NET INTEREST INCOME
Net interest income is the difference between interest earned on assets, and interest paid on deposits and other liabilities, including debt. Net interest margin is net interest income as a percentage of average total assets.
Highlights of 2021
• Net interest income of $892 million was up 12% primarily due to strong loan growth of 9% and a four basis point increase in net interest margin. • Net interest margin of 2.49% was up four basis points, despite the continued historical low Bank of Canada policy interest rates enacted in March 2020, which did not impact our results for a full year in fiscal 2020.
Table 5 - Net Interest Income ($ thousands)
2021
2020
Average Balance (1)
Interest Rate
Average Balance (1)
Interest Rate
Mix
Interest
Mix
Interest
Assets Cash, securities and deposits with regulated financial institutions
$
3,898,805
11 % $
20,947
0.54 %
$
2,799,760
9 % $
32,639
1.17 %
Securities purchased under resale agreements
56,345
-
111
0.20
32,436
-
273
0.84
Loans
Personal
6,079,394
17
210,483
3.46
5,814,502
18
220,707
3.80
Business
24,931,015
70
1,086,471
4.36
23,171,792
71
1,115,295
4.81
31,010,409
87
1,296,954
4.18
28,986,294
89
1,336,002
4.61
Total interest bearing assets
34,965,559
98
1,318,012
3.77
31,818,490
98
1,368,914
4.30
Other assets
811,430
2
-
0.00
748,411
2
-
0.00
Total Assets
$ 35,776,989
100 % $
1,318,012
3.68 %
$ 32,566,901
100 % $
1,368,914
4.20 %
Liabilities Deposits
Personal
$ 15,508,125
43 % $
246,614
1.59 %
$ 15,562,654
48 % $
342,623
2.20 %
Business and government
13,408,510
37
114,004
0.85
10,564,415
32
156,472
1.48
28,916,635
80
360,618
1.25
26,127,069
80
499,095
1.91
Securities sold under repurchase agreements
31,826
-
45
0.14
13,922
-
45
0.32
Other liabilities
671,260
2
2,809
0.42
821,385
3
2,904
0.35
Debt
2,708,222
8
62,177
2.30
2,532,544
8
67,459
2.66
Shareholders' equity
3,448,826
10
-
0.00
3,070,800
9
-
0.00
Non-controlling interests
220
-
-
0.00
1,181
-
-
0.00
Total Liabilities and Equity
$ 35,776,989
100 % $
425,649
1.19 %
$ 32,566,901
100 % $
569,503
1.75 %
Total Assets/Net Interest Income
$ 35,776,989
$
892,363
2.49 %
$ 32,566,901
$
799,411
2.45 %
(1) Non-GAAP measure – refer to definitions and detail provided on page 18.
Net interest income of $892 million was up 12% ($93 million) from last year. Growth was primarily driven by a 10% increase in average interest-earning assets and a four basis point increase in net interest margin. Net interest margin benefited from a favourable shift in our funding mix from strong branch-raised deposit growth, which drove a decline in more expensive broker deposits, and proactive deposit pricing reductions, partially offset by the impact of holding higher average cash and securities balances compared to last year. The yield on average cash, securities and deposits with regulated financial institutions of 0.54% decreased 63 basis points primarily due to the full year impact of market interest rate reductions. Average balances of cash and securities were higher than last year due to additional liquidity carried to fund capital market maturities and held against higher deposit balances.
The average loan yield declined 43 basis points to 4.18% primarily due to a 56 basis point reduction in average prime rate, driven by the full year impact of policy interest rate reductions in March 2020.
Average deposit costs were down 66 basis points to 1.25% and the overall cost of average interest-bearing liabilities and equity decreased 56 basis points to 1.19%, primarily due to market interest rate reductions, which also resulted in proactive deposit pricing changes on certain products based on market conditions, and a favourable shift in our funding mix driven by strong branch-raised deposit growth and a resulting decline in broker deposits.
CWB Financial Group 2021 Annual Report | 25
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