Despite a difficult operating environment for the global financial services sector, Canadian Western Bank earned net income of $25.6 million in the first quarter ended Jan. 31, down 1% from $25.9 million in the same period last year.

The company reported on Thursday that total revenues for the quarter, on a tax equivalent basis, were $76.9 million, up 3% from $74.7 million last year.

Revenue was helped by loan growth of 4% during the quarter, but was offset by significantly lower net interest margin.

Quarterly net interest income was $54.6 million in the first quarter, down $2.5 million, or 4%, from the same period last year. The bank said this was a result of reductions in the prime lending interest rate, lower yields on investments held in the securities portfolio and elevated deposit costs related to ongoing disruptions in financial markets. It was partially offset by lower average liquidity levels and improved interest spreads on both new and renewal accounts.

“Not unlike other financial institutions around the globe, CWB continued to be significantly impacted by ongoing market disruptions and a deteriorating economic outlook,” said Larry Pollock, president and CEO. “However, our position is different in that the bulk of our challenges are centered on net interest margin. While this circumstance is inflicting considerable pain as it relates to our current revenue and profit growth, margins will return to more normal levels over time and we’re actively developing strategies to help accelerate this process.”

First quarter return on equity was 14.7%, down from 16.9% a year earlier. Return on assets was 0.93%, compared to 1.07% a year earlier.

While the bank’s primary markets have been hit by the economic downturn, its management believes that Western Canada is better positioned than the rest of the country to manage through these challenges.

“Western Canada is not immune to a global recession and we are undoubtedly facing more tough times ahead, but I can’t think of a place I’d rather be situated than Western Canada,” said Pollock. “Provincial governments in the west have very low debt levels – zero in Alberta – and have been managing surpluses for some time. We also have the lowest unemployment levels in the country.”

The bank’s gross impaired loans at Jan. 31 totalled $107.8 million, up sharply from $91.6 million last quarter and $38.9 million a year earlier. This is partially a result of moderated residential sales activity, the bank said.

“While we have seen a considerable increase in the dollar level of gross impaired loans, I remain confident that our secured lending practices and disciplined underwriting, coupled with effective stimulus from government to manage our economies, should keep our actual write-offs within acceptable levels,” Pollock said.

Canadian Western Bank’s insurance subsidiary, Canadian Direct Insurance Incorporated, saw net income tumble to $0.8 million in the quarter, down 46% from $1.5 million in the same quarter last year. This was largely a result of high frequency and severity of claims in the B.C. home product line, thanks to major snowstorms and the melt that followed.

During the quarter, the bank closed the acquisition of 72.5% of Adroit Investment Management Ltd., an Edmonton-based firm specializing in wealth management for individuals, corporations and institutional clients.