6. LOANS, IMPAIRED LOANS AND ALLOWANCE FOR CREDIT LOSSES LOANS AT AMORTIZED COST
Loans, including leases, which are measured at amortized cost and stated net of unearned income, unamortized premiums or discounts and allowance for credit losses, are originated or purchased with the objective of collecting contractual cash flows and generating cash flows that satisfy the requirements of the SPPI test. Loan fees integral to the yield, net of transaction costs, are amortized to interest income using the effective interest method.
The composition of our loan portfolio by geographic region and industry sector follows:
Composition Percentage
Oct. 31 2022
Oct. 31 2021
($ millions)
BC
AB
ON
SK
QC
MB
Other
Total
Personal (1)
$
1,694 $
1,881
$
2,823 $
275 $
- $
157 $
122 $
6,952
19 %
19 %
Business General commercial loans
3,786 3,794
3,903 2,667 1,476 1,021
3,413
461 246 464 113
344
344 143 278
179
12,430
35 21 15
33 22 16
Commercial mortgages
536
60
-
7,446 5,546 3,200
Equipment financing and leasing (2)
881
1,359
724
364
Real estate project loans
1,473
469
70
54
- -
9 1
9 1
Oil and gas production loans
64
268
-
-
-
-
332
9,998
9,335
5,777
1,284
1,198
819
543
28,954
81
81
Total (3)
$ 11,692 $ 11,216 $
8,600
$
1,559 $ 1,198 $
976 $
665 $ 35,906
100 %
100 %
Composition Percentage October 31, 2022
33 % 33 %
31 % 31 %
24 % 23 %
4 %
3 %
3 %
2 %
100 % 100 %
October 31, 2021
5 %
3 %
3 %
2 %
(1) Includes mortgages securitized through the National Housing Act Mortgage Backed Securities program reported on-balance sheet of $1,386 (October 31, 2021 – $1,381) (see Note 6). (2) Includes securitized leases and loans reported on-balance sheet of $2,125 (October 31, 2021 – $1,927) (see Note 7). (3) This table does not include an allocation of the allowance for credit losses.
CREDIT QUALITY Internal Risk Ratings
Within our loan portfolios, borrowers are assigned a borrower risk rating (BRR) that reflects the credit quality of the obligor using industry and sector-specific risk models and expert credit judgment. BRRs are assessed and assigned at the time of loan origination and reviewed at least annually, with the exception of consumer loans and single unit residential mortgages. More frequent reviews are conducted for borrowers with weaker risk ratings, borrowers that trigger a review based on adverse changes in financial performance and borrowers requiring or requesting changes to credit facilities. Each BRR has a PD calibrated against it, which is estimated based on our historical loss experience for each risk segment or risk rating level, adjusted for forward-looking information. Our BRR scale broadly aligns to external ratings as follows:
Description
CWB Rating Category
Standard & Poor’s
Moody’s Investor Services
Investment grade or low risk
1 to 6M 6L to 8L
AAA to BBB- BB+ to CCC+
Aaa to Baa3 Ba1 to Caa1
Non-investment grade or medium risk
Watchlist or high risk
9H to 10L
CCC and below
Caa2 and below
Impaired
11 to 12
Default
Default
78 | CWB Financial Group 2022 Annual Report
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