LAURENTIAN BANK REPORTS NET INCOME OF $30.1 MILLION FOR THE THIRD QUARTER OF
2010
------------------------------------------------------------------------- Highlights of the third quarter 2010 - Net income of $30.1 million, up 5% from $28.7 million for the third quarter of 2009 - Return on common shareholders' equity of 11.0%, compared to 11.6% for the third quarter of 2009 - Total revenue of $188.8 million, an increase of 7% from $176.7 million a year ago - Loan losses of $20.0 million, up from $16.0 million in the second quarter of 2010 and the third quarter of 2009 - Total loans and bankers' acceptances increased by more than $1.9 billion, or 12%, over the last twelve months - Efficiency ratio remained stable at 67.7% ------------------------------------------------------------------------- </pre> <p/> <p><span class="xn-location">MONTREAL</span>, <span class="xn-chron">Sept. 2</span> /CNW Telbec/ - Laurentian Bank of <span class="xn-location">Canada</span> reported net income of <span class="xn-money">$30.1 million</span>, or <span class="xn-money">$1.13</span> diluted per common share, for the third quarter ended <span class="xn-chron">July 31, 2010</span>, compared to net income of <span class="xn-money">$28.7 million</span>, or <span class="xn-money">$1.08</span> diluted per common share, for the third quarter of 2009. Return on common shareholders' equity was 11.0% for the quarter, compared to 11.6% for the corresponding period in 2009.</p> <p>For the nine months ended <span class="xn-chron">July 31, 2010</span>, net income totalled <span class="xn-money">$90.4 million</span> or <span class="xn-money">$3.39</span> diluted per common share, compared with net income of <span class="xn-money">$74.9 million</span> or <span class="xn-money">$2.76</span> diluted per common share in 2009. Return on common shareholders' equity was 11.4% for the nine months ended <span class="xn-chron">July 31, 2010</span>, compared to 10.1% for the same period in 2009.</p> <p>Commenting on the third quarter results, Réjean Robitaille, President and Chief Executive Officer, mentioned: "We continue to see improvement in earnings and total revenue year-over-year. Higher net interest margins and growth in loan and deposit volumes since last year strongly contributed to these good results. The credit quality of our portfolios has, overall, remained sound, with significant improvements on the retail side, even though loan losses for the quarter were affected by a single commercial exposure. We are pleased to see that all our business lines are contributing to the Bank's success, thanks to the continued strong commitment of all our employees."</p> <p>"We are also encouraged by the recent upgrade of our credit rating by Standard & Poors, which is an acknowledgement of our overall improvement in profitability over the last 5 years, despite the economic turmoil of the recent years."</p> <p/> <p>Review of Business Highlights</p> <p/> <p>The third quarter of 2010 reconfirmed the momentum of the Laurentian Bank and the solidity of its business plan. Strategic diversification and the strength of its four businesses provide opportunities to improve the Bank's profitability. This was evidenced by the increase in earnings in the third quarter compared to a year earlier and the continued growth in loans and deposits. The effectiveness and relevance of the Bank's business strategies, over the past few years, have allowed the Bank to generate sustained growth.</p> <p>Pursuing the objective of optimizing the branch network configuration, the Retail and SME <span class="xn-location">Quebec</span> segment opened its 32nd financial services boutique, in Laval, <span class="xn-location">Quebec</span>. The customers' high level of satisfaction with these non-traditional branches translates into solid business development. This brings the number of retail branches to 157, the third largest network in the Province of <span class="xn-location">Quebec</span>. Furthermore, a growing number of these branches offer the services of financial planners, which not only allows the Bank to pursue its Wealth Management strategy but also helps clients achieve financial security. The Bank is also continuing to see positive results from its growing team of mobile mortgage bankers. This approach is generating an increase in high quality residential mortgage loans and contributes to the achievement of the Bank's overall growth objectives.</p> <p>Within B2B Trust, the development of the different distribution channels remains a top priority. The 15,000 independent financial advisors dealing with B2B Trust are pleased with the most complete suite of products available in the industry. Offering prime mortgages through brokers is proving to be effective in furthering geographic diversification and contributing to growth. Charged with developing and executing B2B Trust's strategies, its President and CEO, François Desjardins, was a recipient of "Canada's Top 40 Under 40(TM)" award in 2010. This attests to the growing depth of talent within the organization.</p> <p>The Bank continues to view positively the solid loan growth of the Real Estate and Commercial segment, particularly given challenging market conditions. With last year's lenders' market transitioning into this year's borrowers' market, the team is increasing its disciplined and rigorous approach to ensure profitable growth. The recently-formed <span class="xn-location">Toronto</span> real estate syndication desk is improving the Bank's competitive position, allowing it to participate in a wider range of projects, while maintaining strict underwriting criteria, thereby enhancing both the geographic and sectoral diversification of the portfolio.</p> <p>Laurentian Bank Securities and Capital Markets continues to gradually build its Institutional Equity division, focusing on the small cap market niche. As well, the growing presence and reputation of the retail brokerage operation are compelling strengths which attract brokers with established books of business. These growth initiatives complement a strong Institutional Fixed Income operation and diversify the source of revenues, thereby strengthening its business base.</p> <p>Further development of human capital, distribution channels and market capabilities, favors organic growth and sustained profitability for the Bank.</p> <p/> <p>Non-GAAP Financial Measures</p> <p/> <p>The Bank uses both generally accepted accounting principles ("GAAP") and certain non-GAAP measures to assess performance, such as return on common shareholders' equity, net interest margin and efficiency ratios. With regard to the calculation of the return on common shareholders' equity, the Bank considers that net income is the best measure of profitability and that common shareholders' equity, excluding accumulated other comprehensive income, would be used as a measure of capital. The calculation of the Bank's book value is also based on common shareholders' equity, excluding accumulated other comprehensive income. Tangible common equity is defined as common shareholders' equity, excluding accumulated other comprehensive income, less goodwill and contractual and customer relationship intangible assets.</p> <p>Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are unlikely to be comparable to any similar measures presented by other companies. The Bank believes that these non-GAAP financial measures provide investors and analysts with useful information so that they can better understand financial results and analyze the Bank's growth and profit potential more effectively.</p> <p/> <p>Caution Regarding Forward-looking Statements</p> <p/> <p>In this document and in other documents filed with Canadian regulatory authorities or in other communications, Laurentian Bank of <span class="xn-location">Canada</span> may from time to time make written or oral forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements include, but are not limited to, statements regarding the Bank's business plan and financial objectives. The forward-looking statements contained in this document are used to assist the Bank's security holders and financial analysts in obtaining a better understanding of the Bank's financial position and the results of operations as at and for the periods ended on the dates presented and may not be appropriate for other purposes. Forward-looking statements typically use the conditional, as well as words such as prospects, believe, estimate, forecast, project, expect, anticipate, plan, may, should, could and would, or the negative of these terms, variations thereof or similar terminology.</p> <p>By their very nature, forward-looking statements are based on assumptions and involve inherent risks and uncertainties, both general and specific in nature. It is therefore possible that the forecasts, projections and other forward-looking statements will not be achieved or will prove to be inaccurate. Although the Bank believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct.</p> <p>The Bank cautions readers against placing undue reliance on forward-looking statements when making decisions, as the actual results could differ considerably from the opinions, plans, objectives, expectations, forecasts, estimates and intentions expressed in such forward-looking statements due to various material factors. Among other things, these factors include capital market activity, changes in government monetary, fiscal and economic policies, changes in interest rates, inflation levels and general economic conditions, legislative and regulatory developments, competition, credit ratings, scarcity of human resources and technological environment. The Bank further cautions that the foregoing list of factors is not exhaustive. For more information on the risks, uncertainties and assumptions that would cause the Bank's actual results to differ from current expectations, please also refer to the Bank's public filings available at <a href="http://www.sedar.com">www.sedar.com</a>.</p> <p>The Bank does not undertake to update any forward-looking statements, whether oral or written, made by itself or on its behalf, except to the extent required by securities regulations.</p> <p/> <pre> FINANCIAL HIGHLIGHTS FOR THE THREE MONTHS ENDED IN MILLIONS OF DOLLARS, ---------------------------- UNLESS OTHERWISE INDICATED JULY 31 JULY 31 (UNAUDITED) 2010 2009 VARIANCE ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings Net income $ 30.1 $ 28.7 5% Net income available to common shareholders $ 27.0 $ 25.9 4% Return on common shareholders' equity(1) 11.0% 11.6% ------------------------------------------------------------------------- Per common share Diluted net income $ 1.13 $ 1.08 5% Dividends declared $ 0.36 $ 0.34 6% ------------------------------------------------------------------------- ------------------------------------------------------------------------- FINANCIAL RATIOS Dividend yield 3.13% 3.80% Dividend payout ratio 31.9% 31.4% ------------------------------------------------------------------------- As a percentage of average assets Net interest income 2.22% 2.15% Provision for loan losses 0.34% 0.31% ------------------------------------------------------------------------- Profitability Efficiency ratio (non-interest expenses as a % of total revenue) 67.7% 67.4% ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED IN MILLIONS OF DOLLARS, --------------------------- UNLESS OTHERWISE INDICATED JULY 31 JULY 31 (UNAUDITED) 2010 2009 VARIANCE ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings Net income $ 90.4 $ 74.9 21% Net income available to common shareholders $ 81.2 $ 65.8 23% Return on common shareholders' equity(1) 11.4% 10.1% ------------------------------------------------------------------------- Per common share Diluted net income $ 3.39 $ 2.76 23% Dividends declared $ 1.08 $ 1.02 6% Book value(1) $ 40.99 $ 37.57 9% Share price - close $ 46.00 $ 35.75 29% ------------------------------------------------------------------------- Financial position Balance sheet assets $ 23,577 $ 21,316 11% Loans, bankers' acceptances and assets purchased under reverse repurchase agreements, net $ 18,009 $ 15,853 14% Personal deposits $ 15,592 $ 14,766 6% Shareholders' equity and debentures $ 1,367 $ 1,293 6% Number of common shares - end of period (in thousands) 23,920 23,856 -% Net impaired loans as a % of loans, bankers' acceptances and assets purchased under reverse repurchase agreements 0.29% 0.05% ------------------------------------------------------------------------- Capital ratios Tier I BIS capital ratio 10.7% 10.8% Total BIS capital ratio 12.5% 12.8% Assets to capital multiple 18.4x 17.8x Tangible common equity as a percentage of risk-weighted assets(2) 8.9% 8.8% ------------------------------------------------------------------------- ------------------------------------------------------------------------- FINANCIAL RATIOS Per common share Price / earnings ratio (trailing four quarters) 9.4x 9.5x Market to book value 112% 95% Dividend yield 3.13% 3.80% Dividend payout ratio 31.8% 37.0% ------------------------------------------------------------------------- As a percentage of average assets Net interest income 2.15% 2.03% Provision for loan losses 0.30% 0.27% ------------------------------------------------------------------------- Profitability Efficiency ratio (non-interest expenses as a % of total revenue) 67.9% 70.5% ------------------------------------------------------------------------- ------------------------------------------------------------------------- OTHER INFORMATION Number of full-time equivalent employees 3,694 3,571 Number of branches 157 156 Number of automated banking machines 410 362 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) With regard to the calculation of the Return on common shareholders' equity ratio, the Bank considers that net income is the best measure of profitability and that common shareholders' equity, excluding accumulated other comprehensive income, would be used as a capital measure. The calculation of the Bank's book value is also based on common shareholders' equity, excluding accumulated other comprehensive income. (2) Tangible common equity is defined as common shareholders' equity, excluding accumulated other comprehensive income, less goodwill and contractual and customer relationship intangible assets. </pre> <p/> <p>Management's Discussion and Analysis</p> <p/> <p>This Management's Discussion and Analysis (MD&A) is a narrative explanation, through the eyes of management, of the Bank's financial condition as at <span class="xn-chron">July 31, 2010</span>, and of how it performed during the three-month and nine-month periods then ended. This MD&A, dated <span class="xn-chron">September 2, 2010</span>, should be read in conjunction with the unaudited interim consolidated financial statements for the third quarter of 2010. Supplemental information on risk management, critical accounting policies and estimates, and off-balance sheet arrangements is also provided in the Bank's 2009 Annual Report.</p> <p>Additional information about the Laurentian Bank of <span class="xn-location">Canada</span>, including the Annual Information Form, is available on the Bank's website at <a href="http://www.laurentianbank.ca">www.laurentianbank.ca</a> and on SEDAR at <a href="http://www.sedar.com">www.sedar.com</a>.</p> <p/> <p>Performance and Financial Objectives</p> <p/> <p>The following table presents management's financial objectives for 2010 and the Bank's performance to date. These financial objectives are based on the same assumptions noted on page 21 of the Bank's 2009 Annual Report under the title "Key assumptions supporting the Bank's objectives".</p> <p/> <pre> 2010 FINANCIAL OBJECTIVES FOR THE NINE MONTHS ENDED JULY 31, 2010 OBJECTIVES 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Revenue growth 5 % to 10 % 12 % Efficiency ratio 70 % to 67 % 67.9 % Return on common shareholders' equity 10.0 % to 12.0 % 11.4 % Diluted net income per common share $ 4.00 to $ 4.70 $ 3.39 Tier I BIS capital ratio Minimum of 9.5 % 10.7 % ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>With only three months remaining in the current year, management believes that the Bank is well positioned to meet the 2010 objectives set at the beginning of the year, as shown in the table above.</p> <p/> <p>Consolidated Results</p> <p/> <p>Three months ended <span class="xn-chron">July 31, 2010</span> compared to three months ended <span class="xn-chron">July 31, 2009</span></p> <p>Net income was <span class="xn-money">$30.1 million</span>, or <span class="xn-money">$1.13</span> diluted per common share, for the third quarter ended <span class="xn-chron">July 31, 2010</span>, compared with <span class="xn-money">$28.7 million</span>, or <span class="xn-money">$1.08</span> diluted per common share, for the third quarter of 2009.</p> <p/> <p>Total revenue</p> <p/> <p>Total revenue increased by 7% year-over-year to <span class="xn-money">$188.8 million</span> in the third quarter of 2010, compared with <span class="xn-money">$176.7 million</span> in the third quarter of 2009. The Bank's net interest income increased to <span class="xn-money">$129.9 million</span> for the third quarter of 2010, from <span class="xn-money">$112.8 million</span> in the third quarter of 2009. The strong loan and deposit growth year-over-year combined with high interest margins contributed to the 15% increase in net interest income. However, interest margins should remain under pressure, as a result of the sustained competition for retail customers and the continued low interest rate environment, as well as the Bank's higher liquidity level.</p> <p>Other income was <span class="xn-money">$58.9 million</span> in the third quarter of 2010, compared to <span class="xn-money">$63.9 million</span> in the third quarter of 2009. Securitization income decreased by <span class="xn-money">$8.8 million</span> compared to the same quarter a year ago, as a result of lower securitization gains given the tighter spreads on the mortgages sold. See note 3 to the interim financial statements for further details on securitization activities. This decline was partly offset by higher fees and commissions on loans and deposits, further demonstrating the Bank's ability to grow its core business. Income from treasury and financial market operations improved by <span class="xn-money">$4.2 million</span> compared to the same quarter a year ago, essentially as a result of a <span class="xn-money">$4.8 million</span> charge related to the write-down of certain available-for-sale securities recorded in the third quarter of 2009. Income from brokerage operations decreased by <span class="xn-money">$3.8 million</span> compared to the third quarter of 2009, as a result of the lower level of institutional market activity.</p> <p/> <p>Provision for loan losses</p> <p/> <p>The provision for loan losses amounted to <span class="xn-money">$20.0 million</span> in the third quarter of 2010, compared to <span class="xn-money">$16.0 million</span> for the third quarter of 2009. During the third quarter of 2010, loan losses were particularly affected by a <span class="xn-money">$5.0 million</span> loss on a single commercial exposure. While the credit quality of most retail portfolios has improved, certain sectors of the economy impacted by the last recession continue to contribute to higher loan losses in commercial and real estate portfolios. The Risk Management section below provides additional information on the credit quality of the Bank's loan portfolios.</p> <p/> <p>Non-interest expenses</p> <p/> <p>Non-interest expenses totalled <span class="xn-money">$127.8 million</span> for the third quarter of 2010, compared to <span class="xn-money">$119.1 million</span> for the third quarter of 2009, a 7% year-over-year increase as the Bank continued to invest in its development. Salaries and employee benefits rose by <span class="xn-money">$8.2 million</span>, mainly as a result of salary increases, costs related to growth and service quality initiatives, higher taxes on salaries, as well as higher pension costs. Premises and technology costs also increased from <span class="xn-money">$30.3 million</span> for the third quarter of 2009 to <span class="xn-money">$33.2 million</span> for the third quarter of 2010. This increase results from higher amortization expense related to IT development projects coming on stream, overall increases in technology costs to support business growth and higher rental costs. Other non-interest expenses decreased as a result of tight cost control.</p> <p>The efficiency ratio (non-interest expenses divided by total revenue) remained relatively unchanged at 67.7% in the third quarter of 2010, compared with 67.4% in the third quarter of 2009.</p> <p/> <p>Income taxes</p> <p/> <p>For the quarter ended <span class="xn-chron">July 31, 2010</span>, the income tax expense was <span class="xn-money">$10.9 million</span> and the effective tax rate was 26.7%. The lower tax rate, compared to the statutory rate, mainly resulted from the favourable effect of holding investments in Canadian securities that generate non-taxable dividend income and the lower taxation level on revenues from credit insurance operations. For the quarter ended <span class="xn-chron">July 31, 2009</span>, the income tax expense was <span class="xn-money">$12.9 million</span> and the effective tax rate was 31.0%.</p> <p/> <p>Nine months ended <span class="xn-chron">July 31, 2010</span> compared to nine months ended <span class="xn-chron">July 31, 2009</span></p> <p/> <p>For the nine months ended <span class="xn-chron">July 31, 2010</span>, net income totalled <span class="xn-money">$90.4 million</span> or <span class="xn-money">$3.39</span> diluted per common share, compared with net income of <span class="xn-money">$74.9 million</span> or <span class="xn-money">$2.76</span> diluted per common share in 2009.</p> <p/> <p>Total revenue</p> <p/> <p>Total revenue improved 12% to <span class="xn-money">$547.4 million</span> for the nine months ended <span class="xn-chron">July 31, 2010</span>, compared to <span class="xn-money">$488.0 million</span> for the nine months ended <span class="xn-chron">July 31, 2009</span>. Net interest income increased from <span class="xn-money">$305.5 million</span> for the nine months ended <span class="xn-chron">July 31, 2009</span> to <span class="xn-money">$368.2 million</span> for the same period in 2010, as a combined result of improved net interest margins and higher loan and deposit volumes. Net interest margins had temporarily been under pressure in the first part of 2009 as a result of the introductory promotional pricing on B2B Trust's High Interest Investment Accounts and a generally lower interest rate environment. Other income only slightly decreased compared to <span class="xn-chron">July 31, 2009</span>, as higher fees and commissions resulting from overall business growth, as well as higher brokerage revenues offset most of the <span class="xn-money">$23.4 million</span> decrease in securitization income.</p> <p/> <p>Provision for loan losses</p> <p/> <p>The provision for loan losses amounted to <span class="xn-money">$52.0 million</span> for the nine months ended <span class="xn-chron">July 31, 2010</span>, compared to <span class="xn-money">$40.0 million</span> for the nine months ended <span class="xn-chron">July 31, 2009</span>. The increase essentially relates to the commercial loan and mortgage portfolios, while the credit quality of consumer loan portfolios has continued to improve.</p> <p/> <p>Non-interest expenses</p> <p/> <p>Non-interest expenses totalled <span class="xn-money">$371.8 million</span> for the nine months ended <span class="xn-chron">July 31, 2010</span>, compared to <span class="xn-money">$343.8 million</span> for the nine months ended <span class="xn-chron">July 31, 2009</span>. The increase is principally attributable to higher salaries and costs related to growth initiatives, as well as higher pension costs. Premises and technology costs also increased as a result of higher amortization expense related to IT development projects and overall increases in technology costs to support higher business activity levels. Other non-interest expenses decreased slightly. For the nine months ended <span class="xn-chron">July 31, 2010</span>, the efficiency ratio improved significantly to 67.9%, compared to 70.5% for the nine months ended <span class="xn-chron">July 31, 2009</span>; reflecting a 4% positive operating leverage.</p> <p/> <p>Income taxes</p> <p/> <p>For the nine months ended <span class="xn-chron">July 31, 2010</span>, the income tax expense was <span class="xn-money">$33.2 million</span> and the effective tax rate was 26.9%, compared to <span class="xn-money">$29.2 million</span> and 28.1% for the nine months ended <span class="xn-chron">July 31, 2009</span>. The lower tax rate, compared to the statutory rate, mainly resulted from the favourable effect of holding investments in Canadian securities that generate non-taxable dividend income, as well as the lower taxation level on revenues from credit insurance operations, as noted above.</p> <p/> <p>Third quarter 2010 compared to second quarter 2010</p> <p/> <p>Net income was <span class="xn-money">$30.1 million</span> for the third quarter of 2010, compared to <span class="xn-money">$28.3 million</span> for the second quarter ended <span class="xn-chron">April 30, 2010</span>. Net interest income increased by <span class="xn-money">$12.2 million</span>, as a result of higher net interest margins, which stood at 2.22% in the third quarter of 2010, compared to 2.10% for the second quarter of 2010, and the three additional days in the third quarter. Seasonally higher penalty revenues on mortgage loan prepayments, as well as a better product mix helped to lift net interest margins when compared to those in the second quarter. However, funding cost increases in the latter part of the third quarter in the wake of rising short-term market rates and the continued fierce competition in the mortgage market could put pressure on margins in the coming months. Other income remained relatively unchanged compared to the second quarter of 2010.</p> <p>The provision for loan losses amounted to <span class="xn-money">$20.0 million</span> in the third quarter of 2010, compared to <span class="xn-money">$16.0 million</span> for the second quarter of 2010. The increase is mainly related to the provisioning of the single commercial exposure noted above, as the overall credit condition of the portfolios has otherwise remained relatively stable over the last three months.</p> <p>Non-interest expenses increased by <span class="xn-money">$4.3 million</span> compared with the second quarter of 2010, essentially as a result of the longer quarter and higher variable compensation costs.</p> <p/> <p>Financial Condition</p> <p/> <pre> CONDENSED BALANCE SHEET AS AT AS AT AS AT In thousands of dollars JULY 31 OCTOBER 31 JULY 31 (Unaudited) 2010 2009 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ASSETS Cash resources $ 165,427 $ 300,616 $ 532,226 Securities 4,436,083 4,432,183 3,876,632 Assets purchased under reverse repurchase agreements 656,791 536,064 403,961 Loans, net 17,163,829 15,601,307 15,229,991 Other assets 1,154,700 1,294,610 1,273,590 ---------------------------------------- $23,576,830 $22,164,780 $21,316,400 ---------------------------------------- ---------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $19,062,124 $18,299,966 $17,957,858 Other liabilities 3,148,073 2,543,588 2,065,052 Subordinated debentures 150,000 150,000 150,000 Shareholders' equity 1,216,633 1,171,226 1,143,490 ---------------------------------------- $23,576,830 $22,164,780 $21,316,400 ---------------------------------------- ---------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>Balance sheet assets increased by more than <span class="xn-money">$1.4 billion</span> from year-end 2009 and stood at <span class="xn-money">$23.6 billion</span> at <span class="xn-chron">July 31, 2010</span>. Over the last twelve months, balance sheet assets increased by <span class="xn-money">$2.3 billion</span> or nearly 11%.</p> <p/> <p>Liquid assets</p> <p/> <p>Liquid assets, including cash, deposits with other banks, securities and assets purchased under reverse repurchase agreements, remained relatively unchanged at <span class="xn-money">$5.3 billion</span>. However, loans now represent 73% of total assets, compared to 70% at the beginning of the year, as the Bank is gradually reducing its overall excess level of liquidity to fund its loan disbursements.</p> <p/> <p>Loan portfolio</p> <p/> <p>The portfolio of loans and bankers' acceptances stood at <span class="xn-money">$17.5 billion</span> at <span class="xn-chron">July 31, 2010</span>, up <span class="xn-money">$1.5 billion</span> from <span class="xn-chron">October 31, 2009</span>. The Bank had another solid quarter of loan growth, up <span class="xn-money">$372.3 million</span>, or <span class="xn-money">$734.7 million</span> before new securitizations of <span class="xn-money">$362.4 million</span>. Since the beginning of the year, residential mortgages, including securitized loans, increased by 12% or <span class="xn-money">$1,180.1 million</span>, as the Bank capitalized on favourable market conditions in the first part of the year. However, slower seasonal demand and some softness in the Canadian housing market were noticed recently.</p> <p/> <pre> RESIDENTIAL MORTGAGE PORTFOLIO AS AT AS AT In thousands of dollars JULY 31 OCTOBER 31 (Unaudited) 2010 2009 VARIANCE ------------------------------------------------------------------------- ------------------------------------------------------------------------- On-balance sheet residential mortgage loans $ 8,407,188 $ 7,219,830 $ 1,187,358 Securitized residential mortgage loans (off-balance sheet) 2,695,550 2,702,762 (7,212) ---------------------------------------- Total residential mortgage loans, including securitized loans $11,102,738 $ 9,922,592 $ 1,180,146 ---------------------------------------- ---------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>Commercial mortgages and commercial loans, including bankers' acceptances, increased by <span class="xn-money">$227.9 million</span> and <span class="xn-money">$130.0 million</span>, respectively, as the Bank continues to capitalize on growth opportunities in the Canadian market. Personal loans increased by <span class="xn-money">$4.7 million</span>, mainly reflecting growth in investment loans, as well as home equity lines of credit, offsetting run-offs in point-of-sale financing.</p> <p/> <p>Deposits</p> <p/> <p>Total personal deposits increased by <span class="xn-money">$453.8 million</span> since the beginning of the year and <span class="xn-money">$179.2 million</span> during the last quarter to <span class="xn-money">$15.6 billion</span> as at <span class="xn-chron">July 31, 2010</span>. Business and other deposits increased by <span class="xn-money">$308.4 million</span> since the beginning of the year and <span class="xn-money">$146.2 million</span> during the last quarter. The Bank continues to optimize its liquidity levels to meet funding requirements while maintaining its privileged access to the retail market. Retail deposits continue to be a particularly stable source of financing for the Bank, owing to their availability and lower cost when compared to institutional deposits. As at <span class="xn-chron">July 31, 2010</span>, personal deposits accounted for 81.8% of total deposits of <span class="xn-money">$19.1 billion</span>.</p> <p/> <p>Shareholders' equity</p> <p/> <p>Shareholders' equity stood at <span class="xn-money">$1,216.6 million</span> as at <span class="xn-chron">July 31, 2010</span>, compared with <span class="xn-money">$1,171.2 million</span> as at <span class="xn-chron">October 31, 2009</span>. The increase in shareholders' equity mainly resulted from net income accumulated during the first nine months of the year; partly offset by a decrease in the deferred gain related to interest rate swaps presented in accumulated other comprehensive income.</p> <p>The Bank's book value per common share, excluding accumulated other comprehensive income, was <span class="xn-money">$40.99</span> as at <span class="xn-chron">July 31, 2010</span>, compared to <span class="xn-money">$38.68</span> as at <span class="xn-chron">October 31, 2009</span>. There were 23,920,962 common shares and 54,075 share purchase options outstanding as at <span class="xn-chron">August 24, 2010</span>.</p> <p/> <p>Assets under administration</p> <p/> <p>Assets under administration increased by <span class="xn-money">$0.4 billion</span> from <span class="xn-chron">October 31, 2009</span> and amounted to <span class="xn-money">$14.7 billion</span> as at <span class="xn-chron">July 31, 2010</span>, and increased by <span class="xn-money">$0.5 billion</span> from <span class="xn-chron">July 31, 2009</span> when they stood at <span class="xn-money">$14.2 billion</span>. The increase compared with <span class="xn-chron">July 31, 2009</span> is attributable to the recovery in market value of the assets under administration, mainly as they relate to self-directed RRSPs, client brokerage assets and mutual funds.</p> <p/> <p>Capital Management</p> <p/> <p>The regulatory Tier I capital of the Bank reached <span class="xn-money">$1,098.7 million</span> as at <span class="xn-chron">July 31, 2010</span>, compared with <span class="xn-money">$1,045.8 million</span> as at <span class="xn-chron">October 31, 2009</span>. The BIS Tier 1 and total capital ratios stood at 10.7% and 12.5%, respectively, as at <span class="xn-chron">July 31, 2010</span>, compared to 11.0% and 13.0%, respectively, as at <span class="xn-chron">October 31, 2009</span>. Although slightly lower than at the beginning of the year, due to an 8% increase in risk-weighted assets, these ratios remain strong, while the tangible common equity ratio of 8.9% reflects the high quality of the Bank's capital.</p> <p/> <pre> REGULATORY CAPITAL - BIS In thousands of dollars, AS AT AS AT AS AT except percentage amounts JULY 31 OCTOBER 31 JULY 31 (Unaudited) 2010 2009 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total - Tier 1 capital (A) $ 1,098,670 $ 1,045,824 $ 1,015,251 Tier I BIS capital ratio (A/C) 10.7% 11.0% 10.8% Total - capital (B) $ 1,285,421 $ 1,235,866 $ 1,205,720 Total BIS capital ratio (B/C) 12.5% 13.0% 12.8% Total risk-weighted assets (C) $10,244,069 $ 9,480,823 $ 9,410,447 Assets to capital multiple 18.4x 18.0x 17.8x Tangible common equity as a percentage of risk-weighted assets(1) 8.9% 9.1% 8.8% ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Tangible common equity is defined as common shareholders' equity, excluding accumulated other comprehensive income, less goodwill and contractual and customer relationship intangible assets. RISK-WEIGHTED ASSETS AS AT AS AT AS AT In thousands of dollars JULY 31 OCTOBER 31 JULY 31 (Unaudited) 2010 2009 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Balance sheet items Cash resources $ 13,611 $ 12,697 $ 30,088 Securities 360,248 220,257 228,187 Mortgage loans 3,754,609 3,222,867 3,077,728 Other loans and customers' liabilities under acceptances 3,813,507 3,807,878 3,871,995 Other assets 511,335 516,561 492,372 ---------------------------------------- Total - balance sheet items 8,453,310 7,780,260 7,700,370 Off-balance sheet items 570,721 547,050 582,639 Operational risk 1,220,038 1,153,513 1,127,438 ---------------------------------------- Total - risk-weighted assets $10,244,069 $ 9,480,823 $ 9,410,447 ---------------------------------------- ---------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p><span class="xn-location">Basel</span> Committee on Banking Supervision new proposed capital and liquidity regulation</p> <p/> <p>In <span class="xn-chron">December 2009</span>, the <span class="xn-location">Basel</span> Committee on Banking Supervision published proposals on new capital and liquidity requirements. In <span class="xn-chron">July 2010</span>, additional information was provided by regulatory agencies with regard to certain capital and liquidity requirements, as well as to measures to reduce potential procyclicality. Although these revised guidelines appear less onerous than the initial proposals, the final guidelines are not expected until late 2010. The Bank is devoting significant resources to analyse these new requirements which, when published, are not expected to become regulation until late 2012 at the earliest, with a protracted transition period. At this stage, it is too early to determine the definitive impact on capital ratios and liquidity requirements, considering the proposals are still likely to change between now and when the final rules take effect.</p> <p/> <p>Dividends</p> <p/> <p>At its meeting on <span class="xn-chron">August 25, 2010</span>, the Board of Directors declared regular dividends on the various series of preferred shares to shareholders of record on <span class="xn-chron">September 9, 2010</span>. At its meeting on <span class="xn-chron">September 2, 2010</span>, the Board of Directors declared a dividend of <span class="xn-money">$0.36</span> per common share, payable on <span class="xn-chron">November 1, 2010</span>, to shareholders of record on <span class="xn-chron">October 1, 2010</span>.</p> <p/> <p>Risk Management</p> <p/> <p>The Bank is exposed to various types of risks owing to the nature of its activities. These risks are mainly related to the use of financial instruments. In order to manage these risks, controls such as risk management policies and various risk limits have been implemented. These measures aim to optimize the risk/return ratio in all operating segments. For additional information regarding the Bank's Risk Management Framework, please refer to the 2009 Annual Report.</p> <p/> <p>Credit risk</p> <p/> <p>The following sections provide further details on the credit quality of the Bank's loan portfolios. Note 2 to the interim consolidated financial statements also provides detailed information on the Bank's loan portfolios and related credit exposures.</p> <p/> <pre> PROVISION FOR LOAN LOSSES RECORDED IN THE CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED ---------------------------------------- In thousands of dollars JULY 31 APRIL 30 JULY 31 (Unaudited) 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Loan portfolios Personal loans $ 8,292 $ 7,591 $ 10,221 Residential mortgages 1,715 170 207 Commercial mortgages 3,378 3,069 595 Commercial and other loans 6,615 5,170 4,977 ---------------------------------------- Total $ 20,000 $ 16,000 $ 16,000 ---------------------------------------- ---------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED -------------------------- In thousands of dollars JULY 31 JULY 31 (Unaudited) 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Loan portfolios Personal loans $ 24,541 $ 27,363 Residential mortgages 2,148 1,003 Commercial mortgages 7,241 620 Commercial and other loans 18,070 11,014 -------------------------- Total $ 52,000 $ 40,000 -------------------------- -------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>The provision for loan losses amounted to <span class="xn-money">$20.0 million</span> in the third quarter of 2010, while it was <span class="xn-money">$16.0 million</span> in the third quarter of 2009. The year-over-year increase in residential mortgage loan losses was essentially caused by provisions of <span class="xn-money">$1.5 million</span> on two residential construction projects. Also, provisions on commercial loans and commercial mortgages were up a combined <span class="xn-money">$4.4 million</span> compared to the third quarter of 2009 due mainly to a <span class="xn-money">$5.0 million</span> loss on a single commercial exposure. These losses were partly offset by the lower level of losses in personal loan portfolios attributable, in part, to the Bank's reduced exposure to the point-of-sale financing business and overall improvements in the labour market.</p> <p/> <p/> <pre> ALLOWANCE FOR LOAN LOSSES In thousands of dollars, except percentage AS AT AS AT AS AT AS AT amounts JULY 31 APRIL 30 OCTOBER 31 JULY 31 (Unaudited) 2010 2010 2009 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Gross impaired loans $ 182,451 $ 161,930 $ 137,494 $ 123,109 Allowance for loan losses 129,964 124,178 114,546 114,672 ------------------------------------------------------ Net impaired loans $ 52,487 $ 37,752 $ 22,948 $ 8,437 ------------------------------------------------------ ------------------------------------------------------ Impaired loans as a % of loans, bankers' acceptances and assets purchased under reverse repurchase agreements Gross 1.01% 0.92% 0.83% 0.77% Net 0.29% 0.21% 0.14% 0.05% ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>Gross impaired loans stood at <span class="xn-money">$182.5 million</span> at <span class="xn-chron">July 31, 2010</span>, compared to <span class="xn-money">$161.9 million</span> as at <span class="xn-chron">April 30, 2010</span> and <span class="xn-money">$137.5 million</span> at <span class="xn-chron">October 31, 2009</span>. The increase since <span class="xn-chron">October 31, 2009</span> essentially resulted from certain specific commercial loans and commercial mortgages, while the credit quality of retail portfolios has continued to improve. Net impaired loans stood at <span class="xn-money">$52.5 million</span> at <span class="xn-chron">July 31, 2010</span> (representing 0.29% of total loans, bankers' acceptances and assets purchased under reverse repurchase agreements), compared to <span class="xn-money">$23.0 million</span> (0.14%) at <span class="xn-chron">October 31, 2009</span>. At approximately 30% of impaired loans, the specific provisioning was relatively stable compared to the beginning of the year and reflects the good quality of the underlying collateral.</p> <p/> <p>Market risk</p> <p/> <p>Market risk corresponds to the financial losses that the Bank could incur due to unfavourable fluctuations in the value of financial instruments following variations in the parameters underlying their valuation, such as interest rates, exchange rates or quoted stock market prices. This risk is inherent to the Bank's financing, investment, trading and asset-liability management (ALM) activities.</p> <p>The purpose of ALM activities is to control structural interest rate risk, which corresponds to the potential negative impact of interest rate movements on the Bank's revenues and economic value. Dynamic management of structural risk is intended to maximize the Bank's profitability while preserving the economic value of common shareholders' equity. As at <span class="xn-chron">July 31, 2010</span>, the effect on the economic value of common shareholders' equity and on net interest income before taxes of a sudden and sustained 1% increase in interest rates remained low and was as follows.</p> <p/> <pre> STRUCTURAL INTEREST RATE SENSITIVITY AS AT AS AT In thousands of dollars JULY 31 OCTOBER 31 (Unaudited) 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Increase (decrease) in net interest income before taxes over the next 12 months $ 3,429 $ (4,779) Change in the economic value of common shareholders' equity (Net of income taxes) $ (24,153) $ (19,626) ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>While keeping the overall level of risk well under control, the Bank is actively managing its interest rate sensitivity position in order to benefit from current interest rate conditions.</p> <p/> <p>Segmented Information</p> <p/> <p>This section outlines the Bank's operations according to its organizational structure. Services to individuals, businesses, financial intermediaries and institutional clients are offered through the following business segments:</p> <p/> <pre> - Retail & SME Quebec - Laurentian Bank Securities and - Real Estate & Commercial Capital Markets - B2B Trust - Other </pre> <p/> <p>As of <span class="xn-chron">November 1, 2009</span>, certain capital market activities which were previously reported in the Other segment are now reported with Laurentian Bank Securities activities under the newly formed Laurentian Bank Securities and Capital Markets business segment. In addition, foreign exchange and international services, which were also formerly reported in the Other segment, are now reported in the Real Estate & Commercial segment. The Retail & SME <span class="xn-location">Quebec</span> and B2B Trust business segments were not affected by this reorganization. Comparative figures were reclassified to conform to the current period presentation.</p> <p/> <p>Retail & SME <span class="xn-location">Quebec</span></p> <p/> <pre> FOR THE THREE MONTHS ENDED In thousands of dollars, ---------------------------------------- except percentage amounts JULY 31 APRIL 30 JULY 31 (Unaudited) 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total revenue $ 116,963 $ 111,382 $ 109,081 Provision for loan losses $ 9,583 $ 11,542 $ 12,408 Net income $ 14,633 $ 10,082 $ 9,674 Efficiency ratio 75.4% 78.4% 77.7% ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED In thousands of dollars, -------------------------- except percentage amounts JULY 31 JULY 31 (Unaudited) 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total revenue $ 340,848 $ 317,650 Provision for loan losses $ 30,915 $ 30,072 Net income $ 37,267 $ 29,610 Efficiency ratio 76.9% 78.7% ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>The Retail & SME <span class="xn-location">Quebec</span> business segment's contribution to net income improved 51%, totalling <span class="xn-money">$14.6 million</span> for the third quarter of 2010, compared with <span class="xn-money">$9.7 million</span> for the third quarter of 2009.</p> <p>Total revenue increased by <span class="xn-money">$7.9 million</span>, from <span class="xn-money">$109.1 million</span> in the third quarter of 2009 to <span class="xn-money">$117.0 million</span> in the third quarter of 2010, mainly as a result of increases in loan and deposit volumes over the last twelve months. In addition, fees have risen 7% year-over-year as strategies aimed at increasing other revenue streams, such as card fees and credit insurance revenues, continue to generate benefits. Loan losses decreased from <span class="xn-money">$12.4 million</span> in the third quarter of 2009 to <span class="xn-money">$9.6 million</span> in the third quarter of 2010, as a result of the significant improvement in the credit quality of retail loan portfolios. Non-interest expenses rose by 4% or <span class="xn-money">$3.4 million</span>, from <span class="xn-money">$84.7 million</span> in the third quarter of 2009 to <span class="xn-money">$88.2 million</span> in the third quarter of 2010, mainly as a result of annual increases in salaries, as well as an increase in the number of employees partly offset by operating productivity improvements.</p> <p>For the nine months ended <span class="xn-chron">July 31, 2010</span>, net income improved by 26% to <span class="xn-money">$37.3 million</span>. Higher revenues stemming from various growth initiatives and favourable market conditions more than offset increases in non-interest expenses, essentially in salaries.</p> <p/> <p>Balance sheet highlights</p> <p/> <pre> - Loans up 6% or $699 million over the last 12 months - Increase in deposits of $720 million over the last 12 months, to $8.2 billion as at July 31, 2010 </pre> <p/> <p>Real Estate & Commercial</p> <p/> <p>As of <span class="xn-chron">November 1, 2009</span>, foreign exchange and international services, which were reported in the Other segment, are now reported in the Real Estate & Commercial segment. Comparative figures were reclassified to conform to the current period presentation.</p> <p/> <pre> FOR THE THREE MONTHS ENDED In thousands of dollars, ---------------------------------------- except percentage amounts JULY 31 APRIL 30 JULY 31 (Unaudited) 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total revenue $ 31,608 $ 29,125 $ 25,806 Provision for loan losses $ 9,433 $ 3,984 $ 2,105 Net income $ 10,427 $ 13,655 $ 11,170 Efficiency ratio 22.8% 19.1% 28.8% ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED In thousands of dollars, -------------------------- except percentage amounts JULY 31 JULY 31 (Unaudited) 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total revenue $ 88,323 $ 66,916 Provision for loan losses $ 18,567 $ 6,920 Net income $ 36,770 $ 26,810 Efficiency ratio 19.3% 31.3% ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>The Real Estate & Commercial business segment's contribution to net income decreased 7%, to <span class="xn-money">$10.4 million</span> for the third quarter of 2010, compared with <span class="xn-money">$11.2 million</span> for the third quarter of 2009.</p> <p>Total revenue increased by <span class="xn-money">$5.8 million</span>, from <span class="xn-money">$25.8 million</span> in the third quarter of 2009 to <span class="xn-money">$31.6 million</span> in the third quarter of 2010. Continued strong business growth and better interest margins resulting from repricing measures initiated last year helped improve revenues. Loan losses stood at <span class="xn-money">$9.4 million</span> in the third quarter of 2010, compared to <span class="xn-money">$2.1 million</span> in the third quarter of 2009. Loan losses for the third quarter of 2010 were particularly affected by a <span class="xn-money">$5.0 million</span> loss on a single commercial exposure and losses of <span class="xn-money">$1.5 million</span> on two residential construction projects. Although credit conditions seem to have stabilized lately, there remain some challenges in some sectors of the economy. Non-interest expenses remained stable at <span class="xn-money">$7.2 million</span> in the third quarter of 2010, compared to <span class="xn-money">$7.4 million</span> in the third quarter of 2009.</p> <p>For the nine months ended <span class="xn-chron">July 31, 2010</span>, net income improved by 37% to <span class="xn-money">$36.8 million</span>. For that same period, revenues improved by 32% to <span class="xn-money">$88.3 million</span>, mainly as a result of higher net interest margins and sustained efforts to grow the business. Loan losses increased to <span class="xn-money">$18.6 million</span> for the nine months ended <span class="xn-chron">July 31, 2010</span>, from <span class="xn-money">$6.9 million</span> for the nine months ended <span class="xn-chron">July 31, 2009</span>, as certain commercial and real estate accounts encountered difficulties as a result of the latest recession having affected some sectors of the economy. For the nine months ended <span class="xn-chron">July 31, 2010</span>, expenses remained well under control at <span class="xn-money">$17.0 million</span>, net of a <span class="xn-money">$2.8 million</span> favourable adjustment to operational loss provisions during the first six months of 2010, compared to <span class="xn-money">$21.0 million</span> for the nine months ended <span class="xn-chron">July 31, 2009</span>.</p> <p/> <p>Balance sheet highlight</p> <p/> <p>- Loans and BAs up 18% or more than <span class="xn-money">$450 million</span> over the last 12 months</p> <p/> <p>B2B Trust</p> <p/> <pre> FOR THE THREE MONTHS ENDED In thousands of dollars, --------------------------------------- except percentage amounts JULY 31 APRIL 30 JULY 31 (Unaudited) 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total revenue $ 32,711 $ 29,635 $ 26,430 Provision for loan losses $ 984 $ 474 $ 1,487 Net income $ 11,818 $ 11,359 $ 8,665 Efficiency ratio 44.8% 43.0% 46.5% ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED In thousands of dollars, -------------------------- except percentage amounts JULY 31 JULY 31 (Unaudited) 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total revenue $ 92,183 $ 73,844 Provision for loan losses $ 2,518 $ 3,008 Net income $ 34,238 $ 24,624 Efficiency ratio 43.4% 47.1% ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>The B2B Trust business segment's contribution to net income improved 36%, reaching <span class="xn-money">$11.8 million</span> in the third quarter of 2010, compared with <span class="xn-money">$8.7 million</span> in the third quarter of 2009.</p> <p>Total revenue increased by <span class="xn-money">$6.3 million</span>, from <span class="xn-money">$26.4 million</span> in the third quarter of 2009, to <span class="xn-money">$32.7 million</span> in the third quarter of 2010, essentially as a result of continued growth in loan and deposit volumes over the last twelve months. In addition, net interest margins also improved due to lower funding costs. Loan losses, including losses on investment lending activities, remained low at <span class="xn-money">$1.0 million</span> in the third quarter of 2010, compared with <span class="xn-money">$1.5 million</span> in the third quarter of 2009. Non-interest expenses increased to <span class="xn-money">$14.7 million</span> in the third quarter of 2010, compared with <span class="xn-money">$12.3 million</span> in the third quarter of 2009, mainly as a result of higher staffing levels, salary and employee benefits.</p> <p>For the nine months ended <span class="xn-chron">July 31, 2010</span>, net income improved by 39% to <span class="xn-money">$34.2 million</span>, essentially as a result of higher net interest income. B2B Trust's margins had been under pressure in the first half of 2009 as a result of the introductory promotional pricing on the High Interest Investment Accounts and a generally lower interest rate environment.</p> <p/> <p>Balance sheet highlights</p> <p/> <pre> - Loans up 18% or $801 million over the last 12 months - Increase in deposits of $0.7 billion over the last 12 months, to $9.4 billion as at July 31, 2010 </pre> <p/> <p>Laurentian Bank Securities and Capital Markets</p> <p/> <p>As of <span class="xn-chron">November 1, 2009</span>, certain Bank's capital market activities which were previously reported in the Other segment are now reported with Laurentian Bank Securities activities under the newly formed Laurentian Bank Securities and Capital Markets business segment. Comparative figures were reclassified to conform to the current period presentation.</p> <p/> <pre> In thousands of dollars, FOR THE THREE MONTHS ENDED except percentage amounts ---------------------------------------- (Unaudited) JULY 31 APRIL 30 JULY 31 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total revenue $ 13,981 $ 15,280 $ 16,815 Net income $ 2,100 $ 2,586 $ 3,379 Efficiency ratio 79.0% 76.3% 71.4% ------------------------------------------------------------------------- ------------------------------------------------------------------------- In thousands of dollars, FOR THE NINE MONTHS ENDED except percentage amounts -------------------------- (Unaudited) JULY 31 JULY 31 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total revenue $ 43,748 $ 43,090 Net income $ 6,520 $ 9,246 Efficiency ratio 78.6% 69.3% ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>The Laurentian Bank Securities and Capital Markets business segment's contribution to net income amounted to <span class="xn-money">$2.1 million</span> in the third quarter of 2010, compared with <span class="xn-money">$3.4 million</span> in the third quarter of 2009. Revenues decreased by <span class="xn-money">$2.8 million to $14.0 million</span> in the third quarter of 2010, mainly as a result of weaker capital markets. Non-interest expenses decreased to <span class="xn-money">$11.1 million</span> in the third quarter of 2010, from <span class="xn-money">$12.0 million</span> in the third quarter of 2009, due primarily to lower variable compensation.</p> <p>For the nine months ended <span class="xn-chron">July 31, 2010</span>, net income decreased by 30% or <span class="xn-money">$2.7 million</span> compared to the same period last year, as increases in revenues from Laurentian Bank Securities was offset by lower income from other capital market operations and higher non-interest expenses. The increase in expenses essentially results from variable compensation in the brokerage business.</p> <p/> <p>Balance sheet highlight</p> <p/> <p>- Assets under management up 15% or <span class="xn-money">$290 million</span> over the last 12 months</p> <p/> <p>Other Sector</p> <p/> <p>As of <span class="xn-chron">November 1, 2009</span>, certain Bank's capital market activities, as well as foreign exchange and international services, which were previously reported in the Other segment, are now reported with the Laurentian Bank Securities and Capital Markets and Real Estate & Commercial business segments. Comparative figures were reclassified to conform to the current period presentation.</p> <p/> <pre> FOR THE THREE MONTHS ENDED ---------------------------------------- In thousands of dollars JULY 31 APRIL 30 JULY 31 (Unaudited) 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total revenue $ (6,453) $ (7,309) $ (1,475) Net loss $ (8,914) $ (9,333) $ (4,205) ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED -------------------------- In thousands of dollars JULY 31 JULY 31 (Unaudited) 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total revenue $ (17,730) $ (13,538) Net loss $ (24,368) $ (15,405) ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>The Other sector posted a negative contribution to net income of <span class="xn-money">$8.9 million</span> in the third quarter of 2010, compared with a negative contribution of <span class="xn-money">$4.2 million</span> in the third quarter of 2009. Net interest income improved to negative <span class="xn-money">$6.7 million</span> in the third quarter of 2010, compared to negative <span class="xn-money">$7.9 million</span> in the third quarter of 2009 as a result of favourable asset-liability management positioning. Other income for the third quarter of 2010 was <span class="xn-money">$0.2 million</span>, compared to <span class="xn-money">$6.4 million</span> for the third quarter of 2009. This decrease mainly resulted from lower income from securitization partly offset by the absence of write-downs on securities as in the third quarter of 2009.</p> <p>For the nine months ended <span class="xn-chron">July 31, 2010</span>, the negative contribution stood at <span class="xn-money">$24.4 million</span>, compared to negative <span class="xn-money">$15.4 million</span> for the nine months ended <span class="xn-chron">July 31, 2009</span>. Net interest income improved, as noted above, as asset-liability management activities contributed more positively to results. However, securitization income declined sharply as interest spreads on securitized loans narrowed and the mark-to-market on seller-swaps affected results.</p> <p/> <p>Additional Financial Information - Quarterly Results</p> <p/> <pre> In thousands of dollars, except per share and percentage amounts JULY 31 APRIL 30 JANUARY 31 OCTOBER 31 (Unaudited) 2010 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total revenue $ 188,810 $ 178,113 $ 180,449 $ 178,540 Income from continuing operations $ 30,064 $ 28,349 $ 32,014 $ 26,779 Net income $ 30,064 $ 28,349 $ 32,014 $ 38,248 Income per common share from continuing operations Basic $ 1.13 $ 1.06 $ 1.21 $ 0.99 Diluted $ 1.13 $ 1.06 $ 1.21 $ 0.99 Net income per common share Basic $ 1.13 $ 1.06 $ 1.21 $ 1.47 Diluted $ 1.13 $ 1.06 $ 1.21 $ 1.47 Return on common shareholders' equity(1) 11.0% 10.9% 12.3% 15.3% Balance sheet assets (in millions of dollars) $ 23,577 $ 23,089 $ 23,184 $ 22,165 ------------------------------------------------------------------------- ------------------------------------------------------------------------- In thousands of dollars, except per share and percentage amounts JULY 31 APRIL 30 JANUARY 31 OCTOBER 31 (Unaudited) 2009 2009 2009 2008 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total revenue $ 176,657 $ 154,768 $ 156,537 $ 152,811 Income from continuing operations $ 28,683 $ 21,155 $ 25,047 $ 22,910 Net income $ 28,683 $ 21,155 $ 25,047 $ 27,333 Income per common share from continuing operations Basic $ 1.08 $ 0.76 $ 0.92 $ 0.84 Diluted $ 1.08 $ 0.76 $ 0.91 $ 0.84 Net income per common share Basic $ 1.08 $ 0.76 $ 0.92 $ 1.02 Diluted $ 1.08 $ 0.76 $ 0.91 $ 1.02 Return on common shareholders' equity(1) 11.6% 8.5% 10.0% 11.5% Balance sheet assets (in millions of dollars) $ 21,316 $ 20,403 $ 19,868 $ 19,579 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) With regard to the calculation of the Return on common shareholders' equity ratio, the Bank considers that net income is the best measure of profitability and that common shareholders' equity, excluding accumulated other comprehensive income, would be used as a capital measure. The calculation of the Bank's book value is also based on common shareholders' equity, excluding accumulated other comprehensive income. </pre> <p/> <p>Accounting Policies</p> <p/> <p>A summary of the Bank's significant accounting policies is presented in notes 2 and 3 of the 2009 audited annual consolidated financial statements. Pages 51 to 53 of the 2009 Annual Report also contain a discussion of critical accounting policies and estimates which refers to material amounts reported in the consolidated financial statements or require management's judgment. The interim consolidated financial statements for the third quarter of 2010 have been prepared in accordance with these accounting policies.</p> <p/> <p>Future changes in accounting policy</p> <p/> <p>International Financial Reporting Standards</p> <p/> <p>In <span class="xn-chron">February 2008</span>, the AcSB confirmed the convergence of financial reporting standards for Canadian public companies with International Financial Reporting Standards (IFRS). As a result, the Bank will adopt IFRS commencing on <span class="xn-chron">November 1, 2011</span> and will publish its first consolidated financial statements, prepared in accordance with IFRS, for the quarter ending <span class="xn-chron">January 31, 2012</span>. Comparative financial information for fiscal 2011 will be provided at that time, prepared in accordance with IFRS, including an opening balance sheet as at <span class="xn-chron">November 1, 2010</span>.</p> <p>The Bank has prepared a conversion plan and assembled a project team, including both internal and external resources, to coordinate and execute the conversion to IFRS. The Bank considers having the appropriate resources to finalize the IFRS conversion plan on schedule.</p> <p>The conversion plan consists of the following phases:</p> <p/> <pre> - Preliminary assessment - This phase served to heighten management's awareness of the key conversion issues and establish a timeline mapping out the Bank's priorities with regard to analyses and significant issues. - Financial standards analysis - This phase consists of a detailed assessment of the quantitative, qualitative and technological impact of IFRS implementation. - Selection of key accounting policies - The initial adoption of IFRS will require the Bank to make certain elections. - Implementation - This phase consists of implementing the necessary information systems to comply with the new IFRS requirements. </pre> <p/> <p>The Bank completed its preliminary assessment of the IFRS impact during the planning stage of the project in early 2009. Work on the financial standards analysis is well underway and nearly completed, subject to changes to IFRS by the International Accounting Standards Board (IASB). Key differences between IFRS and Canadian GAAP have been summarized below. The impact of certain key differences is still being evaluated. The selection of key accounting policies is currently being assessed concurrently with standards analysis. The Bank is now progressing to the implementation of the necessary changes to processes and systems. The implementation phase is expected to be completed by the end of fiscal 2011. The Bank has therefore not finalized the estimation and analysis of the expected financial impact of its IFRS conversion as at the end of the third quarter of 2010.</p> <p>Another important component of the IFRS conversion plan consists of training key finance and operational staff. This ongoing process was initiated in 2008. As the Bank progresses in its conversion plan in 2010, it will also, together with other members of the banking community, communicate IFRS implications to the various interested stakeholders. The Bank has put in place a Steering Committee that is responsible for ensuring the conversion plan is adequately followed. The Bank's Board of Directors, mainly through its Audit Committee, is also involved in the IFRS conversion plan. They receive quarterly updates of the timeline for implementation, the implications of IFRS standards on the business and an overview of the impact on the financial statements. The Audit Committee will continue to receive quarterly project status updates to ensure proper oversight of the conversion project.</p> <p/> <p>The following project statuses have been presented to the Audit Committee in 2010:</p> <p/> <pre> First quarter - A preliminary IFRS analysis, which consisted of an assessment of the quantitative, qualitative and technological impact of IFRS implementation; - A list of potential transition date and ongoing accounting policy choices; - A list of technological changes which have been identified with respect to certain items, namely hedging, securitization, impaired loans, share-based compensation and customer loyalty programs. The necessary adjustments to the information system supporting these items are expected to be completed before the end of 2010. Second quarter - An assessment of the main IFRS disclosure impacts based on the October 31, 2009 year end financial statements. This exercise was aimed at identifying the areas where additional disclosure is required. - A communication plan highlighting the impact for all known stakeholders. Third quarter - A summary of the main findings from a pro forma conversion of the 2009 year-end financial statements to IFRS. This exercise allowed the Bank to better assess the workload and potential impact of first-time adoption and future accounting policy choices under IFRS, as well as to evaluate the potential impact on capital and other financial ratios. - An update of certain IFRS analyses pursuant to new developments published by the IASB. The Bank will continue to monitor future developments. - An IT strategy defined to appropriately manage the dual-accounting period in fiscal 2011. </pre> <p/> <p>IFRS were developed using a conceptual framework similar to Canadian GAAP, although significant differences exist in certain areas including recognition, measurement and disclosure. The following key differences between the Bank's current accounting practices and the corresponding accounting treatment under IFRS have been identified:</p> <p/> <p>a) Loan provisioning</p> <p/> <p>In line with current Canadian GAAP, the Bank's provisioning for impaired loans is designed to take into account incurred losses in the Bank's loan portfolio. This principle will not change as IFRS also currently require that provisioning be based on incurred losses. However, under IFRS, loan losses and allowances will be presented based on whether they are assessed individually or collectively for groups of similar loans. The methodologies to calculate these provisions are still being developed. As a result, there may be changes in the amount of the Bank's collective provisioning, mainly for loans which are not classified as impaired.</p> <p>Provisions for loan losses must be based on the discounted values of estimated future cash flows. This amount is accreted over the period from the initial recognition of the provision to the eventual recovery of the present value of the loan, resulting in the recording of interest in the statement of income, within interest income. Under Canadian GAAP, the accretion amount is generally presented as a reduction of the provision for credit losses.</p> <p/> <p>b) Securitization</p> <p/> <p>The combined effect of financial asset derecognition rules and the consolidation of special purpose entity rules will impact securitization arrangements involving the Bank's off balance sheet loans. The rules provide more stringent criteria for the derecognition of financial assets. Based on initial assessments, the criteria would not be met. This should lead to a significant gross-up of the Bank's balance sheet. In addition, prior gains and losses related to these transactions would be eliminated and the corresponding net interest income recorded in period earnings. In July, the IFRS Interpretations Committee issued an Exposure Draft which would modify guidance applicable on transition (IFRS 1) with regard to the derecognition exception. The revised IFRS 1 would provide the option to grandfather certain securitization transactions up to <span class="xn-chron">October 31, 2010</span>, instead of <span class="xn-chron">January 1, 2004</span>. The Bank will closely monitor this proposed change and reassess its choices accordingly.</p> <p/> <p>c) Employee benefits</p> <p/> <p>At transition, IFRS generally provide for a retrospective adoption of the Employee Benefits standard (IAS 19). To date, the Bank has not determined its potential impact given the significant challenge posed by the complexity of pension benefit plans and the fact that the Bank has been offering pension plans for more than 30 years. However, IFRS provide the option of not retrospectively applying IAS 19. If this election is made, gains and losses accumulated to the date of transition will be eliminated. This may have a significant effect on shareholders' equity. Actuarial gains or losses post transition to IFRS could be recognized in income immediately, amortized to income using a "Corridor Method" similar to Canadian GAAP, or directly in equity (the "SORIE Method"). The Bank is currently assessing its options and will make its election, when new BIS capital requirements are defined, presumably toward the end of the year 2010.</p> <p/> <p>d) Share-based payments</p> <p/> <p>IFRS introduces a new requirement for the Bank to recognize as an expense the fair value of stock appreciation rights. Under Canadian GAAP, these rights are presently accounted for using the intrinsic value method. This should lead to an adjustment of the Bank's financial liabilities and shareholders' equity. With respect to stock option awards granted prior to <span class="xn-chron">November 1, 2002</span>, the Bank is not required to apply IFRS 2 - Share based payment retrospectively, therefore, the Bank will continue to apply the previous Canadian GAAP under which no compensation cost is recognized for these options. In the second quarter of 2010, a new software application has been implemented that will allow the Bank to automate the calculations and ensure appropriate internal controls.</p> <p/> <p>e) Business combinations</p> <p/> <p>IFRS 3 and section 1582 of the CICA Handbook have been harmonized since <span class="xn-chron">January 2009</span>. Henceforth, there will be no accounting differences beyond the IFRS transition date. However, at the transition date, the Bank has to make an election to either apply IFRS 3 retrospectively to all past business acquisitions before a chosen date or apply it prospectively from the transition date. The Bank is currently analyzing the impact of the two options and will make an election in the coming months.</p> <p/> <p>f) Earnings per share</p> <p/> <p>IAS 33 is similar to section 3500 of the CICA Handbook in many regards. However, based on preliminary assessments, the Bank's perpetual preferred shares must be included in the calculation of the diluted earnings per share as they may be converted into common shares; even though the conversion option lies with the Bank.</p> <p>The differences identified in the above discussion on IFRS transition should not be regarded as an exhaustive list and other changes may result from the transition to IFRS. Furthermore, the disclosed impacts of the transition to IFRS reflect the most recent assumptions, estimates and expectations, including the assessment of IFRS expected to be applicable at the time of transition. As a result of changes in circumstances, such as economic conditions or operations, and the inherent uncertainty from the use of assumptions, the actual impacts of the transition to IFRS may be different from those presented above.</p> <p>Throughout the current year and the period leading up to the transition to IFRS in 2012, the Bank will continue to follow the above-mentioned accounting policies and finalize its assessment of policy decisions available under IFRS in order to prepare the Bank for an orderly transition to IFRS. The evolving nature of IFRS will also likely result in additional accounting changes, some of which may be significant, in the years following the initial conversion. The Bank will continue to actively monitor all of the IASB's projects that are relevant to the Bank's financial reporting and accounting policies and adjust its IFRS conversion project accordingly.</p> <p>Furthermore, the Bank is specifically addressing internal controls, lending practices and capital issues, as summarized below, as well as all other matters to ensure an orderly transition.</p> <p/> <p>Internal controls over financial reporting (ICFR)</p> <p/> <p>As the review of accounting policies is completed, appropriate changes to ensure the integrity of internal control over financial reporting and disclosure controls and procedures will be made. Based on existing IFRS, the Bank has not identified the need for any significant modifications to its financial information technology architecture or to existing internal controls over financial reporting and disclosure controls. ICFR will be appropriately addressed as processes and system assessments are finalized in the upcoming periods.</p> <p/> <p>Lending practices</p> <p/> <p>The transition to IFRS will not only impact the Bank's financial statements, but also some of its clients' financial statements. This will have repercussions on the various loan covenants monitored by underwriting groups and the credit department. The Bank has met with commercial account managers as well as credit analysts, to foster a better internal understanding of IFRS to properly analyze the clients' IFRS financial statements and the impacts on ratios and covenants.</p> <p/> <p>Capital implications</p> <p/> <p>The Bank is closely monitoring the potential impact of IFRS conversion on capital requirements. Securitization and employee benefits are the two main areas which could have a significant impact on capital.</p> <p>The Office of the Superintendent of Financial Institutions (OSFI) has issued an IFRS advisory that permits a five-quarter phase-in of the adjustment to retained earnings arising from the first time adoption of certain IFRS changes for purposes of calculating certain ratios. Transitional relief for the impact to the asset to capital multiple will also be provided in the form of exclusion of the effect of any on-balance sheet recognition of mortgages sold through CMHC programs up to <span class="xn-chron">March 31, 2010</span>, that under current practice are not reported on the Bank's balance sheet.</p> <p>The potential implication of the new proposed capital and liquidity requirements issued by the <span class="xn-location">Basel</span> Committee on Banking Supervision in <span class="xn-chron">December 2009</span> are also being considered closely as part of the IFRS transition plan.</p> <p/> <p>Other considerations</p> <p/> <p>The Bank is also assessing the impact of the IFRS conversion to its performance measurement processes, including planning and budgeting.</p> <p/> <p>Corporate Governance and Changes in Internal Control over Financial Reporting</p> <p/> <p>The Board of Directors and the Audit Committee of Laurentian Bank reviewed this press release prior to its release today. The disclosure controls and procedures support the ability of the President and Chief Executive Officer and the Executive Vice-President and Chief Financial Officer in assuring that Laurentian Bank's interim consolidated financial statements are fairly presented.</p> <p>During the quarter ended <span class="xn-chron">July 31, 2010</span>, there have been no changes in the Bank's policies or procedures and other processes that comprise its internal control over financial reporting which have materially affected, or are reasonably likely to materially affect, the Bank's internal control over financial reporting.</p> <p/> <p>About Laurentian Bank</p> <p/> <p>Laurentian Bank of <span class="xn-location">Canada</span> is a banking institution operating across <span class="xn-location">Canada</span> and offering its clients diversified financial services. Distinguishing itself through excellence in service, as well as through its simplicity and proximity, the Bank serves individual consumers and small and medium-sized businesses. The Bank also offers its products to a wide network of independent financial intermediaries through B2B Trust, as well as full-service brokerage solutions through Laurentian Bank Securities.</p> <p>Laurentian Bank is well established in the Province of <span class="xn-location">Quebec</span>, operating the third-largest retail branch network. Elsewhere throughout <span class="xn-location">Canada</span>, it operates in specific market segments where it holds an enviable position. Laurentian Bank of <span class="xn-location">Canada</span> has more than <span class="xn-money">$23 billion</span> in balance sheet assets and more than <span class="xn-money">$14 billion</span> in assets under administration. Founded in 1846, the Bank employs more than 3,600 people.</p> <p/> <p>Conference Call</p> <p/> <p>Laurentian Bank invites media representatives and the public to listen to the conference call with financial analysts to be held at <span class="xn-chron">2:00 p.m. Eastern Time</span> on <span class="xn-chron">Thursday, September 2, 2010</span>. The live, listen-only, toll-free, call-in number is 1-866-696-5910 Code 1303140.</p> <p>You can listen to the call on a delayed basis at any time from <span class="xn-chron">6:00 p.m.</span> on <span class="xn-chron">Thursday, September 2</span>, until <span class="xn-chron">11:59 p.m.</span> on <span class="xn-chron">Friday, September 24, 2010</span>, by dialing the following playback number: 416-695-5800 Code 2256173. The conference call can also be heard through the Investor Relations section of the Bank's Web site at <a href="http://www.laurentianbank.ca">www.laurentianbank.ca</a>. The Bank's Website also offers additional financial information.</p> <p/> <pre> INTERIM CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET AS AT AS AT AS AT IN THOUSANDS OF DOLLARS JULY 31 OCTOBER 31 JULY 31 (UNAUDITED) NOTES 2010 2009 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ASSETS Cash and non-interest- bearing deposits with other banks $ 69,213 $ 61,010 $ 56,240 ----------------------------------------- Interest-bearing deposits with other banks 96,214 239,606 475,986 ----------------------------------------- Securities accounts 9 Available-for-sale 1,039,864 1,424,043 1,023,959 Held-for-trading 1,605,998 1,391,313 1,277,764 Designated as held-for-trading 1,790,221 1,616,827 1,574,909 ----------------------------------------- 4,436,083 4,432,183 3,876,632 ----------------------------------------- Assets purchased under reverse repurchase agreements 656,791 536,064 403,961 ----------------------------------------- Loans 2 and 3 Personal 5,659,775 5,655,055 5,664,935 Residential mortgage 8,407,188 7,219,830 6,978,469 Commercial mortgage 1,512,892 1,285,012 1,148,071 Commercial and other 1,713,938 1,555,956 1,553,188 ----------------------------------------- 17,293,793 15,715,853 15,344,663 Allowance for loan losses (129,964) (114,546) (114,672) ----------------------------------------- 17,163,829 15,601,307 15,229,991 ----------------------------------------- Other Customers' liabilities under acceptances 188,824 216,817 219,533 Premises and equipment 57,206 58,163 57,439 Derivatives 175,130 253,661 241,239 Goodwill 53,790 53,790 53,790 Software and other intangible assets 106,832 103,386 97,037 Other assets 572,918 608,793 604,552 ----------------------------------------- 1,154,700 1,294,610 1,273,590 ----------------------------------------- $ 23,576,830 $ 22,164,780 $ 21,316,400 ----------------------------------------- ----------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Personal $ 15,592,405 $ 15,138,637 $ 14,765,581 Business, banks and other 3,469,719 3,161,329 3,192,277 ----------------------------------------- 19,062,124 18,299,966 17,957,858 ----------------------------------------- Other Obligations related to assets sold short 1,199,018 1,054,470 700,058 Obligations related to assets sold under repurchase agreements 794,023 284,988 251,749 Acceptances 188,824 216,817 219,533 Derivatives 173,584 174,859 139,348 Other liabilities 792,624 812,454 754,364 ----------------------------------------- 3,148,073 2,543,588 2,065,052 ----------------------------------------- Subordinated debentures 150,000 150,000 150,000 ----------------------------------------- Shareholders' equity Preferred shares 4 210,000 210,000 210,000 Common shares 4 259,363 259,208 257,641 Contributed surplus 234 209 201 Retained earnings 720,908 665,538 638,480 Accumulated other comprehensive income 8 26,128 36,271 37,168 ----------------------------------------- 1,216,633 1,171,226 1,143,490 ----------------------------------------- $ 23,576,830 $ 22,164,780 $ 21,316,400 ----------------------------------------- ----------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes are an integral part of the interim consolidated financial statements. CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED IN THOUSANDS OF DOLLARS, ----------------------------------------- EXCEPT PER SHARE AMOUNTS JULY 31 APRIL 30 JULY 31 (UNAUDITED) NOTES 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest income Loans $ 193,722 $ 180,142 $ 178,002 Securities 19,075 17,241 18,031 Deposits with other banks 73 60 278 Other, including derivative financial instruments 29,490 29,434 40,979 ----------------------------------------- 242,360 226,877 237,290 ----------------------------------------- Interest expense Deposits 109,304 106,778 122,119 Other, including derivative financial instruments 1,235 579 455 Subordinated debentures 1,951 1,887 1,950 ----------------------------------------- 112,490 109,244 124,524 ----------------------------------------- Net interest income 129,870 117,633 112,766 ----------------------------------------- Other income Fees and commissions on loans and deposits 29,372 28,488 26,768 Income from brokerage operations 11,607 13,742 15,417 Securitization income 3 935 328 9,771 Credit insurance income 4,287 4,556 4,767 Income from sales of mutual funds 3,739 3,786 3,225 Income from treasury and financial market operations 4,186 4,576 17 Income from registered self-directed plans 2,282 2,313 2,056 Other 2,532 2,691 1,870 ----------------------------------------- 58,940 60,480 63,891 ----------------------------------------- Total revenue 188,810 178,113 176,657 ----------------------------------------- Provision for loan losses 2 20,000 16,000 16,000 ----------------------------------------- Non-interest expenses Salaries and employee benefits 71,021 67,617 62,828 Premises and technology 33,201 32,017 30,331 Other 23,598 23,915 25,922 ----------------------------------------- 127,820 123,549 119,081 ----------------------------------------- Income before income taxes 40,990 38,564 41,576 Income taxes 10,926 10,215 12,893 ----------------------------------------- Net income $ 30,064 $ 28,349 $ 28,683 ----------------------------------------- ----------------------------------------- Preferred share dividends, including applicable taxes 3,075 3,074 2,824 ----------------------------------------- Net income available to common shareholders $ 26,989 $ 25,275 $ 25,859 ----------------------------------------- ----------------------------------------- Average number of common shares outstanding (in thousands) Basic 23,921 23,921 23,854 Diluted 23,938 23,937 23,872 ----------------------------------------- Net income per common share Basic $ 1.13 $ 1.06 $ 1.08 Diluted $ 1.13 $ 1.06 $ 1.08 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED IN THOUSANDS OF DOLLARS, --------------------------- EXCEPT PER SHARE AMOUNTS JULY 31 JULY 31 (UNAUDITED) NOTES 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest income Loans $ 556,611 $ 539,808 Securities 53,955 53,219 Deposits with other banks 186 3,801 Other, including derivative financial instruments 93,000 97,511 --------------------------- 703,752 694,339 --------------------------- Interest expense Deposits 327,580 376,764 Other, including derivative financial instruments 2,165 6,249 Subordinated debentures 5,788 5,784 --------------------------- 335,533 388,797 --------------------------- Net interest income 368,219 305,542 --------------------------- Other income Fees and commissions on loans and deposits 84,839 75,042 Income from brokerage operations 38,014 34,862 Securitization income 3 5,443 28,890 Credit insurance income 13,026 12,595 Income from sales of mutual funds 11,051 9,046 Income from treasury and financial market operations 12,921 10,571 Income from registered self-directed plans 6,683 6,073 Other 7,176 5,341 --------------------------- 179,153 182,420 --------------------------- Total revenue 547,372 487,962 --------------------------- Provision for loan losses 2 52,000 40,000 --------------------------- Non-interest expenses Salaries and employee benefits 203,863 183,631 Premises and technology 97,360 88,106 Other 70,529 72,110 --------------------------- 371,752 343,847 --------------------------- Income before income taxes 123,620 104,115 Income taxes 33,193 29,230 --------------------------- Net income $ 90,427 $ 74,885 --------------------------- --------------------------- Preferred share dividends, including applicable taxes 9,223 9,050 --------------------------- Net income available to common shareholders $ 81,204 $ 65,835 --------------------------- --------------------------- Average number of common shares outstanding (in thousands) Basic 23,920 23,851 Diluted 23,937 23,866 --------------------------- Net income per common share Basic $ 3.39 $ 2.76 Diluted $ 3.39 $ 2.76 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes are an integral part of the interim consolidated financial statements. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE FOR THE THREE MONTHS ENDED NINE MONTHS ENDED IN THOUSANDS OF ----------------------- ----------------------- DOLLARS JULY 31 JULY 31 JULY 31 JULY 31 (UNAUDITED) NOTES 2010 2009 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income $ 30,064 $ 28,683 $ 90,427 $ 74,885 ------------------------------------------------ Other comprehensive income, net of income taxes 8 Unrealized gains (losses) on available-for-sale securities (420) 8,674 3,273 9,529 Reclassification of (gains) losses on available-for- sale securities to net income 49 3,123 (1,828) 3,795 Net change in value of derivative instruments designated as cash flow hedges 14,882 (17,786) (11,588) 5,018 ------------------------------------------------ 14,511 (5,989) (10,143) 18,342 ------------------------------------------------ Comprehensive income $ 44,575 $ 22,694 $ 80,284 $ 93,227 ------------------------------------------------ ------------------------------------------------ ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes are an integral part of the interim consolidated financial statements. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED --------------------------- JULY 31 JULY 31 IN THOUSANDS OF DOLLARS (UNAUDITED) NOTES 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Preferred shares Balance at beginning and end of period $ 210,000 $ 210,000 --------------------------- Common shares 4 Balance at beginning of period 259,208 257,462 Issued during the period under share purchase option plan 5 155 179 --------------------------- Balance at end of period 259,363 257,641 --------------------------- Contributed surplus Balance at beginning of period 209 173 Stock-based compensation 5 25 28 --------------------------- Balance at end of period 234 201 --------------------------- Retained earnings Balance at beginning of period 665,538 596,974 Net income 90,427 74,885 Dividends Preferred shares, including applicable taxes (9,223) (9,050) Common shares (25,834) (24,329) --------------------------- Balance at end of period 720,908 638,480 --------------------------- Accumulated other comprehensive income 8 Balance at beginning of period 36,271 18,826 Other comprehensive income, net of income taxes (10,143) 18,342 --------------------------- Balance at end of period 26,128 37,168 --------------------------- Shareholders' equity $ 1,216,633 $ 1,143,490 --------------------------- --------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes are an integral part of the interim consolidated financial statements. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED ----------------------------------------- IN THOUSANDS OF DOLLARS JULY 31 APRIL 30 JULY 31 (UNAUDITED) 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flows relating to operating activities Net income $ 30,064 $ 28,349 $ 28,683 Adjustments to determine net cash flows relating to operating activities: Provision for loan losses 20,000 16,000 16,000 Gains on securitization operations (2,153) (5,017) (5,234) Net loss (gain) on disposal of non-trading securities (224) (627) 404 Future income taxes 2,579 4,155 5,007 Depreciation 2,691 2,667 2,807 Amortization of software and other intangible assets 6,679 6,446 5,604 Net change in held-for-trading securities (115,221) 571,817 (421,073) Change in accrued interest receivable 18,814 (14,262) 13,120 Change in derivative assets 79,239 (21,836) 42,351 Change in accrued interest payable (2,067) 7,744 (42,979) Change in derivative liabilities (58,166) 59,511 (8,582) Other, net 20,087 (46,603) 14,969 ----------------------------------------- 2,322 608,344 (348,923) ----------------------------------------- Cash flows relating to financing activities Net change in deposits 325,372 310,418 697,095 Change in obligations related to assets sold short (21,741) (294,918) 128,876 Change in obligations related to assets sold under repurchase agreements 203,855 (127,699) 68,325 Issuance of common shares - 9 145 Dividends, including applicable income taxes (11,686) (11,686) (10,935) ----------------------------------------- 495,800 (123,876) 883,506 ----------------------------------------- Cash flows relating to investing activities Change in securities available-for-sale and designated as held-for-trading Purchases (565,447) (951,316) (1,231,326) Proceeds from sale and maturities 422,019 894,412 1,547,606 Change in loans (708,411) (826,470) (1,000,405) Change in assets purchased under reverse repurchase agreements (87,725) 246,383 135,898 Proceeds from mortgage loan securitizations 362,104 182,256 253,234 Additions to premises and equipment and software, net of disposals (13,296) (11,018) (9,311) Change in interest-bearing deposits with other banks 98,602 (20,454) (234,422) Cash flows from discontinued operations - - - ----------------------------------------- (492,154) (486,207) (538,726) ----------------------------------------- Net change in cash and non-interest-bearing deposits with other banks during the period 5,968 (1,739) (4,143) Cash and non-interest-bearing deposits with other banks at beginning of period 63,245 64,984 60,383 ----------------------------------------- Cash and non-interest-bearing deposits with other banks at end of period $ 69,213 $ 63,245 $ 56,240 ----------------------------------------- ----------------------------------------- Supplemental disclosure relating to cash flows: Interest paid during the period $ 115,630 $ 103,324 $ 172,759 Income taxes paid during the period $ 959 $ 7,654 $ 3,303 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED --------------------------- IN THOUSANDS OF DOLLARS JULY 31 JULY 31 (UNAUDITED) 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flows relating to operating activities Net income $ 90,427 $ 74,885 Adjustments to determine net cash flows relating to operating activities: Provision for loan losses 52,000 40,000 Gains on securitization operations (10,355) (31,135) Net loss (gain) on disposal of non-trading securities (2,640) 3,814 Future income taxes 12,204 16,620 Depreciation 7,979 8,363 Amortization of software and other intangible assets 19,506 16,286 Net change in held-for-trading securities (214,685) (208,567) Change in accrued interest receivable 17,015 7,577 Change in derivative assets 78,531 (3,535) Change in accrued interest payable (7,209) (50,148) Change in derivative liabilities (1,275) (8,121) Other, net (24,379) (29,944) --------------------------- 17,119 (163,905) --------------------------- Cash flows relating to financing activities Net change in deposits 762,158 2,624,046 Change in obligations related to assets sold short 144,548 (119,178) Change in obligations related to assets sold under repurchase agreements 509,035 (884,347) Issuance of common shares 155 179 Dividends, including applicable income taxes (35,057) (33,379) --------------------------- 1,380,839 1,587,321 --------------------------- Cash flows relating to investing activities Change in securities available-for-sale and designated as held-for-trading Purchases (2,540,356) (4,037,541) Proceeds from sale and maturities 2,764,753 3,880,890 Change in loans (2,261,024) (1,855,403) Change in assets purchased under reverse repurchase agreements (120,727) 257,430 Proceeds from mortgage loan securitizations 645,872 737,166 Additions to premises and equipment and software, net of disposals (29,973) (22,433) Change in interest-bearing deposits with other banks 143,392 (381,695) Cash flows from discontinued operations 8,308 - --------------------------- (1,389,755) (1,421,586) --------------------------- Net change in cash and non-interest-bearing deposits with other banks during the period 8,203 1,830 Cash and non-interest-bearing deposits with other banks at beginning of period 61,010 54,410 --------------------------- Cash and non-interest-bearing deposits with other banks at end of period $ 69,213 $ 56,240 --------------------------- --------------------------- Supplemental disclosure relating to cash flows: Interest paid during the period $ 345,457 $ 434,405 Income taxes paid during the period $ 19,892 $ 13,301 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes are an integral part of the interim consolidated financial statements. NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS ALL TABULAR AMOUNTS ARE IN THOUSANDS OF DOLLARS, UNLESS OTHERWISE INDICATED (UNAUDITED) </pre> <p/> <p>1. ACCOUNTING POLICIES</p> <p/> <p>These unaudited interim consolidated financial statements of Laurentian Bank of <span class="xn-location">Canada</span> (the "Bank") have been prepared by management who is responsible for the integrity and fairness of the financial information presented. These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") for interim financial statements and follow the same significant accounting policies as those in the Bank's audited annual consolidated financial statements as at <span class="xn-chron">October 31, 2009</span>. These accounting policies conform to GAAP. However, these interim consolidated financial statements do not reflect all of the information and disclosures required by GAAP for complete financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements as at <span class="xn-chron">October 31, 2009</span>. These interim consolidated financial statements reflect amounts which are based on the best estimates and judgment of management. Actual results may differ from these estimates. Certain comparative figures have been reclassified to conform to the current period presentation.</p> <p/> <p>Future changes in accounting policies</p> <p/> <p>International Financial Reporting Standards</p> <p/> <p>The Canadian Accounting Standards Board (AcSB) confirmed the convergence of financial reporting standards for Canadian public companies with International Financial Reporting Standards (IFRS). The Bank will use IFRS for interim and annual financial statements relating to periods beginning on or after <span class="xn-chron">November 1, 2011</span>. The Bank is assessing the impact of IFRS on its consolidated financial statements upon adoption in the first quarter of 2012.</p> <p/> <p/> <p>2. LOANS</p> <p/> <p>Loans and impaired loans</p> <p/> <pre> AS AT JULY 31, 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- GROSS AMOUNT GROSS AMOUNT OF IMPAIRED SPECIFIC OF LOANS LOANS ALLOWANCES ------------------------------------------------------------------------- Personal loans $ 5,659,775 $ 17,837 $ 5,486 Residential mortgages 8,407,188 29,907 3,145 Commercial mortgages 1,512,892 33,510 9,456 Commercial and other loans 1,713,938 101,197 38,627 ---------------------------------------- $17,293,793 $ 182,451 $ 56,714 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AS AT JULY 31, 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- GENERAL TOTAL ALLOWANCES ALLOWANCES ------------------------------------------------------------------------- Personal loans $ 30,219 $ 35,705 Residential mortgages 3,052 6,197 Commercial mortgages 5,620 15,076 Commercial and other loans 34,359 72,986 -------------------------- $ 73,250 $ 129,964 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AS AT OCTOBER 31, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- GROSS AMOUNT GROSS AMOUNT OF IMPAIRED SPECIFIC OF LOANS LOANS ALLOWANCES ------------------------------------------------------------------------- Personal loans $ 5,655,055 $ 23,738 $ 7,048 Residential mortgages 7,219,830 32,368 1,878 Commercial mortgages 1,285,012 11,230 2,525 Commercial and other loans 1,555,956 70,158 29,845 ---------------------------------------- $15,715,853 $ 137,494 $ 41,296 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AS AT OCTOBER 31, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- GENERAL TOTAL ALLOWANCES ALLOWANCES ------------------------------------------------------------------------- Personal loans $ 33,713 $ 40,761 Residential mortgages 2,956 4,834 Commercial mortgages 5,000 7,525 Commercial and other loans 31,581 61,426 -------------------------- $ 73,250 $ 114,546 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AS AT JULY 31, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- GROSS AMOUNT GROSS AMOUNT OF IMPAIRED SPECIFIC OF LOANS LOANS ALLOWANCES ------------------------------------------------------------------------- Personal loans $ 5,664,935 $ 21,102 $ 7,333 Residential mortgages 6,978,469 24,633 1,643 Commercial mortgages 1,148,071 9,316 2,503 Commercial and other loans 1,553,188 68,058 29,943 ---------------------------------------- $15,344,663 $ 123,109 $ 41,422 ------------------------------------------------------------------------- AS AT JULY 31, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- GENERAL TOTAL ALLOWANCES ALLOWANCES ------------------------------------------------------------------------- Personal loans $ 28,949 $ 36,282 Residential mortgages 4,091 5,734 Commercial mortgages 5,879 8,382 Commercial and other loans 34,331 64,274 -------------------------- $ 73,250 $ 114,672 ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>Specific allowances for loan losses</p> <p/> <pre> ------------------------------------------------------------------------- ------------------------------------------------------------------------- PERSONAL RESIDENTIAL COMMERCIAL LOANS MORTGAGES MORTGAGES ------------------------------------------------------------------------- Balance at beginning of period $ 7,048 $ 1,878 $ 2,525 Provision for loan losses recorded in the consolidated statement of income 24,541 2,148 7,241 Write-offs (31,864) (1,040) (429) Recoveries 5,761 159 119 ---------------------------------------- Balance at end of period $ 5,486 $ 3,145 $ 9,456 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED JULY 31 --------------------------- 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- TOTAL TOTAL COMMERCIAL AND SPECIFIC SPECIFIC OTHER LOANS ALLOWANCES ALLOWANCES ------------------------------------------------------------------------- Balance at beginning of period $ 29,845 $ 41,296 $ 39,184 Provision for loan losses recorded in the consolidated statement of income 18,070 52,000 40,000 Write-offs (9,349) (42,682) (44,260) Recoveries 61 6,100 6,498 ---------------------------------------- Balance at end of period $ 38,627 $ 56,714 $ 41,422 ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>Loans past due but not impaired</p> <p/> <p>Personal and residential mortgage loans past due shown in the table below are not classified as impaired because they are less than 90 days past due or they are secured such as to reasonably expect full recovery. Commercial loans past due but not impaired are not significant.</p> <p/> <pre> AS AT JULY 31, 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 1 TO 32 TO OVER 31 DAYS 90 DAYS 90 DAYS TOTAL ------------------------------------------------------------------------- Personal loans $ 88,883 $ 24,201 $ 7,041 $ 120,125 Residential mortgages 238,714 39,489 34,516 312,719 ------------------------------------------------------ $ 327,597 $ 63,690 $ 41,557 $ 432,844 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AS AT OCTOBER 31, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 1 TO 32 TO OVER 31 DAYS 90 DAYS 90 DAYS TOTAL ------------------------------------------------------------------------- Personal loans $ 88,479 $ 30,522 $ 6,275 $ 125,276 Residential mortgages 218,282 43,839 25,756 287,877 ------------------------------------------------------ $ 306,761 $ 74,361 $ 32,031 $ 413,153 ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>3. LOAN SECURITIZATION</p> <p/> <p>Under the mortgage-backed securitization program governed by the National Housing Act, the Bank securitizes residential mortgage loans secured by the Canadian Mortgage and Housing Corporation (CMHC) through the creation of mortgage-backed securities. The Bank also securitized conventional residential mortgages prior to 2008. Gains before income taxes, net of transaction costs, are recognized in other income.</p> <p>The following table summarizes the residential mortgage securitization transactions carried out by the Bank.</p> <p/> <pre> FOR THE THREE MONTHS ENDED ---------------------------------------- JULY 31 APRIL 30 JULY 31 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash proceeds, net of transaction costs $ 362,104 $ 182,256 $ 253,234 Rights to future excess spreads 15,841 10,524 9,366 Servicing liability (2,814) (1,636) (2,317) Other (5,613) (883) 61 ---------------------------------------- 369,518 190,261 260,344 Residential mortgages securitized and sold (362,355) (182,609) (253,469) Write-off of loan origination costs (5,010) (2,635) (1,641) ---------------------------------------- Gains before income taxes $ 2,153 $ 5,017 $ 5,234 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED --------------------------- JULY 31 JULY 31 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash proceeds, net of transaction costs $ 645,872 $ 737,166 Rights to future excess spreads 31,189 52,853 Servicing liability (5,139) (6,416) Other (6,896) (7,732) -------------------------- 665,026 775,871 Residential mortgages securitized and sold (646,502) (737,910) Write-off of loan origination costs (8,169) (6,826) -------------------------- Gains before income taxes $ 10,355 $ 31,135 ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>With regard to the transfer of residential mortgages, the key assumptions used to determine the initial fair value of retained interests at the securitization date are summarized as follows.</p> <p/> <pre> DURING THE QUARTER ENDED ---------------------------------------- JULY 31 APRIL 30 JULY 31 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average term (months) 31 36 38 Rate of prepayment 19.3% 18.0% 18.2% Discount rate 2.1% 1.9% 1.7% ------------------------------------------------------------------------- ------------------------------------------------------------------------- No loss is expected on insured residential mortgages. </pre> <p/> <p>Securitization income, as reported in the consolidated statement of income, is detailed in the following table.</p> <p/> <pre> FOR THE THREE MONTHS ENDED ---------------------------------------- JULY 31 APRIL 30 JULY 31 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Gains on securitization operations $ 2,153 $ 5,017 $ 5,234 Changes in fair value of retained interests related to excess spreads, securitization swaps and financial instruments held for economic hedging purposes (1,929) (4,506) 4,879 Loan management income 1,455 1,977 1,938 Other (744) (2,160) (2,280) ---------------------------------------- $ 935 $ 328 $ 9,771 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED --------------------------- JULY 31 JULY 31 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Gains on securitization operations $ 10,355 $ 31,135 Changes in fair value of retained interests related to excess spreads, securitization swaps and financial instruments held for economic hedging purposes (5,768) (4,472) Loan management income 5,407 5,593 Other (4,551) (3,366) -------------------------- $ 5,443 $ 28,890 ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>As at <span class="xn-chron">July 31, 2010</span>, the Bank held rights to future excess spreads of <span class="xn-money">$93,668,000</span> (of which <span class="xn-money">$92,172,000</span> related to insured mortgages) and cash reserve accounts of <span class="xn-money">$9,808,000</span>.</p> <p>The total principal amount of securitized residential mortgages outstanding amounted to <span class="xn-money">$2,695,550,000</span> as at <span class="xn-chron">July 31, 2010</span> (<span class="xn-money">$2,702,762,000</span> as at <span class="xn-chron">October 31</span>, 2009).</p> <p/> <p/> <p>4. CAPITAL STOCK</p> <p/> <p>Issuance of common shares</p> <p/> <p>During the quarter, no common shares were issued to management under the Bank's employee share purchase option plan (6,999 common shares for a cash consideration of <span class="xn-money">$155,000</span> during the nine-month period ended <span class="xn-chron">July 31</span>, 2010).</p> <p/> <pre> ISSUED AND OUTSTANDING AS AT JULY 31, 2010 AS AT OCTOBER 31, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF NUMBER OF NUMBER OF SHARES SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------- Class A Preferred Shares(1) Series 9 4,000,000 $ 100,000 4,000,000 $ 100,000 Series 10 4,400,000 110,000 4,400,000 110,000 ------------------------------------------------------ Total preferred shares 8,400,000 $ 210,000 8,400,000 $ 210,000 ------------------------------------------------------ Common shares 23,920,262 $ 259,363 23,913,963 $ 259,208 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) The preferred shares are convertible into common shares at the Bank's option. However, the number of shares issuable on conversion is not determinable until the date of conversion. </pre> <p/> <p>Capital management</p> <p/> <p>Capital must meet minimum regulatory requirements, as defined by the Office of the Superintendent of Financial Institutions <span class="xn-location">Canada</span> (OSFI) and internal capital adequacy objectives.</p> <p>Regulatory guidelines issued by OSFI require banks to maintain a minimum Tier 1 capital ratio of at least 7% and a Total capital ratio of at least 10%. The Bank is monitoring its regulatory capital based on the Standard Approach for credit risk and on the Basic Indicator Approach for operational risk, as proposed by the Bank for International Settlements regulatory risk-based capital framework (<span class="xn-location">Basel</span> II). In addition, Canadian banks are required to ensure that their assets-to-capital multiple, which is calculated by dividing gross adjusted assets by Total capital, does not exceed a maximum level prescribed by OSFI. The Bank has complied with these requirements throughout the nine-month period ended <span class="xn-chron">July 31, 2010</span>.</p> <p/> <p>5. STOCK-BASED COMPENSATION</p> <p/> <p>Share purchase option plan</p> <p/> <p>There were no new grants during the first nine months of 2010. Information on the outstanding number of options is as follows.</p> <p/> <pre> AS AT AS AT JULY 31, OCTOBER 31, 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NUMBER NUMBER ------------------------------------------------------------------------- Share purchase options Outstanding at end of period 54,075 61,074 Exercisable at end of period 41,575 36,074 ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>Restricted share unit plan</p> <p/> <p>During the first quarter of 2010, under the restricted share unit plan, annual bonuses for certain employees amounting to <span class="xn-money">$1,651,000</span> were converted into 38,268 entirely vested restricted share units. Simultaneously, the Bank also granted 22,961 additional restricted share units that will vest in <span class="xn-chron">December 2012</span>. There were no new grants during the second and third quarters.</p> <p/> <p>Performance-based share unit plan</p> <p/> <p>During the first quarter of 2010, under the performance-based share unit plan, the Bank granted 50,426 performance-based share units valued at <span class="xn-money">$43.15</span> each. Rights to 37.5% of these units will vest after three years. The rights to the remaining units will vest after three years, upon meeting certain financial objectives. There were no new grants during the second and third quarters.</p> <p/> <p>Stock appreciation rights plan</p> <p/> <p>There were no new grants during the first nine months of 2010 under the stock appreciation rights plan.</p> <p/> <p>Stock-based compensation plan expense</p> <p/> <p>The following table presents the expense related to all stock-based compensation plans, net of the effect of related hedging transactions.</p> <p/> <pre> FOR THE THREE MONTHS ENDED ---------------------------------------- JULY 31 APRIL 30 JULY 31 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Stock-based compensation plan expense $ 2,579 $ 4,658 $ 4,024 Effect of hedges (1,623) (4,384) (4,979) ---------------------------------------- Total $ 956 $ 274 $ (955) ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED -------------------------- JULY 31 JULY 31 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Stock-based compensation plan expense $ 7,166 $ (1,653) Effect of hedges (5,194) 3,034 -------------------------- Total $ 1,972 $ 1,381 ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p/> <p>6. EMPLOYEE FUTURE BENEFITS</p> <p/> <pre> FOR THE THREE MONTHS ENDED ---------------------------------------- JULY 31 APRIL 30 JULY 31 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Defined benefit pension plan expense $ 2,071 $ 1,992 $ 1,194 Defined contribution pension plan expense 1,188 1,132 1,077 Other plan expense 853 825 832 ---------------------------------------- Total $ 4,112 $ 3,949 $ 3,103 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED -------------------------- JULY 31 JULY 31 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Defined benefit pension plan expense $ 5,970 $ 3,805 Defined contribution pension plan expense 3,413 3,101 Other plan expense 2,531 2,468 -------------------------- Total $ 11,914 $ 9,374 ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p/> <p>7. WEIGHTED AVERAGE NUMBER OF OUTSTANDING COMMON SHARES</p> <p/> <pre> FOR THE THREE MONTHS ENDED ---------------------------------------- JULY 31 APRIL 30 JULY 31 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Average number of outstanding common shares 23,920,962 23,920,906 23,853,725 Dilutive share purchase options 17,186 16,035 18,488 ---------------------------------------- Weighted average number of outstanding common shares 23,938,148 23,936,941 23,872,213 ---------------------------------------- ---------------------------------------- Average number of share purchase options not taken into account in the calculation of diluted net income per common share(1) - - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED -------------------------- JULY 31 JULY 31 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Average number of outstanding common shares 23,920,383 23,850,522 Dilutive share purchase options 16,448 15,849 -------------------------- Weighted average number of outstanding common shares 23,936,831 23,866,371 -------------------------- -------------------------- Average number of share purchase options not taken into account in the calculation of diluted net income per common share(1) - 34,361 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) The average number of share purchase options was not taken into account in the calculation of diluted net income per common share since the average exercise price of these options exceeded the average market price of the Bank's shares during these periods. </pre> <p/> <p/> <p>8. ADDITIONAL INFORMATION REGARDING OTHER COMPREHENSIVE INCOME</p> <p/> <p>Other comprehensive income</p> <p/> <pre> FOR THE THREE MONTHS ENDED ---------------------------------------- JULY 31 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- BEFORE NET OF INCOME INCOME INCOME TAXES TAXES TAXES ------------------------------------------------------------------------- Unrealized net gains (losses) on available-for-sale securities $ (321) $ (99) $ (420) Reclassification of net (gains) and losses to net income on available-for-sale securities 9 40 49 ---------------------------------------- (312) (59) (371) Net change in value of derivative instruments designated as cash flow hedges 21,422 (6,540) 14,882 ---------------------------------------- Other comprehensive income $ 21,110 $ (6,599) $ 14,511 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED ---------------------------------------- JULY 31 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- BEFORE NET OF INCOME INCOME INCOME TAXES TAXES TAXES ------------------------------------------------------------------------- Unrealized net gains (losses) on available-for-sale securities $ 12,276 $ (3,602) $ 8,674 Reclassification of net (gains) and losses to net income on available-for-sale securities 4,523 (1,400) 3,123 ---------------------------------------- 16,799 (5,002) 11,797 Net change in value of derivative instruments designated as cash flow hedges (26,214) 8,428 (17,786) ---------------------------------------- Other comprehensive income $ (9,415) $ 3,426 $ (5,989) ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED ---------------------------------------- JULY 31 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- BEFORE NET OF INCOME INCOME INCOME TAXES TAXES TAXES ------------------------------------------------------------------------- Unrealized net gains on available-for-sale securities $ 4,891 $ (1,618) $ 3,273 Reclassification of net (gains) and losses to net income on available-for-sale securities (2,603) 775 (1,828) ---------------------------------------- 2,288 (843) 1,445 Net change in value of derivative instruments designated as cash flow hedges (17,113) 5,525 (11,588) ---------------------------------------- Other comprehensive income $ (14,825) $ 4,682 $ (10,143) ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED ---------------------------------------- JULY 31 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- BEFORE NET OF INCOME INCOME INCOME TAXES TAXES TAXES ------------------------------------------------------------------------- Unrealized net gains on available-for-sale securities $ 13,412 $ (3,883) $ 9,529 Reclassification of net (gains) and losses to net income on available-for-sale securities 5,500 (1,705) 3,795 ---------------------------------------- 18,912 (5,588) 13,324 Net change in value of derivative instruments designated as cash flow hedges 7,949 (2,931) 5,018 ---------------------------------------- Other comprehensive income $ 26,861 $ (8,519) $ 18,342 ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>Accumulated other comprehensive income (net of income taxes)</p> <p/> <pre> ------------------------------------------------------------------------- ------------------------------------------------------------------------- ACCUMULATED OTHER CASH AVAILABLE- COMPREHEN- FLOW FOR-SALE SIVE HEDGES SECURITIES INCOME ------------------------------------------------------------------------- Balance at October 31, 2009 $ 32,596 $ 3,675 $ 36,271 Change during the three months ended January 31, 2010 (2,238) 2,401 163 Change during the three months ended April 30, 2010 (24,232) (585) (24,817) Change during the three months ended July 31, 2010 14,882 (371) 14,511 ---------------------------------------- Balance at July 31, 2010 $ 21,008 $ 5,120 $ 26,128 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- ACCUMULATED OTHER CASH AVAILABLE- COMPREHEN- FLOW FOR-SALE SIVE HEDGES SECURITIES INCOME ------------------------------------------------------------------------- Balance at October 31, 2008 $ 35,417 $ (16,591) $ 18,826 Change during the three months ended January 31, 2009 15,041 (6,797) 8,244 Change during the three months ended April 30, 2009 7,763 8,324 16,087 Change during the three months ended July 31, 2009 (17,786) 11,797 (5,989) ---------------------------------------- Balance at July 31, 2009 40,435 (3,267) 37,168 Change during the three months ended October 31, 2009 (7,839) 6,942 (897) ---------------------------------------- Balance at October 31, 2009 $ 32,596 $ 3,675 $ 36,271 ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p/> <p>9. ADDITIONAL INFORMATION REGARDING FINANCIAL INSTRUMENTS</p> <p/> <p>Securities</p> <p/> <p>Gains and losses on the portfolio of available-for-sale securities</p> <p/> <p>The following gains and losses were recognized in net income with regard to the available-for-sale securities.</p> <p/> <pre> FOR THE THREE MONTHS ENDED ---------------------------------------- JULY 31 APRIL 30 JULY 31 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Realized net gains (losses) $ (9) $ 2,037 $ 211 Writedowns for impairment recognized in net income (34) (148) (4,734) ---------------------------------------- Total $ (43) $ 1,889 $ (4,523) ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED -------------------------- JULY 31 JULY 31 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Realized net gains (losses) $ 2,603 $ (766) Writedowns for impairment recognized in net income (182) (4,734) -------------------------- Total $ 2,421 $ (5,500) ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>Unrealized gains and losses on the portfolio of available-for-sale securities</p> <p/> <p>The following table presents the gross unrealized gains and unrealized losses on available-for-sale securities, recognized in other comprehensive income.</p> <p/> <pre> AS AT JULY 31, 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ------------------------------------------------------------------------- Securities issued or guaranteed by Canada(1) $ 380,429 $ - $ 33 $ 380,396 by provinces 425,497 4,455 7 429,945 Other debt securities 121,038 5,929 127 126,840 Asset-backed securities 24,058 1,108 57 25,109 Preferred shares 43,352 494 358 43,488 Common shares and other securities 32,539 2,544 997 34,086 ------------------------------------------------------ $ 1,026,913 $ 14,530 $ 1,579 $ 1,039,864 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AS AT OCTOBER 31, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ------------------------------------------------------------------------- Securities issued or guaranteed by Canada(1) $ 686,786 $ 69 $ 13 $ 686,842 by provinces 535,422 4,913 2 540,333 Other debt securities 107,827 6,213 27 114,013 Asset-backed securities 18,545 159 600 18,104 Preferred shares 38,839 763 1,262 38,340 Common shares and other securities 26,959 1,062 1,610 26,411 ------------------------------------------------------ $ 1,414,378 $ 13,179 $ 3,514 $ 1,424,043 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Including mortgage-backed securities that are fully guaranteed by the CMHC pursuant to the National Housing Act. </pre> <p/> <p>Available-for-sale securities are assessed for impairment at each reporting date to determine whether it is probable that the amortized cost of the security would be recovered. As at <span class="xn-chron">July 31, 2010</span>, gross unrealized losses on available-for-sale securities were <span class="xn-money">$1,579,000</span>. These unrealized losses are mainly related to publicly traded common and preferred shares. Management believes that these unrealized losses are temporary as the underlying financial conditions and outlooks of the issuers have remained sound.</p> <p/> <p>Financial instruments designated as held-for-trading</p> <p/> <p>Management can elect to designate financial instruments as held-for-trading instruments, with changes in fair value recorded in income, provided that such designations meet specific criteria. Certain securities, retained interests related to securitization activities and retail deposits were designated as held-for-trading in order to significantly reduce recognition inconsistencies that would otherwise arise from recognizing gains and losses on different bases. These financial instruments provide an economic hedge for other financial instruments that are measured at fair value. Gains and losses on these instruments are therefore generally offset by changes in value of other financial instruments. The following table shows the impact of changes in value of these instruments.</p> <p/> <pre> FOR THE THREE MONTHS ENDED ---------------------------------------- JULY 31 APRIL 30 JULY 31 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Included in securitization income $ 28,286 $ (28,120) $ (26,498) Included in income from treasury and financial market operations - - 137 ---------------------------------------- Total $ 28,286 $ (28,120) $ (26,361) ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED -------------------------- JULY 31 JULY 31 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Included in securitization income $ 6,803 $ (1,797) Included in income from treasury and financial market operations - 231 -------------------------- Total $ 6,803 $ (1,566) ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>Derivatives</p> <p/> <p>Ineffective portions of hedging relationships</p> <p/> <p>The following tables shows the ineffective portions of the cumulative changes in fair value of hedging instruments recognized in the consolidated statement of income.</p> <p/> <pre> FOR THE THREE MONTHS ENDED ---------------------------------------- JULY 31 APRIL 30 JULY 31 2010 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flow hedges $ 81 $ (141) $ 87 Fair value hedges 72 (105) 242 ---------------------------------------- $ 153 $ (246) $ 329 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED -------------------------- JULY 31 JULY 31 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flow hedges $ (125) $ 211 Fair value hedges 55 (755) -------------------------- $ (70) $ (544) ------------------------------------------------------------------------- ------------------------------------------------------------------------- </pre> <p/> <p>Other information on hedging relationships</p> <p/> <p>Net deferred losses of <span class="xn-money">$580,000</span>, included in accumulated other comprehensive income as at <span class="xn-chron">July 31, 2010</span>, are expected to be transferred into net income over the next twelve months.</p> <p>The maximum term of cash flow hedging relationships was nine years as at <span class="xn-chron">July 31, 2010</span>.</p> <p/> <p>10. SEGMENTED INFORMATION</p> <p/> <p>As of <span class="xn-chron">November 1, 2009</span>, certain capital market activities which were previously reported in the Other segment are now reported with Laurentian Bank Securities activities under the newly formed Laurentian Bank Securities and Capital Markets business segment. In addition, foreign exchange and international services, which were also formerly reported in the Other segment, are now reported in the Real Estate & Commercial segment. The Retail & SME <span class="xn-location">Quebec</span> and B2B Trust business segments were not affected by this reorganization. Comparative figures were reclassified to conform to the current period presentation.</p> <p/> <pre> FOR THE THREE MONTHS ENDED JULY 31, 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- R&SME QUEBEC RE&C B2B ------------------------------------------------------------------------- Net interest income $ 83,585 $ 22,229 $ 30,025 Other income 33,378 9,379 2,686 ---------------------------------------- Total revenue 116,963 31,608 32,711 Provision for loan losses 9,583 9,433 984 Non-interest expenses 88,179 7,221 14,659 ---------------------------------------- Income (loss) before income taxes 19,201 14,954 17,068 Income taxes (recovered) 4,568 4,527 5,250 ---------------------------------------- Net income (loss) $ 14,633 $ 10,427 $ 11,818 ---------------------------------------- ---------------------------------------- Average assets(1) $12,069,272 $ 2,943,601 $ 5,136,470 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED JULY 31, 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LBS/CM OTHER TOTAL ------------------------------------------------------------------------- Net interest income $ 701 $ (6,670) $ 129,870 Other income 13,280 217 58,940 ---------------------------------------- Total revenue 13,981 (6,453) 188,810 Provision for loan losses - - 20,000 Non-interest expenses 11,050 6,711 127,820 ---------------------------------------- Income (loss) before income taxes 2,931 (13,164) 40,990 Income taxes (recovered) 831 (4,250) 10,926 ---------------------------------------- Net income (loss) $ 2,100 $ (8,914) $ 30,064 ---------------------------------------- ---------------------------------------- Average assets(1) $ 2,233,244 $ 852,337 $23,234,924 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED APRIL 30, 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- R&SME QUEBEC RE&C B2B ------------------------------------------------------------------------- Net interest income $ 78,531 $ 20,527 $ 26,863 Other income 32,851 8,598 2,772 ---------------------------------------- Total revenue 111,382 29,125 29,635 Provision for loan losses 11,542 3,984 474 Non-interest expenses 87,305 5,558 12,757 ---------------------------------------- Income (loss) before income taxes 12,535 19,583 16,404 Income taxes (recovered) 2,453 5,928 5,045 ---------------------------------------- Net income (loss) $ 10,082 $ 13,655 $ 11,359 ---------------------------------------- ---------------------------------------- Average assets(1) $11,869,619 $ 2,864,115 $ 4,965,651 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED APRIL 30, 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LBS/CM OTHER TOTAL ------------------------------------------------------------------------- Net interest income $ 436 $ (8,724) $ 117,633 Other income 14,844 1,415 60,480 ---------------------------------------- Total revenue 15,280 (7,309) 178,113 Provision for loan losses - - 16,000 Non-interest expenses 11,657 6,272 123,549 ---------------------------------------- Income (loss) before income taxes 3,623 (13,581) 38,564 Income taxes (recovered) 1,037 (4,248) 10,215 ---------------------------------------- Net income (loss) $ 2,586 $ (9,333) $ 28,349 ---------------------------------------- ---------------------------------------- Average assets(1) $ 2,570,640 $ 680,037 $22,950,062 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED JULY 31, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- R&SME QUEBEC RE&C B2B ------------------------------------------------------------------------- Net interest income $ 77,844 $ 18,355 $ 23,945 Other income 31,237 7,451 2,485 ---------------------------------------- Total revenue 109,081 25,806 26,430 Provision for loan losses 12,408 2,105 1,487 Non-interest expenses 84,734 7,441 12,293 ---------------------------------------- Income (loss) before income taxes 11,939 16,260 12,650 Income taxes (recovered) 2,265 5,090 3,985 ---------------------------------------- Net income (loss) $ 9,674 $ 11,170 $ 8,665 ---------------------------------------- ---------------------------------------- Average assets(1) $11,210,055 $ 2,517,541 $ 4,326,084 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED JULY 31, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LBS/CM OTHER TOTAL ------------------------------------------------------------------------- Net interest income $ 501 $ (7,879) $ 112,766 Other income 16,314 6,404 63,891 ---------------------------------------- Total revenue 16,815 (1,475) 176,657 Provision for loan losses - - 16,000 Non-interest expenses 12,007 2,606 119,081 ---------------------------------------- Income (loss) before income taxes 4,808 (4,081) 41,576 Income taxes (recovered) 1,429 124 12,893 ---------------------------------------- Net income (loss) $ 3,379 $ (4,205) $ 28,683 ---------------------------------------- ---------------------------------------- Average assets(1) $ 2,067,187 $ 668,155 $20,789,022 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED JULY 31, 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- R&SME QUEBEC RE&C B2B ------------------------------------------------------------------------- Net interest income $ 243,927 $ 62,667 $ 84,228 Other income 96,921 25,656 7,955 ---------------------------------------- Total revenue 340,848 88,323 92,183 Provision for loan losses 30,915 18,567 2,518 Non-interest expenses 261,986 17,021 40,023 ---------------------------------------- Income (loss) before income taxes 47,947 52,735 49,642 Income taxes (recovered) 10,680 15,965 15,404 ---------------------------------------- Net income (loss) $ 37,267 $ 36,770 $ 34,238 ---------------------------------------- ---------------------------------------- Average assets(1) $11,897,485 $ 2,869,386 $ 4,946,779 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED JULY 31, 2010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LBS/CM OTHER TOTAL ------------------------------------------------------------------------- Net interest income $ 1,622 $ (24,225) $ 368,219 Other income 42,126 6,495 179,153 ---------------------------------------- Total revenue 43,748 (17,730) 547,372 Provision for loan losses - - 52,000 Non-interest expenses 34,387 18,335 371,752 ---------------------------------------- Income (loss) before income taxes 9,361 (36,065) 123,620 Income taxes (recovered) 2,841 (11,697) 33,193 ---------------------------------------- Net income (loss) $ 6,520 $ (24,368) $ 90,427 ---------------------------------------- ---------------------------------------- Average assets(1) $ 2,420,209 $ 758,887 $22,892,746 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED JULY 31, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- R&SME QUEBEC RE&C B2B ------------------------------------------------------------------------- Net interest income $ 228,587 $ 47,976 $ 66,556 Other income 89,063 18,940 7,288 ---------------------------------------- Total revenue 317,650 66,916 73,844 Provision for loan losses 30,072 6,920 3,008 Non-interest expenses 250,072 20,968 34,809 ---------------------------------------- Income (loss) before income taxes 37,506 39,028 36,027 Income taxes (recovered) 7,896 12,218 11,403 ---------------------------------------- Net income (loss) $ 29,610 $ 26,810 $ 24,624 ---------------------------------------- ---------------------------------------- Average assets(1) $10,934,428 $ 2,338,446 $ 4,240,737 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED JULY 31, 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LBS/CM OTHER TOTAL ------------------------------------------------------------------------- Net interest income $ 1,845 $ (39,422) $ 305,542 Other income 41,245 25,884 182,420 ---------------------------------------- Total revenue 43,090 (13,538) 487,962 Provision for loan losses - - 40,000 Non-interest expenses 29,882 8,116 343,847 ---------------------------------------- Income (loss) before income taxes 13,208 (21,654) 104,115 Income taxes (recovered) 3,962 (6,249) 29,230 ---------------------------------------- Net income (loss) $ 9,246 $ (15,405) $ 74,885 ---------------------------------------- ---------------------------------------- Average assets(1) $ 1,908,781 $ 748,109 $20,170,501 ------------------------------------------------------------------------- ------------------------------------------------------------------------- R&SME Quebec The Retail & SME Quebec segment covers the full range of savings, investment, financing and transactional products and services offered through its direct distribution network, which includes branches, the electronic network and the call centre, as well as Point-of-Sale financing across Canada. This business segment also offers Visa credit card services, insurance products and trust services. As well, it offers all commercial financial services to the small and medium-sized enterprises in Quebec. RE&C The Real Estate & Commercial segment handles real estate financing throughout Canada, commercial financing in Ontario and national accounts, as well as foreign exchange and international services. B2B The B2B Trust business segment supplies generic and complementary banking and financial products to financial advisors and non-bank financial institutions across Canada. This business segment also encompasses deposit brokerage operations. LBS/CM Laurentian Bank Securities and Capital Markets segment consists of the Laurentian Bank Securities Inc. subsidiary and capital market activities. Other The Other segment includes treasury and securitization activities and other activities of the Bank, including revenues and expenses that are not attributable to the above-mentioned segments. (1) Assets are disclosed on an average basis as this measure is most relevant to a financial institution.
For further information: Chief Financial Officer: Michel C. Lauzon, 514-284-4500 #7997; Media and Investor Relations contact: Gladys Caron, 514-284-4500 #7511; cell 514-893-3963
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