CWBFG Annual Report 2022

Our cross functional IBOR Reform working group continues to coordinate an orderly transition to alternative reference rates. During the year, we completed the remediation of our USD LIBOR referenced contracts by incorporating appropriate fallback language or by replacing the referenced rates with the Secured Overnight Financing Rate (SOFR), with appropriate spread adjustments. We also ceased the issuance of new USD LIBOR products at the end of calendar 2021. In 2022, the working group incorporated CDOR transition into our plans, which include incorporating appropriate contract fallback language, supporting the introduction of new products referencing CORRA or other alternative rates post-transition, preparing to cease the issuance of CDOR-based financial instruments, transitioning legacy CDOR-based contracts and preparing for overall operational readiness. The working group monitors recommendations from industry groups and regulatory bodies, and engages with industry associations and counterparties regarding transition of CDOR to CORRA as we update our transition plans. The working group provides periodic updates to senior management and the Asset and Liability Committee and quarterly to the Audit Committee of the Board of Directors regarding the status of transition plans for migrating our CDOR and USD LIBOR products and upgrading systems and processes. The following table presents the gross outstanding balances of our non-derivative financial assets and liabilities, and notional amounts of our derivatives that are indexed to CDOR and USD LIBOR as at October 31, 2022 and November 1, 2021, which were due to mature after their announced cessation dates. In the normal course of business, our exposures may continue to fluctuate.

Notional/gross outstanding amounts

October 31, 2022

November 1, 2021

CDOR (1, 2)

USD LIBOR (3)

CDOR (1, 2)

USD LIBOR (3)

($ thousands)

Maturing after June 2024

Maturing after June 2023

Maturing after June 2024

Maturing after June 2023

Non-derivative Financial Assets Securities

$

$

$

-

$

-

-

-

350,349

339,760

Loans

1,254,038

295,527

$

$

$

350,349

$

339,760

1,254,038

295,527

Non-derivative Financial Liabilities Deposits - business and government

$

$

-

$

-

- $

-

125,000

-

Debt - subordinated debentures

125,000

-

$

$

125,000

$

-

125,000 $

-

$

$

$

2,172,469

$

-

Derivative Financial Instruments (4)

2,127,716

-

(1) While the six-month and 12-month tenors of CDOR were discontinued on May 17, 2021, we did not hold significant positions referencing these tenors at October 31, 2022 and November 1, 2021. (2) Excludes undrawn loan commitments. As at October 31, 2022, the total outstanding undrawn loan commitments that can potentially be drawn in CDOR beyond the announced cessation date of June 28, 2024 is $49 million (November 1, 2021 – less than $1 million). (3) Excludes undrawn loan commitments. As at October 31, 2022 and November 1, 2021, the total outstanding undrawn loan commitments that can potentially be drawn in USD LIBOR beyond the announced cessation dates of June 30, 2023 is less than $1 million. (4) Derivative financial instruments are comprised of interest rate swaps referencing CDOR and USD LIBOR that we use to manage interest rate risk. As at October 31, 2022 and November 1, 2021, all of these instruments were designated in hedge relationships.

K) FUTURE ACCOUNTING CHANGES

A number of standards and amendments have been issued by the IASB, and the following changes may have an impact on our future financial statements.

IFRS 12 Income Taxes In May 2021, the IASB issued Deferred Tax related to Assets and Liabilities arising from a Single Transaction ( Amendments to IAS 12 Income Taxes). The amendments narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As a result, there is recognition of a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and a decommissioning provision. CWB will adopt the amendments effective for our fiscal year beginning November 1, 2022. We have assessed the amendment and determined that there will be no significant impact upon adoption. IFRS 17 Insurance Contracts In May 2017, the IASB issued IFRS 17 Insurance Contracts which will replace IFRS 4 Insurance Contracts. In June 2020, the IASB issued amendments to IFRS 17 aimed at helping companies implement the Standard and to defer the effective date. In December 2021, the IASB issued a narrow-scope amendment to the transition requirements in IFRS 17, providing insurers with an option aimed at improving the usefulness of information to investors on initial application of IFRS 17 by presenting comparative information about financial assets, using a classification overlay approach on a basis that is more consistent with how IFRS 9 will be applied in future reporting periods. This Standard introduces consistent accounting for all insurance contracts. The Standard requires a company to measure insurance contracts using updated estimates and assumptions that reflect the timing of cash flows and any uncertainty relating to insurance contracts. Additionally, IFRS 17 requires an entity to recognize profits as it delivers insurance services, rather than when it receives premiums.

The new Standard and its amendments are effective for our fiscal year beginning November 1, 2024 and we are assessing the potential impacts on our consolidated financial statements.

CWB Financial Group 2022 Annual Report | 73

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