Salaries and employee benefits increased 13% ($44 million) primarily due to costs incurred related to the reorganization of our operations in the fourth quarter this year. Excluding the impact of non-recurring reorganization activities, salaries and benefits increased 8% ($27 million) driven by a higher average staffing complement, the impact of annual salary increments and higher share-based compensation expense associated with a higher share price in the current year. Premises expense remained relatively consistent with the prior year as higher rent expense associated with the full year impact of our Markham, Ontario, and downtown Vancouver banking centres, were offset by our efforts to temporarily reduce maintenance and repair costs. Equipment and software costs were down 7% ($6 million) primarily due to the accelerated amortization of intangible assets of previously capitalized AIRB assets recognized in the prior year. Excluding the accelerated amortization of intangible assets, equipment and software costs were up 13%, primarily driven by our ongoing investments in technology infrastructure, including our continued transition to cloud based solutions, as we position ourselves for future growth and improve our client and employee experience. General non-interest expenses were down 8% ($9 million) from the prior year. Lower professional fees and services reflected a reduced spend on strategic projects in the year. Lower amortization of acquisition-related intangible assets was primarily driven by the launch of our CWB Wealth brand and the concurrent retirement of legacy wealth management brands in the prior year. Lower employee recruitment and training, marketing and other general non-interest expenses reflected our prudent approach to managing our expenditures in the current economic environment, as well as the recognition of an SR&ED investment tax credit in the year. Lower general non-interest expenses were partially offset by higher capital taxes and regulatory costs.
The efficiency ratio was 52.6% compared to 51.5%, as non-interest expense growth outpaced revenue growth primarily due to the decrease in net interest margin as discussed in the Net Interest Income section. Figure 1 – Number of Full-time Equivalent Employees
(1) Approximately half of the fiscal 2020 increase related to the wealth acquisition (2) Decrease in fiscal 2023 primarily relates to the reorganization of our operations that occurred late in the fourth quarter of the year
INCOME TAXES On November 4, 2022, the Canadian Government introduced Bill C-32 which included legislation to increase the federal income tax rate by 1.5% on taxable income above $100 million for banking and life insurance groups. Bill C-32 received Royal Assent on December 15, 2022. The new legislation increased our annual effective tax rate by approximately 80 basis points compared to the prior year, as the increase from the higher federal income tax rate was partially offset by a one-time deferred tax recovery associated with the re-measurement of our net deferred tax assets at the higher tax rate. The current year effective income tax rate of 26.1% was 120 basis points higher than last year, primarily driven by the combined impact of the additional 1.5% of federal income tax associated with the enactment of Bill C-32 and non-recurring adjustments related to the completion of our prior year tax filings that increased tax expense in the current year compared to a reduction in tax expense recognized when our filings were completed in the prior year. COMPREHENSIVE INCOME Comprehensive income is comprised of net income and other comprehensive income (OCI), all net of taxes. Our OCI includes changes in unrealized gains and losses on debt securities measured at FVOCI, equity securities designated at FVOCI, and fair value changes for derivative instruments designated as cash flow hedges. Comprehensive income of $392 million was up $201 million due to a $187 million increase in OCI and a $14 million increase in net income. Higher OCI, net of tax, was driven by unrealized gains from changes in the fair value of our debt securities measured at FVOCI compared to losses in the prior year ($156 million) and the impact of reclassifications to net income ($49 million) related to our derivatives designated as cash flow hedges, partially offset by higher unrealized losses from the fair value of our derivatives designated as cash flow hedges ($16 million). Our debt securities portfolio, which is classified at FVOCI, is primarily comprised of bonds issued or guaranteed by federal (Canada or United States), provincial or municipal governments used exclusively for liquidity management purposes and have an average remaining duration of approximately one year. Fluctuations in value are generally attributed to changes in interest rates, movements in market credit spreads and shifts in the interest rate curve and are fully reflected in regulatory capital on an after-tax basis.
24 | CWB Financial Group 2023 Annual Report
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