NON-GAAP MEASURES We use a number of financial measures and ratios to assess our performance against strategic initiatives and operational benchmarks. Some of these financial measures and ratios do not have standardized meanings prescribed by Generally Accepted Accounting Principles (GAAP) and may not be comparable to similar measures presented by other financial institutions. Non-GAAP financial measures and ratios provide readers with an enhanced understanding of how we view our financial performance. These measures and ratios may also provide the ability to analyze trends related to profitability and the effectiveness of our operations and strategies, and are disclosed in compliance with National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure . To calculate non-GAAP financial measures, we exclude certain items from our financial results prepared in accordance with IFRS. Adjustments relate to items which we believe are not indicative of underlying operating performance. Our non-GAAP financial measures include: • Adjusted non-interest expenses – total non-interest expenses, excluding pre-tax accelerated amortization of previously capitalized AIRB assets, amortization of acquisition-related intangible assets, and acquisition and integration costs. Accelerated amortization of previously capitalized AIRB assets is a result of a reduction in estimated useful lives of certain previously capitalized AIRB assets. Acquisition and integration costs include direct and incremental costs incurred as part of the execution and integration of the acquisition of the businesses of T.E. Wealth and Leon Frazer & Associates that occurred in June 2020. • Adjusted common shareholders’ net income – total common shareholders’ net income, excluding the accelerated amortization of previously capitalized AIRB assets, amortization of acquisition-related intangible assets, and acquisition and integration costs, net of tax. • Pre-tax, pre-provision income – total revenue less adjusted non-interest expenses.
The following table provides a reconciliation of our non-GAAP financial measures to our reported financial results.
Table 1 - Non-GAAP Measures ($ thousands)
For the three months ended
For the year ended
October 31 2022
October 31 2021
October 31 2022
October 31 2021
Non-interest expenses
$
166,783
$
140,802
$
581,777
$
508,718
Adjustments (before tax): Accelerated amortization of previously capitalized AIRB assets
(16,555)
-
(16,555)
-
Amortization of acquisition-related intangible assets
(2,557)
(2,032)
(10,212)
(8,073)
Acquisition and integration costs
(361)
(893)
(626)
(1,761)
Adjusted Non-interest Expenses
$
147,310
$
137,877
$
554,384
$
498,884
Common shareholders' net income
$
67,687
$
89,998
$
310,302
$
327,471
Adjustments (after-tax): Accelerated amortization of previously capitalized AIRB assets (1)
12,549
-
12,549
-
Amortization of acquisition-related intangible assets (2)
1,913
1,485
7,641
5,901 1,329
Acquisition and integration costs (3)
270
674
470
Adjusted Common Shareholders' Net Income
$
82,419
$
92,157
$
330,962
$
334,701
Total revenue
$
279,838
$
260,624
$ 1,076,287
$
1,016,033
Less: Adjusted non-interest expenses (see above)
147,310
137,877
554,384
498,884
Pre-tax, Pre-provision Income
$
132,528
$
122,747
$
521,903
$
517,149
(1) Net of income tax of $4,006 for the three months ended October 31, 2022 (Q4 2021 – nil) and $4,006 for the year ended October 31, 2022 (2021 – nil). (2) Net of income tax of $644 for the three months ended October 31, 2022 (Q4 2021 – $547) and $2,571 for the year ended October 31, 2022 (2021 – $2,172). (3) Net of income tax of $91 for the three months ended October 31, 2022 (Q4 2021 – $219) and $156 for the year ended October 31, 2022 (2021 – $432).
Non-GAAP ratios are calculated using the non-GAAP financial measures defined above. Our non-GAAP ratios include: • Adjusted earnings per common share – diluted earnings per common share calculated w ith adjusted common shareholders’ net income.
• Adjusted return on common shareholders’ equity – annualized adjusted common shareholders’ net income divided by average common shareholders’ equity, which is total shareholders’ equity excluding preferred shar es and limited recourse capital notes.
• Efficiency ratio – adjusted non-interest expenses divided by total revenue.
• Operating leverage – growth rate of total revenue less growth rate of adjusted non-interest expenses.
Supplementary financial measures are measures that do not have definitions prescribed by GAAP and do not meet the definition of a non-GAAP financial measure or ratio. Our supplementary financial measures include: • Return on assets – annualized common shareholders’ net income divided by avera ge total assets.
• Net interest margin – annualized net interest income divided by average total assets.
• Return on common shareholders’ equity – annualized common shareholders’ net income divided by average common shareholders’ equity.
• Write-offs as a percentage of average loans – annualized write-offs divided by average total loans.
• Book value per common share – total common shareholders’ equity divided by total common shares outstanding.
• Branch-raised deposits – total deposits excluding broker term and capital market deposits.
• Provision for credit losses on total loans as a percentage of average loans – annualized provision for credit losses on loans, committed but undrawn credit exposures and letters of credit divided by average total loans. Provisions for credit losses related to debt securities measured at fair value through other comprehensive income (FVOCI) and other financial assets are excluded.
• Provision for credit losses on impaired loans as a percentage of average loans – annualized provision for credit losses on impaired loans divided by average total loans.
16 | CWB Financial Group 2022 Annual Report
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