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 costs associated with a reorganization of our operations, amortization of acquisition- related intangible assets, acquisition and integration costs and accelerated amortization of previously capitalized AIRB assets. Non-recurring reorganization costs were incurred to execute reorganization initiatives to realize efficiencies in our banking centre footprint, operational support functions, and administrative processes. Acquisition and integration costs include direct and incremental costs incurred as part of the execution and integration of business acquisitions. Accelerated amortization of AIRB assets is a result of a reduction in estimated useful lives of certain previously capitalized AIRB assets. • Adjusted common shareholders’ net income – total common shareholders’ net income, excluding the costs associated with organizational redesign initiatives, accelerated amortization of acquisition-related intangible assets, acquisition and integration costs and amortization of previously capitalized AIRB assets, 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 2023
October 31 2022
October 31 2023
October 31 2022
Non-interest expenses
$
167,600
$
166,783
$
611,283
$
581,777
Adjustments (before tax): Non-recurring reorganization costs
(17,146) (1,728)
-
(17,146) (8,490)
-
Amortization of acquisition-related intangible assets
(2,557)
(10,212)
Acquisition and integration costs
-
(361)
(602)
(626)
Accelerated amortization of previously capitalized AIRB assets
-
(16,555) 147,310
-
(16,555) 554,384 310,302
Adjusted Non-interest Expenses Common shareholders' net income Adjustments (after-tax): Non-recurring reorganization costs (1)
$ $
148,726 76,845
$ $
$ $
585,045 324,316
$ $
67,687
12,726
-
12,726
-
Amortization of acquisition-related intangible assets (2)
1,267
1,913
6,495
7,641
Acquisition and integration costs (3)
- -
270
451
470
Accelerated amortization of previously capitalized AIRB assets (4)
12,549 82,419 279,838
-
12,549 330,962
Adjusted Common Shareholders' Net Income
$ $
90,838 291,763
$ $
$
343,988
$ $
Total revenue
$ 1,112,574
1,076,287
Less: Adjusted non-interest expenses (see above)
148,726 143,037
147,310 132,528
585,045 527,529
554,384 521,903
Pre-tax, Pre-provision Income
$
$
$
$
(1) Net of income tax of $4,420 for the three months ended October 31, 2023 (Q4 2022 – $nil) and $4,420 for the year ended October 31, 2023 (2022 – $nil). (2) Net of income tax of $461 for the three months ended October 31, 2023 (Q4 2022 – $644) and $1,995 for the year ended October 31, 2023 (2022 – $2,571). (3) Net of income tax of $nil for the three months ended October 31, 2023 (Q4 2022 – $91) and $151 for the year ended October 31, 2023 (2022 – $156). (4) Net of income tax of $nil for the three months ended October 31, 2023 (Q4 2022 – $4,006) and $nil for the year ended October 31, 2023 (2022– $4,006).
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 with 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 shares 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, but 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 average 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.
16 | CWB Financial Group 2023 Annual Report
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