Accounting

TABLE OF CONTENTS

Management’s Responsibility for Financial Reporting ............. 68

Independent Auditors’ Report .............................................. 69

Consolidated Financial Statements ...................................... 71

Consolidated Balance Sheets ................................................. 71

Consolidated Statements of Income ....................................... 72

Consolidated Statements of Comprehensive Income ................. 73

Consolidated Statements of Changes In Equity ......................... 74

Consolidated Statements of Cash Flows .................................. 75

Notes to Consolidated Financial Statements .......................... 76

Consolidated Financial Statements

CWB Financial Group 2020 Annual Report | 67

68 | CWB Financial Group 2020 Annual Report

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING The consolidated financial statements of Canadian Western Bank (CWB) and related financial information presented in this annual report have been prepared by management, who are responsible for the integrity and fair presentation of the information presented, which includes the consolidated financial statements, management’s discussion and analysis (MD&A) and other information. The consolidated financial statements were prepared in accordance with International Financial Reporting Standards, including the requirements of the Bank Act and related rules and regulations issued by the Office of the Superintendent of Financial Institutions Canada. The MD&A has been prepared in accordance with the requirements of securities regulators, including National Instrument 51-102 of the Canadian Securities Administrators (CSA).

The consolidated financial statements, MD&A and related financial information reflect amounts which must, of necessity, be based on informed estimates and judgments of management with appropriate consideration to materiality. The financial information represented elsewhere in this annual report is fairly presented and consistent with the consolidated financial statements.

Management has designed the accounting system and related internal controls, and supporting procedures are maintained to provide reasonable assurance that financial records are complete and accurate, assets are safeguarded and CWB is in compliance with all regulatory requirements. These supporting procedures include the careful selection and training of qualified staff, defined division of responsibilities and accountability for performance, and the written communication of policies and guidelines of business conduct and risk management throughout CWB.

We, as CWB’s Chief Executive Officer and Chief Financial Officer, will certify CWB’s annual filings with the CSA as required by National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings.

The system of internal controls is also supported by our internal audit function, which carries out periodic internal audits of all aspects of CWB’s operations. The Chief Internal Auditor has full and free access to the Audit Committee and to the external auditors.

The Audit Committee, appointed by the Board of Directors, is comprised entirely of independent directors who are not officers or employees of CWB. The Committee is responsible for reviewing the consolidated financial statements and annual report, including the MD&A, and recommending them to the Board of Directors for approval. Other key responsibilities of the Audit Committee include meeting with management, the Chief Internal Auditor and the external auditors to discuss the effectiveness of certain internal controls over the financial reporting process and the planning and results of the external audit. The Audit Committee also meets regularly with the Chief Financial Officer, Chief Internal Auditor and the external auditors without management present.

The Governance and Conduct Review Committee, appointed by the Board of Directors, is comprised of directors who are not officers or employees of CWB. Their responsibilities include reviewing related party transactions and reporting to the Board of Directors, those related party transactions which may have a material impact on CWB.

The Office of the Superintendent of Financial Institutions Canada, at least once a year, makes such examination and inquiry into the affairs of CWB and its federally regulated subsidiaries as is deemed necessary or expedient to satisfy themselves that the provisions of the relevant Acts, having reference to the safety of depositors, are being duly observed and that CWB is in a sound financial condition.

KPMG LLP, the independent auditors appointed by the shareholders of CWB, have performed an audit of the consolidated financial statements and their report follows. The external auditors have full and free access to, and meet periodically with, the Audit Committee to discuss their audit and any resulting matters.

Chris H. Fowler Carolyn J. Graham, FCPA, FCA President and Chief Executive Officer Executive Vice President and Chief Financial Officer

December 3, 2020

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INDEPENDENT AUDITORS’ REPORT To the Shareholders of Canadian Western Bank

OPINION

We have audited the consolidated financial statements of Canadian Western Bank (the Entity), which comprise:

• the consolidated balance sheets as at October 31, 2020 and October 31, 2019 • the consolidated statements of income for the years then ended • the consolidated statements of comprehensive income for the years then ended • the consolidated statements of changes in equity for the years then ended • the consolidated statements of cash flows for the years then ended • and notes to the consolidated financial statements, including a summary of significant accounting policies

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at October 31, 2020 and October 31, 2019, and its consolidated financial performance, and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).

BASIS FOR OPINION

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our auditors’ report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

OTHER INFORMATION

Management is responsible for the other information. Other information comprises:

• the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions. • the information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled “2020 Annual Report”.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors’ report.

We have nothing to report in this regard.

The information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled “2020 Annual Report” is expected to be made available to us after the date of this auditors’ report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance

RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity‘s financial reporting process.

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AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

• Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

KPMG LLP Chartered Professional Accountants

The engagement partner on the audit resulting in this auditors’ report is Arnold Singh

Edmonton, Canada December 3, 2020

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CONSOLIDATED BALANCE SHEETS ($ thousands)

As at October 31

2020

As at October 31 2019

Assets Cash Resources (Note 4)

Cash and non-interest bearing deposits with financial institutions $ 113,868 $ 116,963 Interest bearing deposits with regulated financial institutions 254,451 293,856 Cheques and other items in transit - 5,023

368,319 415,842

Securities (Note 5) Issued or guaranteed by Canada 1,317,967 1,341,326 Issued or guaranteed by a province or municipality 967,415 489,261 Other debt securities 377,244 170,456 Preferred shares 1,992 18,164

2,664,618 2,019,207

Securities Purchased Under Resale Agreements (Note 6) 50,084 40,366

Loans (Note 7) Personal 6,073,643 5,689,833 Business 24,094,076 22,786,894

30,167,719 28,476,727 Allowance for credit losses (159,326) (110,834)

30,008,393 28,365,893

Other Property and equipment (Note 9) 139,349 63,166 Goodwill (Note 10) 138,256 85,392 Intangible assets (Note 10) 220,708 173,748 Derivatives (Notes 11 and 27) 96,615 47,815 Other assets (Note 12) 251,523 212,806

846,451 582,927

Total Assets $ 33,937,865 $ 31,424,235

Liabilities and Equity Deposits (Note 13)

Personal $ 15,661,320 $ 15,300,505 Business and government 11,649,034 10,050,856

27,310,354 25,351,361

Other Cheques and other items in transit 52,326 22,532 Securities sold under repurchase agreements (Notes 6 and 8) 65,198 29,965 Derivatives (Notes 11 and 27) 6,285 14,016 Other liabilities (Note 14) 746,979 646,386

870,788 712,899

Debt Debt related to securitization activities (Notes 8 and 15) 2,051,680 1,913,799 Subordinated debentures (Note 15) 372,643 498,494

2,424,323 2,412,293

Equity Preferred shares (Note 16) 390,000 390,000 Limited recourse capital notes (Note 16) 175,000 - Common shares (Note 16) 730,846 731,970 Retained earnings 1,907,739 1,785,273 Share-based payment reserve (Note 17) 25,749 24,309 Accumulated other comprehensive income 102,204 14,258

Total Shareholders' Equity 3,331,538 2,945,810 Non-controlling interests (Note 18) 862 1,872

Total Equity 3,332,400 2,947,682

Total Liabilities and Equity $ 33,937,865 $ 31,424,235

The accompanying notes are an integral part of the consolidated financial statements.

Robert L. Phillips Chris H. Fowler Chair of the Board President and Chief Executive Officer

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CONSOLIDATED STATEMENTS OF INCOME For the Years Ended October 31 ($ thousands, except per share amounts)

2020 2019

Interest Income (Note 25) Loans $ 1,336,002 $ 1,379,730 Securities 29,046 30,696 Deposits with regulated financial institutions 3,866 8,274

1,368,914 1,418,700

Interest Expense Deposits 499,140 573,479 Debt 70,363 59,637

569,503 633,116

Net Interest Income 799,411 785,584

Non-interest Income Credit related 34,921 34,082 Wealth management services 33,565 19,640 Retail services 9,679 10,627 Trust services 8,377 7,651 Gains on securities, net 9,428 301 Other 2,014 3,719

97,984 76,020

Total Revenue 897,395 861,604 Provision for Credit Losses (Notes 5 and 7) 92,167 57,758

Acquisition-related Fair Value Changes (Note 26) - 7,854

Non-interest Expenses Salaries and employee benefits 281,408 257,966 Premises and equipment 80,362 70,515 Other expenses 74,876 77,000

436,646 405,481

Net Income before Income Taxes 368,582 390,511 Income Taxes (Note 21) 97,032 102,665

Net Income 271,550 287,846 Net income attributable to non-controlling interests 968 1,052

Shareholders' Net Income 270,582 286,794 Preferred share dividends (Note 16) 21,626 19,854

Common Shareholders' Net Income $ 248,956 $ 266,940

Average number of common shares (in thousands) 87,159 87,513 Average number of diluted common shares (in thousands) 87,192 87,739

Earnings Per Common Share (Note 22) Basic $ 2.86 $ 3.05 Diluted 2.86 3.04

The accompanying notes are an integral part of the consolidated financial statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended October 31 ($ thousands)

2020 2019

Net Income $ 271,550 $ 287,846

Other Comprehensive Income (Loss), net of tax Items that will be subsequently reclassified to net income Debt securities measured at fair value through other comprehensive income

Gains from change in fair value(1) 14,046 34,301 Reclassification to net income(2) (5,900) (354)

8,146 33,947

Derivatives designated as cash flow hedges Gains from change in fair value(3) 105,003 71,361 Reclassification to net income(4) (31,855) (383)

73,148 70,978

Items that will not be subsequently reclassified to net income Gains (losses) on equity securities designated at fair value through other comprehensive income(5) 528 (14,175)

81,822 90,750

Comprehensive Income $ 353,372 $ 378,596

Comprehensive income for the year attributable to: Shareholders $ 352,404 $ 377,544 Non-controlling interests 968 1,052

Comprehensive Income $ 353,372 $ 378,596

(1) Net of income tax of $4,623 (2019 – $12,132). (2) Net of income tax of $2,003 (2019 – $116). (3) Net of income tax of $34,277 (2019 – $26,007). (4) Net of income tax of $10,843 (2019 – $140). (5) Net of income tax of $171 (2019 – $4,982).

The accompanying notes are an integral part of the consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the Years Ended October 31 ($ thousands) 2020 2019

Preferred Shares (Note 16) Balance at beginning of year $ 390,000 $ 265,000

Issued - 125,000

Balance at end of year 390,000 390,000 Limited Recourse Capital Notes (Note 16) Balance at beginning of year - -

Issued 175,000 -

Balance at end of year 175,000 - Common Shares (Note 16) Balance at beginning of year 731,970 744,701

Purchased for cancellation (1,503) (15,326) Transferred from share-based payment reserve on the exercise or exchange of options 379 1,245 Issued under dividend reinvestment plan - 1,350

Balance at end of year 730,846 731,970 Retained Earnings Balance at beginning of year 1,785,273 1,649,196

Impact of adopting IFRS 16 on November 1, 2019 (Note 1) (13,035) n/a Impact of adopting IFRS 9 on November 1, 2018 n/a 22,514 Shareholders' net income 270,582 286,794 Dividends - Preferred shares (Note 16) (21,626) (19,854)

- Common shares (Note 16) (100,211) (94,573) Net premium on common shares purchased for cancellation (Note 16) (3,642) (34,266) Realized losses reclassified from accumulated other comprehensive income (Note 5) (6,124) (20,370) Issuance costs on limited recourse capital notes (2,157) - Issuance costs on preferred shares - (3,007) Decrease in equity attributable to non-controlling interests ownership change (1,321) (1,161)

Balance at end of year 1,907,739 1,785,273 Share-based Payment Reserve (Note 17) Balance at beginning of year 24,309 23,937

Amortization of fair value of options 1,819 1,617 Transferred to common shares on the exercise or exchange of options (379) (1,245)

Balance at end of year 25,749 24,309 Accumulated Other Comprehensive Income Debt securities measured at fair value through other comprehensive income Balance at beginning of year (2,021) (35,968)

Other comprehensive income 8,146 33,947

Balance at end of year 6,125 (2,021) Derivatives designated as cash flow hedge Balance at beginning of year 22,858 (48,120)

Other comprehensive income 73,148 70,978

Balance at end of year 96,006 22,858 Equity securities designated at fair value through other comprehensive income Balance at beginning of year (6,579) (12,774)

Other comprehensive income (loss) 528 (14,175) Realized losses reclassified to retained earnings (Note 5) 6,124 20,370

Balance at end of year 73 (6,579) Total accumulated other comprehensive income 102,204 14,258 Total Shareholders' Equity 3,331,538 2,945,810 Non-controlling Interests (Note 18) Balance at beginning of year 1,872 2,751

Net income attributable to non-controlling interests 968 1,052 Dividends to non-controlling interests (862) (1,071) Ownership change (1,116) (860)

Balance at end of year 862 1,872 Total Equity $ 3,332,400 $ 2,947,682

n/a – not applicable

The accompanying notes are an integral part of the consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended October 31 ($ thousands) 2020 2019

Cash Flows from Operating Activities Net income $ 271,550 $ 287,846 Adjustments to determine net cash flows:

Provision for credit losses (Notes 5 and 7) 92,167 57,758 Depreciation and amortization 50,448 32,444 Amortization of fair value of employee stock options (Note 17) 1,819 1,617 Current income taxes receivable and payable, net (60,813) 56,162 Accrued interest receivable and payable, net (25,458) 41,672 Deferred income taxes, net (10,173) (1,433) Gains on securities, net (9,428) (301) Fair value change in contingent consideration (Note 26) - 7,854

Change in operating assets and liabilities Deposits, net 1,958,993 1,651,404 Debt related to securitization activities, net 137,881 155,945 Derivative collateral payable 67,220 9,282 Securities sold under repurchase agreements, net 35,233 (65,161) Accounts payable and accrued liabilities 19,275 42,563 Loans, net (1,733,375) (2,202,000) Securities purchased under resale agreements, net (9,718) (40,366) Other items, net 74,858 (15,298)

860,479 19,988 Cash Flows from Financing Activities

Debentures redeemed (Note 15) (250,000) - Debentures issued, net of issuance costs (Note 15) 123,694 248,447 Limited recourse capital notes issued, net of issuance costs (Note 16) 172,843 - Preferred shares issued, net of issuance costs (Note 16) - 121,993 Dividends (121,837) (113,077) Repayment of lease liabilities (Note 1) (15,027) - Common shares purchased for cancellation (Note 16) (5,145) (49,592) Non-controlling interests, ownership change, dividends and contributions (3,721) (3,320)

(99,193) 204,451 Cash Flows from Investing Activities

Interest bearing deposits with regulated financial institutions, net 39,405 (267,031) Securities, purchased (12,117,629) (5,543,483) Securities, sales proceeds 5,324,496 2,454,694 Securities, matured 6,092,862 3,219,365 Property, equipment and intangible assets (54,819) (49,069) Acquisition, net of cash acquired (Note 3) (83,513) - Acquisition-related contingent consideration instalment payments (Note 26) - (37,368)

(799,198) (222,892) Change in Cash and Cash Equivalents (37,912) 1,547 Cash and Cash Equivalents at Beginning of Year 99,454 97,907

Cash and Cash Equivalents at End of Year * $ 61,542 $ 99,454 * Represented by:

Cash and non-interest bearing deposits with financial institutions $ 113,868 $ 116,963 Cheques and other items in transit (included in Cash Resources) - 5,023 Cheques and other items in transit (included in Other Liabilities) (52,326) (22,532)

Cash and Cash Equivalents at End of Year $ 61,542 $ 99,454

Supplemental Disclosure of Cash Flow Information

Interest and dividends received $ 1,397,866 $ 1,428,117 Interest paid 602,860 588,740 Income taxes paid 189,973 80,566

The accompanying notes are an integral part of the consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended October 31, 2020 and 2019 ($ thousands, except per share amounts)

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

A) REPORTING ENTITY

Canadian Western Bank (CWB) is a publicly traded, federally regulated Canadian bank headquartered in Edmonton, Alberta. We are a diversified financial services organization serving businesses and individuals across Canada.

The consolidated financial statements were authorized for issue by the Board of Directors on December 3, 2020.

B) BASIS OF CONSOLIDATION

The consolidated financial statements include the assets, liabilities and results of operations of CWB and all of its subsidiaries, after the elimination of intercompany transactions and balances. Subsidiaries are defined as entities whose operations are controlled by CWB and are corporations in which we are the beneficial owner. Non- controlling interest in subsidiaries is presented on the consolidated balance sheets as a separate component of equity that is distinct from shareholders’ equity. The net income attributable to non-controlling interest in subsidiaries is presented separately in the consolidated income statements. See Note 30 for details of CWB’s subsidiaries.

The consolidated financial statements have been prepared on a historic cost basis, except the revaluation of the following items: financial instruments classified as fair value through profit or loss, or as fair value through other comprehensive income and contingent consideration.

C) STATEMENT OF COMPLIANCE

These consolidated financial statements of CWB have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and in accordance with subsection 308 (4) of the Bank Act and the accounting requirements of the Office of the Superintendent of Financial Institutions Canada (OSFI).

The significant accounting policies used in the preparation of these financial statements, including the accounting requirements of OSFI, are summarized below and in the following notes.

D) USE OF ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with IFRS requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as at the date of the consolidated financial statements as well as the reported amount of revenues and expenses during the period. Key areas of estimation where we have made subjective judgments, often as a result of matters that are inherently uncertain, include those relating to the allowance for credit losses, fair value of financial instruments, impairment of goodwill and intangible assets, valuation of deferred tax assets and liabilities, impairment of financial instruments classified as fair value through profit or loss, or as fair value through other comprehensive income and fair value of stock options. Therefore, actual results could differ from these estimates.

COVID-19 Pandemic Considerations

The Canadian economy experienced significant disruption and market volatility related to the global COVID-19 pandemic. The overall impact of the pandemic continues to be uncertain and is dependent on actions taken by Canadian governments, businesses and individuals to limit spread of the COVID-19 virus, as well as government economic response and support efforts.

Information on critical judgments impacted by the COVID-19 pandemic that have the most significant effect on the amounts recognized in the consolidated financial statements is described in Note 7 Loans, Impaired Loans and Allowance for Credit Losses.

Additional information about the impact of COVID-19 on our risk management practices is provided in the Impact of COVID-19 and Our Response section of the Management’s Discussion and Analysis (MD&A).

E) SIGNIFICANT JUDGMENTS

Information on critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is described in Note 7 Loans, Impaired Loans and Allowance for Credit Losses.

F) BUSINESS COMBINATIONS

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured at the fair value of the consideration, including contingent consideration, given at the acquisition date. Contingent consideration is a financial instrument and, as such, is remeasured each period thereafter with the adjustment recorded to acquisition-related fair value changes in the consolidated statements of income. Acquisition-related costs are recognized as an expense in the income statement in the period in which they are incurred. The acquired identifiable assets, liabilities and contingent liabilities are measured at their fair values at the date of acquisition. Goodwill is measured as the excess of the aggregate of the consideration transferred, including any amount of any non-controlling interest in the acquiree, over the net of the recognized amounts of the identifiable assets acquired and the liabilities assumed.

We elect on a transaction-by-transaction basis whether to measure a non-controlling interest at its fair value or at its proportionate share of the recognized amount of the identifiable net assets, at the acquisition date.

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G) FUNCTIONAL AND FOREIGN CURRENCIES

The consolidated financial statements are presented in Canadian dollars, which is our functional currency. Assets and liabilities denominated in foreign currencies are translated into Canadian dollars at rates prevailing at the balance sheet date. Revenue and expenses in foreign currencies are translated at the average exchange rates prevailing during the period. Realized and unrealized gains and losses on foreign currency positions are included in non-interest income.

H) PROVISIONS AND CONTINGENT LIABILITIES

Management exercises judgment in determining whether a past event or transaction may result in the recognition of a provision or the disclosure of a contingent liability. Provisions are recognized in the consolidated financial statements when management determines that it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated, considering all relevant risks and uncertainties. Management as well as internal and external experts may be involved in estimating any amounts required. The actual costs of resolving these obligations may be significantly higher or lower than the recognized provision.

I) SPECIFIC ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, except as noted. To facilitate a better understanding of our consolidated financial statements, the significant accounting policies are disclosed in the notes, where applicable, with related financial disclosures by major caption:

Note Topic Note Topic

2 Financial instruments 17 Share-based payments 3 Acquisition 18 Non-controlling interests 4 Cash resources 19 Contingent liabilities and commitments 5 Securities 20 Employee future benefits 6 Securities sold under repurchase agreements

and purchased under resale agreements 21 22

Income taxes Earnings per common share

7 Loans, impaired loans and allowance for credit losses 23 Related party transactions 8 Financial assets transferred but not derecognized 24 Interest rate sensitivity 9 Property and equipment 25 Interest income 10 Goodwill and intangible assets 26 Fair value of financial instruments 11 Derivative financial instruments 27 Financial instruments - offsetting 12 Other assets 28 Risk management 13 Deposits 29 Capital management 14 Other liabilities 30 Subsidiaries 15 Debt 31 Comparative figures 16 Capital stock

J) CHANGES IN ACCOUNTING POLICIES

IFRS 16 Leases

We adopted IFRS 16 effective November 1, 2019, which replaced IAS 17 Leases (IAS 17). This standard provides principles for the recognition, measurement, presentation and disclosure of leases. The standard sets out a single lessee accounting model for all leases and eliminates the distinction between operating and financing leases. Lessor accounting remains substantially unchanged.

We elected to adopt IFRS 16 using the modified retrospective approach, in which we recognized the cumulative effect on initial application in retained earnings as of November 1, 2019. Prior period comparatives were not restated. At November 1, 2019, lease liabilities were measured at the present value of the remaining lease payments discounted at our weighted average incremental borrowing rate on that date of 3.01%. Right-of-use assets have generally been measured at an amount equal to the lease liability and adjusted by any prepaid or accrued lease payments. As permitted under IFRS 16, for select leases, we measured right-of-use assets retrospectively as if the standard had been applied since the commencement date of the lease, discounted using our November 1, 2019 incremental borrowing rate. On adoption, we applied the following recognition exemptions and practical expedients. We:

 did not apply the requirements of IFRS 16 to short-term and low value leases;  treated existing operating leases with a remaining term of less than 12 months at November 1, 2019 as short-term leases;  applied a single discount rate to a portfolio of leases with reasonably similar characteristics;  excluded initial direct costs related to existing leases from the measurement of the right-of-use assets;  relied on previous assessments of whether leases were onerous in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets immediately before

the date of application as an alternative to performing an impairment review; and,  used hindsight to determine the lease term where our lease contracts contain options to extend or terminate the lease.

The adoption of IFRS 16 resulted in the recognition of right-of-use assets of $79,874 within property and equipment and lease liabilities of $98,863 within other liabilities, primarily related to premises leases previously classified as operating leases. A transition adjustment of $13,035, net of taxes, reduced retained earnings primarily representing the difference between the right-of-use assets and lease liabilities recognized.

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The following table reconciles our minimum future operating lease commitments as at October 31, 2019, to the lease obligations recognized on initial application of IFRS 16 at November 1, 2019:

Lease commitments at October 31, 2019 $ 92,584

Short-term leases – transition exemption (216)

Low-value leases – transition exemption (13)

Extension and termination options reasonably certain to be exercised 28,470

Commitments for leases that have not yet commenced (7,045)

Undiscounted lease payments 113,780

Discount effect at November 1, 2019 (14,917)

Lease Liabilities Recognized as at November 1, 2019 $ 98,863

Accounting Policies for Leases under IFRS 16

As a lessee, new arrangements are assessed to determine whether a contract is or contains a lease in accordance with IFRS 16. A contract is or contains a lease if, in return for consideration, the contract conveys the right to obtain substantially all of the economic benefits from and direct the use of an identified asset for a period of time. If the arrangement meets this definition, we initially record a right-of-use asset and corresponding lease liability at the date the leased asset is available for use, subject to certain adjustments.

Lease liabilities are initially measured at the present value of contractual lease payments, discounted using the interest rate implicit in the lease, if that rate can be readily determined. In instances where we cannot determine the implicit lease rate, we use our incremental borrowing rate. In determining the lease term, we assess whether it is reasonably certain we will exercise the extension or termination options. This assessment considers all relevant facts and circumstances that create an economic incentive to exercise these options. Reassessment occurs if there is a significant change in circumstances. Where we are reasonably certain to exercise extension and termination options, they are included in the expected lease term. Interest expense on the lease liability is recorded using the effective interest rate method and presented within interest expense in the consolidated statements of income over the remaining lease term. Lease liabilities are remeasured when a modification to the lease contract occurs, which may include adjustments to future lease payments, or changes in assumptions related to the exercise of purchase, extension, or termination options.

Right-of-use assets are initially measured based on the amount of the related lease liabilities, adjusted for initial direct costs incurred and an estimate of costs to dismantle, remove, or restore the asset, less any lease incentives received. Right-of-use assets are generally depreciated on a straight-line basis over the earlier of the lease term and the expected life. If ownership will transfer to us or we are reasonably certain to exercise a purchase option at the end of the lease term, the expected life of the right-of- use asset is used. Right-of-use-asset depreciation is recognized in premises and equipment expense in the consolidated statements of income. Right-of-use assets are subsequently measured at cost less accumulated depreciation and any related accumulated impairments.

We apply IAS 36 Impairment of Assets to determine whether a right-of-use asset is impaired and account for any impairment loss as described in the premises and equipment accounting policies in Note 9.

We have elected not to recognize right-of-use assets and lease liabilities for lease contracts where the total term of the respective lease contract is less than or equal to 12 months or for low value lease contracts. Payments for short-term leases and low-value asset leases are recognized as an expense on a straight-line basis within premises and equipment expense in the consolidated statements of income.

Accounting Policies for Leases under IAS 17

The following accounting policies were applied to comparative information for the year ended October 31, 2019, as prior periods were not restated upon adoption of IFRS 16.

As lessees, we previously classified leases as either a finance or operating lease depending on whether substantially all the risks and rewards of ownership of the asset were transferred. Leases that transferred substantially all of the benefits and risks of ownership of property were classified as finance leases. All other arrangements that were determined to contain a lease were classified as operating leases.

Our leases, primarily branches and office premises, were previously classified as operating leases and were not capitalized. Total costs, including free rent periods and step- rent increases, were expensed on a straight-line basis within premises and equipment in the consolidated statements of income over the lease term.

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.

Interest Rate Benchmark Reform

In September 2019, the IASB issued Phase 1 amendments to hedge accounting requirements in IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures which address the possible effects of uncertainties created by Inter-bank Offered Rate (IBOR) reform. The amendments are effective for CWB’s fiscal year beginning November 1, 2020 with early adoption permitted. We have not early adopted the revised standards and determined there will be no significant impact upon adoption.

In August 2020, the IASB finalized its Phase 2 response to the ongoing IBOR and other interest rate benchmark reform by issuing a package of amendments to IFRS standards which focus on accounting and disclosure matters that will arise once an existing benchmark is replaced with an alternative benchmark rate. The amendments provide practical expedients if contract modifications result directly from IBOR reform and occur on an economic equivalent basis. In these cases, changes may be accounted for by updating the effective interest rate. Further, existing hedging relationships are not required to be discontinued if changes in hedge documentation are required solely by IBOR reform. The amendments are effective for CWB’s fiscal year beginning November 1, 2021 with early adoption permitted. We are in the process of assessing the impact of these amendments.

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Conceptual Framework for Financial Reporting

In March 2018, the IASB issued a revised version of the Conceptual Framework for Financial Reporting which assists the IASB in developing IFRS standards and serves as an accounting policy guide when no IFRS standard applies. The amendments provide revised definitions and recognition criteria for assets and liabilities, and guidance on different measurement bases. The IASB also issued amendments to IFRS standards to refer to the revised framework. The revisions are effective for CWB’s fiscal year beginning November 1, 2020. We have assessed the revised framework and determined there will be no significant impact upon adoption.

2. FINANCIAL INSTRUMENTS

As a financial institution, most of our balance sheets are comprised of financial instruments and the majority of net income results from gains, losses, income and expenses related to the same.

Financial assets include cash resources, securities, securities purchased under resale agreements, loans, derivative financial instruments and certain other assets. Financial liabilities include deposits, cheques and other items in transit, securities sold under repurchase agreements, derivative financial instruments, debt and certain other liabilities.

The use of financial instruments exposes CWB to credit, liquidity and market risk. A discussion of how these are managed can be found in the Risk Management section of the MD&A.

CLASSIFICATION AND MEASURMENT OF FINANCIAL ASSETS

Initial Recognition and Measurement

Financial assets consist of both debt and equity instruments. Financial assets are initially recognized at fair value and subsequently measured at fair value through profit or loss (FVTPL), fair value through other comprehensive income (FVOCI) or amortized cost.

Derivatives are measured at FVTPL, except to the extent that they are designated in a hedging relationship, in which case the IAS 39 hedge accounting requirements are applied as described in Note 11.

Debt Instruments

Debt instruments, including loans and debt securities, are initially measured at fair value and are subsequently classified and measured at FVTPL, FVOCI or amortized cost based on the contractual cash flow characteristics of the instrument and the business model under which the asset is held.

The intent of the assessment of the contractual cash flow characteristics of an instrument is to determine if contractual payments to be received represent solely principal and interest (SPPI), consistent with a basic lending arrangement. Principal, for the purposes of the test, is defined as the fair value of the instrument at initial recognition and is subject to change over its life due to transactions such as repayments and amortization of related premiums or discounts. Interest represents consideration for the time value of money, credit risk, other basic lending risks and costs, such as liquidity risk and administrative costs, as well as a profit margin. Contractual terms that introduce risks or volatility that are unrelated to a basic lending arrangement do not represent cash flows that are SPPI and as a result, the related financial asset is classified and measured at FVTPL.

For debt instruments that meet the requirements of the SPPI test, classification at initial recognition is determined based on the business model under which the assets are managed. Considerations include how performance of the debt instruments is evaluated, the risks that affect the performance of the business model, and how those risks are managed, and the manner in which management is compensated. Potential business models are as follows:

 Held to collect: Objective is to collect contractual cash flows.  Held to collect and sell: Objective is to both collect contractual cash flows and sell the financial assets.  Held for sale or other business models: Encompasses all other business models. CWB does not currently hold assets within this category.

The use of judgment is required in assessing both the contractual cash flow characteristics and the business model of debt instruments.

Measured at Amortized Cost

Debt instruments measured at amortized cost are managed under a ‘held to collect’ business model and have contractual cash flows that satisfy the requirements of the SPPI test. These financial assets are initially measured at fair value, net of transaction costs, and are subsequently measured at amortized cost using the effective interest rate method, net of allowance for credit losses estimated based on the expected credit loss (ECL) approach.

Measured at Fair Value through Other Comprehensive Income

Debt instruments measured at FVOCI, which are managed under a ‘held to collect and sell’ business model and have contractual cash flows that represent SPPI, are initially recorded at fair value, net of transaction costs. Subsequent to initial recognition, unrealized gains and losses related to the debt instruments are recorded in other comprehensive income (OCI), net of tax. Impairment losses and recoveries, estimated using an ECL approach, are recognized in the consolidated statements of income and correspondingly reduce the accumulated changes in fair value recorded in OCI. Gains and losses realized on disposal of debt instruments classified at FVOCI are included in the consolidated statements of income

Equity Instruments

Equity instruments are classified and measured at FVTPL unless an irrevocable election is made to designate non-trading instruments at FVOCI at the time of initial recognition. If the election is applied, unrealized gains and losses are recorded in OCI, net of tax, and are not subsequently reclassified to the consolidated statements of income. When realized, gains and losses that arise upon derecognition are reclassified from accumulated other comprehensive income (AOCI) to retained earnings. Equity securities are not subject to an impairment assessment.

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IMPAIRMENT

Expected Credit Loss Approach

The ECL approach categorizes financial assets into three stages based on changes in credit risk since initial recognition of the asset. A financial asset can move between stages depending on improvement or deterioration of credit risk.

Performing Assets

• Stage 1: From initial recognition until the date on which the financial asset experiences a significant increase in credit risk (SICR), the allowance for credit losses is measured based on ECL from defaults occurring in the 12 months following the reporting date.

• Stage 2: A financial asset migrates to Stage 2 when it experiences a SICR subsequent to initial recognition and the allowance for credit losses is measured based on ECL from defaults occurring over the remaining life of the asset.

Impaired Assets

• Stage 3: When a financial asset is identified as credit-impaired, it migrates to Stage 3 and an allowance for credit losses equal to full lifetime ECL is recognized. Interest income is recognized on the carrying amount of the asset, net of the allowance for credit losses.

ECL represents the discounted probability-weighted estimate of cash shortfalls expected to result from defaults over the relevant time horizon. ECL estimations are a function of the probability of default (PD), loss given default (LGD) and exposure at default (EAD). PD, which represents the estimate of the likelihood of default, considers past events, current market conditions and forward-looking information over the relevant time horizon. LGD represents an estimate of loss arising from default based on the difference between the contractual cash flows due and those that CWB expects to receive, including consideration for the amount and quality of collateral held. EAD represents an estimate of the exposure at a future default date, taking into account estimated future repayments of principal and draws on committed facilities.

For most financial assets, ECL is estimated on an individual basis. Financial assets for which an allowance for credit losses is estimated on a collective basis are grouped based on similar credit risk characteristics.

Forward-looking Information

The estimation of ECL and the assessment of SICR consider information about past events and current conditions as well as reasonable and supportable projections of future events and economic conditions. The estimation and application of forward-looking information requires significant judgment.

With consideration of several external sources of information, we formulate a base case view of the future direction of relevant macroeconomic variables, which is updated quarterly. A representative range of other possible forecast scenarios is developed to incorporate multiple probability-weighted outcomes. The base case scenario represents the best estimate of forecast macroeconomic variables.

Additional information regarding the incorporation of forward-looking information and the related judgment and estimation involved in the process is described in Note 7.

Assessment of Significant Increases in Credit Risk

At each reporting date, we assess whether a financial asset has experienced a SICR since initial recognition by comparing the risk of a default occurring over the asset’s remaining expected life at the reporting date and the date of initial recognition.

The assessment of changes in credit risk is performed at least quarterly, generally at the instrument level. Significant judgment is also required in the application of SICR thresholds. The thresholds used to define SICR are not expected to change frequently, and will be reassessed as needed based on significant changes in credit risk management practices.

Refer to Note 7 for additional information regarding the assessment of SICR.

Expected Life

When measuring ECL, we consider the maximum contractual period over which an exposure to credit risk exists. For most instruments, the expected life is limited to the remaining contractual life, including prepayment and extension options. For certain revolving credit facilities, the expected life is estimated based on the period over which we are exposed to credit risk and how credit losses are mitigated by management actions.

Modified Financial Assets

The original terms of a financial asset may be renegotiated or otherwise modified, resulting in an impact to contractual cash flows. In particular, in an effort to minimize our realized losses, modifications may be granted in situations where a borrower experiences financial difficulty. Modifications may include payment deferrals, extension of amortization periods, interest rate reductions, principal forgiveness, debt consolidation or forbearance. If it is determined that the modification results in expiry of cash flows, the original asset is derecognized and a new asset is recognized based on the new contractual terms.

Where a modification does not result in derecognition, the gross carrying amount of the financial asset is recalculated as the present value of the renegotiated or modified contractual cash flows, discounted at the original effective interest rate, and a gain or loss is recognized immediately in the consolidated statements of income. The financial asset continues to be subject to the same assessment for SICR relative to initial recognition. Expected cash flows arising from the modified contractual terms are considered when estimating ECL for the modified asset. Financial assets that are modified while having an allowance for credit losses equal to lifetime ECL may revert to having to an allowance for credit losses equal to 12-month ECL after a period of performance and improvement in the borrower’s financial condition.

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Definition of Default

The definition of default used in the estimation of ECL is consistent with the definition of default used for internal credit risk management purposes. Loans are determined to be in default and classified as impaired when payments are contractually past due 90 days or more, when we have commenced realization proceedings, or when we are of the opinion that the loan should be regarded as impaired based on objective evidence. Objective evidence that a loan is impaired may include significant financial difficulty of a borrower, default or delinquency of a borrower, breach of loan covenants or conditions, or indications that a borrower will enter bankruptcy.

Financial assets are reviewed on an ongoing basis to assess whether any should be classified as impaired. Loans that have become impaired are monitored closely by a specialized team with regular reviews of each loan and its realization plan. Impaired loans are returned to performing status when the timely collection of both principal and interest is reasonably assured and all delinquent principal and interest payments are brought current.

Write-offs

Financial assets are written off, either partially or in full, against the related allowance for credit losses when we conclude that there is no realistic prospect of future recovery in respect of those amounts. When financial assets are secured, this is generally after all collateral has been realized or transferred to us, or in certain circumstances, when the net realizable value of any collateral and other available information suggests that there is no reasonable expectation of further recovery. In subsequent periods, any recoveries of amounts previously written off are recorded as a reduction to the provision for credit losses in the consolidated statements of income.

3. ACQUISITION

On June 1, 2020, we acquired 100% of the common shares of iA Investment Counsel Inc., comprising the businesses of T.E. Wealth and Leon Frazer & Associates (the wealth acquisition), in exchange for $87 million cash. The wealth acquisition is accounted for in accordance with IFRS 3 Business Combinations as described in Note 1. The results of operations from the wealth acquisition have been included in our consolidated financial statements since the acquisition date.

T.E. Wealth and Leon Frazer & Associates provide financial planning and wealth management services that target high-net-worth clients as well as investment management and financial education services to Indigenous communities. The wealth acquisition has a significant client base in Ontario as well as across Canada, including Quebec, Alberta and British Columbia.

Along with $6 billion of off-balance sheet assets under management, advisement and administration, the following table summarizes the fair value of the assets acquired and liabilities assumed on the acquisition date:

Assets and Liabilities Acquired at Fair Value

June 1 2020

Goodwill $ 52,506

Intangible assets 33,123

Property and equipment 5,703

Cash and non-interest bearing deposits with financial institutions 3,303

Other assets(1) 10,384

Other liabilities(2) (18,203)

Net Assets Acquired $ 86,816

(1) Includes accounts receivable of $9,870, with a carrying value which approximates fair value. (2) Includes deferred tax liability of $7,767.

Intangible assets include customer relationships, brands, and software. Goodwill primarily reflects the value of future growth prospects and expected business synergies from combining the acquired businesses with our existing wealth management businesses. The goodwill and the majority of intangible assets are not deductible for income tax purposes.

Since June 1, 2020, the wealth acquisition contributed $14,681 of wealth management non-interest income and a net loss of $661, including after-tax acquisition and integration costs of $2,442 and amortization of acquisition related intangible assets of $898. If the acquisition had occurred on November 1, 2019, the wealth acquisition would have contributed approximately $36 million to wealth management non-interest income and a net loss of approximately $2 million, including the estimated amortization of acquisition related intangible assets of approximately $2 million to October 31, 2020.

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4. CASH RESOURCES

Cash resources include highly liquid investments that are readily convertible to cash and are subject to an insignificant risk of change in value. Cheques and other items in transit included in cash resources are recorded at amortized cost and represent the net position of uncleared cheques and other items in transit.

Interest bearing deposits with regulated financial institutions included in cash resources are classified and measured at FVOCI as the requirements of the SPPI test are satisfied and the deposits are managed under a ‘hold to collect and sell’ business model. Changes in fair value are reported in other comprehensive income, net of income taxes.

At October 31, 2020, the fair value of deposits with regulated financial institutions was $254,451 (October 31, 2019 – $293,856) with $21,515 (October 31, 2019 – $20,355) restricted from use in relation to the securitization of equipment financing leases and loans.

5. SECURITIES

Classification and Measurement

The securities portfolio consists of both debt securities and preferred shares. The applicable measurement categories are as follows:

Debt Securities

Debt securities, which are measured at FVOCI, have contractual cash flows that satisfy the requirements of the SPPI test and are purchased with the objective of collecting contractual cash flows and selling the assets in response to, or in anticipation of, changes in interest rate, credit or foreign currency risk, funding sources, terms or to meet liquidity requirements.

Debt securities measured at FVOCI are initially recorded at fair value, net of transaction costs. They are subsequently measured at fair value, with unrealized gains and losses recorded in OCI, net of tax, until the security is sold. Gains and losses realized upon sale of the securities are recorded in gains (losses) on securities, net in the consolidated statements of income. Interest income earned is recorded using the effective interest method.

Preferred Shares

CWB has made the irrevocable election to measure preferred shares, which are equity instruments held for long-term investment purposes, at FVOCI. Dividends from preferred shares are recognized in interest income in the consolidated statements of income. Unrealized gains and losses are recorded in OCI, net of tax, and are subsequently transferred directly to retained earnings if the instrument is sold.

The analysis of securities at carrying value, by type and maturity or reprice date, follows:

Maturity/Reprice

Within 1 Year

1 to 3 Years

3 to 5 Years

Greater than 5 years

As at October 31

2020

As at October 31

2019

Measured at FVOCI Interest bearing deposits with regulated financial institutions(1) $ 254,451 $ - $ - $ - $ 254,451 $

293,856

Debt securities issued or guaranteed by Canada 515,089 637,354 127,164 38,360 1,317,967

1,341,326

A province or municipality 62,428 370,255 34,732 - 967,415 489,261

Other debt securities(2) 213,279 137,906 - 26,059 377,244 170,456

Designated at FVOCI Preferred shares 1,992 - -

- 1,992

18,164

Total $ 1,547,239 $ 1,145,515 S 161,896 $ 64,419 $ 2,919,069 $ 2,313,063

(1) Included in cash resources on the consolidated balance sheets. (2) Includes securities issued or guaranteed by the United States Treasury of $93,078 (October 31, 2019 – $76,033).

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Unrealized Gains and Losses

Unrealized gains and losses related to debt securities and cash resources measured at FVOCI and equity securities designated at FVOCI are as follows:

As at October 31, 2020

Amortized Cost(1)

Unrealized

Gains

Unrealized Losses

Fair

Value

Measured at FVOCI Interest bearing deposits with regulated financial institutions $ 254,442 $ 11 $ 2 $ 254,451 Debt securities issued or guaranteed by

Canada 1,313,002 5,232 267 1,317,967 A province or municipality 964,084 3,394 63 967,415

Other debt securities 376,377 1,126 259 377,244

Designated at FVOCI Preferred shares 1,953 39 - 1,992

Total $ 2,909,858 $ 9,802 $ 591 $ 2,919,069

As at October 31, 2019

Amortized Cost(1)

Unrealized

Gains

Unrealized Losses

Fair

Value

Measured at FVOCI Interest bearing deposits with regulated financial institutions $ 293,865 $ - $ 9 $ 293,856 Debt securities issued or guaranteed by

Canada 1,344,455 477 3,606 1,341,326 A province or municipality 489,361 290 390 489,261

Other debt securities 170,431 76 51 170,456

Designated at FVOCI Preferred shares 26,648 - 8,484 18,164

Total $ 2,324,760 $ 843 $ 12,540 $ 2,313,063

(1) The amortized cost of debt securities and cash resources measured at FVOCI is net of an allowance for credit losses of $349 (October 31, 2019 – $196).

During the year ended October 31, 2020, we disposed of preferred shares with a fair value of $16,690 (October 31, 2019 – $56,279). Related to the dispositions, we reclassified cumulative after-tax realized losses of $6,124 from AOCI to retained earnings (October 31, 2019 – $20,370). Dividend income recognized in the consolidated statements of income on preferred shares that were held at October 31, 2020 totaled $41 (October 31, 2019 – $999). Dividend income recognized in the consolidated statements of income related to preferred shares disposed during the year totaled $117 (October 31, 2019 – $1,355).

Impairment

Impairment losses and recoveries on debt securities measured at FVOCI, estimated using an ECL approach, are recognized in the provision for credit losses in the consolidated statements of income and correspondingly reduce the accumulated changes in fair value recorded in OCI.

During the year ended October 31, 2020, credit losses of $153 (October 31, 2019 – reversal of $103) were recorded in the consolidated statements of income related to a reduction in the estimated allowance for credit losses on performing debt securities measured at FVOCI, all of which were in Stage 1 as at October 31, 2020 (October 31, 2019 – increase).

6. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS AND PURCHASED UNDER RESALE AGREEMENTS

Securities sold under repurchase agreements represent the sale of Government of Canada securities or United States Treasury securities by CWB effected with a simultaneous agreement to purchase them back at a specified price on a future date, which is generally short term. The difference between the proceeds of the sale and the predetermined cost to be paid on a resale agreement is recorded as deposit interest expense.

Securities purchased under resale agreements represent the purchase of Government of Canada or United States Treasury securities by CWB effected with a simultaneous agreement to sell them back at a specified price on a future date, which is generally short term. The difference between the cost of the purchase and the predetermined proceeds to be received on a resale agreement is recorded as securities interest income.

Securities sold under repurchase agreements and purchased under resale agreements are classified and measured at amortized cost in the consolidated balance sheets.

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7. 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 generate 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

($ millions)

BC AB ON SK QC MB Other Total Oct. 31

2020 Oct. 31

2019

Personal(1) $ 1,639 $ 1,680 $ 2,233 $ 274 $ - $ 129 $ 119 $ 6,074 20% 20%

Business General commercial loans

2,917 2,930 2,801 307 286 302 154 9,697 32 30

Commercial mortgages 2,802 2,291 176 276 15 136 - 5,696 19 18

Equipment financing and leasing(2) 797 1,339 1,424 462 624 264 344 5,254 17 18

Real estate project loans 1,567 1,110 382 87 13 93 - 3,252 11 13

Oil and gas production loans - 179 - 16 - - - 195 1 1

8,083 7,849 4,783 1,148 938 795 498 24,094 80 80

Total(3) $ 9,722 $ 9,529 $ 7,016 $ 1,422 $ 938 $ 924 $ 617 $ 30,168 100% 100%

Composition Percentage October 31, 2020

32% 32% 23% 5% 3% 3% 2% 100%

October 31, 2019 33% 32% 22% 5% 3% 3% 2% 100%

(1) Includes mortgages securitized through the National Housing Act Mortgage Backed Securities program reported on-balance sheet of $1,093 (October 31, 2019 – $837) (see Note 8). (2) Includes securitized leases and loans reported on-balance sheet of $1,678 (October 31, 2019 – $1,613) (see Note 8). (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 AAA to BBB- Aaa to Baa3 Non-investment grade or medium risk 6L to 8L BB+ to CCC+ Ba1 to Caa1 Watchlist or high risk 9H to 10L CCC and below Caa2 and below Impaired 11 to 12 Default Default

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Carrying Value of Exposures by Risk Rating

Gross carrying amounts of loans and the contractual amounts of committed but undrawn credit exposures and letters of credit, categorized based on internal risk ratings, are as follows:

As at October 31, 2020

Performing Impaired

Total Stage 1 Stage 2 Stage 3

Loans – Personal Low risk $ 1,825,017 $ 1,549,911 $ - $ 3,374,928 Medium risk 543,315 1,900,608 - 2,443,923 Watchlist or high risk - 228,311 - 228,311 Impaired - - 26,481 26,481

Total 2,368,332 3,678,830 26,481 6,073,643 Allowance for credit losses (1,338) (5,360) (829) (7,527)

Total, net of allowance for credit losses 2,366,994 3,673,470 25,652 6,066,116

Loans – Business Investment grade or low risk 1,679,587 157,541 - 1,837,128 Non-investment grade or medium risk 15,545,571 5,837,525 - 21,383,096 Watchlist or high risk - 643,192 - 643,192 Impaired - - 230,660 230,660

Total 17,225,158 6,638,258 230,660 24,094,076 Allowance for credit losses (55,829) (62,664) (33,306) (151,799)

Total, net of allowance for credit losses 17,169,329 6,575,594 197,354 23,942,277

Total loans 19,593,490 10,317,088 257,141 30,167,719 Allowance for credit losses (57,167) (68,024) (34,135) (159,326)

Total Loans, Net of Allowance for Credit Losses $ 19,536,323 $ 10,249,064 $ 223,006 $ 30,008,393

Committed but Undrawn Credit Exposures and Letters of Credit Investment grade or low risk $ 1,001,324 $ 159,135 $ - $ 1,160,459 Non-investment grade or medium risk 3,110,428 1,865,438 - 4,975,866 Watchlist or high risk - 34,498 - 34,498 Impaired - - - -

Total 4,111,752 2,059,071 - 6,170,823 Allowance for credit losses (1,682) (3,405) - (5,087)

Total, Net of Allowance for Credit Losses $ 4,110,070 $ 2,055,666 $ - $ 6,165,736

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As at October 31, 2019

Performing Impaired

Total Stage 1 Stage 2 Stage 3

Loans – Personal Low risk $ 2,955,248 $ 48,534 $ - $ 3,003,782 Medium risk 2,034,651 507,047 - 2,541,698 Watchlist or high risk - 114,085 - 114,085 Impaired - - 30,268 30,268

Total 4,989,899 669,666 30,268 5,689,833 Allowance for credit losses (1,614) (1,469) (1,036) (4,119)

Total, net of allowance for credit losses 4,988,285 668,197 29,232 5,685,714

Loans – Business Investment grade or low risk 1,667,859 32,794 - 1,700,653 Non-investment grade or medium risk 20,059,887 617,162 - 20,677,049 Watchlist or high risk - 291,210 - 291,210 Impaired - - 117,982 117,982

Total 21,727,746 941,166 117,982 22,786,894 Allowance for credit losses (59,957) (21,830) (24,928) (106,715)

Total, net of allowance for credit losses 21,667,789 919,336 93,054 22,680,179

Total loans 26,717,645 1,610,832 148,250 28,476,727 Allowance for credit losses (61,571) (23,299) (25,964) (110,834)

Total Loans, Net of Allowance for Credit Losses $ 26,656,074 $ 1,587,533 $ 122,286 $ 28,365,893

Committed but Undrawn Credit Exposures and Letters of Credit Investment grade or low risk $ 1,029,967 $ 2,655 $ - $ 1,032,622 Non-investment grade or medium risk 4,518,220 108,812 - 4,627,032 Watchlist or high risk - 19,484 - 19,484 Impaired - - - -

Total 5,548,187 130,951 - 5,679,138 Allowance for credit losses (2,601) (1,590) - (4,191)

Total, Net of Allowance for Credit Losses $ 5,545,586 $ 129,361 $ - $ 5,674,947

Payment Deferrals

In response to the COVID-19 pandemic, we considered payment deferral requests from eligible commercial and personal customers. The agreement to a payment deferral on its own does not represent a significant increase in credit risk for an individual borrower that required migration from Stage 1 to Stage 2 under IFRS 9, nor are facilities with payment deferrals considered past due. Loans that have migrated to Stage 2 have experienced a significant increase in credit risk due to the adverse shift in economic conditions and forecasts. In assessing credit risk, we monitor the credit quality of impacted borrowers using sound credit risk management practices. The loan modifications due to payment deferrals did not result in any modification gains or losses. Details regarding the number and balance of loans under payment deferral terms within Stages 1 and 2 included in the Carrying Value of Exposures by Risk Rating table above, are as follows:

($ millions, except number of loans)

As at October 31, 2020

Stage 1 Stage 2 Total

Number of Loans Balance

Number of Loans Balance

Number of Loans Balance

Personal loans and mortgages 146 $ 52 352 $ 122 498 $ 174

General commercial loans 44 127 24 76 68 203

Commercial mortgages 45 126 10 28 55 154

Equipment financing and leasing 252 55 124 46 376 101

Real estate project loans - - - - - -

Oil and gas production loans - - - - - -

Total 487 $ 360 510 $ 272 997 $ 632

CWB Financial Group 2020 Annual Report | 87

Impaired and Past Due Loans

Outstanding gross loans and impaired loans, net of allowance for credit losses, by loan type, are as follows:

As at October 31, 2020 As at October 31, 2019

Gross Amount

Gross Impaired

Amount(1) Stage 3

Allowance

Net Impaired

Loans Gross

Amount

Gross Impaired

Amount(1) Stage 3

Allowance

Net Impaired

Loans

Personal $ 6,073,643 $ 26,481 $ 829 $ 25,652 $ 5,689,833 $ 30,268 $ 1,036 $ 29,232

Business

General commercial loans 9,697,325 90,628 21,261 69,367 8,599,527 26,030 7,030 19,000

Commercial mortgages(2) 5,695,614 48,797 1,719 47,078 5,088,193 22,950 2,764 20,186

Equipment financing and leasing 5,253,503 63,642 10,326 53,316 5,191,901 43,767 15,134 28,633

Real estate project loans 3,252,519 24,858 - 24,858 3,752,480 5,446 - 5,446

Oil and gas production loans 195,115 2,735 - 2,735 154,793 19,789 - 19,789

Total $ 30,167,719 $ 257,141 $ 34,135 $ 223,006 $ 28,476,727 $ 148,250 $ 25,964 $ 122,286

(1) Gross impaired loans include foreclosed assets with a carrying value of $4,357 (October 31, 2019 – 4,217). CWB pursues timely realization on foreclosed assets and does not use the assets for its own operations. (2) Multi-family residential mortgages are included in commercial mortgages.

During the year, interest recognized as income on impaired loans totaled $7,801 (2019 – $3,328).

Outstanding impaired loans, net of allowance for credit losses, by provincial location of security are as follows:

As at October 31, 2020 As at October 31, 2019

Gross Impaired Amount

Stage 3

Allowance

Net Impaired

Loans

Gross Impaired Amount

Stage 3 Allowance

Net Impaired

Loans

Alberta $ 105,487 $ 14,292 $ 91,195 $ 77,891 $ 10,692 $ 67,199

British Columbia 40,304 4,659 35,645 17,488 1,349 16,139

Ontario 60,892 8,104 52,788 20,126 4,157 15,969

Saskatchewan 23,692 2,103 21,589 10,529 2,181 8,348

Quebec 8,636 1,942 6,694 6,622 1,886 4,736

Manitoba 4,007 2,356 1,651 11,831 4,795 7,036

Other 14,123 679 13,444 3,763 904 2,859

Total $ 257,141 $ 34,135 $ 223,006 $ 148,250 $ 25,964 $ 122,286

Loans are considered past due when a customer has not made a payment by the contractual due date. The following table presents the carrying value of loans that are contractually past due but not classified as impaired:

As at October 31, 2020 1 - 30

days 31 - 60

days 61 - 90

days

Total

Personal $ 38,975 $ 9,874 $ 1,770 $ 50,619

Business 100,685 31,925 16,559 149,169

Total $ 139,660 $ 41,799 $ 18,329 $ 199,788

As at October 31, 2019 $ 169,979 $ 74,030 $ 11,355 $ 255,364

Allowance for Credit Losses

Allowance for credit losses related to performing loans is estimated using an ECL approach that incorporates a number of underlying assumptions which involve a high degree of management judgment and can have a significant impact on financial results. The allowance for credit losses is our most significant accounting estimate. Significant key drivers impacting the estimation of ECL, which are interrelated, include:

• changes in internal risk ratings attributable to a borrower or instrument reflecting changes in credit quality; • thresholds used to determine when a borrower has experienced a SICR; and, • changes in forward-looking information, specifically related to variables to which the ECL models are calibrated.

The inputs and models used for estimating ECL may not always capture all emerging market conditions at the reporting date and as such, qualitative adjustments based on expert judgment that consider reasonable and supportable information may be incorporated.

88 | CWB Financial Group 2020 Annual Report

Assessment of Significant Increases in Credit Risk

The determination of whether a loan has experienced a SICR has a significant impact on the estimation of allowance for credit losses as 12-month ECL is recorded for loans in Stage 1 and lifetime ECL are recorded for loans that have migrated to Stage 2. Movement between Stages 1 and 2 is impacted by changes in borrower-specific risk characteristics as well as changes in applicable forward-looking information. The main factors considered in assessing whether a loan has experienced a SICR are relative changes in internal risk ratings since initial recognition, incorporating forward-looking information, and certain other criteria such as 30 days past due and migration to watchlist status.

Forecasting Forward-looking Information

Forward-looking information is incorporated into both the assessment of whether a loan has experienced a SICR since its initial recognition and the estimation of ECL. The models used to estimate ECL consider macroeconomic factors that are most closely correlated with credit risk in the relevant portfolios and are calibrated to consider our geographic diversification.

As indicated in Note 1, COVID-19 and the measures taken by Canadian federal, provincial and municipal governments to limit its spread have had a material adverse impact on the Canadian economy. To mitigate the economic impact, governments enacted policy measures to provide economic stimulus and financial support to individuals and businesses, and to settle financial market volatility.

The forward-looking macroeconomic scenario described below reflects our best estimate as at October 31, 2020, calibrated to an average of the large Canadian banks’ macroeconomic forecasts. The rapidly evolving nature of this pandemic and its impacts on the economy, along with government relief and stimulus, has led to continuously changing macroeconomic assumptions. Hindsight cannot be used, so while these evolving assumptions may result in future forecasts that differ from those used in the ECL estimation as at October 31, 2020, those changes will be reflected in future quarters.

The primary macroeconomic variables, for each quarter over the next 12 months and the remaining forecast period thereafter, used to estimate ECL are as follows:

Forecast

Macroeconomic Variable January 31

2021 April 30

2021 July 31

2021 October 31

2021

Remaining Forecast

Period

GDP growth (decline), quarter over quarter, annualized (5) % (1) % 13 % 6 % 3 %

Unemployment rate 9 8 8 7 6

Housing price growth (decline), year over year 1 (2) 3 1 2

Three-month treasury bill rate 0.2 0.2 0.2 0.2 2.4

U.S. dollar/Canadian dollar exchange rate $ 1.36 $ 1.35 $ 1.34 $ 1.34 $ 1.34

WTI oil price (U.S. dollar per barrel) 40 45 46 46 49

The primary macroeconomic variables impacting ECL for personal loan portfolios are unemployment rates and Multiple Listings Service (MLS) housing resale price growth. Business portfolios are impacted by all of the variables in the table above, to varying degrees. Increases in unemployment rates and interest rates will generally correlate with higher expected credit losses while increases in oil price, annual gross domestic product (GDP) growth, and MLS housing resale price growth, and the U.S. dollar/Canadian dollar exchange rate will generally result in lower ECL.

The forecast scenario presented in the table above incorporates assumptions about the resulting economic impacts of the COVID-19 pandemic, based on information and facts available at October 31, 2020. The forecast assumes a gradual and continued recovery of the economy and the estimated impact of various government and central bank stimulus programs. Housing price growth typically lags behind other economic factors, with a slight dip forecast in 2021, followed by a resumption of growth. The oil price forecast begins at the current price with a gradual recovery following increased energy demand as the economy recovers.

ECL is sensitive to changes in both the scenario described above as well as the incorporation of multiple macroeconomic scenarios. Our models include a simulation incorporating a large volume of alternate macroeconomic scenarios into our ECL estimate. This approach resulted in an increase of approximately $12 million to the performing loan allowance for credit losses at October 31, 2020, relative to using only the forecast scenario presented above.

We continue to supplement our modeled ECL to reflect expert credit judgments to our estimation of ECL. These expert credit judgments account for the variability in the results provided by the models and consider the impact of both tail-risk events and the lagging impacts of typical credit cycles. These expert credit judgments also allow us to incorporate the estimated impact of the unprecedented levels of government stimulus and support, which cannot be modelled historically as they have not occurred in the past, or any risks of uncertainties that we believe have not been fully reflected in our underlying models.

Stage 3 Allowance for Credit Losses

For impaired loans in Stage 3, the allowance for credit losses is measured for each loan as the difference between the carrying value of the loan at the time it is classified as impaired and the present value of the cash flows we expects to receive, using the original effective interest rate of the loan. When the amounts and timing of future cash flows cannot be reliably estimated, either the fair value of the security underlying the loan, net of any expected realization costs, or the current market price for the loan may be used to measure the estimated realizable amount. Security can vary by type of loan and may include real property, working capital, guarantees, or other equipment.

CWB Financial Group 2020 Annual Report | 89

Reconciliation

A reconciliation of changes in the allowance for credit losses related to loans, committed but undrawn credit exposures and letters of credit follows:

2020

Performing Impaired

Total Stage 1 Stage 2 Stage 3

Personal Balance at beginning of year $ 1,620 $ 1,480 $ 1,036 $ 4,136 Transfers to (from)

Stage 1(1) 223 (223) - - Stage 2(1) (1,871) 1,871 - - Stage 3(1) (2) (1,168) 1,170 -

Net remeasurement(2) (1,139) 3,874 360 3,095 New originations 2,860 - - 2,860 Derecognitions and maturities (345) (458) (4) (807)

Provision for (reversal of) credit losses(3) (274) 3,896 1,526 5,148 Write-offs - - (1,795) (1,795) Recoveries - - 62 62

Balance at end of year 1,346 5,376 829 7,551

Business Balance at beginning of year $ 62,552 $ 23,409 $ 24,928 $ 110,889 Transfers to (from)

Stage 1(1) 8,654 (8,654) - - Stage 2(1) (16,686) 16,779 (93) - Stage 3(1) (224) (12,965) 13,189 -

Net remeasurement(2) (34,733) 68,716 42,053 76,036 New originations 68,588 - - 68,588 Derecognitions and maturities (30,648) (21,232) (6,120) (58,000)

Provision for (reversal of) credit losses(3) (5,049) 42,644 49,029 86,624 Write-offs - - (46,736) (46,736) Recoveries - - 6,085 6,085

Balance at end of year 57,503 66,053 33,306 156,862

Total Allowance for Credit Losses $ 58,849 $ 71,429 $ 34,135 $ 164,413

Represented by: Loans $ 57,167 $ 68,024 $ 34,135 $ 159,326 Committed but undrawn credit exposures and letters of credit(4) 1,682 3,405 - 5,087

Total Allowance for Credit Losses(5) $ 58,849 $ 71,429 $ 34,135 $ 164,413

(1) Represents stage movements prior to remeasurement of the allowance for credit losses. (2) Represents credit risk changes as a result of significant increases in credit risk, changes in credit risk that did not result in a transfer between stages, changes in model inputs and assumptions, including changes in forward-looking

macroeconomic forecasts and qualitative adjustments, and changes due to partial repayment. (3) Included in the provision for credit losses in the consolidated statements of income. (4) Included in other liabilities in the consolidated balance sheets. (5) Allowance for credit losses related to debt securities measured at FVOCI, cash resources and other financial assets classified at amortized cost were excluded from the table above. See Note 5 for details related to the allowance

for credit losses on debt securities measured at FVOCI. Cash resources and other financial assets classified at amortized cost are presented in the consolidated balance sheets, net of allowance for credit losses.

90 | CWB Financial Group 2020 Annual Report

2019

Performing Impaired

Total Stage 1 Stage 2 Stage 3

Personal Balance at beginning of year $ 1,461 $ 1,181 $ 647 $ 3,289 Transfers to (from)

Stage 1(1) 211 (211) - - Stage 2(1) (369) 389 (20) - Stage 3(1) (10) (96) 106 -

Net remeasurement(2) (1,236) 594 1,860 1,218 New originations 1,870 - - 1,870 Derecognitions and maturities (307) (377) (172) (856)

Provision for (reversal of) credit losses(3) 159 299 1,774 2,232 Write-offs - - (1,422) (1,422) Recoveries - - 37 37

Balance at end of year 1,620 1,480 1,036 4,136

Business Balance at beginning of year $ 59,325 $ 26,570 $ 26,380 $ 112,275 Transfers to (from)

Stage 1(1) 13,802 (13,802) - -

Stage 2(1) (5,780) 6,788 (1,008) - Stage 3(1) (158) (3,231) 3,389 -

Net remeasurement(2) (34,446) 14,896 53,477 33,927 New originations 46,846 - - 46,846 Derecognitions and maturities (17,037) (7,812) (295) (25,144)

Provision for (reversal of) credit losses(3) 3,227 (3,161) 55,563 55,629 Write-offs - - (60,844) (60,844) Recoveries - - 3,829 3,829

Balance at end of year 62,552 23,409 24,928 110,889

Total Allowance for Credit Losses(4) $ 64,172 $ 24,889 $ 25,964 $ 115,025

Represented by: Loans $ 61,571 $ 23,299 $ 25,964 $ 110,834 Committed but undrawn credit exposures and letters of credit(4) 2,601 1,590 - 4,191

Total Allowance for Credit Losses(5) $ 64,172 $ 24,889 $ 25,964 $ 115,025

8. FINANCIAL ASSETS TRANSFERRED BUT NOT DERECOGNIZED

Securitization of equipment financing leases and loans

We securitize equipment financing leases and loans to third parties. These securitizations do not qualify for derecognition as we continue to be exposed to certain risks associated with the leases and loans, therefore we have not transferred substantially all of the risk and rewards of ownership. As the leases and loans do not qualify for derecognition, the assets are not removed from the consolidated balance sheets and a securitization liability is recognized within debt related to securitization activities for the cash proceeds received (see Note 15).

During 2020, we securitized equipment financing leases and loans of $1,253,266 (2019 – $784,125) which were sold to third parties for cash proceeds of $1,115,814 (2019 – $704,392).

Securitization of residential mortgages

We securitize fully insured residential mortgage loans through the creation of mortgage-backed securities under the National Housing Act Mortgage Backed Securities (NHA MBS) program sponsored by the Canada Mortgage and Housing Corporation (CMHC). The mortgage-backed securities are sold directly to third party investors, sold to the Canada Housing Trust (CHT) as part of the Canada Mortgage Bond (CMB) program or are held by us. The CHT issues CMBs, which are government guaranteed, to third party investors and uses resulting proceeds to purchase NHA MBS from us and other mortgage issuers in the Canadian market.

The third party sale of the mortgage pools that comprise the NHA MBS does not qualify for derecognition as we retain the credit and interest rate risks associated with the mortgages, which represent substantially all of the risks and rewards associated with the transferred assets. As a result, the mortgages remain on the consolidated balance sheets as personal loans and are carried at amortized cost. Cash proceeds from the third party sale of the mortgage pools, including those sold as part of the CMB program, are recognized within debt related to securitization activities (see Note 15).

During 2020, we securitized residential mortgages of $208,305 which were sold to the CHT for cash proceeds of $207,005 (2019 – $203,455 sold for cash proceeds of $202,871) and did not sell any securitized residential mortgages directly to third party investors (2019 – nil).

CWB Financial Group 2020 Annual Report | 91

Securities sold under repurchase agreements

We enter into repurchase agreements under which we sell previously recognized securities, with a simultaneous agreement to purchase them back at a specific price on a future date, but retain substantially all of the credit, price, interest rate, and foreign exchange risks and rewards associated with the assets (see Note 6). These securities are not derecognized and the cash proceeds from the sale are recognized within other liabilities on the consolidated balance sheets.

Additionally, we have securitized residential mortgages through the NHA MBS program totaling $577,449 with a fair value of $584,743 (2019 – $394,342 with a fair value of $393,159) that were not transferred to third parties.

Details about the nature of transferred financial assets that do not qualify for derecognition and the associated liabilities are as follows:

As at October 31, 2020 As at October 31, 2019

Carrying Value Fair Value Carrying Value Fair Value

Transferred Assets that do not Qualify for Derecognition Securitized leases and loans $ 1,677,515 $ 1,710,730 $ 1,613,426 $ 1,616,653 Securitized residential mortgages 515,540 522,051 442,310 440,983 Securities sold under repurchase agreements 65,198 65,198 29,965 29,965

2,258,253 2,297,979 2,085,701 2,087,601 Associated Liabilities(1) 2,116,878 2,148,860 1,943,764 1,965,313

Net Position $ 141,375 $ 149,119 $ 141,937 $ 122,288

(1) Associated liabilities relating to securities sold under repurchase agreements are $65,198 (October 31, 2019 – $29,965), and associated liabilities relating to securitized leases and loans, and securitized residential mortgages are described in Note 15.

9. PROPERTY AND EQUIPMENT

Land is carried at cost. Buildings, equipment and furniture, and leasehold improvements are carried at cost less accumulated depreciation and impairment. Right-of-use assets, which reflect the adoption of IFRS 16 as described in Note 1, reflect leases of primarily branches and office premises.

Depreciation is calculated primarily using the straight-line method over the estimated useful life of the asset, as follows:

• Buildings: 20 years • Computer and office equipment and furniture: 3 to 10 years • Leasehold improvements: over the shorter of the term of the lease and the remaining useful life • Right-of-use assets: over the earlier of the lease term and the expected life. If ownership will transfer to us or we are reasonably certain to exercise a purchase option at the end of the lease term, the expected life of the right-of-use asset is used.

When components of an item of property and equipment have different useful lives, they are accounted for as separate items. Gains and losses on disposal are recorded in non-interest income in the period of disposal. Property and equipment is subject to an impairment review if there are events or changes in circumstances which indicate that the carrying amount may not be recoverable.

92 | CWB Financial Group 2020 Annual Report

Leasehold Improvements

Land and Buildings

Computer Equipment

Office Equipment

Right of Use Asset Total

Cost Balance at November 1, 2019 $ 80,782 $ 18,653 $ 42,197 $ 49,152 $ - $ 190,784

Adoption of IFRS 16 on November 1, 2019 (Note 1) - - - - 79,874 79,874

Acquisition (Note 3) 884 - 32 114 4,673 5,703

Additions 6,376 302 5,812 1,128 5,955 19,573

Lease modifications - - - - (3,767) (3,767)

Disposals (2,037) - (120) (1,291) (347) (3,795)

Balance at October 31, 2020 86,005 18,955 47,921 49,103 86,388 288,372

Accumulated Depreciation and Impairment Balance at November 1, 2019 55,713 6,386 29,462 36,057 - 127,618

Depreciation 5,485 566 3,883 2,907 12,305 25,146

Disposals (2,013) - (90) (1,291) (347) (3,741)

Balance at October 31, 2020 59,185 6,952 33,255 37,673 11,958 149,023

Net Carrying Amount at October 31, 2020 $ 26,820 $ 12,003 $ 14,666 $ 11,430 $ 74,430 $ 139,349

Cost Balance at November 1, 2018 $ 76,505 $ 18,905 $ 36,701 $ 44,321 $ - $ 176,432 Additions 4,277 165 5,713 5,326 - 15,481 Disposals - (417) (217) (495) - (1,129)

Balance at October 31, 2019 80,782 18,653 42,197 49,152 - 190,784

Accumulated Depreciation and Impairment

Balance at November 1, 2018

51,324

6,129

26,140

33,741

-

117,334 Depreciation 4,389 564 3,539 2,810 - 11,302 Disposals - (307) (217) (494) - (1,018)

Balance at October 31, 2019 55,713 6,386 29,462 36,057 - 127,618

Net Carrying Amount at October 31, 2019 $ 25,069 $ 12,267 $ 12,735 $ 13,095 $ - $ 63,166

10. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the fair value of the purchase consideration, including any amount of any non-controlling interest in the acquiree, over the net recognized amounts of the identifiable assets, including identifiable intangible assets, and liabilities assumed. For the purposes of calculating goodwill, fair values of acquired assets and liabilities are determined by reference to market values or by discounting expected future cash flows to present value.

This discounting is performed using either market rates, or risk-free rates with risk-adjusted expected future cash flows.

Goodwill is stated at cost less impairment losses. Goodwill is allocated to cash-generating units (CGU) for the purpose of impairment testing considering the business level at which goodwill is monitored for internal management purposes. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. On this basis, CWB’s CGUs with goodwill allocated are:

• CWB Maxium Financial Inc. (MX); • CWB National Leasing Inc. (NL); and, • Wealth Management (WM) which includes CWB Wealth Management Ltd., CWB McLean & Partners Wealth Management Ltd. (M&P), and the wealth acquisition

described in Note 3. In 2020, we reassessed our cash generating units following the wealth acquisition to reflect subsequent changes to our business operations. In 2019, WM and M&P were separate cash generating units.

MX NL WM Total

Balance at November 1, 2019 $ 38,869 $ 35,776 $ 10,747 $ 85,392

Acquisition (Note 3) - - 52,506 52,506

Ownership change - - 358 358

Balance at October 31, 2020 $ 38,869 $ 35,776 $ 63,611 $ 138,256

MX NL WM Total

Balance at November 1, 2018 $ 38,869 $ 35,776 $ 10,523 $ 85,168

Ownership change - - 224 224

Balance at October 31, 2019 $ 38,869 $ 35,776 $ 10,747 $ 85,392

CWB Financial Group 2020 Annual Report | 93

Intangible Assets

Intangible assets represent identifiable non-monetary assets without physical substance and are acquired either separately through a business combination, or generated internally. Intangible assets with a finite useful life are recorded at cost less any accumulated amortization and impairment losses. Certain intangible assets, such as trademarks and trade names, have an indefinite useful life. These indefinite life intangibles are not amortized but are tested for impairment at least annually. The assets’ useful lives are assessed at least annually.

Amortization of acquisition-related intangible assets with finite useful lives is reported in other expenses and amortization of internally generated software is included in premises and equipment expenses on the consolidated statements of income and provided on a straight-line basis from the date at which it is available for use as follows:

• Software and related assets: 3 to 15 years • Customer relationships: 10 to 15 years • Non-competition agreements: 4 to 5 years • Other: 3 to 5 years

Software

and Related Assets

Customer

Relationships

Trademarks and

Tradenames

Non- competition Agreements

Other

Total Cost Balance at November 1, 2019 $ 217,595 $ 59,215 $ 6,587 $ 11,084 $ 5,150 $ 299,631 Additions 39,066 - - - - 39,066 Acquisition (Note 3) 523 30,500 2,100 - - 33,123 Ownership change - 34 39 - - 73 Disposals (76) - - - - (76) Balance at October 31, 2020 257,108 89,749 8,726 11,084 5,150 371,817

Accumulated Amortization Balance at November 1, 2019 75,452 34,402 - 11,059 4,970 125,883 Amortization 19,175 5,972 - 20 135 25,302 Disposals (76) - - - - (76) Balance at October 31, 2020 94,551 40,374 - 11,079 5,105 151,109

Net Carrying Amount at October 31, 2020 $

162,557 $

49,375 $

8,726 $

5 $

45 $

220,708

Cost Balance at November 1, 2018 $ 184,271 $ 59,211 $ 6,564 $ 11,084 $ 5,150 $ 266,280 Additions 34,073 - - - - 34,073 Ownership change - 4 23 - - 27 Disposals (749) - - - - (749) Balance at October 31, 2019 217,595 59,215 6,587 11,084 5,150 299,631

Accumulated Amortization

Balance at November 1, 2018 60,066 29,745 - 11,039 4,640 105,490 Amortization 16,135 4,657 - 20 330 21,142 Disposals (749) - - - - (749) Balance at October 31, 2019 75,452 34,402 - 11,059 4,970 125,883

Net Carrying Amount at October 31, 2019 $

142,143 $

24,813 $

6,587 $

25 $

180 $

173,748

Impairment

The carrying amounts of our intangible assets with finite useful lives are reviewed at each reporting date to determine whether there is any indication of impairment. If an indication exists, we test for impairment. Goodwill and intangible assets with indefinite useful lives are tested for impairment annually or more frequently if events or changes in circumstances indicate impairment.

Impairment testing is performed by comparing an asset’s carrying amount with its recoverable amount. Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of the CGU to which the asset belongs will be determined and compared to the carrying amount of the CGU’s net assets, including attributable goodwill. Goodwill is tested for impairment at the level of a CGU or a group of CGUs. If the recoverable amount is less than the carrying value, an impairment loss is charged to the consolidated statements of income.

The recoverable amounts for our CGUs are calculated based on the higher of their value in use and fair value less costs of disposal. Fair value less costs of disposal is determined by using a market-based approach of the associated CGU, whereby the fair value is determined using comparable market transactions for similar businesses. Value in use is determined by discounting the future cash flows expected to be generated from the continuing use of the CGU.

In the 2020 annual impairment tests, the recoverable amounts of our CGUs are based on their value in use with the exception of the WM CGU, which is based on fair value less costs of disposal. In 2019, the recoverable amounts of all CGUs were based on their value in use.

94 | CWB Financial Group 2020 Annual Report

MX and NL CGUs

The recoverable amount of these CGUs was based on their value in use in the current and comparative period. We calculate value in use using a discounted cash flow method. Cash flows are projected based on forecasted results of the business for a five-year period including the capital required to support future cash flows. Key drivers of cash flows include net interest margins and average interest-earning assets. Beyond five years, cash flows are assumed to increase at a terminal growth rate of 3.9% (3.7% in 2019) based on management’s expectations of real GDP growth and inflation rates. Forecasted cash flows are discounted at rates ranging from 11.3% to 11.8% (9.3% in 2019).

WM CGU

The recoverable amount of the WM CGU was based on fair value less cost to sell. We calculated fair value using a multiples-based approach, using the average of both Price- to-assets-under-management (P/AUM) and Price-to-revenue (P/Rev) multiples, to reflect the considerations of a prospective buyer. We applied a P/AUM multiple of 2.3% and a P/Rev multiple of 3.2x to revenue for the 12 months preceding the testing date normalized for the wealth acquisition described in Note 3. These multiples represent our best estimate from a range of reasonably possible inputs based on precedent transactions for comparable businesses.

The key assumptions described above may change as economic and market conditions change. We estimate that reasonable possible changes in these assumptions are not expected to cause the recoverable amounts of the cash-generating units to decline below the carrying amounts.

No impairment losses on goodwill or intangible assets were identified during 2020 or 2019.

11. DERIVATIVE FINANCIAL INSTRUMENTS

Interest rate, foreign exchange, bond forward and equity swaps/contracts such as futures, options, swaps, floors and rate locks are entered into for risk management purposes in accordance with our asset liability management policies. It is our policy not to utilize derivative financial instruments for trading or speculative purposes. Interest rate swaps and floors are primarily used to reduce the impact of fluctuating interest rates. Equity swaps are used to reduce earnings volatility related to restricted share units and deferred share units linked to our common share price. Bond forward contracts are used to manage interest rate risk related to our participation in the NHA MBS program. Foreign exchange contracts are used for the purposes of meeting the needs of clients, day-to-day business and liquidity management.

Use of Derivatives

We enter into derivative financial instruments for risk management purposes. Derivative financial instruments are financial contracts whose value is derived from an underlying interest rate, foreign exchange rate, equity or commodity instrument or index.

Derivative financial instruments primarily used by us include:

• interest rate swaps, which are agreements where two counterparties exchange a series of payments based on different interest rates applied to a notional amount; • bond forward contracts, which are a contractual obligation to purchase or sell a bond at a predetermined future date; • foreign exchange forwards and futures, which are contractual obligations to exchange one currency for another at a specified price for settlement at a

predetermined future date; and, • equity swaps, which are agreements where CWB makes periodic interest payments to a counterparty and receives the capital gain or loss plus dividends of a

notional CWB common share.

Embedded Derivatives

When derivatives are embedded in other financial instruments or host contracts, such combinations are known as hybrid instruments. If the host contract is a financial asset within the scope of IFRS 9, the classification and measurement criteria are applied to the entire hybrid instrument and there is no separation of the embedded derivative. If the host contract is a financial liability or an asset that is not within the scope of IFRS 9, embedded derivatives are treated as separate derivatives when their economic characteristics and risk are not closely related to those of the host contract, unless an election is made to measure the contract at fair value. Identified embedded derivatives that are separated from the host contract are recorded at fair value.

Fair Value

Derivative financial instruments are recorded on the balance sheet at fair value. Changes in fair value related to the effective portion of cash flow interest rate hedges recorded in other comprehensive income, net of income taxes, and changes in fair value interest rate hedges are recorded in net interest income. Changes in fair value related to the ineffective portion of a designated accounting hedge, a derivative not designated as an accounting hedge, and all other derivative financial instruments are reported in non-interest income on the consolidated statements of income.

Designated Accounting Hedges

Under IAS 39, when designated as accounting hedges by us, certain derivative financial instruments are designated as either a hedge of the fair value of recognized assets, liabilities or firm commitments (fair value hedges), or a hedge of highly probable future cash flows attributable to a recognized asset or liability or a forecast transaction (cash flow hedges). On an ongoing basis, the derivatives used in hedging transactions are assessed to determine whether they are effective in offsetting changes in fair values or cash flows of the hedged items. If a hedging transaction becomes ineffective or if the derivative is not designated as a cash flow hedge, any subsequent change in the fair value of the hedging instrument is recognized in net income.

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Potential sources of ineffectiveness can be attributed to the differences between hedging instruments and the hedged items:

• Mismatches in terms of hedged item and hedging instrument, such as the repricing dates and frequency of payments. • The effect of the counterparty and our own credit risk.

Interest income received or interest expense paid on derivative financial instruments designated as cash flow hedges is accounted for on the accrual basis and recognized as interest expense over the term of the hedge contract. Premiums on purchased contracts are amortized to interest expense over the term of the contract. Accrued interest receivable and payable and deferred gains and losses for these contracts are recorded in other assets or liabilities as appropriate.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in other comprehensive income at that time is held separately in accumulated other comprehensive income until the forecast transaction is eventually recognized in the consolidated statements of income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in accumulated other comprehensive income is immediately reclassified to the consolidated statements of income.

Interest Rate Risk

Interest rate risk arises when changes in interest rates affect the cash flows, earnings and values of assets and liabilities. We have a policy of interest rate risk management to maintain an appropriate balance between earnings volatility and economic value volatility while keeping both within their respective risk appetite limits. Exposure to interest rate risk is controlled by managing the size of the static gap positions between interest sensitive assets and interest sensitive liabilities for future periods. This is achieved partly by using interest rate swaps and bond forward contracts as a hedge to interest rate changes.

Only the changes in fair value and cash flows related to changes in benchmark interest rates are designated as hedges for accounting purposes. Other risk elements present in these relationships, such as credit risk, have a less significant impact on changes in fair value and cash flows, and are not designated as accounting hedges.

The hedging ratio is established by matching the notional amount of the hedging instrument with the notional amount of the hedged item. The existence of an economic relationship between the hedging instrument and hedged item is based on the reference interest rates, tenors, repricing dates and maturities, and the notional or par amounts.

Equity Risk

Equity risk arises when changes in our common share price affects the payout of share-based payment plans (see Note 17) that have not yet vested. We have a policy to hedge a portion of the earnings volatility related to restricted share unit (RSU) and deferred share unit (DSU) grants through the use of equity swaps, where we make periodic interest payments to a counterparty and receive the capital gain or loss plus dividends of a CWB common share.

The following table shows the derivative financial instruments split between those contracts that have a positive fair value (favourable contracts) and those that have a negative fair value (unfavourable contracts):

As at October 31, 2020 As at October 31, 2019

Favourable Contracts Unfavourable Contracts Favourable Contracts Unfavourable Contracts

Notional Amount

Fair Value

Notional Amount

Fair Value

Notional Amount

Fair Value

Notional Amount

Fair Value

Cash Flow Hedges Interest rate risk

Interest rate swaps $ 4,458,000 $ 95,035 $ - $ - $ 4,952,000 $ 42,855 $ 1,876,000 $ (13,104) Bond forward contracts - - - - - - 20,000 (91)

Equity risk Equity swaps - - 20,470 (1,500) 13,084 3,049 6,184 (159) Fair Value Hedges Interest rate risk

Interest rate swaps 70,109 68 265,716 (4,069) 19,746 20 20,000 (58) Not Designated as Accounting Hedges

Foreign exchange contracts 68,168 1,512 52,672 (619) 106,575 1,005 164,338 (604) Equity swaps - - 6,184 (97) 5,319 886 - -

Total $ 4,596,277 $ 96,615 $ 345,042 $ (6,285) $ 5,096,724 $ 47,815 $ 2,086,522 $ (14,016)

The aggregate contractual or notional amount of the derivative financial instruments on hand, the extent to which instruments are favourable or unfavourable and, thus, the aggregate fair values of these financial assets and liabilities can fluctuate significantly from time to time.

The average fair values of the derivative financial instruments on hand during the year are set out in the following table:

2020 2019

Favourable derivative financial instruments (assets) $ 101,720 $ 40,853

Unfavourable derivative financial instruments (liabilities) $ 13,313 $ 22,174

96 | CWB Financial Group 2020 Annual Report

The following table summarizes the maturities of derivative financial instruments and the weighted average interest rates paid and received on contracts:

As at October 31, 2020 As at October 31, 2019

Maturity Maturity

1 Year or Less More than 1 Year 1 Year or Less More than 1 Year

Notional Amount

Contractual Interest

Rate Notional Amount

Contractual Interest

Rate Notional Amount

Contractual Interest

Rate Notional Amount

Contractual Interest

Rate

Cash Flow Hedges Interest rate risk

Interest rate swaps(1) $ 1,968,000 1.74% $ 2,490,000 1.89% $ 2,100,000 1.92% $ 4,728,000 2.01% Bond forward contracts - - - - 20,000 - - -

Equity risk Equity swaps(2) 10,020 1.26% 10,450 1.62% 9,365 2.58% 9,903 2.62%

Fair Value Hedges Interest rate risk

Interest rate swaps(3) - - 335,825 0.86% - - 39,746 1.72% Not Designated as Accounting Hedges

Foreign exchange contracts(4) 120,840 - - - 270,913 - - - Equity swaps(5) 6,184 1.53% - - 5,319 2.47% - -

Total $ 2,105,044 $ 2,836,275 $ 2,405,597 $ 4,777,649

(1) We receive interest at a fixed contractual rate and pay interest on the one-month (30-day) Canadian Bankers’ Acceptance rate. Interest rate swaps designated as accounting cash flow hedges outstanding at October 31, 2020 mature between November 2020 and January 2025.

(2) Equity swaps designated as accounting hedges outstanding at October 31, 2020 mature between June 2021 and June 2023. (3) Interest rate swaps designated as accounting fair value hedges outstanding at October 31, 2020 mature between June 2022 and December 2024. (4) Foreign exchange contracts outstanding at October 31, 2020 mature between November 2020 and February 2021. The contractual interest rate is not meaningful for foreign exchange contracts. (5) Equity swaps not designated as accounting hedges outstanding at October 31, 2020 mature in June 2021.

The following tables present the details of the hedged items categorized by their hedging relationships:

As at October 31, 2020

Statement of Consolidated Balance

Sheets Line Item

Changes in Fair Value Used for Calculating Hedge

Ineffectiveness AOCI -

Cash Flow Hedges

Cash Flow Hedges Interest rate risk

Variable rate assets Loans $ 65,284 $ 98,790 Forecasted NHA MBS issuances n/a - (2,479)

Equity risk Restricted share units Other liabilities (4,390) (305)

As at October 31, 2019

Statement of Consolidated Balance

Sheets Line Item

Changes in Fair Value Used for Calculating

Hedge Ineffectiveness AOCI -

Cash Flow Hedges

Cash Flow Hedges Interest rate risk

Variable rate assets Loans $ 94,881 $ 21,991 Forecasted NHA MBS issuances n/a (146) (224)

Equity risk Restricted share units Other liabilities 2,024 1,091

n/a - not applicable

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As at October 31, 2020

Carrying Amount of Hedged Item Accumulated Amount of Fair Value Adjustments on the Hedged Item Consolidated Balance

Sheets Line Item

Changes in Fair Value Used for Calculating

Hedge Ineffectiveness Assets Liabilities Assets Liabilities

Fair Value Hedges

Interest rate risk

Fixed rate assets $ 348,090 $ - $ 4,255 $ - Securities, Loans $ (3,963)

As at October 31, 2019

Carrying Amount of Hedged Item Accumulated Amount of Fair Value Adjustments on the Hedged Item Consolidated Balance

Sheets Line Item

Changes in Fair Value Used for Calculating

Hedge Ineffectiveness Assets Liabilities Assets Liabilities

Fair Value Hedges

Interest rate risk

Fixed rate assets $ 40,393 $ - $ (13) $ - Securities $ (38)

The following table contains information regarding the effectiveness of the hedging relationships, as well as the impacts on the consolidated statements of income and consolidated statements of comprehensive income:

2020

Change in Fair Value of Hedging Instrument

Hedge Ineffectiveness Recognized in Income

Change in the Fair Value of the Hedging

Instrument Recognized in OCI

Amount Reclassified from AOCI - Cash Flow

Hedges to Income

Cash Flow Hedges Interest rate risk

Interest rate swaps(1) $ 65,284 $ - $ 111,476 $ (34,677) Bond forward contracts(1) - - (2,638) 383

Equity risk Equity swaps(2) (4,390) - (3,835) 2,439

Fair Value Hedges Interest rate risk

Interest rate swaps (3,963) - - -

2019

Change in Fair Value of Hedging Instrument

Hedge Ineffectiveness Recognized in Income

Change in the Fair Value of the Hedging

Instrument Recognized in OCI

Amount Reclassified from AOCI - Cash Flow

Hedges to Income

Cash Flow Hedges Interest rate risk

Interest rate swaps(1) $ 94,881 $ - $ 69,538 $ (3) Bond forward contracts(1) (146) - (99) 147

Equity risk Equity swaps(2) 2,024 - 1,922 (527)

Fair Value Hedges Interest rate risk

Interest rate swaps (38) - - -

(1) Amounts reclassified from OCI into net interest income (2) Amounts reclassified from OCI into non-interest expenses

98 | CWB Financial Group 2020 Annual Report

The following table shows a reconciliation of the accumulated other comprehensive income from derivatives designated as cash flow hedges and an analysis of other comprehensive income relating to hedge accounting:

Accumulated Other Comprehensive Income - Cash Flow Hedges 2020 2019

Balance at beginning of year $ 22,858 $ (48,120)

Amounts recognized in other comprehensive income:

Interest rate risk - Interest rate swaps and bond forward contracts

Effective portion of changes in fair value 108,838 69,439

Amounts reclassified to net income (34,294) 144

Equity risk - Equity swaps

Effective portion of changes in fair value (3,835) 1,922

Amounts reclassified to net income 2,439 (527)

Balance at End of Year $ 96,006 $ 22,858

At October 31, 2020, hedged cash flows are expected to occur and affect profit or loss within the next five years.

12. OTHER ASSETS

As at October 31

2020

As at October 31

2019

Accrued interest receivable $ 71,810 $ 79,709 Accounts receivable 67,876 63,150 Deferred tax assets (Note 21) 49,578 37,868 Prepaid expenses 12,359 10,396 Income tax receivable 12,229 2,092 Financing costs(1) 8,455 6,986 Derivative collateral receivable (Note 27) - 4,070 Other 29,216 8,535

Total $ 251,523 $ 212,806

(1) Amortization for the year amounted to $3,103 (2019 – $3,016).

13. DEPOSITS

Deposits are accounted for on an amortized cost basis. Costs relating to the issuance of fixed term deposits are amortized over the expected life of the deposit using the effective interest method.

As at October 31, 2020

Individuals

Business and Government

Total

Payable on demand $ 35,520 $ 949,514 $ 985,034

Payable after notice 6,128,753 4,399,327 10,528,080

Payable on a fixed date 9,497,047 6,300,193 15,797,240

Total $ 15,661,320 $ 11,649,034 $ 27,310,354

As at October 31, 2019

Individuals

Business and Government Total

Payable on demand $ 34,296 $ 715,875 $ 750,171

Payable after notice 4,452,592 3,420,754 7,873,346

Payable on a fixed date 10,813,617 5,914,227 16,727,844

Total $ 15,300,505 $ 10,050,856 $ 25,351,361

A summary of all outstanding deposits payable on a fixed date, by contractual maturity date, follows:

As at October 31

2020

As at October 31

2019

Within 1 year $ 8,068,489 $ 6,694,117

1 to 2 years 3,366,283 5,013,286

2 to 3 years 2,583,480 2,242,094

3 to 4 years 1,071,237 1,793,324

4 to 5 years 707,751 985,023

Total $ 15,797,240 $ 16,727,844

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14. OTHER LIABILITIES

As at October 31

2020

As at October 31

2019

Accounts payable and accrued liabilities $ 352,398 $ 333,123

Accrued interest payable 175,191 208,548

Lease liabilities (Note 1) 94,956 n/a

Derivative collateral payable (Note 27) 86,590 19,370

Deferred tax liabilities (Note 21) 9,956 4,716

Income taxes payable 9,825 60,501

Allowance for committed but undrawn credit exposures and letters of credit (Note 7) 5,087 4,191

Deferred revenue 3,683 4,357

Other 9,293 11,580

Total $ 746,979 $ 646,386

n/a - not applicable

15. DEBT

A) DEBT SECURITIES

A summary of outstanding debt related to the securitization of equipment financing leases and loans and residential mortgages by contractual maturity date follows:

Within 1 Year

1 to 3 Years

3 to

5 Years

As at October 31

2020

As at October 31

2019

Securitized leases and loans $ 505,639 $ 775,787 $ 247,236 $ 1,528,662 $ 1,469,509

Securitized residential mortgages 54,421 254,082 214,515 523,018 444,290

Total $ 560,060 $ 1,029,869 $ 461,751 $ 2,051,680 $ 1,913,799

B) NON-VIABILITY CONTINGENT CAPITAL (NVCC) SUBORDINATED DEBENTURES

Financing costs relating to the issuance of subordinated debentures are amortized over the expected life of the related subordinated debenture using the effective interest method.

The following qualify as bank debentures under the Bank Act and are subordinate in right of payment to all deposit liabilities. All redemptions are subject to the approval of OSFI.

Interest Rate(1)

Maturity Date

Reset Spread(1)

Earliest Date Redeemable by

CWB at Par Par Value(2)

Series F NVCC subordinated debentures 3.668% June 11, 2029 199 bp June 11, 2024 $ 250,000

Series G NVCC subordinated debentures 4.840% June 29, 2030 410.2 bp June 29, 2025 125,000

(1) The interest rate will be paid until the earliest date redeemable, after which the interest rate will reset quarterly at the reset spread basis points over the then three-month Bankers’ Acceptance rate (2) The balance reported on the consolidated balance sheet as at October 31, 2020 includes unamortized financing costs related to the issuance of subordinated debentures of $2,357 (2019 - $1,506).

bp – basis points

On June 29, 2020, we issued $125,000 of NVCC subordinated debentures with a fixed annual interest rate of 4.840% until June 29, 2025. Thereafter, the rate will be set quarterly at the three-month Bankers’ Acceptance Rate plus 410.2 basis points until maturity on June 29, 2030. The debentures are redeemable by us on or after June 29, 2025.

Upon the occurrence of a trigger event (as defined by OSFI), each subordinated debenture will be automatically converted, without the consent of the holders, into CWB common shares. Conversion to common shares will be determined by dividing the debenture conversion value (the principal amount of the debenture plus accrued but unpaid interest times a multiplier of 1.5) by the common share value (the greater of (i) the floor price of $5.00 and (ii) the current market price calculated as the volume weighted average trading price for the ten consecutive trading days ending on the day immediately prior to the date of conversion).

On November 18, 2019, we redeemed for cash all $250,000 outstanding 3.463% subordinated debentures without NVCC features. The debentures were redeemed for an aggregate amount of $253,900, representing the principal amount plus accrued interest and an early redemption premium, as the debentures were redeemed prior to the earliest date of redemption at par on December 17, 2019.

100 | CWB Financial Group 2020 Annual Report

16. CAPITAL STOCK

Authorized:

• An unlimited number of common shares without nominal or par value; • 33,964,324 class A shares without nominal or par value; and, • An unlimited number of first preferred shares, without nominal or par value, issuable in series, provided that the maximum aggregate consideration for all outstanding

first preferred shares at any time does not exceed $1,000,000.

Issued and Fully Paid:

2020 2019

Number of Shares Amount

Number of Shares Amount

Preferred Shares - Series 5 Outstanding at beginning and end of year

5,000,000 $ 125,000 5,000,000 $ 125,000

Preferred Shares - Series 7 Outstanding at beginning and end of year

5,600,000 140,000 5,600,000 140,000

Preferred Shares - Series 9 Outstanding at beginning of year

5,000,000 125,000 - -

Issued - - 5,000,000 125,000 Outstanding at end of year – Series 9 5,000,000 125,000 5,000,000 125,000 Outstanding at end of year 15,600,000 390,000 15,600,000 390,000

Limited Recourse Capital Notes - Series 1(1) Outstanding at beginning of year

- - - -

Issued 175,000 175,000 - -

Outstanding at end of year 175,000 175,000 - -

Common Shares Outstanding at beginning of year

87,249,711 731,970 88,952,099 744,701

Purchased for cancellation (179,176) (1,503) (1,829,944) (15,326) Issued on exercise or exchange of options(2) 29,296 379 77,667 1,245 Issued under dividend reinvestment plan - - 49,889 1,350

Outstanding at end of year 87,099,831 730,846 87,249,711 731,970

Share Capital $ 1,295,846 $ 1,121,970

(1) In connection with the issuance of LRCN Series 1, on October 30, 2020, we issued $175 million of First Preferred Shares Series 11 at a price of $1,000 per Series 11 Preferred Share. The Series 11 Preferred Shares were issued to a Limited Recourse Trust to be held as trust assets in connection with the LRCN structure. The Series 11 Preferred Shares and corresponding Trust investment are eliminated on consolidation.

(2) Represents shares issued and amounts transferred from the share-based payment reserve to share capital upon cashless settlement of options exercised.

We are prohibited by the Bank Act from declaring any dividends on common shares when we are or would be placed, as a result of the declaration, in contravention of the capital adequacy and liquidity regulations or any regulatory directives issued under the Bank Act. This limitation does not restrict the current level of dividends.

A) COMMON SHARES

On September 26, 2019, we announced a normal course issuer bid (NCIB) to repurchase for cancellation up to 1,740,000 common shares, representing approximately 2% of the issued and outstanding common shares, for a 12-month period expiring September 30, 2020. The previous NCIB announced on September 27, 2018, originally for the purchase of up to 1,767,000 common shares and amended on April 10, 2019 to 3,534,000 common shares, was for a 12-month period that expired on September 30, 2019.

During the year, prior to the OSFI-mandated suspension of share buyback programs announced on March 13, 2020, we repurchased and cancelled 179,176 (2019 – 1,829,944) common shares under our NCIBs at an average price of $28.70 (2019 – $27.08). The total cost of these purchases, including related transaction costs, was $5,145 (2019 – $49,592).

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B) PREFERRED SHARES

NVCC Preferred Share Rights and Privileges

Redemption Amount

Quarterly Non-cumulative

Dividend(1) Reset

Spread(2) Annual Yield(3)

Date Redeemable/ Convertible(4) Convertible to(2)(5)

Preferred Shares - Series 5 $ 25.00 $ 0.2688125 276 bp 4.30% April 30, 2024 Preferred Shares - Series 6

Preferred Shares - Series 7 $ 25.00 $ 0.390625 547 6.25% July 31, 2021 Preferred Shares - Series 8

Preferred Shares - Series 9 $ 25.00 $ 0.375 504 6.00% April 30, 2024 Preferred Shares - Series 10

(1) Non-cumulative fixed dividends are payable quarterly as and when declared by the Board of Directors of CWB. (2) The dividend rate will reset on the date redeemable and every five years thereafter at a level of the reset spread basis points over the then five-year Government of Canada Bond Yield. (3) Based on the stated issue price per share of $25.00. (4) Redeemable by CWB, subject to the approval of OSFI, on the date noted and every five years thereafter. Convertible by the shareholders, subject to certain conditions, on the date noted and every five years thereafter if not

redeemed by CWB to an equal number of First Preferred Shares Series 6, Series 8, and Series 10 which are non-cumulative, floating rate preferred shares. (5) If converted, holders of the First Preferred Shares Series 6, Series 8, and Series 10 will be entitled to receive quarterly floating rate dividends as and when declared by the Board of Directors of CWB, which reset quarterly at a rate

equal to the 90-day Government of Canada Treasury Bill rate. bp – basis points

Upon the occurrence of a non-viability trigger event (as defined by OSFI), each preferred share will be automatically converted, without the consent of the holders, into CWB common shares. Conversion to common shares will be determined by dividing the preferred share conversion value ($25.00 per preferred share plus any declared but unpaid dividends) by the common share value (the greater of (i) the floor price of $5.00 and (ii) the current market price calculated as the volume-weighted average trading price for the ten consecutive trading days ending on the day immediately prior to the date of the conversion). If a trigger event were to occur, based on a floor price of $5.00, the preferred shares would be converted into approximately 78 million CWB common shares, assuming no accrued interest and no declared and unpaid dividends.

C) LIMITED RECOURSE CAPITAL NOTES (LRCN)

Redemption

Amount Interest Rate Maturity Date Reset

Spread(1) Earliest Date Redeemable

LRCN - Series 1 $ 1,000 6.00% April 30, 2081 562.1 bp April 30, 2026

(1) The interest rate will reset on the date redeemable and every five years thereafter at a level of the reset spread basis points over the then five-year Government of Canada Bond Yield. bp – basis points

On October 30, 2020, we issued $175 million of Limited Recourse Capital Notes Series 1 (LRCN Series 1) which bear interest paid semi-annually.

In the event of (i) non-payment of interest on any interest payment date, (ii) non-payment of the redemption price in case of a redemption of LRCN Series 1, (iii) non- payment of principal at the maturity of LRCN Series 1, or (iv) an event of default on the notes, noteholders will have recourse limited to receipt of a proportionate amount of Series 11 preferred shares, and the delivery of the Series 11 preferred shares will represent the full and complete extinguishment of our obligations under LRCN Series 1. The Series 11 preferred shares are held by a third party trustee in a consolidated trust, CWB LRT (Limited Recourse Trust).

LRCN Series 1 are redeemable on or prior to maturity on each five-year anniversary, subject to the approval of OSFI and the Series 11 Preferred Shares would be redeemed at the same time. The terms of Series 11 Preferred Shares and LRCN Series 1 include NVCC provisions necessary for them to qualify as Tier 1 regulatory capital under Basel III. Upon the occurrence of a trigger event (as defined by OSFI), LRCN Series 1 will be automatically redeemed by the delivery of common shares after an automatic conversion of Series 11 Preferred Shares. Conversion to common shares will be determined by dividing the share value of Series 11 preferred shares (including declared and unpaid dividends) by the common share value (the greater of: (i) a floor price of $5.00 and (ii) the current market price of our common shares based on the volume weighted average trading price for the ten consecutive trading days ending on the day immediately prior to the date of conversion). If a trigger event were to occur, based on a floor price of $5.00, the LRCN would be converted into approximately 35 million CWB common shares, assuming no accrued interest and no declared and unpaid dividends.

LRCN Series 1 are compound instruments with both equity and liability features as payments of interest and principal in cash are made at our discretion. Semi-annual distributions on the LRCN Series 1 will be recorded when payable. Non-payment of interest and principal in cash does not constitute an event of default and will trigger a delivery of Series 11 preferred shares. The liability component of the notes has a nominal value and, as a result, the full proceeds received have been presented as equity.

D) DIVIDENDS

The following dividends were declared by the Board of Directors and paid during the year:

2020 2019

$1.15 per common share (2019 – $1.08) $ 100,211 $ 94,573 $1.08 per preferred share - Series 5 (2019 – $1.09) 5,376 5,438 $1.56 per preferred share - Series 7 (2019 – $1.56) 8,750 8,750 $1.50 per preferred share - Series 9 (2019 – $1.13) 7,500 5,666

Total $ 121,837 $ 114,427

Subsequent to October 31, 2020, the Board of Directors of CWB declared a dividend of $0.29 per common share payable on January 7, 2021 to shareholders of record on December 17, 2020, and cash dividends for preferred shares of $0.2688125 per Series 5, $0.390625 per Series 7, and $0.375 per Series 9 preferred share payable on January 31, 2021 to shareholders of record on January 22, 2021. With respect to these dividend declarations, no liability was recorded on the consolidated balance sheets at October 31, 2020.

102 | CWB Financial Group 2020 Annual Report

E) DIVIDEND REINVESTMENT PLAN

Under the dividend reinvestment plan (the plan), we provide holders of our common shares and holders of any other class of shares deemed eligible by our Board of Directors with the opportunity to direct cash dividends paid on any class of their eligible shares towards the purchase of additional common shares. Currently, the Board of Directors has deemed that the holders of all common and preferred shares are eligible to participate in the plan. The plan is open to shareholders residing in Canada.

At our option, the common shares may be issued from our treasury at an average market price based on the closing prices of a board lot of common shares on the TSX for the five trading days immediately preceding the dividend payment date, with a discount of 0% to 5% or through the open market at market prices. During the year, no common shares were issued under the plan from our treasury (2019 – 49,889 with no discount), with requirements of the plan satisfied through purchases of common shares in the open market.

17. SHARE-BASED PAYMENTS

A) STOCK OPTIONS

Stock options are accounted for using the fair value method. The estimated value is recognized over the applicable vesting period as an increase to both salary expense and share-based payment reserve. When options are exercised, the proceeds received and the applicable amount in share-based payment reserve are credited to common shares.

We have authorized 6,291,765 common shares (2019 – 6,321,061) for issuance under the share incentive plan. Of the amount authorized, options exercisable into 1,788,818 shares (2019 – 1,676,604) are issued and outstanding. The outstanding options vest within three years and are exercisable at a fixed price equal to the average of the market price on the day of and the four days preceding the grant date. Outstanding options expire from March 2023 to March 2026, each with an expiry date that is within seven years of the grant date.

The details of, and changes in, the issued and outstanding options are as follows:

Options

2020 2019

Number of Options

Weighted Average

Exercise Price Number of

Options

Weighted Average

Exercise Price

Balance at beginning of year 1,676,604 $ 28.41 2,833,461 $ 31.90 Granted 407,807 31.93 380,728 29.43 Exercised or exchanged (125,207) 25.80 (407,134) 25.66 Expired (94,774) 25.93 (1,105,653) 38.58 Forfeited (75,612) 31.50 (24,798) 31.50

Balance at End of Year 1,788,818 $ 29.39 1,676,604 $ 28.41

Exercisable at End of Year 812,180 $ 26.45 718,481 $ 24.36

Further details relating to stock options outstanding and exercisable are as follows:

Options Outstanding Options Exercisable

Range of Exercise Prices Number of

Options

Weighted Average

Remaining Contractual Life (years)

Weighted Average Exercise

Price Number of

Options

Weighted Average Exercise

Price

$23.70 498,500 2.4 $ 23.70 498,500 $ 23.70 $29.43 to $29.99 658,602 4.4 30.10 313,680 30.84 $30.85 to $35.15 631,716 5.5 33.15 - -

Total 1,788,818 4.2 $ 29.39 812,180 $ 26.45

All exercised options are settled via cashless settlement, which provides the option holder the number of shares equivalent to the excess of the market value of the shares under option, determined at the exercise date, over the exercise price. During fiscal 2020, option holders exchanged the rights to 125,207 (2019 – 407,134) options and received 29,296 (2019 – 77,667) shares in return by way of cashless settlement.

Salary expense of $1,819 (2019 – $1,617) was recognized relating to the estimated fair value of options granted. The fair value of options granted during the year was estimated using a binomial option pricing model with the following variables and assumptions: (i) risk-free interest rate of 1.6% (2019 – 1.6%), (ii) expected option life of 5.0 (2019 – 5.0) years, (iii) expected annual volatility of 28% (2019 – 29%), and (iv) expected annual dividends of 3.7% (2019 – 3.7%). Expected volatility is estimated by evaluating historical volatility of the share price over multi-year periods. The weighted average fair value of options granted was estimated at $5.01 (2019 – $4.93) per share.

During the year, $379 (2019 – $1,245) was transferred from the share-based payment reserve to share capital, representing the estimated fair value recognized for options exercised during the year.

CWB Financial Group 2020 Annual Report | 103

B) RESTRICTED SHARE UNITS

Under the RSU plan, certain employees are eligible to receive an award in the form of RSUs. Each RSU entitles the employee to receive the cash equivalent of the market value of our common shares at the vesting date. Throughout the vesting period, common share dividend equivalents accrue to the employee in the form of additional units. RSUs vest on each anniversary of the grant in equal one-third instalments over a period of three years. Salary expense is recognized over the vesting period except where the employee is eligible to retire prior to the vesting date, in which case the expense is recognized between the grant date and the date the employee is eligible to retire.

During the year, salary expense of $9,782 (2019 – $9,683) was recognized related to RSUs. As at October 31, 2020, the liability for the RSUs held under this plan was $8,992 (October 31, 2019 – $10,966). At the end of each period, the liability is adjusted to reflect changes in the fair value of the RSUs.

Number of RSUs 2020 2019

Balance at beginning of year 675,196 626,814 Granted 456,787 410,225 Vested and paid out (323,063) (337,425) Forfeited (43,884) (24,418)

Balance at End of Year 765,036 675,196

C) PERFORMANCE SHARE UNITS

Under the Performance Share Unit (PSU) plan, certain employees are eligible to receive an award in the form of PSUs on an annual basis. At the time of a grant, each PSU represents a unit with an underlying value equivalent to the value of a common share. Throughout the vesting period, common share dividend equivalents accrue to the employee in the form of additional units. Under the PSU plan, each PSU vests at the end of a three-year period and is settled in cash.

At the end of each specified performance period, a multiplier based on performance targets set at grant date is applied to a portion of the PSUs originally granted and any accrued notional dividends such that the total value of the PSUs may vary from 0% to 200% of the value of an equal number of our common shares.

During the year, salary expense of $945 (2019 – $1,643) was recognized related to PSUs. As at October 31, 2020, the liability for the PSUs held under this plan was $2,898 (October 31, 2019 – $4,416). At the end of each period, the liability and salary expense are adjusted to reflect changes in the fair value of the PSUs.

Number of PSUs 2020 2019

Balance at beginning of year 185,370 194,233 Granted 77,563 78,789 Vested and paid out (57,734) (87,652) Forfeited (4,518) -

Balance at End of Year 200,681 185,370

D) DEFERRED SHARE UNITS

Under the DSU plan, non-employee directors receive a portion of their retainer in DSUs. Each DSU represents a unit with an underlying value equivalent to the value of one common share. The DSUs are not redeemable until the individual is no longer a director and must be redeemed for cash. Common share dividend equivalents accrue to the directors in the form of additional units. The expense related to the DSUs is recorded in the period the award is earned by the director.

During the year, other non-interest expenses included $1,330 (2019 – $1,180) related to the DSUs. As at October 31, 2020, the liability for DSUs held under this plan was $6,330 (October 31, 2019 – $6,575). At the end of each period, the liability and expense are adjusted to reflect changes in the market value of the DSUs.

Number of DSUs 2020 2019

Balance at beginning of year 197,211 171,069 Granted 61,175 41,002 Paid out - (14,860)

Balance at End of Year 258,386 197,211

18. NON-CONTROLLING INTERESTS

Non-controlling interests relate to the following:

As at

October 31 2020

As at October 31

2019

CWB McLean & Partners Wealth Management Ltd. $ 862 $ 781 CWB Wealth Management Ltd.(1) - 1,091

Total $ 862 $ 1,872

(1) During the year ended October 31, 2020, we acquired all shares of the non-controlling interests in CWB Wealth Management Ltd.

104 | CWB Financial Group 2020 Annual Report

19. CONTINGENT LIABILITIES AND COMMITMENTS

A) CREDIT INSTRUMENTS

In the normal course of business, we enter into various commitments and has contingent liabilities, which are not reflected in the consolidated balance sheets. These items are reported below and are expressed in terms of the contractual amount of the related commitment.

As at October 31

2020

As at October 31

2019

Credit Instruments Commitments to extend credit $ 5,721,782 $ 5,173,866 Guarantees and standby letters of credit 449,041 505,272

Total $ 6,170,823 $ 5,679,138

Commitments to extend credit to customers also arise in the normal course of business and include undrawn availability under lines of credit and business operating loans of $2,673,468 (October 31, 2019 – $2,568,449) and authorized but unfunded loan commitments of $3,048,313 (October 31, 2019 – $2,605,417). In the majority of instances, availability of undrawn business commitments is subject to the borrower meeting specified financial tests or other covenants regarding completion or satisfaction of certain conditions precedent. It is also usual practice to include the right to review and withhold funding in the event of a material adverse change in the financial condition of the borrower. The allowance for credit losses related to committed but undrawn credit exposures and letters of credit is included in other liabilities on the consolidated balance sheets. From a liquidity perspective, undrawn credit authorizations will be funded over time, with draws in many cases extending over a period of months. In some instances, authorizations are never advanced or may be reduced because of changing requirements. Revolving credit authorizations are subject to repayment which, on a pooled basis, also decreases liquidity risk.

Guarantees and standby letters of credit represent our obligation to make payments to third parties when a customer is unable to make required payments or meet other contractual obligations. These instruments carry the same credit risk, recourse and collateral security requirements as loans extended to customers and generally have a term that does not exceed one year.

B) PURCHASE OBLIGATIONS

We have contractual obligations related to operating and capital expenditures which typically run one to five years.

Purchase obligations for each of the succeeding years are as follows:

2021 $ 10,034 2022 5,714 2023 2,071 2024 957

Total $ 18,776

C) GUARANTEES

A guarantee is defined as a contract that contingently requires the guarantor to make payments to a third party based on (i) changes in an underlying economic characteristic that is related to an asset, liability or equity security of the guaranteed party, (ii) failure of another party to perform under an obligating agreement, or (iii) failure of another third party to pay indebtedness when due.

Significant guarantees provided to third parties include guarantees and standby letters of credit as discussed above.

In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify the other party. Under these agreements, we may be required to compensate counterparties for costs incurred as a result of various contingencies, such as changes in laws and regulations and litigation claims. A maximum potential liability cannot be identified as the terms of these arrangements vary and generally no predetermined amounts or limits are identified. The likelihood of occurrence of contingent events that would trigger payment under these arrangements is either remote or difficult to predict and, in the past, payments under these arrangements have been insignificant.

No amounts are reflected in the consolidated financial statements related to these guarantees and indemnifications.

D) LEGAL AND REGULATORY PROCEEDINGS

In the ordinary course of business, CWB and our subsidiaries are party to legal and regulatory proceedings. Based on current knowledge, we do not expect the outcome of any of these proceedings to have a material effect on the consolidated financial position or results of operations.

20. EMPLOYEE FUTURE BENEFITS

All employee future benefits related to our group retirement savings and employee share purchase plans are recognized in the periods during which services are rendered by employees. Our contributions to the group retirement savings plan and employee share purchase plan totaled $18,138 (2019 – $16,654).

CWB Financial Group 2020 Annual Report | 105

21. INCOME TAXES

We follow the deferred method of accounting for income taxes whereby current income taxes are recognized for the estimated income taxes payable for the current period. Deferred tax assets and liabilities represent the cumulative amount of tax applicable to temporary differences between the carrying amount of the assets and liabilities, and their values for tax purposes. Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates anticipated to apply to taxable income in the years in which those temporary differences are anticipated to be recovered or settled. Changes in deferred taxes related to a change in tax rates are recognized in income in the period of the tax rate change. All deferred tax assets and liabilities are expected to be realized in the normal course of operations.

The provision for income taxes consists of the following:

2020 2019

Consolidated statements of income Current $ 107,259 $ 105,140

Deferred (10,227) (2,475)

97,032 102,665

Other comprehensive income Tax expense (recovery) related to:

Items that will be subsequently reclassified to net income 2,620 12,016

Items that will not be subsequently reclassified to net income 171 (4,982)

Derivatives designated as cash flow hedges 23,434 25,867

26,225 32,901

Total $ 123,257 $ 135,566

The combined statutory tax rate changed in 2019 as a result of a decrease in the Alberta provincial tax rate from 12% to 8% over four years, beginning with a 1% decrease on July 1, 2019 with further reductions of 1% scheduled on each of January 1, 2020, 2021 and 2022. In 2020, the Alberta government accelerated the rate reduction by reducing the provincial tax rate to 8%, effective July 1, 2020.

A reconciliation of the statutory tax rates and income tax that would be payable at these rates to the effective income tax rates and provision for income taxes reported in the consolidated statements of income follows:

2020 2019

Combined Canadian federal and provincial income taxes and statutory tax rate $ 94,422 25.6 % $ 104,433 26.7 %

Increase (decrease) arising from:

Change in tax rate 1,364 0.4 (1,530) (0.4)

Tax-exempt income (34) - (634) (0.1)

Stock-based compensation 452 0.1 428 0.1

Other 828 0.2 (32) -

Provision for Income Taxes and Effective Tax Rate $ 97,032 26.3 % $ 102,665 26.3 %

Deferred tax balances are comprised of the following:

2020 2019

Deferred Tax Assets

Leasing income $ 25,546 $ 21,869

Allowance for credit losses 20,246 13,527

Deferred loan fees 11,994 10,573

Deferred deposit broker commission (4,337) (6,367)

Other temporary differences (3,871) (1,734)

$ 49,578 $ 37,868

Deferred Tax Liabilities

Intangible assets $ 9,689 $ 3,324

Other temporary differences 267 1,392

$ 9,956 $ 4,716

106 | CWB Financial Group 2020 Annual Report

22. EARNINGS PER COMMON SHARE

Basic earnings per common share is calculated based on the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the treasury stock method, which assumes that any proceeds from in-the-money stock options are used to purchase our common shares at the average market price during the period.

The calculation of earnings per common share follows:

2020 2019

Numerator Common shareholders’ net income $ 248,956 $ 266,940

Denominator Weighted average number of common shares outstanding - basic 87,158,714 87,512,616

Dilutive instruments: Stock options(1) 33,469 225,988

Weighted Average Number of Common Shares Outstanding - Diluted $ 87,192,183 $ 87,738,604

Earnings Per Common Share Basic $ 2.86 $ 3.05

Diluted 2.86 3.04

(1) At October 31, 2020, the denominator excludes 1,290,318 (2019 – 958,123) employee stock options with an average exercise price of $32.78 (2019 – $33.22), adjusted for unrecognized stock-based compensation, that is greater than the average market price.

23. RELATED PARTY TRANSACTIONS

Transactions with and between subsidiary entities are made at normal market prices and eliminated on consolidation.

Preferred Rates and Terms We make loans, primarily residential mortgages, to our officers and employees at various preferred rates and terms. The total amount outstanding for these types of loans is $197,559 (October 31, 2019 – $184,130). We offer deposits, primarily fixed term deposits, to our officers and employees and their immediate family at preferred rates.

The total amount outstanding for these deposits is $327,323 (October 31, 2019 – $323,308).

Key Management Personnel

Key management personnel are those that have authority and responsibility for planning, directing and controlling our activities and include our independent directors.

Compensation of key management personnel follows:

2020 2019

Salaries, benefits and directors' compensation $ 5,029 $ 5,168

Share-based payments (stock options, RSUs, PSUs and DSUs)(1) 3,895 3,449

Total $ 8,924 $ 8,617

(1) Share-based payments are based on the estimated fair value on grant date.

Loans outstanding with key management personnel totaled $121 as at October 31, 2020 (October 31, 2019 – $259). No loans were outstanding with our independent directors as at October 31, 2020 and 2019.

CWB Financial Group 2020 Annual Report | 107

24. INTEREST RATE SENSITIVITY

We are exposed to interest rate risk as a result of a difference, or gap, between the maturity or repricing behaviour of interest sensitive assets and liabilities. The interest rate gap is managed by adjusting the repricing behaviour of interest sensitive assets or liabilities to ensure the gap falls within our risk appetite. The repricing profile of these assets and liabilities has been incorporated in the table following, which contains the gap position at October 31 for select time intervals. Figures in brackets represent an excess of liabilities over assets or a negative gap position.

Asset Liability Gap Positions ($millions)

October 31, 2020

Floating Rate and Within 1

Month 1 Month to

3 Months 3 Months

to 1 Year

Total Within 1 Year

1 Year to

5 Years More than

5 Years

Non- interest Sensitive

Total

Assets

Cash resources and securities $ 745 $ 312 $ 771 $ 1,828 $ 1,190 $ 57 $ 8 $ 3,083 Loans(1) 13,889 1,270 4,255 19,414 10,468 284 (158) 30,008 Other assets(2) - - - - - - 846 846 Derivatives(3) 331 510 1,479 2,320 2,500 - 121 4,941

Total 14,965 2,092 6,505 23,562 14,158 341 817 38,878

Liabilities and Equity Deposits(1) 11,129 1,682 5,598 18,409 8,919 1 (19) 27,310 Securities sold under

repurchase agreements 65 - - 65 - - - 65 Other liabilities(2) - - - - - - 806 806 Debt 67 116 440 623 1,801 - - 2,424 Equity - - 140 140 425 - 2,767 3,332 Derivatives(3) 4,457 (83) - 4,374 265 181 121 4,941

Total 15,718 1,715 6,178 23,611 11,410 182 3,675 38,878

Interest Rate Sensitive Gap $ (753) $ 377 $ 327 $ (49) $ 2,748 $ 159 $ (2,858) $ -

Cumulative Gap $ (753) $ (376) $ (49) $ (49) $ 2,699 $ 2,858 $ - $ -

Cumulative Gap as a Percentage of Total Assets (1.9)% (1.0)% (0.1)% (0.1)% 6.9% 7.4% - -

October 31, 2019

Cumulative Gap $ (1,183) $ (756) $ 551 $ 551 $ 2,419 $ 2,713 $ - $ -

Cumulative Gap as a Percentage of Total Assets (3.1)% (2.0)% 1.4% 1.4% 6.3% 7.0% - -

(1) Potential prepayments of fixed rate loans and early redemption of redeemable fixed term deposits have not been estimated. Redemptions of fixed term deposits where depositors have this option are not expected to be material. The majority of fixed rate loans, mortgages and leases are either closed or carry prepayment penalties.

(2) Accrued interest is excluded in calculating interest sensitive assets and liabilities. (3) Derivative financial instruments are included in this table at the notional amount.

The effective, weighted average interest rates for each class of financial asset and liability are shown below:

Weighted Average Effective Interest Rates (%)

October 31, 2020

Floating Rate and Within 1

Month

1 Month to 3

Months 3 Months to 1 Year

Total Within 1 Year

1 Year to 5

Years

More than 5 Years Total

Total assets 3.1% 2.9% 3.5% 3.2% 3.7% 4.1% 3.4% Total liabilities 0.8 1.9 2.2 1.2 2.3 1.0 1.5

Interest Rate Sensitive Gap 2.3% 1.0% 1.3% 2.0% 1.4% 3.1% 1.9% October 31, 2019

Total assets 4.4% 3.5% 3.8% 4.1% 3.7% 5.3% 3.9% Total liabilities 1.9 2.3 2.4 2.1 2.7 - 2.1

Interest Rate Sensitive Gap 2.5% 1.2% 1.4% 2.0% 1.0% 5.3% 1.8%

Based on the current interest rate gap position, it is estimated that a one-percentage point increase or decrease in all interest rates would impact net interest income by less than 2%. A one-percentage point increase in interest rates would decrease other comprehensive income by $72,721 (October 31, 2019 – $107,812) net of tax and a one-percentage point decrease in interest rates would increase other comprehensive income by $74,999 (October 31, 2019 – $111,563), net of tax.

108 | CWB Financial Group 2020 Annual Report

25. INTEREST INCOME

The composition of our interest income follows:

2020 2019

Loans measured at amortized cost(1) $ 1,336,002 $ 1,379,730

Securities

Debt securities measured at FVOCI(1) 28,615 26,841

Equity securities designated at FVOCI 158 2,354

Securities purchased under resale agreements measured at amortized cost(1) 273 1,501

Deposits with regulated financial institutions measured at FVOCI(1) 3,866 8,274

Total $ 1,368,914 $ 1,418,700

(1) Interest income is calculated using the effective interest method.

26. FAIR VALUE OF FINANCIAL INSTRUMENTS

A) FINANCIAL ASSETS AND LIABILITIES BY MEASUREMENT BASIS

The fair value of a financial instrument on initial recognition is normally the transaction price (i.e. the value of the consideration given or received). Subsequent to initial recognition, financial instruments measured at fair value that are quoted in active markets are based on bid prices for financial assets and offer prices for financial liabilities. For certain securities and derivative financial instruments where an active market does not exist, fair values are determined using valuation techniques that refer to observable market data, including discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants, and non- market observable inputs.

Several of our significant financial instruments, such as loans and deposits, lack an available trading market as they are not typically exchanged. Therefore, these instruments have been valued assuming they will not be sold, using present value or other suitable techniques and are not necessarily representative of the amounts realizable in an immediate settlement of the instrument.

Changes in interest rates are the main cause of changes in the fair value of our financial instruments. The carrying value of loans, deposits, subordinated debentures and debt related to securitization activities are not adjusted to reflect increases or decreases in fair value due to interest rate changes as our intention is to realize their value over time by holding them to maturity.

The following table provides the carrying amount of financial instruments by category as defined in IFRS 9 and by balance sheet heading. The table sets out the fair values of financial instruments (including derivatives) using the valuation methods and assumptions referred to below the table. The table does not include assets and liabilities that are not considered financial instruments. The table also excludes assets and liabilities which are considered financial instruments, but are not recorded at fair value and for which the carrying amount approximates fair value.

CWB Financial Group 2020 Annual Report | 109

October 31, 2020

Derivatives

Amortized Cost FVOCI

Total Carrying Amount Fair Value

Fair Value Over (Under)

Carrying Amount

Financial Assets Cash resources (Note 4) $ - $ 113,868 $ 254,451 $ 368,319 $ 368,319 $ - Securities(2) (Note 5) - - 2,664,618 2,664,618 2,664,618 - Securities purchased under resale

agreements - 50,084 - 50,084 50,084 - Loans(3) - 30,158,951 - 30,158,951 30,541,660 382,709 Derivatives 96,615 - - 96,615 96,615 -

Total Financial Assets $ 96,615 $ 30,322,903 $ 2,919,069 $ 33,338,587 $ 33,721,296 $ 382,709

Financial Liabilities Deposits(3) $ - $ 27,328,985 $ - $ 27,328,985 $ 27,738,072 $ 409,087 Securities sold under repurchase

agreements - 65,198 - 65,198 65,198 - Debt - 2,424,323 - 2,424,323 2,483,015 58,692 Derivatives 6,285 - - 6,285 6,285 -

Total Financial Liabilities $ 6,285 $ 29,818,506 $ - $ 29,824,791 $ 30,292,570 $ 467,779

October 31, 2019

Derivatives

Amortized Cost FVOCI

Total Carrying Amount

Fair Value

Fair Value Over(Under)

Carrying Amount

Financial Assets Cash resources (Note 4) $ - $ 121,986 $ 293,856 $ 415,842 $ 415,842 $ - Securities(2) (Note 5) - - 2,019,207 2,019,207 2,019,207 - Securities purchased under resale

agreements - 40,366 - 40,366 40,366 - Loans(3) - 28,450,811 - 28,450,811 28,478,436 27,625 Derivatives 47,815 - - 47,815 47,815 -

Total Financial Assets $ 47,815 $ 28,613,163 $ 2,313,063 $ 30,974,041 $ 31,001,666 $ 27,625

Financial Liabilities Deposits(3) $ - $ 25,380,204 $ - $ 25,380,204 $ 25,544,270 $ 164,066 Securities sold under repurchase

agreements - 29,965 - 29,965 29,965 - Debt - 2,412,293 - 2,412,293 2,444,034 31,741 Derivatives 14,016 - - 14,016 14,016 -

Total Financial Liabilities $ 14,016 $ 27,822,462 $ - $ 27,836,478 $ 28,032,285 $ 195,807

(1) For further information on interest rates associated with financial assets and liabilities, including derivative instruments, refer to Note 24. (2) Securities are comprised of $2,662,626 (2019 - $2,001,043) measured at FVOCI and $1,992 (2019 - $18,164) designated at FVOCI. (3) Loans and deposits exclude deferred premiums, deferred revenue and allowance for credit losses, which are not financial instruments.

The methods and assumptions used to estimate the fair values of financial instruments are as follows:

• Interest bearing deposits with regulated financial institutions and securities are reported on the consolidated balance sheets at the fair value disclosed in Notes 4 and 5. Remaining cash resources and securities purchased under resale agreements are reported at amortized cost, which is equal to fair value, on the consolidated balance sheets. These values are based on quoted market prices, if available. Where a quoted market price is not readily available, other valuation techniques are based on observable market rates used to estimate fair value.

• Fair value of loans reflect changes in the general level of interest rates that have occurred since the loans were originated and exclude the allowance for credit losses. Fair value is estimated by discounting the expected future cash flows of these loans at current market rates for loans with similar terms and risks.

• With the exception of derivative financial instruments and contingent consideration, financial instruments included within other assets and other liabilities reported on the consolidated balance sheets carrying values that closely approximate fair value.

• For derivative financial instruments where an active market does not exist, fair values are determined using valuation techniques that refer to observable market data, including discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.

• The estimated fair values of deposits are determined by discounting the contractual cash flows at current market rates for deposits of similar terms.

The fair values of debt are determined by reference to current market prices for debt with similar terms and risks.

Fair values are based on our best estimates based on market conditions and pricing policies at a certain point in time. The estimates are subjective and involve particular assumptions and matters of judgment and, as such, may not be reflective of future fair values.

110 | CWB Financial Group 2020 Annual Report

Fair Value Hierarchy

We categorize our fair value measurements of financial instruments according to a three-level hierarchy. Level 1 fair value measurements reflect unadjusted quoted prices in active markets for identical assets and liabilities that we can access at the measurement date. Level 2 fair value measurements are estimated using observable inputs, including quoted market prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, and model inputs that are either observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 fair value measurements are determined using one or more inputs that are unobservable and significant to the fair value of the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available at the measurement date.

Valuation Technique

As at October 31, 2020 Fair Value Level 1 Level 2 Level 3

Financial Assets

Cash resources $ 368,319 $ 134,385 $ 233,934 $ - Securities 2,664,618 561,868 2,102,750 - Securities purchased under resale agreements 50,084 - 50,084 - Loans 30,541,660 - - 30,541,660 Derivatives 96,615 - 96,615 -

Total Financial Assets $ 33,721,296 $ 696,253 $ 2,483,383 $ 30,541,660

Financial Liabilities Deposits $ 27,738,072 $ - $ 27,738,072 $ - Securities sold under repurchase agreements 65,198 - 65,198 - Debt 2,483,015 - 2,483,015 - Derivatives 6,285 - 6,285 -

Total Financial Liabilities $ 30,292,570 $ - $ 30,292,570 $ -

Valuation Technique

As at October 31, 2019 Fair Value Level 1 Level 2 Level 3

Financial Assets Cash resources $ 415,842 $ 139,876 $ 275,966 $ - Securities 2,019,207 141,070 1,878,137 - Securities purchased under resale agreements 40,366 - 40,366 - Loans 28,478,436 - - 28,478,436 Derivatives 47,815 - 47,815 -

Total Financial Assets $ 31,001,666 $ 280,946 $ 2,242,284 $ 28,478,436

Financial Liabilities Deposits $ 25,544,270 $ - $ 25,544,270 $ - Securities sold under repurchase agreements 29,965 - 29,965 - Debt 2,444,034 - 2,444,034 - Derivatives 14,016 - 14,016 -

Total Financial Liabilities $ 28,032,285 $ - $ 28,032,285 $ -

B) LEVEL 3 FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

The Level 3 financial liabilities settled in the year ended October 31, 2019 related to the 2016 acquisition of CWB Maxium Financial Inc. and the 2018 divestiture by Canadian Western Trust, a wholly-owned subsidiary of CWB, of self-directed account services to clients holding certain securities. Fair value changes prior to the settlement of the liability were determined by estimating the expected value of the contingent consideration, taking into consideration the potential financial outcomes and their associated probabilities. The following table shows a reconciliation of the fair value measurements related to the Level 3 financial instruments:

2020 2019

Acquisitions

Balance at beginning of year $ - $ 29,514

Acquisition-related fair value changes - 7,854

Contingent consideration instalment payments - (37,358)

- -

Divestitures

Balance at beginning of year - 300

Divestiture-related fair value changes - (300)

- -

Balance at End of Year $ - $ -

CWB Financial Group 2020 Annual Report | 111

27. FINANCIAL INSTRUMENTS - OFFSETTING

The following table provides a summary of financial assets and liabilities which are subject to enforceable master netting agreements and similar arrangements, as well as financial collateral received and pledged to mitigate credit exposures related to these financial instruments. The agreements do not meet the netting criteria required by IAS 32 Financial Instruments: Presentation as the right to set-off is only enforceable in the event of default or occurrence of other predetermined events.

Amounts not Offset on the Consolidated Balance Sheet

As at October 31, 2020

Gross Amounts Reported on the

Consolidated Balance Sheet

Impact of Master Netting

Agreements Cash

Collateral (1)

Securities Received as

Collateral (1)(2) Net Amount

Financial Assets

Derivatives $ 96,615 $ 6,285 $ 55,539 $ 34,791 $ -

Financial Liabilities

Derivatives $ 6,285 $ 6,285 $ - $ - $ -

Amounts not Offset on the Consolidated Balance Sheet

As at October 31, 2019

Gross Amounts Reported on the

Consolidated Balance Sheet

Impact of Master Netting

Agreements Cash

Collateral (1)

Securities Received as

Collateral (1)(2) Net Amount

Financial Assets

Derivatives $ 47,815 $ 13,788 $ 19,370 $ 5,939 $ 8,718

Financial Liabilities

Derivatives $ 14,016 $ 13,788 $ 228 $ - $ -

(1) Financial collateral is reflected at fair value. The amount of financial instruments and cash collateral disclosed is limited to the net balance sheet exposure, and any over-collateralization is excluded from the table. (2) Collateral received in the form of securities is not recognized on the consolidated balance sheets.

28. RISK MANAGEMENT

As part of our risk management practices, the risks that are significant to the business are identified, monitored and controlled. The most significant risks include credit risk, market risk, capital risk and operational risk. The nature of these risks and how they are managed is provided in the Risk Management section of the MD&A.

As permitted by the IASB, certain aspects of the risk management disclosure related to risks inherent with financial instruments is included in the MD&A. The relevant MD&A sections are identified by shading within boxes and the content forms an integral part of these audited consolidated financial statements.

Information on specific measures of risk, including the allowance for credit losses, derivative financial instruments, interest rate sensitivity, fair value of financial instruments and liability for unpaid claims are included elsewhere in these notes to the consolidated financial statements.

29. CAPITAL MANAGEMENT

Capital funds are managed in accordance with policies and plans that are regularly reviewed and approved by the Board of Directors and take into account forecasted capital needs and markets. The goal is to maintain adequate regulatory capital to be considered well-capitalized, protect customer deposits and provide capacity for internally generated growth and strategic opportunities that do not otherwise require accessing the public capital markets, all while providing a satisfactory return for shareholders.

We have a share incentive plan that is provided to officers and employees who are in a position to impact our longer-term financial success as measured by share price appreciation and dividend yield. Note 17 to the consolidated financial statements details the number of shares under options outstanding, the weighted average exercise price and the amounts exercisable at year end.

Regulatory capital and capital ratios are calculated in accordance with the requirements of OSFI. Capital is managed and reported in accordance with the requirements of the Basel III Capital Adequacy Accord (Basel III) using the Standardized approach. OSFI requires banks to measure capital adequacy in accordance with instructions for determining risk-adjusted capital and risk-weighted assets, including off-balance sheet commitments. Based on the deemed credit risk of each type of asset, a standardized weighting of 0% to 150% is assigned. As an example, a loan that is fully insured by CMHC is applied a risk weighting of 0% as our risk of loss is nil, while uninsured business loans are assigned a risk weighting of 100% to reflect the higher level of risk associated with this type of asset. The ratio of regulatory capital to risk-weighted assets is calculated and compared to OSFI’s standards for Canadian financial institutions. Off-balance sheet assets, such as the notional amount of derivatives and some credit commitments, are included in the calculation of risk-weighted assets and both the credit risk equivalent and the risk-weighted calculations are prescribed by OSFI.

Our required minimum regulatory capital ratios, including a 250 basis point capital conservation buffer, are 7.0% common equity Tier 1 (CET1), 8.5% Tier 1 and 10.5% Total capital. In addition, OSFI requires banks to maintain a minimum leverage ratio of 3%. The leverage ratio provides the ratio of Tier 1 capital to on-balance sheet and off- balance sheet exposures.

112 | CWB Financial Group 2020 Annual Report

Regulatory Response to COVID-19

Beginning in March 2020, OSFI introduced new measures to support the economy and maintain financial system resiliency in the face of the COVID-19 pandemic.

OSFI introduced transitional arrangements related to the capital treatment of performing loan allowances, resulting in a portion of allowances that would otherwise be included in Tier 2 capital to be included in CET1 capital. Subject to a scaling factor, the after-tax increase in performing loan allowances between the most recent period end and January 31, 2020 will be included in CET1 capital. The scaling factor is set at 70% for fiscal 2020, 50% for fiscal 2021 and 25% for fiscal 2022. The implementation of the performing loan allowance transitional arrangement, which has no impact on the total capital ratio, resulted in a $21 million increase to CET1 and Tier 1 capital and an approximate 10 basis point increase in the CET1 and Tier 1 ratios at October 31, 2020.

OSFI provided additional guidance related to the leverage ratio, allowing sovereign-issued securities that qualify as High Quality Liquid assets (HQLA) under the Liquidity Adequacy Requirements guideline to be temporarily excluded from the leverage ratio exposure measure until December 31, 2021. This change increased our leverage ratio by approximately 10 basis points at October 31, 2020.

Significant Changes

We adopted IFRS 16 on November 1, 2019 and, on transition recorded a reduction to shareholders’ equity of $13,035 and an increase in risk-weighted assets of $79,874. This resulted in a decrease in all of our capital adequacy ratios of approximately 10 basis points. For further details refer to Note 1.

On November 18, 2019, we redeemed all $250,000 of outstanding non-NVCC subordinated debentures for an aggregate amount of $253,900. This resulted in a decrease in the Total capital ratio of approximately 80 basis points.

On June 1, 2020, the wealth acquisition described in Note 3 resulted in a reduction of all capital adequacy ratios by approximately 30 basis points.

On June 29, 2020, we issued $125,000 of NVCC subordinated debentures due June 29, 2030. This issuance resulted in an increase in the Total capital ratio of approximately 50 basis points.

On October 30, 2020, we issued $175,000 of Limited Recourse Capital Notes Series 1 due April 30, 2081. This issuance resulted in an increase to the Tier 1 and Total capital ratios of approximately 70 basis points. For further details, refer to Note 16.

During 2020, we submitted our final application to OSFI to receive regulatory approval for transition from the Standardized approach to the Advanced Internal Ratings Based (AIRB) approach for capital and risk management. Until OSFI approval for transition to AIRB is received, we will continue to apply the Standardized approach for capital management and reporting.

During the year, we complied with all internal and external capital requirements.

Capital Structure and Regulatory Capital Ratios

2020 2019 Regulatory Capital, Net of Deductions

Common equity Tier 1 $ 2,371,753 $ 2,302,551 Tier 1 2,936,845 2,692,714 Total 3,418,997 3,232,807

Capital Ratios Common equity Tier 1 8.8% 9.1% Tier 1 10.9 10.7 Total 12.6 12.8

Leverage Ratio 8.5 8.3

CWB Financial Group 2020 Annual Report | 113

30. SUBSIDIARIES

As at October 31, 2020, we, either directly or indirectly through our subsidiaries, control the following significant subsidiaries:

Canadian Western Bank Subsidiaries(1) (annexed in accordance with subsection 308 (3) of the Bank Act)

(1) Unless otherwise noted, we, either directly or through our subsidiaries, own 100% of the voting shares of each entity. (2) CWB Private Investment Counsel Ltd, comprised of the wealth management business acquisition described in Note 3, was amalgamated with CWB Wealth Management Ltd. on November 1, 2020. The amalgamated subsidiary

continues under the name of CWB Wealth Management Ltd. (3) We own 100% of the voting shares of CWB Wealth Management Ltd. (October 31, 2019 – 93.91%). (4) CWB Wealth Management Ltd. owns 74.67% of the voting shares of CWB Mclean & Partners Wealth Management Ltd. (October 31, 2019 – 73.70%). (5) The carrying value of voting shares is stated at the cost of our equity in the subsidiaries in thousands of dollars.

31. COMPARATIVE FIGURES Certain prior year figures have been reclassified to conform to the current year’s presentation.

Address of Head Office

Carrying Value of Voting Shares Owned

by CWB(5)

CWB National Leasing Inc. 1525 Buffalo Place Winnipeg, Manitoba

$ 134,458

CWB Private Investment Counsel Ltd.(2) 26 Wellington Street East, 8th Floor Toronto, Ontario

86,816

CWB Wealth Management Ltd.(2)(3) Suite 3000, 10303 Jasper Avenue Edmonton, Alberta

31,844

CWB McLean & Partners Wealth Management Ltd.(4) 801 10th Ave SW Calgary, Alberta

Canadian Western Financial Ltd. Suite 3000, 10303 Jasper Avenue Edmonton, Alberta

CWB Maxium Financial Inc. 30 Vogell Road, Suite 1 Richmond Hill, Ontario

30,812

Canadian Western Trust Company Suite 3000, 10303 Jasper Avenue Edmonton, Alberta

19,136

Valiant Trust Company Suite 3000, 10303 Jasper Avenue Edmonton, Alberta

8,080

CWB Financial Group Corporate Headquarters Suite 3000, 10303 Jasper Avenue NW Canadian Western Bank Place Edmonton, AB T5J 3X6 Telephone: 780.423.8888 Fax: 780.423.8897 cwb.com

2021 Annual Meeting The annual and special meeting of the common shareholders of Canadian Western Bank will be held in Edmonton, AB, on April 1, 2021 at 1:00 p.m. MT (3:00 p.m. ET).

Transfer Agent and Registrar Computershare Trust Company of Canada 100 University Avenue, 8th Floor Toronto, ON M5J 2Y1 Telephone: 416.263.9200 Toll-free: 1.800.564.6253 Fax: 888.453.0330 computershare.com

Stock Exchange Listings The Toronto Stock Exchange (TSX) Common Shares: CWB Series 5 Preferred Shares: CWB.PR.B Series 7 Preferred Shares: CWB.PR.C Series 9 Preferred Shares: CWB.PR.D

Eligible Dividend Designation CWB designates all common and preferred share dividends paid to Canadian residents as “eligible dividends”, as defined in the Income Tax Act (Canada), unless otherwise noted.

Shareholdings and Dividends Contact Information regarding your shareholdings and dividends, including changes to share registrations or addresses, lost share certificates, tax forms or estate transfers, and may be obtained by contacting the transfer agent.

Direct Deposit Services Shareholders may choose to have cash dividends paid on CWB common and preferred shares deposited directly into accounts held at their financial institution. To arrange direct deposit service, please contact the Transfer Agent and Registrar.

Dividend Reinvestment Plan CWB’s dividend reinvestment plan allows common and preferred shareholders to purchase additional common shares by reinvesting their cash dividend without incurring brokerage and commission fees.

For information about participation in the plan, please contact the Transfer Agent and Registrar.

Duplicated Communications If you receive, but do not require, more than one mailing for the same ownership, please contact the Transfer Agent and Registrar to combine the accounts.

Investor Relations Contact For financial information inquiries, please contact:

Investor Relations CWB Financial Group Suite 3000, 10303 Jasper Avenue NW Canadian Western Bank Place Edmonton, AB T5J 3X6 Telephone: 800.836.1886 [email protected]

This 2020 Annual Report, along with our Annual Information Form, Notice of Annual Meeting of Shareholders and Management Proxy Circular, is available on our website, or will be available in due course. For additional printed copies of these reports, please contact the Investor Relations Team.

Filings are also available on the Canadian Securities Administrators’ website at sedar.com.

Further information regarding the Bank’s listed securities is available on our website www.cwb.com/investor- relations.

Resolving concerns We are proud of our reputation and encourage you to tell us if you think we have been unsuccessful in dealing with you properly and fairly in any aspect of our business. Please see our website for steps to resolve your complaint. www.cwb.com/about-us/ resolving-your-concerns

Complaints or Concerns regarding Accounting, Internal Accounting Controls or Auditing Matters Please contact either:

Carolyn Graham Executive Vice President and Chief Financial Officer CWB Financial Group Telephone: 780.423.8854 Fax: 780.969.8326 [email protected]

or

Robert Manning Chair of the Audit Committee c/o 210 – 5324 Calgary Trail Edmonton, AB T6H 4J8 Telephone: 780.438.2626 Fax: 780.438.2632 [email protected]

SENIOR OFFICERS

Executive Officers Chris Fowler President and Chief Executive Officer

Carolyn Graham, FCPA, FCA Executive Vice President and Chief Financial Officer

Kelly Blackett Executive Vice President, Human Resources and Corporate Communications

Glen Eastwood Executive Vice President, Business Transformation

Darrell Jones Executive Vice President and Chief Information Officer

Stephen Murphy Executive Vice President, Banking

Bogac (Bogie) Ozdemir Executive Vice President and Chief Risk Officer

Senior Corporate Officers Vlad Ahmad Senior Vice President, Operations and Business Transformation

Niall Boles Senior Vice President and Treasurer

Bindu Cudjoe Senior Vice President, General Counsel and Corporate Secretary [email protected]

Supriya James Senior Vice President, Human Resources

Azfar Karimuddin Senior Vice President, Information Services

Kelly Martin Senior Vice President and Chief Internal Auditor

Matt Rudd, CPA, CA Senior Vice President, Finance and Investor Relations

David Thomson Senior Vice President, Credit Risk Management

Commercial and Retail Banking Jeff Bowling Senior Vice President, Real Estate

Blaine Forer Senior Vice President and Regional General Manager, British Columbia

Mario Furlan Senior Vice President, Real Estate, BC Region

John Steeves Senior Vice President and Regional General Manager, Prairies Region

Jeff Wright Senior Vice President, Equipment, Digital & Client Solutions

CWB National Leasing Michael Dubowec President and Chief Executive Officer

CWB Optimum Mortgage Rejean Roberge Vice President

CWB Trust Services Bjorn Frohnsdorf Vice President and General Manager

CWB Wealth Management Matt Evans President and Chief Executive Officer

CWB McLean & Partners Wealth Management Kevin Dehod President and Chief Executive Officer

CWB Maxium Financial Daryl MacLellan President and Chief Executive Officer

Shareholder Information

114 | CWB Financial Group 2020 Annual Report