17. CONTINGENT LIABILITIES AND COMMITMENTS A) CREDIT INSTRUMENTS
In the normal course of business, we enter into various commitments and have contingent liabilities, which are not reflected in the consolidated balance sheets. These items are reported below and are expressed in terms of the contractual amount of the related commitment.
As at October 31 2022
As at October 31 2021
Commitments to extend credit
Guarantees and standby letters of credit
Commitments to extend credit to customers also arise in the normal course of business and include undrawn availability under lines of credit and business operating loans of $3,101,155 (October 31, 2021 – $2,896,613) and authorized but unfunded loan commitments of $4,115,497 (October 31, 2021 – $3,348,249). In the majority of instances, availability of undrawn business commitments is subject to the borrower meeting specified financial tests or other covenants regarding completion or satisfaction of certain conditions precedent. It is also usual practice to include the right to review and withhold funding in the event of a material adverse change in the financial condition of the borrower. The allowance for credit losses related to committed but undrawn credit exposures and letters of credit is included in other liabilities on the consolidated balance sheets. From a liquidity perspective, undrawn credit authorizations will be funded over time, with draws in many cases extending over a period of months. In some instances, authorizations are never advanced or may be reduced because of changing requirements. Revolving credit authorizations are subject to repayment which, on a pooled basis, also decreases liquidity risk. Guarantees and standby letters of credit represent our obligation to make payments to third parties when a customer is unable to make required payments or meet other contractual obligations. These instruments carry the same credit risk, recourse and collateral security requirements as loans extended to customers and generally have a term that does not exceed one year.
B) PURCHASE OBLIGATIONS
We have contractual obligations related to operating and capital expenditures which typically run one to five years.
Purchase obligations for each of the succeeding years are as follows:
2023 2024 2025 2026 2027
3,506 3,335 1,964
C) LEASE COMMITMENTS
During the year ended October 31, 2022, we entered into a lease for a new corporate office in Edmonton, commencing January 1, 2026. Future minimum commitments related to the lease on an undiscounted basis are $7,135 for fiscal 2026 and a remaining total of $132,058 for fiscal 2027 and thereafter.
D) GUARANTEES A guarantee is defined as a contract that contingently requires the guarantor to make payments to a third party based on (i) changes in an underlying economic characteristic that is related to an asset, liability or equity security of the guaranteed party, (ii) failure of another party to perform under an obligating agreement, or (iii) failure of another third party to pay indebtedness when due.
Significant guarantees provided to third parties include guarantees and standby letters of credit as discussed above.
In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify the other party. Under these agreements, we may be required to compensate counterparties for costs incurred as a result of various contingencies, such as changes in laws and regulations and litigation claims. A maximum potential liability cannot be identified as the terms of these arrangements vary and generally no predetermined amounts or limits are identified. The likelihood of occurrence of contingent events that would trigger payment under these arrangements is either remote or difficult to predict and, in the past, payments under these arrangements have been insignificant.
No amounts are reflected in the consolidated financial statements related to these guarantees and indemnifications.
E) LEGAL AND REGULATORY PROCEEDINGS
In the ordinary course of business, CWB and our subsidiaries are party to legal and regulatory proceedings. Based on current knowledge, we do not expect the outcome of any of these proceedings to have a material effect on the consolidated financial position or results of operations.
CWB Financial Group 2022 Annual Report | 99
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