Canadian Western Bank (TSX:CWB) reported an “exceptional first quarter financial performance highlighted by record earnings and total revenues.”

First quarter net income of $40 million increased 56 per cent compared to $25.6 million the same quarter last year, the Edmonton-based bank said Thursday.

The increase reflects a recovery in net interest margin to more normal historical levels and very strong other income.

Earnings per common share increased 43 per cent to a record 57 cents from 40 cents a year ago, and include the net impact of the preferred units issued in March 2009.

The bank reported record return on common shareholders’ equity of 18 per cent, up 330 basis points, while total shareholders’ equity surpassed the $1 billion milestone.

Quarterly revenues surpassed the $100 million milestone to reach $100.7 million, up 31 per cent fro the year earlier $76.9 million, and a new record for the bank.

Record banking and trust earnings of $36.7 million were up 48 per cent compared to the same quarter last year as the positive earnings impact from the strong recovery in net interest margin and 3 per cent loan growth helped push this segment’s total revenues up 27 per cent to reach $93.2 million.

Quarterly net income from insurance operations was a record $3.3 million, up $2.5 million compared to a year earlier reflecting a positive $1.9 million before tax contribution from the Alberta risk sharing pools and solid results in the core underwriting business.

“The first quarter included record performance from both business segments that resulted from a combination of positive circumstances,” says Larry Pollock, president and CEO.

“Margins recovered more quickly than we expected and Canadian Direct posted a very strong contribution. High gains on securities sales further increased earnings reflecting both our investment strategies and favourable capital market conditions. While it will be very difficult to duplicate these exceptional results through the remaining three quarters, fiscal 2010 is so far shaping up to be a great year for CWB.”

“Overall loan growth continues to be impacted by the recessionary slowdown and an atmosphere of uncertainty, particularly in the equipment financing and real estate construction portfolios,” continued Pollock. “While there are many positive indicators, we expect ongoing challenges until there is a sustained and clear recovery in global economies.

During the quarter, the bank’s Tier 1 capital ratio was 11.6 per cent and total capital ratio was 15.1 per cent, up from 8.7 per cent and 13.0 per cent respectively.
Insurance.

The bank left its quarterly dividend unchanged at 11 cents per common share.

Canadian Western operates in the four western provinces through several subsidiaries including Canadian Western Trust, Valiant Trust, Adroit Investment Management and the recently acquired National Leasing Group Inc.

“All of our subsidiaries have excellent growth prospects and the acquisition of National Leasing represents an important step in further broadening our product lines and enhancing geographic diversification,” the bank said.

Canadian Western’s shares traded at $21.97, up 31 cents, at midday on the Toronto Stock Exchange.