The inputs and models used to estimate ECL may not always capture all emerging market conditions and as such, qualitative adjustments based on expert credit judgments that consider reasonable and supportable information may be incorporated. These expert credit judgments account for the variability in the results provided by the models and consider the impact of both tail-risk events and the lagging impacts of typical credit cycles. These expert credit judgments also allow us to incorporate the estimated impact of current unprecedented levels of government support programs, which cannot be modelled historically as they have not occurred in the past. Changes in circumstances may cause future assessments of credit risk to be significantly different than current assessments and may require an increase or decrease in the allowance for credit losses. Additional information on the process and methodology for determining the allowance for credit losses can be found in the discussions of Credit Quality section of our MD&A and in Note 7 of the consolidated financial statements for the year ended October 31, 2021.
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
Cash resources, securities, and derivative financial instruments are reported on the consolidated balance sheets at fair value.
We categorize our fair value measurements of financial instruments according to a three-level hierarchy. Level 1 fair value measurements reflect unadjusted quoted prices in active markets for identical assets and liabilities that can be accessed 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.
The following table summarizes the significant financial assets and liabilities recorded on the consolidated balance sheets at fair value. Notes 2, 4, 5, 6, 7, 11, 13, 15, 24 and 26 of the consolidated financial statements for the year ended October 31, 2021 provide additional information regarding these financial instruments.
Table 28 - Valuation of Financial Instruments ($ thousands)
Valuation Technique
As at October 31, 2021
Fair Value
Level 1
Level 2
Level 3
Financial Assets
Cash resources
$
128,459
$
128,459 207,209
$
- $
- - -
Securities
3,567,797
3,360,588
Securities purchased under resale agreements
30,048
- - -
30,048
Loans
33,138,017
-
33,138,017
Derivatives
52,862
52,862
-
Total Financial Assets
$
36,917,183
$
335,668
$
3,443,498 $ 33,138,017
Financial Liabilities Deposits
$
30,118,635
$
- - -
$ 30,118,635 $
- - -
Debt
3,058,090
3,058,090
Derivatives
36,068
36,068
Total Financial Liabilities
$
33,212,793
$
-
$ 33,212,793 $
-
Valuation Technique
As at October 31, 2020
Fair Value
Level 1
Level 2
Level 3
Financial Assets
Cash resources
$
368,319
$
134,385 561,868
$
233,934 $
- - -
Securities
2,664,618
2,102,750
Securities purchased under resale agreements
50,084
- - -
50,084
Loans
30,541,660
-
30,541,660
Derivatives
96,615
96,615
-
Total Financial Assets
$
33,721,296
$
696,253
$
2,483,383 $ 30,541,660
Financial Liabilities Deposits
$
27,738,072
$
- - - -
$ 27,738,072 $
- - - -
Securities sold under repurchase agreements
65,198
65,198
Debt
2,483,015
2,483,015
Derivatives
6,285
6,285
Total Financial Liabilities
$
30,292,570
$
-
$ 30,292,570 $
-
44 | CWB Financial Group 2021 Annual Report
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