impairments. Loss rates on current and future impaired loans are expected to be consistent with CWB's prior experience, where write-offs have been low as a percentage of impaired loans. Last year we took a proactive approach to resolve positions within CWB's small portfolio of loans to oil and gas producers. This portfolio now represents less than 1% of our total loans, and we do not expect material credit impacts related to remaining oil and gas loans.

Efficient operations and positive operating leverage

The first quarter efficiency ratio (teb) improved to 46.0% from 46.9% last year and 47.0% in the previous quarter. Operating leverage, which is calculated as total revenue (teb) growth less non-interest expense growth, excluding the pre-tax amortization of acquisition-related intangible assets, over the past twelve months, was 2.0%.

One of our key priorities is to deliver consistent increases in adjusted cash earnings per share through business growth and strategic investment while maintaining effective control of costs. CWB's ongoing investment in people, technology and infrastructure is expected to contribute to long-term shareholder value through improved financial performance in future periods. In view of the level of necessary future investment to facilitate ongoing implementation of our strategic direction, we expect CWB's efficiency ratio to fluctuate at levels moderately higher than the recent past. We are committed to disciplined control of all discretionary expenses, and we expect to deliver positive operating leverage over the medium-term.

Prudent capital management and dividends

At January 31, 2017, CWB's capital ratios were 9.5% CET1, 10.8% Tier 1 and 13.0% Total capital. With a very strong capital position under the more conservative Standardized approach for calculating risk-weighted assets, CWB is well-positioned to continue to execute against our balanced growth strategy. Ongoing support and development of each of CWB's core businesses will remain a key priority, and we will continue to evaluate potential strategic acquisitions.

We evaluate common share dividend increases every quarter against our dividend payout ratio target of approximately 30% of common shareholders' net income. This quarter's common share dividend of $0.23 per share is consistent with the first quarter last year and the prior quarter. The dividend payout ratio this quarter was approximately 45%, primarily reflecting the impact of elevated provisions for credit losses on common shareholders' net income, as well as the impact of a higher share count on total dividends paid. The timing of future dividend increases will also be influenced by capital requirements under the Standardized approach to support ongoing strong and balanced asset growth.

Medium-term Performance Target Ranges

CWB's performance target ranges for key financial metrics reflect the objectives embedded within CWB's strategic direction and a time horizon consistent with the longer-term interests of our shareholders. These targets are based on expectations for moderate economic growth and a relatively stable net interest margin environment in Canada over the three- to five-year forecast horizon. Our target ranges are presented in the following table:

		Medium-term Performance Target Ranges
Adjusted cash earnings per common share growth(1)		7 - 12%
Adjusted return on common shareholders' equity(2)		12 - 15%
Operating leverage(3)		Positive
Common equity Tier 1 capital ratio under the Standardized approach(4)		Strong
Common share dividend payout ratio(5)		~30%

(1)	Adjusted cash earnings per common share is calculated as diluted earnings per common share excluding the acquisition-related amortization of intangible assets and contingent consideration fair value changes, net of tax (see calculation below). Excluded items are not considered to be indicative of ongoing business performance. Performance for adjusted cash earnings per common share is the current year results over the same period in the prior year.
(2)	Adjusted return on common shareholders' equity is calculated as annualized common shareholders' net income excluding the acquisition-related amortization of intangible assets and contingent consideration fair value changes, net of tax (see calculation below), divided by average common shareholders' equity.
(3)	Operating leverage is calculated as total revenue (teb) growth less non-interest expense growth, excluding the pre-tax amortization of acquisition-related intangible assets, over the past twelve months.
(4)	Common equity Tier 1 capital ratio is calculated in accordance with Basel III guidelines issued by the Office of the Superintendent of Financial Institutions Canada (OSFI).
(5)	Common share dividend payout ratio is calculated as common share dividends declared during the past twelve months divided by common shareholders' net income earned over the same period.

We expect earnings growth and profitability to fall below our medium-term target ranges in fiscal 2017. This reflects a higher share count compared to last year, the lagging impact of the 2015 - 2016 regional recession on loan growth and credit quality, the potential for incremental pressure on net interest margin, and increases in CWB's expense base mainly related to the new core banking system. However, we expect financial performance over a three- to five-year time frame to be consistent with our medium-term targets, and to benefit from an expanding geographic footprint with increased business diversification. We also expect ongoing success in key strategic initiatives to enhance client offerings, build core funding sources, and leverage current and future investment in technology to support CWB's strong financial performance over the medium-term.

About CWB Financial Group

CWB Financial Group (CWB) is a diversified financial services organization serving businesses and individuals across Canada. Operating from its headquarters in Edmonton, Alberta, CWB's key business lines include full-service business and personal banking offered through 42 branches of Canadian Western Bank and Internet banking services provided by Canadian Direct Financial (CDF). Highly responsive specialized financing is delivered under the banners of CWB Equipment Financing, National Leasing, CWB Maxium Financial, CWB Franchise Finance and CWB Optimum Mortgage. Trust Services are offered through Canadian Western Trust. Comprehensive wealth management offerings are provided through CWB Wealth Management, which includes the businesses of Adroit Investment Management, McLean & Partners Wealth Management and Canadian Western Financial. As a public company on the Toronto Stock Exchange (TSX), CWB trades under the symbols "CWB" (common shares), "CWB.PR.B" (Series 5 Preferred Shares) and "CWB.PR.C" (Series 7 Preferred Shares). Learn more at www.cwb.com.

Fiscal 2017 First Quarter Results Conference Call

CWB's first quarter conference call is scheduled for Thursday, March 2^nd, 2017, at 2:00 p.m. ET (12:00 noon MT). CWB'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 (703) 736-7380 (Toronto) or (844) 400-1695 (toll-free) and entering passcode 75481033. The call will also be webcast live through CWB's website, www.cwb.com/investor-relations/webcasts-and-events. A replay of the conference call will be available until March 9^th, 2017, by dialing (855) 859-2056 and entering passcode 75481033.

Annual General Meeting Webcast

CWB's Annual General Meeting will be held Thursday, March 2^nd, 2017, commencing at 5:00 p.m. ET (3:00 p.m. MT), at the Fairmont Hotel Macdonald in Edmonton, Alberta. The event webcast can be accessed through the link above.

Investor Day Webcast

CWB will hold an Investor Day on March 28^th, 2017 at the Thompson Hotel Toronto. The event webcast will also be available through the link above.

Selected Financial Highlights

			For the three months ended
(unaudited) ($ thousands, except per share amounts)				January 31 2017			October 31 2016			January 31 2016		Change from January 31 2016
Results from Operations
	Net interest income(1)		$	156,365		$	149,704		$	144,107		9	%
	Less teb adjustment(1)			616			579			1,231		(50	)
	Net interest income per financial statements			155,749			149,125			142,876		9
	Non-interest income			19,478			19,127			14,626		33
	Pre-tax, pre-provision income (teb)(1)			94,880			89,497			84,358		12
	Common shareholders' net income			49,542			47,834			52,132		(5	)
	Earnings per common share
		Basic		0.56			0.54			0.65		(14	)
		Diluted		0.56			0.54			0.65		(14	)
		Adjusted cash(1)		0.61			0.59			0.66		(8	)
	Return on common shareholders' equity(1)			9.5	%		9.3	%		11.5	%	(200) bp(2)
	Adjusted return on common shareholders' equity(1)			10.4			10.1			11.7		(130	)
	Return on assets(1)			0.78			0.76			0.90		(12	)
	Efficiency ratio (teb)(1)			46.0			47.0			46.9		(90	)
	Efficiency ratio(1)			46.2			47.2			47.2		(100	)
	Net interest margin (teb)(1)			2.47			2.36			2.48		(1	)
	Net interest margin(1)			2.46			2.35			2.46		-
	Provision for credit losses as a percentage of average loans			0.27			0.24			0.18		9
	Number of full-time equivalent staff			1,977			1,966			1,958		1	%
Per Common Share
	Cash dividends		$	0.23		$	0.23		$	0.23		-	%
	Book value			23.77			23.58			22.53		6
	Closing market value			29.59			25.45			22.96		29
	Common shares outstanding (thousands)			88,253			88,103			80,560		10
Balance Sheet and Off-Balance Sheet Summary
	Assets		$	24,814,678		$	25,222,549		$	23,472,553		6
	Loans			21,773,449			21,961,348			20,350,739		7
	Deposits			20,683,360			21,194,553			19,859,768		4
	Debt			1,234,050			1,268,198			1,189,581		4
	Shareholders' equity			2,362,658			2,342,040			1,940,037		22
	Assets under administration			11,119,927			10,689,398			9,500,573		17
	Assets under management			1,971,535			1,924,181			1,825,280		8
Capital Adequacy(1)
	Common equity Tier 1 ratio			9.5	%		9.2	%		8.6	%	90 bp(2)
	Tier 1 ratio			10.8			11.0			9.8		100
	Total ratio			13.0			13.1			12.0		100

(1)	See definitions on page 20.
(2)	bp - basis point change.

Management's Discussion and Analysis

This management's discussion and analysis (MD&A), dated March 1, 2017, should be read in conjunction with Canadian Western Bank's (CWB) unaudited condensed interim consolidated financial statements for the period ended January 31, 2017, and the audited consolidated financial statements and MD&A for the year ended October 31, 2016, available on SEDAR at www.sedar.com and CWB's website at www.cwb.com.

Forward-looking Statements

From time to time, CWB 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 CWB's objectives and strategies, targeted and expected financial results and the outlook for CWB's businesses or for the Canadian economy. Forward-looking statements are typically identified by the words "believe", "expect", "anticipate", "intend", "estimate", "may increase", "may impact", "goal", "focus", "potential", "proposed" and other similar expressions, or future or conditional verbs such as "will", "should", "would" and "could".

By their very nature, forward-looking statements involve numerous assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that management's predictions, forecasts, projections, expectations and conclusions will not prove to be accurate, that its assumptions may not be correct and that its strategic goals will not be achieved.

A variety of factors, many of which are beyond CWB'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 level of liquidity in financial markets, fluctuations in interest rates and currency values, the volatility and level of various commodity prices, changes in monetary policy, changes in economic and political conditions, legislative and regulatory developments, legal developments, the level of competition, the occurrence of natural catastrophes, changes in accounting standards and policies, the accuracy and completeness of information CWB 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 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.

Additional information about these factors can be found in the Risk Management section of CWB's annual Management's Discussion and Analysis (MD&A). These and other factors should be considered carefully, and readers are cautioned not to place undue reliance on these forward-looking statements as a number of important factors could cause CWB's actual results to differ materially from the expectations expressed in such forward-looking statements. Unless required by securities law, CWB 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 over the forecast horizon and how it will affect CWB's businesses are material factors considered when setting organizational objectives and targets. In determining expectations for economic growth, CWB primarily considers economic data and forecasts provided by the Canadian government and its agencies, as well as an average of certain private sector forecasts. These forecasts are subject to inherent risks and uncertainties that may be general or specific. Where relevant, material economic assumptions underlying forward looking statements are disclosed within the Outlook sections of this MD&A.

Acquisitions of CWB Maxium Financial and CWB Franchise Finance

On March 1, 2016, CWB acquired the non-securitized lending assets and other net business assets, including key employees, of CWB Maxium Financial (CWB Maxium). CWB Maxium provides loans, equipment leases and structured financing solutions to more than 35,000 clients, mainly in Ontario. Specialized financing solutions are primarily provided in the areas of health care, golf, transportation, real estate, and general corporate financing. Under the terms of the purchase agreement, contingent payment installments will be made annually with determination of the total amount payable based on CWB Maxium's cumulative business performance over a 36-month period. CWB completed the first contingent instalment this quarter in cash, reflecting very strong operating performance.

On July 1, 2016, CWB acquired the portfolio now referred to as CWB Franchise Finance. The business provides financing across Canada to a diverse group of established companies in the franchised hospitality and restaurant industries. The acquisition included key employees to support CWB's continued strategic commercial banking growth and geographic expansion.

The performance of both acquisitions has been consistent with management's expectations.

Overview

Q1 2017 vs. Q1 2016

CWB delivered strong core operating performance, including a 12% increase in pre-tax, pre-provision income to $94.9 million. Record total revenues of $175.8 million increased 11%, comprised of a 9% increase in net interest income (teb) to $156.4 million and 33% higher non-interest income. Strong growth of net interest income reflects a 10% increase in average loan balances and relatively stable net interest margin (teb) of 2.47%. Common shareholders' net income of $49.5 million was down 5%, as the strong increase in total revenues was more than offset by increased non-interest expenses, higher provisions for credit losses, acquisition-related fair value changes, and higher preferred share dividends. Diluted earnings per common share of $0.56 and adjusted cash earnings per common share of $0.61 were down 14% and 8%, respectively, with changes reflecting the factors noted above and the 2016 issuance of common shares.

Q1 2017 vs. Q4 2016

Total revenue growth of 4% was very strong and pre-tax, pre-provision income increased 6%. Common shareholders' net income growth was also very strong at 4%. While the balance of total loans at quarter-end was relatively flat compared to the prior quarter, net interest income was 4% higher as net interest margin increased 11 basis points and average loan balances were stable. Non-interest income was up 2%. Diluted and adjusted cash earnings per common share increased 4% and 3%, respectively.

Adjusted ROE and ROA

The first quarter adjusted return on common shareholders' equity (ROE) of 10.4% decreased 130 basis points from the same period last year due to the combined impact of lower net income and the common share issuance in the third quarter last year.

Adjusted ROE improved by 30 basis points compared to the prior quarter, primarily reflecting strong sequential growth of common shareholders' net income. Return on assets (ROA) was 0.78%, compared to 0.90% last year and 0.76% in the previous quarter.

Outlook for Profitability Ratios

Management expects CWB's earnings growth and profitability to benefit from expansion of existing client relationships and the attraction of new clients over the medium-term. The capabilities of CWB's new core banking system are expected to facilitate various initiatives aligned with these objectives. Common shares issued in 2016 support CWB's very strong capital position and continued execution against the balanced growth strategy. Primarily due to the impact of the common share issuance on shareholders' equity, as well as the potential for continued net interest margin pressure on growth in total revenues, adjusted return on common shareholders' equity in fiscal 2017 is expected to fall below CWB's medium-term target range.

Total Revenues (teb)

Record first quarter total revenues of $175.8 million, comprised of both net interest income (teb) and non-interest income, grew 11% compared to the same quarter in 2016. Growth of total revenues from the prior quarter of 4% was also very strong.

Net Interest Income (teb)

Q1 2017 vs. Q1 2016

Net interest income (teb) of $156.4 million was up 9% primarily reflecting the benefit of strong 10% growth of average loan balances and relatively stable net interest margin (teb) of 2.47%. Favourable changes in deposit mix contributed approximately six basis points to net interest margin, while elevated prepayment penalties contributed five basis points. CWB's deposit mix improved with lower utilization of higher-cost broker-sourced and capital markets deposits, as well as higher growth in lower-cost branch-raised deposits. The combined benefit of these positive factors was offset by continued pressure on CWB's contractual loan yields and lower yields on cash and securities. Of note, while competitive factors continue to impact loan yields, the magnitude of pressure on net interest margin from loan re-pricing, or the origination and renewal of loans yielding less than the portfolio average, was less severe than prior periods. This partly reflects growing contributions from the relatively higher-yielding CWB Maxium and CWB Franchise Finance portfolios.

Q1 2017 vs. Q4 2016

Net interest income (teb) was up 4% as stable average loan balances were complemented by a significant increase of 11 basis points in net interest margin (teb). Higher net interest margin mainly reflects the combined positive impact of elevated prepayment penalties, which contributed four basis points, incremental improvement in overall loan yields and favourable changes in deposit mix. Overall loan yields have benefitted from continued growth within CWB Maxium. CWB's deposit mix improved with lower utilization of the broker deposit channel and replacement of higher-cost capital markets funding. While the average balance of CWB's cash and securities portfolio was relatively consistent with the prior quarter, the yield on these assets has increased with recent steepening of the yield curve.

Interest rate sensitivity

Note 13 to the unaudited interim consolidated financial statements summarizes CWB's exposure to interest rate risk as at January 31, 2017. 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 12 months from a one-percentage point change in interest rates. The estimates are based on a number of assumptions and factors, which include:

• a constant structure in the interest sensitive asset and liability portfolios;
• interest rate changes affecting interest sensitive assets and liabilities by proportionally the same amount, except floor levels for various deposit liabilities and certain floating rate loans, and applied at the appropriate repricing dates; and,
• no early redemptions.

($ thousands)			January 31 2017			October 31 2016			January 31 2016
Estimated impact on net interest income of a 1% increase in interest rates
	1 year	$	7,230		$	12,582		$	5,689
	1 year percentage change		1.17	%		2.15	%		1.12	%
Estimated impact on net interest income of a 1% decrease in interest rates
	1 year	$	(4,016	)	$	(5,150	)	$	(7,084	)
	1 year percentage change		(0.65	)%		(0.88	)%		(1.40	)%

In addition to the projected changes in net interest income noted above, it is estimated that a one-percentage point increase in all interest rates at January 31, 2017 would increase unrealized losses 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 $80.3 million, net of tax (January 31, 2016 - $69.1 million).

It is estimated that a one-percentage point decrease in all interest rates at January 31, 2017 would have the opposite effect, increasing other comprehensive income by approximately $81.8 million, net of tax (January 31, 2016 - $62.2 million). Management maintains the asset liability structure and interest rate sensitivity within CWB's established policies through pricing and product initiatives, as well as the use of interest rate swaps.

Outlook for net interest margin (teb)

CWB expects efforts to optimize the overall cost of funds through targeted growth of lower-cost funding sources, along with selective, geographically diversified growth in higher yielding loan portfolios with an acceptable risk profile to mitigate the earnings impact of ongoing margin pressure over the medium-term. However, these factors may only partially offset the impacts of ongoing very low interest rates and competitive factors this year. Moreover, the positive impact on net interest margin of elevated pre-payment penalties this quarter is expected to be temporary. As such, incremental net interest margin pressure is likely to reappear. On a full-year basis, margin in 2017 is expected to be relatively consistent with last year.

Non-interest Income

Q1 2017 vs. Q1 2016

Non-interest income of $19.5 million was up 33% ($4.9 million). Negligible net gains on securities in the current period compare to losses of $2.9 million last year. Non-interest income also benefitted from strong growth in credit related fee income.

Q1 2017 vs. Q4 2016

Non-interest income was up 2% ($0.4 million), primarily due to growth in 'other' non-interest income and wealth management revenues.

Outlook for non-interest income

Growth of non-interest income is expected to reflect the extension and deepening of CWB's relationships with both new and existing clients. Increases are expected across most categories of non-interest income reflecting CWB's continued focus on strong, high quality loan growth with associated fee income, as well as enhanced transactional capabilities in cash management and other retail services, including CWB's branch-raised deposit franchise. CWB liquidated its holdings of common equities in 2016 and has no plans to re-establish this portfolio. In view of this change, and based on the current composition of the securities portfolio, net gains/losses on securities are not expected to contribute materially to non-interest income in 2017; however, the magnitude and timing of gains or losses are dependent on market factors that are difficult to predict. Management expects further increases in wealth management revenues to result over the medium-term from solid performance within CWB Wealth Management, including organic growth of discretionary investment services, and further growth of proprietary investment products introduced last year. Management will realize gains on the sale of residential mortgage portfolios as opportunities become available. Such gains are anticipated to be a recurring, although sporadic, source of 'other' non-interest income.

Acquisition-related Fair Value Changes

The estimated change in fair value of contingent consideration related to the acquisition of CWB Maxium was $4.4 million, compared to nil in the first quarter last year which preceded the acquisition, and $3.9 million last quarter. This quarter included the first contingent instalment, paid in cash, reflecting very strong operating performance since the acquisition was completed on March 1, 2016. Quarterly contingent consideration fair value changes approximately similar in magnitude through the remainder of the three-year earn out period would represent the maximum amount available through the purchase agreement.

Non-interest Expenses

Q1 2017 vs. Q1 2016

Non-interest expenses of $82.8 million were up 10% ($7.3 million), primarily due to a 9% ($4.3 million) increase in salaries and benefits, as well as a 19% ($2.3 million) increase in premises, equipment and software expenses. The addition of CWB Maxium accounted for $2.5 million of the change in salaries and benefits, with the remainder attributed to annual salary increments and modest increases in staff complement to support ongoing growth across CWB's business, while higher equipment and software costs primarily relate to the new core banking system implemented last year.

Q1 2017 vs. Q4 2016

Moderate sequential growth of 2% ($1.7 million) in non-interest expenses included a 4% ($2.1 million) increase in salaries and benefits, primarily due to annual salary increments. This was partially offset by a 3% ($0.5 million) reduction in other expenses.

Efficiency ratio and operating leverage

The first quarter efficiency ratio (teb) of 46.0%, which measures non-interest expenses, excluding the pre-tax amortization of acquisition-related intangible assets, divided by total revenues (teb), improved from 46.9% last year and 47.0% last quarter. Compared to prior periods, the efficiency ratio benefitted from the positive impact on total revenues of loan growth, relatively stable, or, on a sequential basis, increasing net interest margin, and higher non-interest income. Operating leverage, which is calculated as total revenue (teb) growth less non-interest expense growth, excluding the pre-tax amortization of acquisition-related intangible assets, over the past twelve months, was 2.0%.

Outlook for the efficiency ratio and operating leverage

A key priority for CWB is to deliver consistent increases in adjusted cash earnings per share through business growth and strategic investment while maintaining effective control of costs. CWB's ongoing investment in people, technology and infrastructure is expected to contribute to long-term shareholder value through improved financial performance in future periods. CWB has delivered an annual average efficiency ratio (teb) of 46.0% over the past three years. In view of the level of necessary future investment to facilitate ongoing implementation of CWB's strategic direction, as well as the potential for incremental pressure on net interest margin from current levels, management expects CWB's efficiency ratio to fluctuate at levels moderately higher than 46.0% going forward. Management is committed to disciplined control of all discretionary expenses, and positive operating leverage is expected over the medium-term.

Income Taxes

The first quarter effective income tax rate (teb) was 27.6%, compared to 27.5% last year.

Outlook for income taxes

CWB's expected income tax rate (teb) for 2017 is approximately 27.5%.

Comprehensive Income

Comprehensive income is comprised of net income and other comprehensive income (OCI), all net of income taxes.

Q1 2017 vs. Q1 2016

Comprehensive income of $43.2 million was down from $47.9 million in the same period last year. The change primarily reflects lower OCI as net income was relatively consistent.

Changes in OCI, all net of tax, mainly resulted from a decrease in fair value of derivatives designated as cash flow hedges, partially offset by an increase in fair value of available-for-sale securities. CWB's portfolio of available-for-sale securities is comprised of debt securities and investment grade preferred shares. While the combined dollar investment in CWB's securities portfolio is relatively small in relation to total assets, volatility in the market value of these securities increases the potential for comparatively larger fluctuations in OCI.

Balance Sheet

The quarter-end balance of total assets of $24,815 million was up 6% from last year and was 2% lower than the previous quarter.

Cash and Securities

Cash and securities totaled $2,552 million at January 31, 2017, compared to $2,770 million a year earlier and $2,629 million at the end of last quarter. Average balances of cash and securities were slightly lower than the same quarter last year and relatively consistent with the prior quarter. CWB will maintain prudent liquidity levels in 2017 while remaining compliant with the Liquidity Adequacy Guideline established by Office of the Superintendent of Financial Institutions Canada (OSFI).

The cash and securities portfolio is comprised of high quality debt instruments and investment grade preferred shares that are not held for trading purposes and typically held until maturity. Net unrealized losses on cash and securities recorded on the balance sheet of $42.7 million were down from $84.9 million last year and $44.7 million last quarter. Fluctuations in value are generally attributed to changes in interest rates, movements in market credit spreads and shifts in the interest rate curve. Differences compared to both last year and the prior quarter primarily reflects higher market values of preferred shares, partially offset by lower market values of debt securities.

Net realized gains on securities in the first quarter were effectively nil, compared to net losses of $2.9 million in the same period last year and nil in the previous quarter. Based on the current composition of the securities portfolio, net gains/losses on securities through the remainder of 2017 are not expected to have a material impact on non-interest income although bond and preferred share market conditions are inherently unpredictable in the short-term.

Loans

Based on quarter-end balances, total loans, excluding the allowance for credit losses, of $21,883 million grew 7% ($1,431 million) in the past twelve months and were relatively flat compared to the prior quarter. Of note, average loan balances increased 10% from the first quarter last year and were stable compared to the prior quarter. In dollar terms, year-over-year growth by lending sector was led by general commercial loans ($690 million) and personal loans and mortgages ($616 million). Growth in real estate project loans was also strong ($455 million), particularly in the first half of 2016, as CWB identified opportunities to finance well-capitalized developers on the basis of sound loan structures and acceptable pre-sale/lease levels. CWB maintained a proactive approach to resolving positions within its small portfolio of oil and gas production loans over the past twelve months, reducing outstanding balances by $156 million. The balance of outstanding equipment financing and leasing exposures and commercial mortgages also contracted slightly, by $104 million and $70 million, respectively. Contraction of equipment financing and leasing exposures mainly reflects the impact of constrained new lending opportunities and higher than expected payouts within Alberta and Saskatchewan due to the 2015 - 2016 regional recession, in combination with this portfolio's relatively short duration. Lower balances of commercial mortgages partly reflect CWB's purposeful emphasis on higher-yielding, relationship business in the context of significant price competition within this market. On a sequential basis, strong growth in personal loans and mortgages ($114 million) was more than offset by higher than expected payouts and incremental contraction in each of the other segments.

(unaudited) (millions)	January 31 2017			October 31 2016	January 31 2016			% Change from January 31 2016
General commercial loans	$	5,500	$	5,644	$	4,810		14	%
Real estate project loans		4,195		4,236		3,740		12
Personal loans and mortgages		4,178		4,064		3,562		17
Commercial mortgages		4,126		4,189		4,196		(2	)
Equipment financing and leasing		3,711		3,711		3,815		(3	)
Oil and gas production loans		173		221		329		(47	)
Total loans outstanding(1)	$	21,883	$	22,065	$	20,452		7	%

(1)	Total loans outstanding by lending sector exclude the allowance for credit losses.

Lending activity in Ontario showed the highest growth in dollar terms on a year-over-year basis ($970 million), followed by British Columbia ($722 million). Strong loan growth in Ontario reflects the geographic diversification objectives defined within CWB's balanced growth strategy, with continued strong contributions from CWB's businesses that have a national footprint, including CWB Optimum Mortgage, National Leasing, CWB Maxium and CWB Franchise Finance. Strong year-over-year loan growth in British Columbia was mainly driven by originations during the first half of fiscal 2016 within the real estate project loan category in the Lower Mainland. Overall outstanding balances within Alberta contracted compared to last year, and growth in Saskatchewan was effectively flat, reflecting the negative impact of the regional recession on new lending opportunities in these provinces. Certain clients in these provinces have chosen to prudently scale back operations and direct cash flows toward the repayment of debt in view of the recessionary environment.

While Ontario contributed strong growth compared to the prior quarter ($111 million), the balance of CWB's outstanding loans in Alberta, British Columbia and Saskatchewan all contracted sequentially. In regard to Alberta and Saskatchewan, this primarily reflects the lagging impacts of the 2015 - 2016 regional recession discussed above. Contraction within British Columbia relates to both commercial mortgage payouts and lower net growth within CWB's real estate project loans segment. With respect to commercial mortgages, demand for commercial properties in Greater Vancouver remains very strong, and certain property owners have chosen to realize gains and pay back mortgage loans early. Regarding real estate project loans, CWB continues to actively support its strong client base in this strategically important segment with well-structured credit facilities. However, in view of the uncertain combined impact of historically high price levels, recent counter-cyclical measures undertaken by the federal government, and policy changes implemented by the provincial government within British Columbia, CWB and its experienced clients within this segment have been cautious with new development opportunities. As such, the past two quarters have presented fewer high-quality lending opportunities compared to prior periods.

(unaudited) (millions)		January 31 2017		October 31 2016		January 31 2016		% Change from January 31 2016
British Columbia	$	7,691	$	7,808	$	6,969		10	%
Alberta		7,822		7,999		8,322		(6	)
Ontario		3,458		3,347		2,488		39
Saskatchewan		1,319		1,355		1,311		1
Manitoba		716		704		583		23
Other		877		852		779		13
Total loans outstanding(1)	$	21,883	$	22,065	$	20,452		7	%

(1)	Total loans outstanding by province exclude the allowance for credit losses.

Outlook for loans

Constrained recent growth within regions affected by the 2015 - 2016 recession is consistent with management's stated expectations. CWB will continue to focus on prudent growth of secured loans that offer an appropriate return and acceptable risk profile. Business sentiment within regions affected by the regional recession has improved with a period of commodity price stability and the recent approval of two important energy pipeline projects. As such, net loan growth is expected to accelerate in the second half of 2017 with an improved economic backdrop and continued strong performance from CWB's business lines with a national footprint. Ongoing economic strength in the U.S. and a lower Canadian dollar are expected to support an escalation of manufacturing and exporting activity in all provinces, especially British Columbia and Ontario. CWB remains committed to its objective to deliver double-digit annual loan growth whenever prudent. While overall loan growth is expected to accelerate with an improving economic backdrop in the second half of 2017, it will likely be challenging to deliver double-digit growth this year.

CWB Optimum Mortgage

Net of portfolio sales, total loans of $2,399 million within CWB Optimum increased 20% ($399 million) year-over-year and 5% ($116 million) compared to the prior quarter. Growth for the quarter was driven almost exclusively by alternative mortgages secured via first mortgages carrying a weighted average loan-to-value ratio at initiation of approximately 68%. The book value of alternative mortgages represented 92% of CWB Optimum's total portfolio at quarter end, compared to 90% last year and unchanged from the prior quarter. Ontario continues to account for more than half of all new originations. At approximately 50% of the total, Ontario also represents the largest geographic exposure by province within CWB Optimum's portfolio, followed by Alberta at 22% and British Columbia at 17%. The average size of CWB Optimum mortgages originated in the first quarter was approximately $328,000, and the average size of mortgages outstanding at January 31, 2017 was $266,000.

Outlook for CWB Optimum Mortgage

Canadian residential real estate markets have been resilient and affordability in most geographic areas outside of certain neighborhoods in Toronto and Vancouver remains within historical ranges, largely reflecting very low interest rates. Moderately reduced housing sector activity and softer pricing is apparent in certain parts of the Greater Vancouver region, as well as in Alberta and Saskatchewan. Reduced activity is particularly apparent within higher-priced segments of the housing market.

As discussed above, the combination of historically high price levels, lagging impacts of the 2015 - 2016 regional recession, recent counter-cyclical measures undertaken by the federal government and policy changes within British Columbia could lead to further moderation of housing sector activity in these and other markets. Recent regulatory changes target both insured mortgages and mortgages funded through securitization, neither of which represents a core business focus for CWB. In isolation, management expects these changes will have no material impact to CWB's outlook for originations within CWB Optimum Mortgage.

Credit Quality

Overall credit quality is consistent with expectations and continues to reflect CWB's secured lending business model, disciplined underwriting practices and proactive loan management. CWB has no material exposure to unsecured personal borrowing, including credit cards. Last year management took a proactive approach to resolve positions within CWB's small portfolio of loans to oil and gas producers. Remaining direct exposure to borrowers in this category represents less than 1% of the overall portfolio. Loans to service companies are primarily comprised of term-reducing advances against standard industrial equipment, as opposed to operating lines of credit or loans secured against receivables and/or inventory. These factors mitigate the risk of CWB's limited direct exposures to the energy sector. Management continues to proactively monitor all accounts with a particular focus on those located within Alberta and Saskatchewan as the lagging impacts of the 2015 - 2016 regional recession continue to work through all facets of the affected economies.

	For the three months ended										Change from January 31 2016
(unaudited) ($ thousands)		January 31 2017			October 31 2016			January 31 2016
Gross impaired loans, beginning of period	$	127,212		$	106,711		$	94,905			34	%
New formations		31,486			50,298			29,895			5
Reductions, impaired accounts paid down or returned to performing status		(20,554	)		(10,355	)		(8,972	)		129
Write-offs		(13,705	)		(19,442	)		(4,321	)		217
Total(1)	$	124,439		$	127,212		$	111,507			12	%
Balance of the ten largest impaired accounts	$	55,544		$	61,397		$	60,820			(9	)%
Total number of accounts classified as impaired(3)		228			232			137			66
Gross impaired loans as a percentage of total loans		0.57	%		0.58	%		0.55	%		2 bp(2)

(1)	Gross impaired loans include foreclosed assets held for sale with a carrying value of $2,419 (October 31, 2016 - $3,876 and January 31, 2016 - $1,482).
(2)	bp - basis point change.
(3)	Total number of accounts excludes National Leasing.

The dollar level of gross impaired loans at January 31, 2017 totaled $124.4 million, up from $111.5 million last year and down slightly from $127.2 million in the prior quarter. While Alberta-based loans represent 36% of CWB's overall portfolio, impaired loans within Alberta of $51.4 million represent 41% of total impairments. This percentage was unchanged from the first quarter last year, and down from 51% in the prior quarter.

The dollar level of gross impaired loans represented 0.57% of total loans at quarter end, compared to 0.55% last year and 0.58% at October 31, 2016. The level of gross impaired loans fluctuates as loans become impaired and are subsequently resolved, and does not directly reflect the dollar value of expected write-offs given tangible security held in support of lending exposures. The overall loan portfolio is reviewed regularly with credit decisions undertaken on a case-by-case basis to provide early identification of possible adverse trends. Loans that have become impaired are monitored closely by a specialized team with regular reviews of each loan and its realization plan. Specific allowances for expected write-offs are established through detailed analyses of both the overall quality and marketability of security held against each impaired account. Within total specific allowances of $14.2 million this quarter are specific allowances of $5.1 million on loans with Alberta-based security, down from $12.8 million one year ago and $6.1 million last quarter.

As at January 31, 2017, the total allowance for credit losses (collective and specific) was $129.5 million, compared to $120.6 million one year ago and $127.2 million last quarter. The total allowance for credit losses represented 104% of gross impaired loans at quarter end, compared to 108% last year and 100% in the prior quarter. Growth of the collective allowance for credit losses of 16% over the past twelve months and 4% this quarter exceeded loan growth in both cases.

Provision for Credit Losses

The first quarter provision for credit losses of 27 basis points of average loans was consistent with expectations for the annual provision to fall in a range between 25 and 35 basis points. The first quarter provision compares to 18 basis points in the same quarter last year and 24 basis points in the prior quarter. Of the $15.0 million of provisions this quarter, $6.5 million related to a single, fully resolved loan and $4.4 million comprised an increase to the collective allowance.

Outlook for credit quality

Gross impaired loans remain low as a percentage of total loans, with the current level of 0.57% comparing to a peak during the prior credit cycle of 1.68% in the second quarter of 2010. Partially due to the lagging impacts of the regional 2015 - 2016 recession, management expects periodic further increases in the balance of impaired loans across the portfolio; however, material credit impacts related to the small balance of remaining oil and gas loans are not expected. Loss rates on current and future impaired loans are expected to reflect the combined positive impact of CWB's disciplined underwriting, secured lending practices and proactive account management, and to be more consistent with our prior experience where write-offs have been low as a percentage of impairments. Ongoing loan management processes include assignment of experienced credit adjudicators to assist branches and credit teams proactively identify and address higher risk loans. Gross impaired loans within CWB Optimum Mortgage are expected to increase in view of softer housing market conditions, particularly in Alberta. Management remains confident in the strength, diversity and underwriting structure of the overall loan portfolio and lending exposures continue to be closely monitored. CWB continues to carefully monitor the entire portfolio for signs of weakness.

Based on the results of stress tests simulating severe economic conditions in Alberta and Saskatchewan, in combination with very challenging economic conditions throughout the rest of CWB's geographic footprint over a multi-year timeframe, management is confident CWB will continue to deliver positive earnings for shareholders while maintaining financial stability and a strong capital position. Stress test assumptions include severe credit losses, a persistent low interest rate environment and significantly slower loan growth to reflect lower assumed levels of economic activity, as well as increased competition for deposits and much higher levels of gross impaired loans that could combine to result in significant compression of net interest margin.

Deposits and Funding

Total deposits were up 4% over the past year ($823 million), and down 2% ($512 million) from the previous quarter. Total deposits by type and source are summarized below:

		As at							Change from January 31 2016
(unaudited) ($ millions)			January 31 2017		October 31 2016		January 31 2016
Deposits by type
	Demand and notice deposits	$	7,615	$	7,694	$	6,872		11	%
	Term deposits		11,292		11,640		11,053		2
	Capital markets		1,776		1,861		1,935		(8	)
Total Deposits		$	20,683	$	21,195	$	19,860		4	%

		As at							Change from January 31 2016
(unaudited) ($ millions)			January 31 2017		October 31 2016		January 31 2016
Deposits by source
	CWB Group branch-raised	$	11,414	$	11,617	$	10,616		8	%
	Deposit brokers		7,493		7,717		7,309		3
	Capital markets		1,776		1,861		1,935		(8	)
Total Deposits		$	20,683	$	21,195	$	19,860		4	%

Personal deposits represented 63% of total deposits at January 31, 2017, compared to 61% one year ago and 62% in the prior quarter. Total branch-raised deposits, including trust services deposits, represented 55% of total deposits at January 31, 2017, up from 53% last year and consistent with the previous quarter. Lower cost demand and notice deposits increased 11% from last year and now comprise 37% of total deposits, up from 35% one year ago and 36% last quarter. Term deposits raised through debt capital markets were down 8% year-over-year to $1,776 million as maturities have exceeded new issuance. Capital markets term deposits represent 9% of total deposits this quarter, down from 10% last year and consistent with the prior quarter.

Securitization

Securitized leases and mortgages are reported on-balance sheet with total loans. The gross amount of securitized leases at January 31, 2017 was $996 million, compared to $947 million one year ago and $1,030 million last quarter. The gross amount of mortgages securitized under the National Housing Act Mortgage Backed Securities (NHA MBS) program was $381 million (Q1 2016 - $173 million). Funding from securitization of leases in the first quarter was $74 million (2016 - $354 million).

Outlook for deposits and funding

CWB's strategic focus to increase branch-raised deposits will continue, with particular emphasis on demand and notice deposits, This funding segment is often lower cost and provides associated transactional fee income. Continued growth in the proportion of branch-raised funding is also a key strategic objective because it reflects success in strengthening targeted multi-product client relationships. The capabilities of CWB's new core banking system are expected to support various growth initiatives related to branch-raised funding over the medium term. CWB's growing market presence, which includes the periodic expansion of full-service branches, also supports objectives to generate branch-raised deposits.

On April 18, 2017, CWB will introduce a new brand for its on-line bank in replacement of Canadian Direct Financial (CDF). The switch to Motive Financial reflects a renewed focus on creating wealth and opportunity for clients from coast-to-coast, and is expected to re-position CWB's on-line bank as an effective channel for funding growth.

The deposit broker network remains an efficient source for raising insured fixed term retail deposits and has proven to be a reliable and effective 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 augment and diversify both the long- and short-term funding base over time.

Ongoing utilization of lease securitization is expected in view of the addition of a second lease securitization funding partner this quarter and the relative cost-effectiveness of these funding channels. CWB commenced securitization of residential mortgages in 2016 through the NHA MBS program, and expects to initiate participation in the Canada Mortgage Bond (CMB) Program in 2017.

Other Assets and Other Liabilities

Other assets totaled $490 million at January 31, 2017, compared to $352 million last year and $469 million last quarter. The year-over-year increase primarily resulted from goodwill and intangible assets related to the acquisition of CWB Maxium.

Other liabilities totaled $534 million at January 31, 2017, compared to $483 million a year earlier and $417 million last quarter. The higher balance of other liabilities compared to last year also related to the acquisition of CWB Maxium, while the increase from previous quarter resulted from a higher balance of securities sold under repurchase agreements.

Off-Balance Sheet

Off-balance sheet items include assets under administration and assets under management. Total assets under administration, which are comprised of trust assets and third-party leases under administration, as well as mortgages under service agreements, totaled $11,120 million at January 31, 2017, compared to $9,501 million one year ago and $10,689 million last quarter. Assets under management were $1,972 million at quarter end, compared to $1,825 million a year earlier and $1,924 million last quarter.

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 11 of the unaudited interim consolidated financial statements for the period ended January 31, 2017, as well as Note 20 of the audited consolidated financial statements in CWB's 2016 Annual Report.

Capital Management

OSFI requires Canadian financial institutions to manage and report regulatory capital in accordance with the Basel III capital management framework. CWB currently reports its regulatory capital ratios using the Standardized approach for calculating risk-weighted assets, which requires CWB to carry significantly more capital for certain credit exposures compared to requirements under the Advanced Internal Ratings Based (AIRB) methodology. For this reason, regulatory capital ratios of banks that utilize the Standardized approach are not directly comparable with the large Canadian banks and other financial institutions which utilize the AIRB methodology. CWB's required minimum regulatory capital ratios, including a 250 basis point capital conservation buffer, are 7.0% common equity Tier 1 (CET1), 8.5% Tier 1 and 10.5% Total capital.

CWB is well-positioned to continue to execute against its balanced growth strategy with very strong capital ratios of 9.5% CET1, 10.8% Tier 1 and 13.0% Total capital at January 31, 2017. The increase in CWB's CET1 capital ratio compared to the prior quarter mainly reflects the impact of a reduction of risk weighted assets with higher than expected loan payouts to start the year, along with the contribution of common shareholders' net income to retained earnings. On December 31, 2016, CWB redeemed both the $105 million senior deposit note held by CWB Capital Trust and all outstanding CWB Capital Trust Capital Securities Series 1 (WesTS), which did not qualify as non-viability contingent capital (NVCC) under the Basel III regulatory capital requirements. The redemption resulted in a $105 million reduction in CWB's Tier 1 regulatory capital and reduced both the Tier 1 and Total capital ratios by approximately 50 basis points. CWB has received regulatory approval to redeem all $75 million outstanding 5.571% subordinated debentures on March 22, 2017. This redemption is expected to reduce the Total capital ratio by approximately 40 basis points. At 8.4%, the Basel III leverage ratio remains very conservative.

Further details regarding CWB's regulatory capital and capital adequacy ratios are included in the following table:

(unaudited) ($ millions)			As at January 31 2017			As at October 31 2016			As at January 31 2016
Regulatory capital
	CET1 capital before deductions	$	2,104		$	2,072		$	1,802
	Net CET1 deductions		(207)			(209)			(147)
	CET1 capital		1,897			1,863			1,655
	Tier 1 capital(1)		2,162			2,233			1,885
	Total capital(1)		2,602			2,669			2,309
Risk-weighted assets		$	20,028		$	20,362		$	19,186
Capital adequacy ratios
	CET1		9.5	%		9.2	%		8.6	%
	Tier 1		10.8			11.0			9.8
	Total		13.0			13.1			12.0

(1)	The 2017 inclusion of non-common equity instruments that do not include NVCC clauses is capped at 50% of the January 1, 2013 outstanding balances (2016 - 60%). For all periods presented, there were no exclusions from regulatory capital related to NVCC.

Book value per common share at January 31, 2017 was $23.77, compared to $22.53 last year and $23.58 last quarter. The change from prior periods reflects both earnings growth and the issuance of common shares in fiscal 2016.

Common shareholders received a quarterly cash dividend of $0.23 per common share on January 5, 2017. On March 1, 2017, CWB's Board of Directors declared a cash dividend of $0.23 per common share, payable on March 31, 2017 to shareholders of record on March 17, 2017. This quarterly dividend is consistent with the prior quarter and the dividend declared one year ago. Series 5 and Series 7 preferred shareholders received quarterly cash dividends of $0.275 and $0.390625 on January 31, 2017. On March 1, 2017, the Board of Directors also declared cash dividends on Series 5 and Series 7 Preferred Shares in amounts unchanged from the prior quarter, both payable on April 30, 2017 to shareholders of record on April 21, 2017.

Common share dividend increases are evaluated every quarter against the dividend payout ratio target of approximately 30%, and capital requirements under the Standardized approach to support ongoing strong and balanced asset growth. The first quarter dividend payout ratio was 45%.

Outlook for Capital Management

CWB is operating from a very strong capital position. Management will maintain strong capital ratios under the Standardized approach for calculating risk-weighted assets, above CWB's target thresholds and OSFI's required minimums. Target capital ratios, including an appropriate capital buffer over the prescribed OSFI minimums, are reconfirmed regularly through CWB's Regulatory Capital Plan. The ongoing retention of earnings, net of expected common and preferred share dividends, is expected to support capital requirements associated with the anticipated achievement of CWB's medium-term performance target range for a strong common equity Tier 1 ratio. CWB continues to monitor changes proposed to the Standardized approach for credit risk by the Basel Committee on Banking Supervision.

AIRB transition plan

CWB's project in support of an application to OSFI for transition to the AIRB methodology for managing credit risk and calculating risk-weighted assets, including an anticipated three-year time frame ending in fiscal 2019, is underway. The AIRB approach will put CWB on more equal footing with its competition. It will add risk sensitivity to CWB's framework for capital management, increase risk quantification processes, improve risk-based pricing capabilities and economic capital estimations, and enhance CWB's ability to comply with new accounting standards. These improved risk management capabilities will better equip CWB to target business segments that generate the most attractive risk-adjusted returns and allocate resources accordingly.

CWB's AIRB transition project is separated into several discrete phases, including: establishment of formalized project governance; creation of models including data collection, development, validation, deployment, operationalization and use test; commencement of model validation; implementation of risk-weighted asset calculator; and, submission of final application to OSFI.

Work continues toward development of an enhanced enterprise data warehouse to serve as a repository for the required data. AIRB models have been developed for Optimum Mortgage, National Leasing, small- and medium-sized enterprises, and branch-based residential mortgages, representing approximately one third of CWB's overall portfolio. These models have been deployed in a pilot phase within the business. Management expects all models to be developed and deployed with operational testing underway by the end of 2017.

Further information relating to CWB's capital position is provided in Note 14 of the unaudited interim consolidated financial statements for the period ended January 31, 2017 as well as the audited consolidated financial statements and MD&A for the year ended October 31, 2016.

Significant Changes in Accounting Policies and Financial Statement Presentation

The unaudited interim consolidated financial statements for the quarter were prepared using the same accounting policies as the audited consolidated financial statements for the year ended October 31, 2016.

Future Accounting Changes

A number of standards and amendments have been issued by the International Accounting Standards Board (IASB) and are described in further detail on page 52 of CWB's 2016 Annual Report. These standards and amendments may impact the presentation of financial statements in the future and management is currently reviewing these changes to determine the impact, if any.

CWB continues to monitor the IASB's proposed changes to IFRS.

Controls and Procedures

There were no significant changes in CWB's disclosure controls and procedures and internal controls over financial reporting that occurred during the quarter ended January 31, 2017 that have materially affected, or are reasonably likely to materially affect, CWB's disclosures of required information and internal controls over financial reporting. CWB's certifying officers had previously limited the scope of the design of disclosure controls and procedures and internal controls over financial reporting to exclude the controls, policies and procedures of CWB Maxium, acquired in the second quarter of 2016. This limitation has now been removed. 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 CWB.

Third-party Credit Ratings

DBRS Limited (DBRS) maintains published credit ratings on CWB's senior debt (deposits), short-term debt, subordinated debentures and preferred shares of "A (low)", "R1 (low)", "BBB (high)" and "Pfd-3", respectively, all with a stable outlook. Credit ratings do not consider market price or address the 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 offerings, while also lowering overall funding costs and the cost of capital.

Updated Share Information

As at February 23, 2017, there were 88,255,270 common shares and 4,125,077 stock options outstanding. For additional information on share capital and stock options, see Notes 17 and 18 of audited annual consolidated financial statements for the year ended October 31, 2016 and Notes 9 and 10 to the interim consolidated financial statements for this quarter.

Dividend Reinvestment Plan

CWB common shares (TSX:CWB) and preferred shares (TSX:CWB.PR.B)(TSX:CWB.PR.C) are deemed eligible to participate in CWB's dividend reinvestment plan (the Plan). The Plan provides holders of eligible shares of CWB the opportunity to direct cash dividends toward the purchase of CWB common shares. CWB has elected to issue common shares for the Plan at the average market price (as defined in the Plan). Further details for the Plan are available on CWB's website.

Summary of Quarterly Financial Information

			2017		2016									2015
($ thousands)			Q1			Q4		Q3		Q2		Q1			Q4		Q3		Q2
Continuing Operations(1)
Common shareholders' net income		$	49,542		$	47,834	$	45,582	$	32,213	$	52,132		$	52,969	$	51,170	$	51,520
Earnings per common share
	Basic		0.56			0.54		0.55		0.40		0.65			0.66		0.64		0.64
	Diluted		0.56			0.54		0.55		0.40		0.65			0.66		0.64		0.64
	Adjusted cash		0.61			0.59		0.60		0.41		0.66			0.67		0.65		0.65
Combined Operations(1)
Common shareholders' net income		$	49,542		$	47,834	$	45,582	$	32,213	$	52,132		$	53,138	$	158,809	$	53,545
Earnings per common share
	Basic		0.56			0.54		0.55		0.40		0.65			0.66		1.97		0.67
	Diluted		0.56			0.54		0.55		0.40		0.65			0.66		1.97		0.67
	Adjusted cash		0.61			0.59		0.60		0.41		0.66			0.67		1.98		0.68
Total assets ($ millions)			24,815			25,223		25,185		24,237		23,473			22,839		22,280		21,545
Discontinued Operations(1)
Common shareholders' net income (loss)		$	-		$	-	$	-	$	-	$	-		$	169	$	107,639	$	2,025
Earnings per common share
	Basic		-			-		-		-		-			-		1.33		0.03
	Diluted		-			-		-		-		-			-		1.33		0.03
	Adjusted cash		-			-		-		-		-			-		1.33		0.03

(1)

On May 1, 2015, CWB sold its property and casualty insurance subsidiary and CWB's stock transfer business as described in the 2015 and 2016 Annual Reports. The 2015 contributions of both the insurance and stock transfer businesses, including gains on sale, are defined as "Discontinued Operations", the remaining operations are defined as "Continuing Operations", and the total Continuing Operations and Discontinued Operations are defined as "Combined Operations". Return on shareholders' equity reflects equity from Combined Operations. All other measures reflect either Continuing or Combined Operations as indicated.

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 in non-leap years, and two fewer days in leap years such as 2016. Common shareholders' net income in the second quarter of 2016 reflects the impact of the credit performance of oil and gas production loans. Results of Discontinued and Combined Operations for the third quarter of fiscal 2015 include divestiture gains.

CWB's past quarterly financial results were subject to some fluctuation due to its exposure to property and casualty insurance. Insurance operations, which are reflected in total revenues of Discontinued Operations up to and including the second quarter of fiscal 2015, are subject to seasonal weather conditions, cyclical patterns of the industry and natural catastrophes. 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 CWB's MD&A for the year ended October 31, 2016 and the individual quarterly reports to shareholders which are available on SEDAR at www.sedar.com and on CWB's website at www.cwb.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 financial institutions. Total revenues, net interest income and income taxes are discussed on a taxable equivalent basis throughout this quarterly report to shareholders.

Non-IFRS Measures

CWB uses a number of financial measures to assess its performance. These measures provide readers with an enhanced understanding of how management views the results. Non-IFRS measures may also provide readers the ability to analyze trends and provide comparisons with our competitors. Taxable equivalent basis, pre-tax, pre-provision income, adjusted cash earnings per common share, return on common shareholders' equity, adjusted 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;
• pre-tax, pre-provision income - total revenue (teb) less non-interest expenses, excluding the pre-tax amortization of acquisition-related intangible assets (see calculation below);
• adjusted cash earnings per common share - diluted earnings per common share excluding the acquisition-related amortization of intangible assets and contingent consideration fair value changes, net of tax (see calculation below). Excluded items are not considered to be indicative of ongoing business performance;
• return on common shareholders' equity - annualized common shareholders' net income divided by average common shareholders' equity;
• adjusted return on common shareholders' equity - annualized common shareholders' net income excluding the acquisition-related amortization of intangible assets and contingent consideration fair value changes, net of tax (see calculation below), divided by average common shareholders' equity;
• return on assets - annualized common shareholders' net income divided by average total assets;
• efficiency ratio - non-interest expenses, excluding the pre-tax amortization of acquisition-related intangible assets, divided by total revenues, (see calculation below);
• net interest margin - net interest income divided by average total assets;
• operating leverage - total revenue (teb) growth less growth of non-interest expenses, excluding the pre-tax amortization of acquisition-related intangible assets;
• common share dividend payout ratio - common share dividends declared during the past twelve months divided by common shareholders' net income earned over the same period;
• Basel III common equity Tier 1, Tier 1 and Total capital ratios - in accordance with guidelines issued by OSFI; and
• average balances - average daily balances.

Adjusted financial measures
		For the three months ended										Change from January 31 2016
(unaudited) ($ thousands)		January 31 2017			October 31 2016			January 31 2016
Non-interest expenses		$	82,815		$	81,129		$	75,553			10	%
Adjustments (before tax):
	Amortization of acquisition-related intangible assets		(1,852	)		(1,795	)		(1,178	)		57
Adjusted non-interest expenses		$	80,963		$	79,334		$	74,375			9	%
Common shareholders' net income		$	49,542		$	47,834		$	52,132			(5	)%
Adjustments (after tax):
	Amortization of acquisition-related intangible assets		1,364			1,324			869			57
	Contingent consideration fair value change		3,184			2,879			-			100
Adjusted common shareholders' net income		$	54,090		$	52,037		$	53,001			2	%

Pre-tax, pre-provision (PTPP) income
		For the three months ended							Change from January 31 2016
(unaudited) ($ thousands)		January 31 2017		October 31 2016		January 31 2016
Total revenue (teb)		$	175,843	$	168,831	$	158,733		11	%
Less:
	Adjusted non-interest expenses (see above)		80,963		79,334		74,375		9
Pre-tax, pre-provision income		$	94,880	$	89,497	$	84,358		12	%

Consolidated Balance Sheets

					As at January 31 2017			As at October 31 2016			As at January 31 2016		Change from January 31 2016
(unaudited) ($ thousands)
Assets
Cash Resources
	Cash and non-interest bearing deposits with financial institutions			$	46,778		$	11,490		$	20,275		131	%
	Interest bearing deposits with regulated financial institutions	(Note 3	)		403,925			890,516			403,620		-
	Cheques and other items in transit				-			18,050			10,905		(100	)
					450,703			920,056			434,800		4
Securities		(Note 3	)
	Issued or guaranteed by Canada				1,330,814			1,142,798			1,112,901		20
	Issued or guaranteed by a province or municipality				349,646			291,947			517,640		(32	)
	Other debt securities				275,628			154,648			540,506		(49	)
	Preferred shares				144,921			119,201			121,859		19
	Common shares				-			-			42,247		(100	)
					2,101,009			1,708,594			2,335,153		(10	)
	Securities Purchased Under Resale Agreements				-			163,318			-		-
Loans		(Notes 4 and 6	)
	Personal				4,177,551			4,063,552			3,562,362		17
	Business				17,705,173			18,001,584			16,889,985		5
					21,882,724			22,065,136			20,452,347		7
	Allowance for credit losses	(Note 5	)		(109,275	)		(103,788	)		(101,608	)	8
					21,773,449			21,961,348			20,350,739		7
Other
	Property and equipment				56,557			57,330			59,896		(6	)
	Goodwill				85,669			84,762			45,619		88
	Intangible assets				148,901			149,312			115,467		29
	Derivative related	(Note 7	)		8,456			10,370			21,498		(61	)
	Other assets				189,934			167,459			109,381		74
					489,517			469,233			351,861		39
Total Assets				$	24,814,678		$	25,222,549		$	23,472,553		6	%
Liabilities and Equity
Deposits
	Personal			$	13,096,585		$	13,223,702		$	12,105,617		8	%
	Business and government				7,586,775			7,970,851			7,754,151		(2	)
					20,683,360			21,194,553			19,859,768		4
Other
	Cheques and other items in transit				49,444			27,683			66,339		(25	)
	Securities sold under repurchase agreements				108,480			-			133,765		(19	)
	Derivative related	(Note 7	)		13,243			7,172			19,092		(31	)
	Other liabilities				363,029			382,130			263,655		38
					534,196			416,985			482,851		11
Debt
	Debt securities				909,050			943,198			864,581		5
	Subordinated debentures				325,000			325,000			325,000		-
					1,234,050			1,268,198			1,189,581		4
Equity
	Preferred shares	(Note 9	)		265,000			265,000			125,000		112
	Common shares	(Note 9	)		724,252			718,377			538,312		35
	Retained earnings				1,384,221			1,354,966			1,295,288		7
	Share-based payment reserve				26,932			31,276			29,927		(10	)
	Other reserves				(37,747	)		(27,579	)		(48,490	)	(22	)
Total Shareholders' Equity					2,362,658			2,342,040			1,940,037		22
	Non-controlling interests				414			773			316		31
Total Equity					2,363,072			2,342,813			1,940,353		22
Total Liabilities and Equity				$	24,814,678		$	25,222,549		$	23,472,553		6	%

The accompanying notes are an integral part of the interim consolidated financial statements.

Consolidated Statements of Income

			For the three months ended							Change from January 31 2016
(unaudited) ($ thousands, except per share amounts)			January 31 2017			October 31 2016		January 31 2016
Interest Income
	Loans		$	243,800	$	240,114	$	222,697		9	%
	Securities			7,030		5,929		9,161		(23	)
	Deposits with regulated financial institutions			2,069		2,081		832		149
				252,899		248,124		232,690		9
Interest Expense
	Deposits			89,474		90,855		82,155		9
	Debt			7,676		8,144		7,659		-
				97,150		98,999		89,814		8
Net Interest Income				155,749		149,125		142,876		9
Non-interest Income
	Credit related			8,769		8,761		7,168		22
	Wealth management services			3,636		3,473		3,597		1
	Retail services			3,413		3,403		3,280		4
	Trust services			2,949		2,964		2,827		4
	Gains (losses) on securities, net			70		52		(2,884	)	nm
	Other			641		474		638		-
				19,478		19,127		14,626		33
Total Revenue				175,227		168,252		157,502		11
Provision for Credit Losses		(Note 5)		14,992		13,110		8,932		68
Acquisition-related Fair Value Changes				4,361		3,917		-		100
Non-interest Expenses
	Salaries and employee benefits			54,364		52,278		50,024		9
	Premises and equipment			14,348		14,273		12,046		19
	Other expenses			14,103		14,578		13,483		5
				82,815		81,129		75,553		10
Net Income before Income Taxes				73,059		70,096		73,017		-
Income Taxes				19,695		18,435		19,167		3
Net Income				53,364		51,661		53,850		(1	)
Net Income Attributable to Non-Controlling Interests				259		265		343		(24	)
Shareholders' Net Income				53,105		51,396		53,507		(1	)
Preferred share dividends				3,563		3,562		1,375		159
Common Shareholders' Net Income			$	49,542	$	47,834	$	52,132		(5	)%
Average number of common shares (in thousands)				88,185		88,073		80,536		9
Average number of diluted common shares (in thousands)				88,492		88,073		80,536		10
Earnings Per Common Share
	Basic		$	0.56	$	0.54	$	0.65		(14	)%
	Diluted			0.56		0.54		0.65		(14	)

nm - not meaningful

The accompanying notes are an integral part of the interim consolidated financial statements.

Consolidated Statements of Comprehensive Income

		For the three months ended
(unaudited) ($ thousands)			January 31 2017			January 31 2016
Net Income		$	53,364		$	53,850
Other Comprehensive Income (Loss), net of tax
	Available-for-sale securities:
	Gains (losses) from change in fair value(1)		1,438			(8,543	)
	Reclassification to net income(2)		51			2,198
			1,489			(6,345	)
	Derivatives designated as cash flow hedges:
	Losses from change in fair value(3)		(10,247	)		(416	)
	Reclassification to net income(4)		(1,410	)		763
			(11,657	)		347
			(10,168	)		(5,998	)
Comprehensive Income for the Period		$	43,196		$	47,852
	Comprehensive income for the period attributable to:
	Shareholders of CWB	$	42,937		$	47,509
	Non-controlling interests		259			343
Comprehensive Income for the Period		$	43,196		$	47,852

(1)	Net of income tax of $523 (2016 - $3,145).
(2)	Net of income tax of $19 (2016 - $810).
(3)	Net of income tax of $3,770 (2016 - $153).
(4)	Net of income tax of $519 (2016 - $281).

Items presented in other comprehensive income will be subsequently reclassified to the Consolidated Statement of Income when specific conditions are met.

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 2017			January 31 2016
($ thousands)
Retained Earnings
	Balance at beginning of period			$	1,354,966		$	1,261,678
	Shareholders' net income				53,105			53,507
	Dividends - Preferred shares				(3,563	)		(1,375	)
	- Common shares				(20,287	)		(18,522	)
	Balance at end of period				1,384,221			1,295,288
Other Reserves
	Balance at beginning of period				(27,579	)		(42,492	)
	Changes in available-for-sale securities				1,489			(6,345	)
	Changes in derivatives designated as cash flow hedges				(11,657	)		347
	Balance at end of period				(37,747	)		(48,490	)
Preferred Shares			(Note 9)
	Balance at beginning and end of period				265,000			125,000
Common Shares			(Note 9)
	Balance at beginning of period				718,377			537,511
	Issued under dividend reinvestment plan				968			801
	Transferred from share-based payment reserve on the exercise or exchange of options				4,907			-
	Balance at end of period				724,252			538,312
Share-based Payment Reserve
	Balance at beginning of period				31,276			29,210
	Amortization of fair value of options		(Note 10)		563			717
	Transferred to common shares on the exercise or exchange of options				(4,907	)		-
	Balance at end of period				26,932			29,927
Total Shareholders' Equity					2,362,658			1,940,037
Non-Controlling Interests
	Balance at beginning of period				773			992
	Net income attributable to non-controlling interests				259			343
	Dividends to non-controlling interests				(501	)		(666	)
	Partial ownership increase				(117	)		(353	)
	Balance at end of period				414			316
Total Equity				$	2,363,072		$	1,940,353

The accompanying notes are an integral part of the interim consolidated financial statements.

Consolidated Statements of Cash Flow

					For the three months ended
(unaudited) ($ thousands)						January 31 2017			January 31 2016
Cash Flows from Operating Activities
	Net income				$	53,364		$	53,850
	Adjustments to determine net cash flows:
		Provision for credit losses				14,992			8,932
		Depreciation and amortization				7,135			5,103
		Current income taxes receivable and payable				1,398			(15,673	)
		Amortization of fair value of employee stock options		(Note 10)		563			717
		Accrued interest receivable and payable, net				(11,441	)		(6,162	)
		Deferred income taxes, net				(905	)		410
		(Gains) losses on securities, net				(70	)		2,884
		Fair value change in contingent consideration		(Note 12)		4,361			-
	Change in operating assets and liabilities:
		Deposits, net				(511,193	)		494,361
		Loans, net				169,724			(884,288	)
		Securities sold under repurchase agreements, net				163,318			133,765
		Securities purchased under resale agreements, net				108,481			-
		Other items, net				(18,175	)		1,754
						(18,448	)		(204,347	)
Cash Flows from Financing Activities
	Debt securities issued					74,220			354,198
	Debt securities repaid					(108,368	)		(52,240	)
	Debentures redeemed					-			(300,000	)
	Dividends					(22,882	)		(19,096	)
	Dividends to non-controlling interests					(501	)		(666	)
						(57,531	)		(17,804	)
Cash Flows from Investing Activities
	Interest bearing deposits with regulated financial institutions, net					486,591			9,371
	Securities, purchased					(1,789,114	)		(1,618,491	)
	Securities, sale proceeds					989,665			1,304,424
	Securities, matured					401,186			536,490
	Property, equipment and intangible assets					(4,902	)		(14,845	)
	Partial ownership increase					(1,838	)		(353	)
	Contingent consideration payment			(Note 12)		(10,132	)		-
						71,456			216,596
Change in Cash and Cash Equivalents						(4,523	)		(5,555	)
Cash and Cash Equivalents at Beginning of Period						1,857			(29,604	)
Cash and Cash Equivalents at End of Period *					$	(2,666	)	$	(35,159	)
* Represented by:
	Cash and non-interest bearing deposits with financial institutions				$	46,778		$	20,275
	Cheques and other items in transit (included in Cash Resources)					-			10,905
	Cheques and other items in transit (included in Other Liabilities)					(49,444	)		(66,339	)
Cash and Cash Equivalents at End of Period					$	(2,666	)	$	(35,159	)
Supplemental Disclosure of Cash Flow Information
	Interest and dividends received				$	255,733		$	242,221
	Interest paid					107,381			99,602
	Income taxes paid					15,650			35,127

The accompanying notes are an integral part of the interim consolidated financial statements.

Notes to Interim Consolidated Financial Statements

(unaudited)

($ thousands, unless otherwise noted)

1. Basis of Presentation and Significant Accounting Policies

These unaudited condensed interim consolidated financial statements of Canadian Western Bank (CWB) 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, 2016, except as noted below. These interim consolidated financial statements of CWB, domiciled in Canada, have also 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 International Financial Reporting Standards (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, 2016 as set out on pages 71 to 110 of CWB's 2016 Annual Report.
The interim consolidated financial statements were authorized for issue by the Board of Directors on March 1, 2017.

2. Future Accounting Changes

CWB continues to monitor the IASB's proposed changes to accounting standards. Although not expected to materially impact CWB's 2017 consolidated financial statements, proposed changes may have a significant impact on future financial statements. Additional discussion on certain accounting standards that may impact CWB is included in the audited consolidated financial statements within CWB's 2016 Annual Report.

3. Securities

Net unrealized gains (losses) reflected on the consolidated balance sheets follow:

			As at January 31 2017			As at October 31 2016			As at January 31 2016
Interest bearing deposits with regulated financial institutions		$	(2	)	$	(81	)	$	(183	)
Securities issued or guaranteed by
	Canada		(11,570	)		147			(2,685	)
	A province or municipality		(597	)		133			(2,480	)
Other debt securities			1,465			1,522			652
Preferred shares			(31,960	)		(46,405	)		(76,466	)
Common shares			-			-			(3,718	)
Unrealized Losses, Net		$	(42,664	)	$	(44,684	)	$	(84,880	)

The securities portfolio is primarily comprised of high quality debt and equity instruments 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. As at January 31, 2017, CWB assessed the securities with unrealized losses and, based on available objective evidence, concluded that the unrealized losses resulted from changes in interest rates and not from deterioration in the creditworthiness of the issuers. No impairment losses were included in gains (losses) on securities, net during the three months ended January 31, 2017 (2016 - nil).

4. Loans

The composition of CWB's loan portfolio by geographic region and industry sector follow:

																							Composition Percentage
($ millions)			BC			AB			ON			SK			MB			Other			Total		January 31 2017		October 31 2016		January 31 2016
Personal(1)		$	1,185		$	1,211		$	1,402		$	191		$	104		$	85		$	4,178		19	%	18	%	17	%
Business
	Real estate		4,076			3,232			350			481			181			1			8,321		38		38		39
	Commercial		1,817			2,105			906			247			259			166			5,500		25		26		24
	Equipment financing(2)		613			1,124			800			377			172			625			3,711		17		17		18
	Energy		-			150			-			23			-			-			173		1		1		2
			6,506			6,611			2,056			1,128			612			792			17,705		81		82		83
Total Loans(3)		$	7,691		$	7,822		$	3,458		$	1,319		$	716		$	877		$	21,883		100	%	100	%	100	%
Composition Percentage
	January 31, 2017		35	%		36	%		16	%		6	%		3	%		4	%		100	%
	October 31, 2016		36	%		36	%		15	%		6	%		3	%		4	%		100	%
	January 31, 2016		34	%		41	%		12	%		6	%		3	%		4	%		100	%

(1)	Includes mortgages securitized through the National Housing Act Mortgage-backed Securities program reported on-balance sheet of $381 (October 31, 2016 - $391, January 31, 2016 - $173)
(2)	Includes securitized leases reported on-balance sheet of $996 (October 31, 2016 - $1,030, January 31, 2016 - $947).
(3)	This table does not include an allocation for credit losses.

5. Allowance for Credit Losses

The following table shows the changes in the allowance for credit losses:

	For the three months ended January 31, 2017								For the three months ended October 31, 2016
		Specific Allowance			Collective Allowance for Credit Losses		Total			Specific Allowance			Collective Allowance for Credit Losses		Total
Balance at beginning of period	$	16,269		$	110,943	$	127,212		$	27,757		$	104,931	$	132,688
Provision for credit losses		10,587			4,405		14,992			7,098			6,012		13,110
Write-offs		(13,705	)		-		(13,705	)		(19,442	)		-		(19,442	)
Recoveries		1,017			-		1,017			856			-		856
Balance at End of Period	$	14,168		$	115,348	$	129,516		$	16,269		$	110,943	$	127,212
Represented by:
Loans	$	14,168		$	95,107	$	109,275		$	16,269		$	87,519	$	103,788
Committed but undrawn exposures		-			20,241		20,241			-			23,424		23,424
Total Allowance	$	14,168		$	115,348	$	129,516		$	16,269		$	110,943	$	127,212

		For the three months ended January 31, 2016
			Specific Allowance			Collective Allowance for Credit Losses		Total
Balance at beginning of period		$	15,806		$	99,613	$	115,419
Provision for credit losses			8,816			116		8,932
Write-offs			(4,321	)		-		(4,321	)
Recoveries			580			-		580
Balance at End of Period		$	20,881		$	99,729	$	120,610
Represented by:
	Loans	$	20,881		$	80,727	$	101,608
	Committed but undrawn exposures		-			19,002		19,002
Total Allowance		$	20,881		$	99,729	$	120,610

6. Impaired and Past Due Loans

Outstanding gross loans and impaired loans, net of allowance for credit losses, by loan type, follow:

		As at January 31, 2017									As at October 31, 2016
			Gross Amount		Gross Impaired Amount		Specific Allowance	Net Impaired Loans				Gross Amount		Gross Impaired Amount	Specific Allowance			Net Impaired Loans
Personal		$	4,177,551	$	21,988	$	202	$	21,786		$	4,063,552	$	21,968	$	204	$	21,764
Business
	Real estate(1)		8,320,920		27,191		2,700		24,491			8,424,777		29,784		2,989		26,795
	Commercial		5,499,699		34,988		1,835		33,153			5,644,231		18,363		1,370		16,993
	Equipment financing		3,711,113		38,803		8,531		30,272			3,711,504		40,201		9,563		30,638
	Energy		173,441		1,469		900		569			221,072		16,896		2,143		14,753
Total(2)		$	21,882,724	$	124,439	$	14,168		110,271		$	22,065,136	$	127,212	$	16,269		110,943
Collective Allowance(3)									(115,348	)								(110,943	)
Net Impaired Loans After Collective Allowance								$	(5,077	)							$	-

		As at January 31, 2016
			Gross Amount		Gross Impaired Amount	Specific Allowance			Net Impaired Loans
Personal		$	3,562,362	$	19,100	$	280	$	18,820
Business
	Real estate(1)		7,935,392		38,180		3,650		34,530
	Commercial		4,810,060		5,441		728		4,713
	Equipment financing		3,816,207		27,120		5,332		21,788
	Energy		328,326		21,666		10,891		10,775
Total(2)		$	20,452,347	$	111,507	$	20,881		90,626
Collective Allowance(3)									(99,729	)
Net Impaired Loans After Collective Allowance								$	(9,103	)

(1)	Multi-family residential mortgages are included in real estate loans.
(2)	Gross impaired loans include foreclosed assets with a carrying value of $2,419 (October 31, 2016 - $3,876; and January 31, 2016 - $1,482) which are held for sale. CWB pursues timely realization on foreclosed assets and does not use the assets for its own operations.
(3)	The collective allowance for credit loss includes amounts related to committed by undrawn credit exposures and is not allocated by loan type.

Outstanding impaired loans, net of allowance for credit losses, by provincial location of security, follow:

	As at January 31, 2017							As at October 31, 2016
	Gross Impaired Amount		Specific Allowance		Net Impaired Loans				Gross Impaired Amount	Specific Allowance			Net Impaired Loans
Alberta	$	51,443	$	5,114	$	46,329		$	64,751	$	6,137	$	58,614
British Columbia		29,860		2,689		27,171			29,074		2,868		26,206
Ontario		24,476		3,606		20,870			16,596		4,680		11,916
Saskatchewan		10,684		894		9,790			8.688		712		7,976
Manitoba		3,698		1,004		2,694			3,903		543		3,360
Other		4,278		861		3,417			4,200		1,329		2,871
Total	$	124,439	$	14,168		110,271		$	127,212	$	16,269		110,943
Collective Allowance(1)						(115,348	)						(110,943	)
Net Impaired Loans After Collective Allowance					$	(5,077	)					$	-

	As at January 31, 2016
		Gross Impaired Amount	Specific Allowance			Net Impaired Loans
Alberta	$	45,239	$	12,796	$	32,443
British Columbia		30,862		4,369		26,493
Ontario		20,022		1,233		18,789
Saskatchewan		8,291		761		7,530
Manitoba		2,334		484		1,850
Other		4,759		1,238		3,521
Total	$	111,507	$	20,881		90,626
Collective Allowance(1)						(99,729	)
Net Impaired Loans After Collective Allowance					$	(9,103	)

(1)	The collective allowance for credit loss includes amounts related to committed by undrawn credit exposures and 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 follow:

	As at January 31, 2017
	1 - 30 days		31 - 60 days		61 - 90 days		More than 90 days			Total
Personal	$	83,598	$	9,599	$	10,703	$	3,804	$	107,704
Business		70,400		27,821		20,357		1,217		119,795
Total	$	153,998	$	37,420	$	31,060	$	5,021	$	227,499
Total as at October 31, 2016	$	168,153	$	47,136	$	9,309	$	4,491	$	229,089
Total as at January 31, 2016	$	88,131	$	71,150	$	14,896	$	1,224	$	175,401

7. Derivative Financial Instruments

When designated as accounting hedges by CWB, certain derivative financial instruments are designated 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). Changes in fair value attributed to both the interest rate swaps designated as fair value hedges and the associated hedged risk are included in non-interest income. Any difference between the two represents hedge ineffectiveness. Changes in fair value of the effective portion of equity and interest rate swap derivatives designated as cash flow hedges are recorded in other comprehensive income and are reclassified to net income in the same period that the hedged item affects income. 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 designated cash flow hedging transaction becomes ineffective, any subsequent change in the fair value of the hedging instrument is recognized in net income.

The notional value outstanding and related fair value for derivative financial instruments follow:

		As at January 31, 2017						As at October 31, 2016
			Notional Amount		Positive Fair Value		Negative Fair Value		Notional Amount		Positive Fair Value		Negative Fair Value
Cash Flow Hedges
	Interest rate swaps(1)	$	3,683,000	$	2,711	$	12,574	$	3,698,000	$	10,335	$	3,014
	Equity swaps(2)		20,117		2,338		621		20,117		-		1,449
Not Designated in a Hedging Relationship
	Equity swaps(3)		3,628		465		-		3,628		-		134
	Foreign exchange contracts(4)		127,290		2,942		48		124,056		35		2,575
Derivative Related Amounts		$	3,834,035	$	8,456	$	13,243	$	3,845,801	$	10,370	$	7,172

		As at January 31, 2016
			Notional Amount		Positive Fair Value		Negative Fair Value
Cash Flow Hedges
	Interest rate swaps	$	3,030,000	$	20,734	$	735
	Equity swaps		19,860		-		4,544
Fair Value Hedges
	Interest rate swaps(5)		452,250		-		4,499
Not Designated in a Hedging Relationship
	Equity swaps		3,024		-		511
	Foreign exchange contracts		253,032		764		8,803
Derivative Related Amounts		$	3,758,166	$	21,498	$	19,092

(1)	Interest rate swaps designated as cash flow hedges outstanding at January 31, 2017 mature between February 2017 and September 2021.
(2)	Equity swaps designated as cash flow hedges outstanding at January 31, 2017 mature between June 2017 and June 2019.
(3)	Equity swaps not designated as hedges outstanding at January 31, 2017 mature in June and December 2017.
(4)	Foreign exchange contracts outstanding at January 31, 2017 mature between February and June 2017.
(5)	Interest rate swaps designated as fair value hedges were unwound in April 2016.

The impact of hedge ineffectiveness gains (losses) recognised in other non-interest income within the consolidated statements of income follow:

		For the three months ended
			January 31 2017		January 31 2016
Fair Value Hedges
	Change in fair value of the hedging instruments	$	-	$	(4,499	)
	Change in fair value of the hedged items attributable to hedged risk		-		4,293
		$	-	$	(206	)
Cash Flow Hedges		$	-	$	-

At January 31, 2017, hedged cash flows are expected to occur and affect profit or loss within the next five years. There were no forecasted transactions that failed to occur during the three months ended January 31, 2017.

CWB limits its exposure to credit losses related to derivative financial instruments by dealing with creditworthy counterparties and entering into contracts that provide for the exchange of collateral between parties where the fair value of the outstanding transactions exceeds an agreed upon threshold. The impact of pledged and received collateral is discussed in Note 8.

8. Financial Instruments - Offsetting

The following table provides a summary of financial assets and liabilities which are subject to enforceable master netting agreements and similar arrangements, as well as financial collateral received to mitigate credit exposures related to these financial instruments. The agreements do not meet the netting criteria required by IAS 32 Financial Instruments: Presentation as the right to set-off is only enforceable in the event of default or occurrence of other predetermined events.

				Amounts not offset in the consolidated balance sheet
As at January 31, 2017			Gross amounts reported on the consolidated balance sheets		Impact of master netting agreements		Cash collateral (1)		Securities received as collateral (1)(2)		Net amount
Financial Assets
	Derivative instruments	$	8,456	$	4,198	$	3,733	$	-	$	525
Financial Liabilities
	Derivative instruments	$	13,243	$	4,198	$	8,528	$	-	$	517
As at October 31, 2016
Financial Assets
	Derivative instruments	$	10,370	$	4,345	$	5,730	$	49	$	246
Financial Liabilities
	Derivative instruments	$	7,172	$	4,345	$	2,121	$	-	$	706
As at January 31, 2016
Financial Assets
	Derivative instruments	$	21,498	$	8,243	$	8,470	$	2,447	$	2,338
Financial Liabilities
	Derivative instruments	$	19,092	$	8,243	$	5,971	$	-	$	4,878

(1)	Financial collateral is reflected at fair value. The amount of financial instruments and cash collateral disclosed is limited to the net balance sheet exposure, and any over-collateralization is excluded from the table.
(2)	Collateral received in the form of securities is not recognized on the consolidated balance sheets.

9. Capital Stock

Share Capital

		For the three months ended
		January 31, 2017			January 31, 2016
		Number of Shares		Amount	Number of Shares		Amount
Preferred Shares - Series 5
	Outstanding at beginning and end of period	5,000,000	$	125,000	5,000,000	$	125,000
Preferred Shares - Series 7
	Outstanding at beginning and end of period	5,600,000		140,000	-		-
		10,600,000		265,000	5,000,000		125,000
Common Shares
	Outstanding at beginning of period	88,103,120		718,377	80,526,069		537,511
	Issued under dividend reinvestment plan	31,458		968	34,349		801
	Issued on exercise or exchange of options(1)	118,635		4,907	-		-
	Outstanding at end of period	88,253,213		724,252	80,560,418		538,312
Share Capital			$	989,252		$	663,312

(1)	Represents shares issued and amounts transferred from the share-based payment reserve to share capital upon cashless settlement of option exercises.

10. Share-based Payments

Stock Options

			For the three months ended
			January 31, 2017				January 31, 2016
			Number of Options			Weighted Average Exercise Price	Number of Options			Weighted Average Exercise Price
Options
	Balance at beginning of period		5,205,794		$	29.63	5,232,366		$	30.26
	Exercised or exchanged		(1,049,067	)		26.52	-			-
	Expired		(4,092	)		26.70	(181,363	)		28.80
	Forfeited		(6,272	)		39.12	(19,298	)		34.22
Balance at End of Period			4,146,363		$	30.40	5,031,705		$	30.30

All exercised options are settled via cashless settlement, which provides the option holder 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. During the three months ended January 31, 2017, option holders exercised 1,049,067 options (2016 - nil) in exchange for 118,635 shares (2016 - nil) by way of cashless settlement.

For the three months ended January 31, 2017, salary expense of $563 (2016 - $717) was recognized relating to the estimated fair value of options granted. No stock options were granted during the three months ended January 31, 2017 or January 31, 2016.

Further details relating to stock options outstanding and exercisable at January 31, 2017 follow:

	Options Outstanding					Options Exercisable
Range of Exercise Prices	Number of Options		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price
$23.70 to $26.13	1,287,621		4.5	$	24.99	53,977	$	26.13
$26.40 to $28.47	1,558,203		1.1		28.04	1,558,203		28.04
$37.50 to $39.42	1,300,539		2.1		38.58	623,364		37.68
Total	4,146,363		2.4	$	30.40	2,235,544	$	30.68

11. Contingent Liabilities and Commitments

In the normal course of business, CWB enters into various commitments and has contingent liabilities, which are not reflected in the consolidated balance sheets. At January 31, 2017, these items include guarantees and standby letters of credit of $464,547 (October 31, 2016 - $492,327; January 31, 2016 - $449,471). Significant contingent liabilities and commitments, including guarantees provided to third parties, are discussed in Note 20 of CWB's audited consolidated financial statements for the year ended October 31, 2016 (see page 99 of the 2016 Annual Report).

In the ordinary course of business, CWB 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.

12. Fair Value of Financial Instruments

Financial Assets and Liabilities by Measurement Basis

The table below provides the carrying amount of financial instruments by category as defined in IAS 39 - Financial Instruments: Recognition and Measurement and by balance sheet heading. The table does not include assets and liabilities that are not considered financial instruments. The table also excludes assets and liabilities which are considered financial instruments, but are not recorded at fair value and for which the carrying amount approximates fair value.

As at January 31, 2017			Derivatives		Loans and Receivables and Non-trading Liabilities		Available-for-sale		Total Carrying Amount		Fair Value		Fair Value Over (Under) Carrying Amount
Financial Assets
	Cash resources	$	-	$	-	$	450,703	$	450,703	$	450,703	$	-
	Securities		-		-		2,101,009		2,101,009		2,101,009		-
	Loans(1)		-		21,880,110		-		21,880,110		22,204,610		324,500
	Derivative related		8,456		-		-		8,456		8,456		-
Total Financial Assets		$	8,456	$	21,880,110	$	2,551,712	$	24,440,278	$	24,764,778	$	324,500
Financial Liabilities
	Deposits(1)	$	-	$	20,707,070	$	-	$	20,707,070	$	20,798,917	$	91,847
	Securities sold under repurchase agreements		-		-		108,480		108,480		108,480		-
	Debt		-		1,234,050		-		1,234,050		1,251,660		17,610
	Derivative related		13,243		-		-		13,243		13,243		-
	Contingent consideration		-		18,486		-		18,486		18,486		-
Total Financial Liabilities		$	13,243	$	21,959,606	$	108,480	$	22,081,329	$	22,190,786	$	109,457
As at October 31, 2016
Total Financial Assets		$	10,370	$	22,049,997	$	2,791,968	$	24,852,335	$	25,179,091	$	326,756
Total Financial Liabilities		$	7,172	$	22,508,297	$	-	$	22,515,469	$	22,584,300	$	68,831
As at January 31, 2016
Total Financial Assets		$	21,498	$	20,413,191	$	2,769,953	$	23,204,642	$	23,552,919	$	348,277
Total Financial Liabilities		$	19,092	$	21,071,750	$	133,765	$	21,224,607	$	21,305,274	$	80,667

(1)	Loans and deposits exclude deferred premiums, deferred revenue, allowances for credit losses and fair value hedge adjustments, which are not financial instruments.

Fair values are based on management's best estimates based on market conditions and pricing policies at a certain point in time. The estimates are subjective and involve particular assumptions and matters of judgment and, as such, may not be reflective of future fair values. Further information on how the fair value of financial instruments is determined is included in Note 27 of the October 31, 2016 consolidated audited financial statements (see page 105 of the 2016 Annual Report).

Fair Value Hierarchy

CWB 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 unadjusted quoted prices in active markets for identical assets and liabilities that CWB can access at the measurement date. Level 2 fair value measurements were estimated using observable inputs, including quoted market prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, and model inputs that are either observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 fair value measurements were determined using one or more inputs that are unobservable and significant to the fair value of the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available at the measurement date. There were no transfers between Level 1, Level 2 or Level 3 during the three months ended January 31, 2017 or 2016.

The following table presents CWB's financial assets and liabilities that are either carried at fair value on the balance sheet or for which fair value is disclosed, categorized by level under the fair value hierarchy:

Fair Value Hierarchy

				Valuation Technique
As at January 31, 2017			Fair Value		Level 1		Level 2		Level 3
Financial Assets
	Cash resources	$	450,703	$	57,215	$	393,488	$	-
	Securities		2,101,009		144,921		1,956,088		-
	Loans		22,204,610		-		-		22,204,610
	Derivative related		8,456		-		8,456		-
Total Financial Assets		$	24,764,778	$	202,136	$	2,358,032	$	22,204,610
Financial Liabilities
	Deposits	$	20,798,917	$	-	$	20,798,917	$	-
	Securities sold under repurchase agreements		108,480		-		108,480		-
	Debt		1,251,660		-		1,251,660		-
	Derivative related		13,243		-		13,243		-
	Contingent consideration(1)		18,486		-		-		18,486
Total Financial Assets		$	22,190,786	$	-	$	22,172,300	$	18,486
As at October 31, 2016
Financial Assets		$	25,179,091	$	367,935	$	2,434,403	$	22,376,753
Financial Liabilities		$	22,584,300	$	-	$	22,560,043	$	24,257
As at January 31, 2016
Financial Assets		$	23,552,919	$	204,809	$	2,586,642	$	20,761,468
Financial Liabilities		$	21,305,274	$	-	$	21,304,624	$	650

(1)	At January 31, 2017 and October 31, 2016, the level 3 financial liability is comprised of contingent consideration related to the acquisition of CWB Maxium. The Level 3 financial liability at January 31, 2016 is comprised of contingent consideration related to a business sold during 2015.

Financial instruments that are not carried on the balance sheet at fair value, but for which fair value is disclosed above, include loans, deposits and debt.

Level 3 Financial Instruments

The level 3 financial liabilities measured at fair value on the consolidated balance sheets are comprised of contingent consideration on business acquisitions and sales. The following table shows a reconciliation of the fair value measurements related to the Level 3 valued instruments:

		For the three months ended January 31
			2017			2016
Business Acquisition
Balance at beginning of period		$	24,257		$	-
	Contingent consideration instalment payment		(10,132	)		-
	Contingent consideration fair value changes		4,361			-
			18,486			-
Business Disposition
Balance at beginning and end of period			-			650
Balance at End of Period		$	18,486		$	650

13. Interest Rate Sensitivity

CWB'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 26 of the audited consolidated financial statements for the year ended October 31, 2016 (see page 104 of the 2016 Annual Report). The following table shows the gap position for selected time intervals.

Asset Liability Gap Positions

($ millions)		Floating Rate and Within 1 Month			1 to 3 Months			3 Months to 1 Year			Total Within 1 Year		1 Year to 5 Years			More than 5 Years				Non-interest Sensitive			Total
January 31, 2017
Assets
Cash resources and securities	$	135		$	451		$	436		$	1,022		$	1,495		$	26		$	9		$	2,552
Loans		10,000			1,346			3,334			14,680			6,996			204			(107	)		21,773
Other assets		-			-			-			-			-			-			489			489
Derivative financial instruments(1)		175			200			805			1,180			2,503			-			151			3,834
Total		10,310			1,997			4,575			16,882			10,994			230			542			28,648
Liabilities and Equity
Deposits		7,535			1,077			4,007			12,619			8,088			-			(24	)		20,683
Other liabilities		108			-			-			108			-			-			426			534
Debt		29			134			255			418			816			-			-			1,234
Equity		-			-			-			-			265			-			2,098			2,363
Derivative financial instruments(1)		3,707			-			-			3,707			-			-			127			3,834
Total		11,379			1,211			4,262			16,852			9,169			-			2,627			28,648
Interest Rate Sensitive Gap	$	(1,069	)	$	786		$	313		$	30		$	1,825		$	230		$	(2,085	)	$	-
Cumulative Gap	$	(1,069	)	$	(283	)	$	30		$	30		$	1,855		$	2,085		$	-		$	-
Cumulative Gap as a Percentage of Total Assets		(3.7	)%		(1.0	)%		0.1	%		0.1	%		6.5	%		7.3	%		-	%		-	%
October 31, 2016
Cumulative Gap	$	219		$	1,235		$	1,003		$	1,003		$	1,815		$	2,075		$	-		$	-
Cumulative Gap as a Percentage of Total Assets		0.8	%		4.2	%		3.5	%		3.5	%		6.2	%		7.1	%		-	%		-	%
January 31, 2016
Cumulative Gap	$	443		$	567		$	(91	)	$	(91	)	$	1,864		$	1,975		$	-		$	-
Cumulative Gap as a Percentage of Total Assets		1.6	%		2.1	%		(0.3	)%		(0.3	)%		6.8	%		7.3	%		-	%		-	%

(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, 2017	Floating Rate and Within 1 Month		1 to 3 Months		3 Months to 1 Year		Total Within 1 Year		1 Year to 5 Years		More than 5 Years		Total
Total assets	3.4	%	2.7	%	3.6	%	3.4	%	3.2	%	4.6	%	3.3	%
Total liabilities	0.9		2.0		1.8		1.2		2.2		-		2.0
Interest rate sensitive gap	2.5	%	0.7	%	1.8	%	2.2	%	1.0	%	4.6	%	1.3	%
October 31, 2016
Total assets	3.1	%	2.5	%	3.7	%	3.2	%	3.4	%	4.1	%	3.3	%
Total liabilities	0.9		2.4		1.7		1.3		2.2		-		2.0
Interest rate sensitive gap	2.2	%	0.1	%	2.0	%	1.9	%	1.2	%	4.1	%	1.3	%
January 31, 2016
Total assets	3.3	%	2.6	%	3.5	%	3.3	%	3.4	%	1.8	%	3.3	%
Total liabilities	0.9		1.7		2.0		1.3		2.1		-		1.6
Interest rate sensitive gap	2.4	%	0.9	%	1.5	%	2.0	%	1.3	%	1.8	%	1.7	%

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 1.17% or $7,230 (October 31, 2016 – 2.15% or $12,582; January 31, 2016 – 1.12% or $5,689) and decrease other comprehensive income by $80,308 (October 31, 2016 - $57,109; January 31, 2016 – $69,061) 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 0.65% or $4,016 (October 31, 2016 – 0.88% or $5,150; January 31, 2016 – 1.40% or $7,084) and increase other comprehensive income by $81,848 (October 31, 2016 - $58,646; January 31, 2016 - $62,206) net of tax.

14. Capital Management

Capital for Canadian financial institutions is managed and reported in accordance with a capital management framework specified by OSFI commonly called Basel III. Additional information about CWB's capital management practices is provided in Note 30 to the fiscal 2016 audited consolidated financial statements within the 2016 Annual Report (see page 109 of the 2016 Annual Report) and in the Capital Management section in the Q1 2017 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.

On December 31, 2016, CWB redeemed both the $105,000 senior deposit note held by CWB Capital Trust and all outstanding CWB Capital Trust Securities Series 1, which did not qualify as non-viability contingent capital under the Basel III regulatory capital requirements. The redemption resulted in a $105,000 reduction in CWB's Total regulatory capital and reduced both the Tier 1 and Total Capital ratios by approximately 50 basis points. Additional information about the senior deposit note held by CWB Capital Trust and CWB Capital Trust Securities Series 1 is provided in Note 14 of the fiscal 2016 audited consolidated financial statements within the 2016 Annual Report (see page 92 of the Annual Report).

CWB will redeem all $75,000 of outstanding 5.571% non-viability contingent capital subordinated debentures on March 22, 2017. The redemption is expected to reduce CWB's Total regulatory capital by approximately 40 basis points.

Capital Structure and Regulatory Ratios

			As at January 31 2017			As at October 31 2016			As at January 31 2016
Regulatory capital, net of deductions
	Common equity Tier 1	$	1,896,565		$	1,863,264		$	1,654,538
	Tier 1		2,161,636			2,233,364			1,884,602
	Total		2,601,999			2,669,334			2,309,346
Capital ratios
	Common equity Tier 1		9.5	%		9.2	%		8.6	%
	Tier 1		10.8			11.0			9.8
	Total		13.0			13.1			12.0
Leverage ratio			8.4			8.6			7.7

During the three months ended January 31, 2017, CWB complied with all internal and external capital requirements.

Shareholder Information

Head Office

Canadian Western Bank Group

Suite 3000, Canadian Western Bank Place

10303 Jasper Avenue

Edmonton, AB T5J 3X6

Telephone: (780) 423-8888

Fax: (780) 423-8897

www.cwb.com

Contact Information

National Leasing Group Inc.

1525 Buffalo Place

Winnipeg, MB R3T 1L9

Toll-free: 1-800-665-1326

Toll-free fax: 1-866-408-0729

www.nationalleasing.com

CWB Maxium Financial

30 Vogell Road, Suite 1

Richmond Hill, ON L4B 3K6

Toll-free: 1-800-379-5888

Fax: (905) 780-3273

www.maxium.net

CWB Optimum Mortgage

Suite 1010, Canadian Western Bank Place

10303 Jasper Avenue

Edmonton, AB T5J 3X6

Toll-free: 1-866-441-3775

Fax: 1-866-477-8897

www.optimummortgage.ca

Canadian Western Trust Company

Suite 300, 750 Cambie Street

Vancouver, BC V6B 0A2

Toll-free: 1-800-663-1124

Fax: (604) 669-6069

www.cwt.ca

CWB Wealth Management Ltd.

Suite 3000, Canadian Western Bank Place

10303 Jasper Avenue

Edmonton, AB T5J 3N6

Telephone: (855) 292-9655

www.cwbwealth.com

Adroit Investment Management Ltd.

Suite 1250, Canadian Western Bank Place

10303 Jasper Avenue

Edmonton, AB T5J 3N6

Telephone: (780) 429-3500

Fax: (780) 429-9680

www.adroitinvestments.ca

McLean & Partners Wealth Management Ltd.

801 10th Avenue SW

Calgary, AB T2R 0B4

Telephone: (403) 234-0005

Fax: (403) 234-0606

www.mcleanpartners.com

Stock Exchange Listings

The Toronto Stock Exchange

Common Shares: CWB

Series 5 Preferred Shares: CWB.PR.B

Series 7 Preferred Shares: CWB.PR.C

Transfer Agent and Registrar

Computershare

100 University Avenue, 8th Floor

Toronto, ON M5J 2Y1

Telephone: (416) 263-9200

Fax: 1-888-453-0330

Website: www.computershare.com

Eligible Dividends Designation

CWB designates all dividends for both common and preferred 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 common and preferred shareholders to purchase additional common shares by reinvesting their cash dividend without incurring brokerage and commission fees. For information about participation in the plan, please contact the Transfer Agent and Registrar or visit www.cwb.com.

Online Investor Information

Additional investor information including supplemental financial information and corporate presentations are available on CWB's website at www.cwb.com.

Quarterly Conference Call and Webcast

CWB's quarterly conference call and live audio webcast will take place on March 2, 2017 at 2:00 p.m. ET. The webcast will be archived on CWB's website at www.cwb.com for sixty days. A replay of the conference call will be available until March 9, 2017, by dialing (855) 859-2056 and entering passcode 75481033.