Laurentian Bank reports strong net income of $32.0 million for the first
quarter of 2010
MONTREAL, March 3 /CNW Telbec/ -
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Highlights of the first quarter 2010
- Strong net income of $32.0 million, up 28% from $25.0 million for the
first quarter of 2009
- Return on common shareholders' equity of 12.3%, compared to 10.0% for
the first quarter of 2009
- Total revenue of $180.4 million, an increase of 15% from $156.5 million
a year ago
- Loan losses of $16 million, unchanged from the fourth quarter of 2009,
and up from $12 million in the first quarter of 2009
- Total loans and bankers' acceptances increased by more than $2 billion
over the last twelve months
- Significant improvement of the efficiency ratio to 66.7%
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Laurentian Bank of Canada reported strong net income of $32.0 million, or $1.21 diluted per common share, for the first quarter ended January 31, 2010, compared to net income of $25.0 million, or $0.91 diluted per common share, for the first quarter of 2009. Return on common shareholders' equity was 12.3% for the quarter, compared to 10.0% for the corresponding period in 2009.
Commenting on first-quarter results, Réjean Robitaille, President and Chief Executive Officer, mentioned: "I am particularly pleased with our strong loan and revenue growth during the quarter, which, thanks to positive operating leverage, generated a significant improvement in the Bank's efficiency ratio. We have maintained our momentum and remain well positioned to benefit from improving economic conditions. Moreover, our high level of liquidity and solid capital position provide the flexibility to support our continued growth. Furthermore, although we continue to closely monitor market conditions, the credit quality of our loan portfolios remained satisfactory in the quarter."
Review of Business Highlights
Our solid performance in the first quarter of 2010 was the result of numerous growth and development initiatives that we have been pursuing. These permitted us to generate growth in loans and acceptances of more than two billion dollars over the last twelve months.
This growth was, to a large extent, due to the increase in residential mortgage volumes, thanks to our retail network and to B2B Trust. Not only do we generate mortgages through our branches, but also through the nearly one hundred mobile bankers specializing in mortgages. Thus, our sales force has both expanded and increased its penetration over the past few years. Working in tandem with the branches, our mobile specialists constitute an important lever to ensure the growth of these financial products. B2B Trust's independent advisors distribution channel also contributed to this growth while providing geographic diversification to our loan portfolio. Furthermore, the popular High Interest Investment Account continues to generate growth, with an increase of approximately $80 million in the last quarter alone. These new funds were efficiently deployed as B2B Trust continues to hold a leadership position in investment loans with growth of nearly $100 million in the last quarter.
We are continually working on diversifying our sources of revenue and are increasing the volume of activity of our brokerage, VISA, insurance and mutual funds operations, which resulted in higher fee and commission income.
Each year, during the RRSP investment campaign that takes place until the end of February, there is a great deal of effort concentrated in our branch network in order to respond to the investment needs of our clients. This period is especially important to the Bank given that it provides an excellent opportunity to increase our share of the investment wallet of each client. To this end, we have put into practice one of our core values: that of proximity. By expanding our opening hours during the last two weeks of the campaign, we allow our clients to make their investment decisions as effortless and convenient as possible.
The Real Estate and Commercial sector, as well as the SME Quebec division, continue to develop their activities. In addition to growing commercial mortgages and loans, these groups have been successful in expanding the array of products that clients have with us, particularly in accumulating significant commercial deposits over the past few quarters. Strategically situated across Canada, the Real Estate Financing group recently opened a new office in Quebec City, bringing the number of offices to seven.
Finally, Laurentian Bank Securities continues to expand its activities. The Institutional Fixed Income division remains highly profitable while the other business lines are gradually strengthening their operations. For example, the Retail Brokerage division now has 80 brokers located in 14 offices in Quebec and Ontario. This allows the Bank to offer a full suite of investment products to its clients.
Non-GAAP Financial Measures
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 asset.
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.
Caution Regarding Forward-looking Statements
In this document and in other documents filed with Canadian regulatory authorities or in other communications, Laurentian Bank of Canada 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.
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.
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 www.sedar.com.
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.
FINANCIAL
HIGHLIGHTS
FOR THE THREE MONTHS ENDED
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IN MILLIONS OF DOLLARS,
UNLESS OTHERWISE INDICATED JANUARY 31 JANUARY 31
(UNAUDITED) 2010 2009 VARIANCE
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Earnings
Net income $ 32.0 $ 25.0 28 %
Net income available to
common shareholders $ 28.9 $ 21.8 33 %
Return on common
shareholders' equity(1) 12.3 % 10.0 %
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Per common share
Diluted net income $ 1.21 $ 0.91 33 %
Dividends declared $ 0.36 $ 0.34 6 %
Book value(1) $ 39.52 $ 36.41 9 %
Share price - close $ 38.03 $ 29.07 31 %
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Financial position
Balance sheet assets $ 23,184 $ 19,868 17 %
Loans, bankers'
acceptances and
assets purchased
under reverse
repurchase agreements,
net $ 17,271 $ 14,901 16 %
Personal deposits $ 15,096 $ 13,168 15 %
Shareholders' equity
and debentures $ 1,342 $ 1,255 7 %
Number of common
shares - end of period
(in thousands) 23,921 23,849 - %
Net impaired loans as
a % of loans, bankers'
acceptances and assets
purchased under
reverse repurchase
agreements 0.21 % 0.09 %
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Capital ratios
Tier I BIS capital ratio 11.0 % 10.1 %
Total BIS capital ratio 12.9 % 12.1 %
Assets to capital multiple 18.6 x 17.1 x
Tangible common equity as
a percentage of
risk-weighted assets(2) 9.1 % 8.3 %
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FINANCIAL RATIOS
Per common share
Price / earnings ratio
(trailing four quarters) 8.4 x 7.2 x
Market to book value 96 % 80 %
Dividend yield 3.79 % 4.68 %
Dividend payout ratio 29.8 % 37.2 %
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As a percentage of
average assets
Net interest income 2.13 % 2.00 %
Provision for loan
losses 0.28 % 0.24 %
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Profitability
Efficiency ratio (non-
interest expenses as
a % of total revenue) 66.7 % 70.7 %
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OTHER INFORMATION
Number of full-time
equivalent employees 3,629 3,454
Number of branches 156 156
Number of automated
banking machines 406 348
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(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.
Management's Discussion and Analysis
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 January 31, 2010, and of how it performed during the three-month period then ended. This MD&A, dated March 3, 2010, should be read in conjunction with the unaudited interim consolidated financial statements for the first 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.
Additional information about the Laurentian Bank of Canada, including the Annual Information Form, is available on the Bank's website www.laurentianbank.ca and on SEDAR at www.sedar.com.
Performance and Financial Objectives
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".
2010 FINANCIAL OBJECTIVES
FOR THE
THREE MONTHS
ENDED
JANUARY 31,
2010 OBJECTIVES 2010
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Revenue growth 5% to 10% 15 %
Efficiency ratio 70% to 67% 66.7 %
Return on common shareholders' equity 10.0% to 12.0% 12.3 %
Diluted net income per common share $4.00 to $4.70 $ 1.21
Tier I BIS capital ratio Minimum of 9.5% 11.0 %
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Although it is early in the fiscal year, the Bank's results for the quarter ended January 31, 2010 compare favorably with the 2010 objectives after three months, as shown in the table above.
Consolidated Results
Net income was $32.0 million, or $1.21 diluted per common share, for the first quarter ended January 31, 2010, compared with $25.0 million, or $0.91 diluted per common share, for the first quarter of 2009.
Total revenue
Total revenue increased by more than 15% year-over-year to $180.4 million in the first quarter of 2010, compared with $156.5 million in the first quarter of 2009. The Bank's net interest income increased to $120.7 million for the first quarter of 2010, from $98.7 million in the first quarter of 2009. The strong loan and deposit growth year-over-year combined with higher interest margins contributed to the 22% increase in net interest income. Margins improved from 2.00% in the first quarter of 2009 to 2.13% in the first quarter of 2010. Repricing measures taken in 2009 to strengthen margins continued to provide benefits during the first quarter.
Other income
Other income was $59.7 million in the first quarter of 2010, compared to $57.8 million in the first quarter of 2009. The increase of $3.4 million in fees and commissions on loans and deposits, largely relating to the increase in business activity year-over-year, as well as the continued stronger contribution from brokerage operations, more than offset lower securitization income. Revenues from securitization activities decreased by $6.3 million, from $10.5 million in the first quarter of 2009 to $4.2 million in the first quarter of 2010. This was a result of the lower level of securitization of $101.5 million in the first quarter of 2010, compared to $312.4 million in the first quarter of 2009, as well as the tightening of credit spreads. Note 3 to the interim financial statements provides further details on securitization activities.
Provision for loan losses
The provision for loan losses amounted to $16.0 million in the first quarter of 2010, compared with $12.0 million in the first quarter of 2009 and $16.0 million in the fourth quarter of 2009. The increase essentially relates to commercial loan portfolios, while the credit quality of consumer loan portfolios has stabilized. The Risk Management section below provides additional information on the credit quality of the Bank's loan portfolios.
Non-interest expenses
Non-interest expenses totaled $120.4 million for the first quarter of 2010, compared to $110.7 million for the first quarter of 2009; an 8.7% year-over-year increase. Several factors contributed to this increase. Firstly, salaries and employee benefits rose by $4.8 million, mainly as a result of salary increases and new hires over the last twelve months to support business development initiatives. Secondly, premises and technology costs increased from $28.0 million for the first quarter of 2009 to $32.1 million for the first quarter of 2010. This increase is mainly explained by higher amortization expense related to recently completed IT development projects and overall increases in technology costs to support growth.
As a result of the strong increase in revenues which more than offset the increase in expenses, the efficiency ratio (non-interest expenses divided by total revenue) significantly improved to 66.7% in the first quarter of 2010, compared with 70.7% in the first quarter of 2009.
Income taxes
For the quarter ended January 31, 2010, the income tax expense was $12.1 million and the effective tax rate was 27.3%. 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. In addition, income taxes for the quarter included the effect on future tax assets related to the reduction to Ontario's tax rates which became effective during the first quarter. For the quarter ended January 31, 2009, the income tax expense was $8.8 million and the effective tax rate was 25.9%.
First quarter 2010 compared to fourth quarter 2009
Net income was $32.0 million for the first quarter of 2010, compared to $38.2 million for the fourth quarter ended October 31, 2009.
Results for the fourth quarter of 2009 included income from discontinued operations of $11.5 million related to the sale of asset management activities in fiscal 2005. Excluding this gain, income from continuing operations was $26.8 million for the fourth quarter of 2009 and increased by 19% to $32.0 million for the first quarter of 2010. Net interest income improved by $2.5 million essentially as a result of higher loan volumes. Net interest margin stood at 2.13% in the first quarter of 2010, six basis points lower than in the fourth quarter of 2009 where it stood at 2.19%, mainly as a result of higher volumes of low-yielding fixed-income trading securities. Other revenue was essentially unchanged compared to the fourth quarter of 2009, as higher revenues from financial market operations offset lower securitization income. Non-interest expenses decreased by $7.8 million compared with the fourth quarter of 2009. A significant portion of the decrease is related to charges for operational issues incurred in the fourth quarter of 2009, of which $2.1 million were recovered in the first quarter. Furthermore, salaries and employee benefits for the first quarter of 2010 only partially reflected the effect of annual increases effective as of January 1st and benefitted from favourable adjustments to variable compensation expenses.
Financial Condition
CONDENSED BALANCE SHEET
In thousands of dollars AS AT AS AT AS AT
JANUARY 31 OCTOBER 31 JANUARY 31
(Unaudited) 2010 2009 2009
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ASSETS
Cash resources $ 239,346 $ 300,616 $ 290,698
Securities 4,688,760 4,432,183 3,653,855
Assets purchased under
reverse repurchase
agreements 815,449 536,064 575,339
Loans, net 16,209,912 15,601,307 14,215,139
Other assets 1,230,440 1,294,610 1,133,116
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$ 23,183,907 $ 22,164,780 $ 19,868,147
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LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits $ 18,426,334 $ 18,299,966 $ 15,572,870
Other liabilities 3,415,700 2,543,588 3,039,836
Subordinated debentures 150,000 150,000 150,000
Shareholders' equity 1,191,873 1,171,226 1,105,441
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$ 23,183,907 $ 22,164,780 $ 19,868,147
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Balance sheet assets increased by more than $1.0 billion from year-end 2009 and stood at $23.2 billion at January 31, 2010. Over the last twelve months, balance sheet assets increased by $3.3 billion or 17%.
Liquid assets
Liquid assets, including cash, deposits with other banks, securities and assets purchased under reverse repurchase agreements, increased by $0.5 billion, mainly as a result of higher trading inventories. The Bank continues to maintain a high level of liquid assets to support its growth.
Loan portfolio
The portfolio of loans and bankers' acceptances stood at $16.6 billion at January 31, 2010, up $0.6 billion from October 31, 2009. The Bank had another solid quarter, with significant new commitments and disbursed loan volumes. Residential mortgages, including securitized loans, increased by $414.5 million, as detailed below.
RESIDENTIAL MORTGAGE PORTFOLIO
In thousands of dollars AS AT AS AT
JANUARY 31 OCTOBER 31
(Unaudited) 2010 2009 VARIANCE
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On-balance sheet
residential mortgage
loans $ 7,695,123 $ 7,219,830 $ 475,293
Securitized residential
mortgage loans (off-
balance sheet) 2,641,960 2,702,762 (60,802)
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Total residential
mortgage loans,
including securitized
loans $ 10,337,083 $ 9,922,592 $ 414,491
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Commercial mortgages and commercial loans, including bankers' acceptances increased by more than $60.2 million and $62.5 million, respectively, as the Bank continues to capitalize on growth opportunities in the Canadian market. Personal loans increased by $46.2 million, mainly reflecting growth in investment loans and home equity lines of credit.
Deposits
Considering overall softer market conditions for personal savings, total personal deposits decreased by $43.1 million during the quarter to $15.1 billion as at January 31, 2010, as the Bank actively managed its liquidity levels and funding costs. 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. During the first quarter, the level of business and other deposits increased by $169.5 million, for a net $126.4 million increase in total deposits. Volumes associated with the B2B Trust High Interest Investment Account were up $80.3 million during the quarter, as this product continues to be popular among the financial advisor community. As at January 31, 2010, personal deposits accounted for 82% of total deposits of $18.4 billion.
Shareholders' equity
Shareholders' equity stood at $1,191.9 million as at January 31, 2010, compared with $1,171.2 million as at October 31, 2009. The increase in shareholders' equity mainly results from net income accumulated during the last quarter.
The Bank's book value per common share, excluding accumulated other comprehensive income, was $39.52 as at January 31, 2010, compared to $38.68 as at October 31, 2009. There were 23,920,962 common shares and 54,075 share purchase options outstanding as at February 23, 2010.
Assets under administration
Assets under administration stood at $14.3 billion as at January 31, 2010, unchanged from October 31, 2009, and $1.1 billion higher than as at January 31, 2009 where they stood at $13.2 billion. The increase compared with January 31, 2009 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.
Capital Management
The regulatory Tier I capital of the Bank reached $1,066.4 million as at January 31, 2010, compared with $1,045.8 million as at October 31, 2009. The BIS Tier 1 and total capital ratios stood at 11.0% and 12.9%, respectively, as at January 31, 2010, compared to 11.0% and 13.0%, respectively, as at October 31, 2009. These ratios remain strong. The tangible common equity ratio of 9.1% also reflects the high quality of the Bank's capital.
REGULATORY CAPITAL - BIS
In thousands of dollars, AS AT AS AT AS AT
except percentage amounts JANUARY 31 OCTOBER 31 JANUARY 31
(Unaudited) 2010 2009 2009
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Total - Tier 1
capital (A) $ 1,066,390 $ 1,045,824 $ 976,343
Tier I BIS capital ratio
(A/C) 11.0 % 11.0 % 10.1 %
Total - capital (B) $ 1,255,570 $ 1,235,866 $ 1,169,558
Total BIS capital ratio
(B/C) 12.9 % 13.0 % 12.1 %
Total risk-weighted
assets (C) $ 9,708,653 $ 9,480,823 $ 9,677,216
Assets to capital
multiple 18.6 x 18.0 x 17.1 x
Tangible common equity
as a percentage of
risk-weighted assets(1) 9.1 % 9.1 % 8.3 %
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(1) Tangible common equity is defined as common shareholders' equity,
excluding accumulated other comprehensive income, less goodwill and
contractual and customer relationships.
RISK-WEIGHTED ASSETS
In thousands of dollars AS AT AS AT AS AT
JANUARY 31 OCTOBER 31 JANUARY 31
(Unaudited) 2010 2009 2009
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Balance sheet items
Cash resources $ 17,125 $ 12,697 $ 36,375
Securities 251,415 220,257 265,356
Mortgage loans 3,385,374 3,222,867 2,516,066
Other loans and
customers' liabilities
under acceptances 3,838,350 3,807,878 5,060,187
Other assets 494,654 516,561 416,886
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Total - balance sheet
items 7,986,918 7,780,260 8,294,870
Off-balance sheet items 543,972 547,050 293,121
Operational risk 1,177,763 1,153,513 1,089,225
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Total - risk-weighted
assets $ 9,708,653 $ 9,480,823 $ 9,677,216
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Basel Committee on Banking Supervision new proposed capital and liquidity regulation
In December 2009, the Basel Committee on Banking Supervision published proposals on new capital and liquidity calculations. The Bank is presently reviewing these new proposals which should not become regulation until late 2012 at the earliest. At this stage, it is too early to determine the impact on capital ratios and liquidity requirements, considering the proposals are likely to change between now and when final rules take effect.
Dividends
At its meeting on February 24, 2010, the Board of Directors declared regular dividends on the various series of preferred shares to shareholders of record on March 9, 2010. Also, at its meeting on March 3, 2010, the Board of Directors declared a dividend of $0.36 per common share, payable on May 1, 2010, to shareholders of record on April 1, 2010.
Risk Management
The Bank is exposed to various types of risks owing to the nature of its activities, mainly risks 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.
Credit risk
The following sections provide further details on the credit quality of the Bank's loan portfolios. Note 2 to these interim consolidated financial statements also provides detailed information on the Bank's loan portfolios and related credit exposures.
PROVISION FOR LOAN LOSSES RECORDED IN THE CONSOLIDATED STATEMENT OF
INCOME
FOR THE THREE MONTHS ENDED
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In thousands of dollars JANUARY 31 OCTOBER 31 JANUARY 31
(Unaudited) 2010 2009 2009
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Loan portfolios
Personal loans $ 8,658 $ 9,749 $ 9,173
Residential mortgages 263 524 670
Commercial mortgages 794 360 19
Commercial and other
loans 6,285 5,367 2,138
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Total $ 16,000 $ 16,000 $ 12,000
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The provision for loan losses amounted to $16.0 million in the first quarter of 2010, compared with $12.0 million in the first quarter of 2009 and $16.0 million in the fourth quarter of 2009. The increase largely relates to specific provisions on commercial loan portfolios as the ongoing sluggish economic conditions have affected certain weaker companies; while congruent with the Bank's expectation, the credit losses on the consumer loan portfolios have stabilized.
Gross impaired loans stood at $157.4 million at January 31, 2010, compared to $137.5 million at October 31, 2009. The increase mainly results from commercial loans and mortgages. Impaired residential mortgage loans have also slightly increased during the quarter. Credit quality of other retail portfolios has however stabilized during the quarter, as a result of the improving economic conditions and measures undertaken to reduce the risk profile of the portfolios.
ALLOWANCE FOR LOAN LOSSES
In thousands of dollars, AS AT AS AT AS AT
except percentage amounts JANUARY 31 OCTOBER 31 JANUARY 31
(Unaudited) 2010 2009 2009
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Gross impaired loans $ 157,373 $ 137,494 $ 124,619
Allowance for loan losses 121,364 114,546 111,608
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Net impaired loans $ 36,009 $ 22,948 $ 13,011
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Impaired loans as a % of
loans, bankers'
acceptances and assets
purchased under reverse
repurchase agreements
Gross 0.90 % 0.83 % 0.83 %
Net 0.21 % 0.14 % 0.09 %
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Net impaired loans stood at $36.0 million at January 31, 2010 (representing 0.21% of total loans, bankers' acceptances and assets purchased under reverse repurchase agreements), compared to $23.0 million (0.14%) at October 31, 2009.
Market risk
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 and liability management (ALM) activities.
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 January 31, 2010, 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.
STRUCTURAL INTEREST RATE SENSITIVITY
In thousands of dollars AS AT AS AT
JANUARY 31 OCTOBER 31
(Unaudited) 2010 2009
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Increase in net interest income before
taxes over the next 12 months $ (5,302) $ (4,779)
Change in the economic value of common
shareholders' equity (Net of income
taxes) $ (10,423) $ (19,626)
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The Bank is actively managing its interest rate sensitivity position in order to benefit from current yield curve conditions.
Segmented Information
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:
- Retail & SME Quebec - Laurentian Bank Securities and
- Real Estate & Commercial Capital Markets
- B2B Trust - Other
As of November 1, 2009, 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 Quebec and B2B Trust business segments were not affected by this reorganization. Comparative figures were reclassified to conform to the current period presentation.
Retail & SME Quebec
FOR THE THREE MONTHS ENDED
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In thousands of dollars,
except percentage amounts JANUARY 31 OCTOBER 31 JANUARY 31
(Unaudited) 2010 2009 2009
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Total revenue $ 112,503 $ 108,274 $ 104,799
Provision for loan losses $ 9,790 $ 11,815 $ 9,535
Income from continuing
operations $ 12,552 $ 10,013 $ 10,180
Net income $ 12,552 $ 21,482 $ 10,180
Efficiency ratio 76.9 % 77.0 % 78.5 %
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The Retail & SME Quebec business segment's contribution to net income improved 23%, totalling $12.6 million for the first quarter of 2010, compared with $10.2 million for the first quarter of 2009.
Total revenue increased by $7.7 million, from $104.8 million in the first quarter of 2009 to $112.5 million in the first quarter of 2010, as a result of higher loan and deposit volumes, improved interest margins, as well as higher fee income. Loan losses were relatively unchanged, at $9.8 million in the first quarter of 2010, compared to $9.5 million in the first quarter of 2009, as the credit quality of retail loan portfolios has stabilized. Loan losses have however improved compared to the fourth quarter of 2009 where they stood at $11.8 million. Non-interest expenses increased by 5% or $4.3 million, from $82.2 million in the first quarter of 2009 to $86.5 million in the first quarter of 2010, mainly as a result of increases in salaries and employee benefits granted in 2009, as well as an increase in the number of employees to support business development.
Balance sheet highlights
- Loans up 9% or $ 984.7 million over the last 12 months
- Increase in deposits of $ 830.0 million, to $8.5 billion as at
January 31, 2010
Real Estate & Commercial
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.
FOR THE THREE MONTHS ENDED
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In thousands of dollars,
except percentage amounts JANUARY 31 OCTOBER 31 JANUARY 31
(Unaudited) 2010 2009 2009
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Total revenue $ 27,590 $ 26,597 $ 19,986
Provision for loan losses $ 5,150 $ 2,897 $ 1,654
Net income $ 12,688 $ 7,611 $ 8,040
Efficiency ratio 15.4 % 47.5 % 33.2 %
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The Real Estate & Commercial business segment's contribution to net income improved 58%, reaching $12.7 million for the first quarter of 2010, compared with $8.0 million for the first quarter of 2009.
Total revenue increased by $7.6 million, from $20.0 million in the first quarter of 2009 to $27.6 million in the first quarter of 2010, mainly as a result of higher net interest income due to growth in loan volumes and repricing measures initiated last year. Loan losses were higher at $5.2 million in the first quarter of 2010, compared to $1.7 million in the first quarter of 2009 as management recorded provisions on certain deteriorating accounts. Nonetheless, at 73 basis points to average loans and bankers' acceptances, losses have remained acceptable and the overall credit quality of the portfolio remained satisfactory. Non-interest expenses decreased by $2.4 million to $4.2 million in the first quarter of 2010, from $6.6 million in the first quarter of 2009, mainly as a result of the partial resolution of certain operational issues during the quarter which generated a $2.1 million favourable adjustment to non-interest expenses.
Balance sheet highlight
- Loans and BAs up 24% or $ 542.4 million over the last 12 months
B2B Trust
FOR THE THREE MONTHS ENDED
-----------------------------------------------
In thousands of dollars,
except percentage amounts JANUARY 31 OCTOBER 31 JANUARY 31
(Unaudited) 2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total revenue $ 29,837 $ 26,412 $ 23,501
Provision for loan losses $ 1,060 $ 1,288 $ 811
Net income $ 11,061 $ 7,468 $ 8,126
Efficiency ratio 42.3 % 53.7 % 45.9 %
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The B2B Trust business segment's contribution to net income improved 36%, reaching $11.1 million in the first quarter of 2010, compared with $8.1 million in the first quarter of 2009.
Total revenue increased by $6.3 million, from $23.5 million in the first quarter of 2009 to $29.8 million in the first quarter of 2010. Net interest income increased markedly by $6.2 million as a combined result of volume growth and recovering margins. Loan losses, including losses on investment lending activities, remained low at $1.1 million in the first quarter of 2010, compared with $0.8 million in the first quarter of 2009. Non-interest expenses increased to $12.6 million in the first quarter of 2010, compared with $10.8 million in the first quarter of 2009, mainly as a result of higher salary and employee benefits, as well as higher technology costs.
Balance sheet highlights
- Loans up 15% or $ 643.9 million over the last 12 months
- Increase in deposits of $2.3 billion over the last 12 months, to
$9.0 billion as at January 31, 2010
Laurentian Bank Securities and Capital Markets
As of November 1, 2009, 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.
FOR THE THREE MONTHS ENDED
-----------------------------------------------
In thousands of dollars,
except percentage amounts JANUARY 31 OCTOBER 31 JANUARY 31
(Unaudited) 2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total revenue $ 14,487 $ 18,483 $ 12,262
Net income $ 1,834 $ 2,730 $ 2,523
Efficiency ratio 80.6 % 73.5 % 70.5 %
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Laurentian Bank Securities and Capital Markets business segment's contribution to net income amounted to $1.8 million in the first quarter of 2010, compared with $2.5 million in the first quarter of 2009. Revenue grew by more than 18% to $14.5 million in the first quarter of 2010, as a result of continued strong performance of the Institutional Fixed Income division and improvements in Retail and Institutional Equity divisions. Non-interest expenses increased to $11.7 million in the first quarter of 2010, from $8.7 million in the first quarter of 2009, due primarily to higher variable compensation costs. Furthermore, the settlement, during the first quarter of 2010, of Laurentian Bank Securities' dispute with the Autorité des marchés financiers related to the Third Party Asset-Backed Commercial Paper did not have a material impact on expenses as the bulk of this cost had been provisioned in prior periods.
Balance sheet highlight
- Asset under management up 31% or $ 490.6 million over the last
12 months
Other Sector
Certain Bank 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.
FOR THE THREE MONTHS ENDED
-----------------------------------------------
In thousands of dollars JANUARY 31 OCTOBER 31 JANUARY 31
(Unaudited) 2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total revenue $ (3,968) $ (1,226) $ (4,011)
Net loss $ (6,121) $ (1,043) $ (3,822)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Other sector posted a negative contribution to net income of $6.1 million in the first quarter of 2010, compared with a negative contribution of $3.8 million in the first quarter of 2009. Net interest income improved to negative $8.8 million in the first quarter of 2010, compared to negative $13.8 million in the first quarter of 2009. In the first quarter of 2009, net interest income had been particularly affected as a result of higher funding costs.
Other income for the first quarter of 2010 was $4.9 million, compared to $9.8 million for the first quarter of 2009. The decrease in profitability mainly results from lower securitization income, which more than offset improvements in other treasury operations.
Non-interest expenses increased to $5.4 million for the first quarter of 2010, compared with $2.4 million for the first quarter of 2009, mainly as a result of higher technology costs and adjustments to capital tax expenses.
Additional Financial Information - Quarterly Results
In thousands of dollars,
except per share
and percentage amounts JANUARY 31 OCTOBER 31 JULY 31 APRIL 30
(Unaudited) 2010 2009 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total revenue $ 180,449 $ 178,540 $ 176,657 $ 154,768
Income from continuing
operations $ 32,014 $ 26,779 $ 28,683 $ 21,155
Net income $ 32,014 $ 38,248 $ 28,683 $ 21,155
Income per common share
from continuing
operations
Basic $ 1.21 $ 0.99 $ 1.08 $ 0.76
Diluted $ 1.21 $ 0.99 $ 1.08 $ 0.76
Net income per common
share
Basic $ 1.21 $ 1.47 $ 1.08 $ 0.76
Diluted $ 1.21 $ 1.47 $ 1.08 $ 0.76
Return on common
shareholders'
equity(1) 12.3 % 15.3 % 11.6 % 8.5 %
Balance sheet assets
(in millions of
dollars) $ 23,184 $ 22,165 $ 21,316 $ 20,403
-------------------------------------------------------------------------
-------------------------------------------------------------------------
In thousands of dollars,
except per share
and percentage amounts JANUARY 31 OCTOBER 31 JULY 31 APRIL 30
(Unaudited) 2009 2008 2008 2008
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total revenue $ 156,537 $ 152,811 $ 171,095 $ 155,505
Income from continuing
operations $ 25,047 $ 22,910 $ 30,937 $ 25,149
Net income $ 25,047 $ 27,333 $ 30,937 $ 25,149
Income per common share
from continuing
operations
Basic $ 0.92 $ 0.84 $ 1.17 $ 0.93
Diluted $ 0.91 $ 0.84 $ 1.17 $ 0.93
Net income per common
share
Basic $ 0.92 $ 1.02 $ 1.17 $ 0.93
Diluted $ 0.91 $ 1.02 $ 1.17 $ 0.93
Return on common
shareholders'
equity(1) 10.0 % 11.5 % 13.4 % 11.2 %
Balance sheet assets
(in millions of
dollars) $ 19,868 $ 19,579 $ 19,301 $ 18,383
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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.
Accounting Policies
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 first quarter of 2010 have been prepared in accordance with these accounting policies.
Future changes in accounting policy
International Financial Reporting Standards
In February 2008, the 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 fiscal periods beginning on or after November 1, 2011.The Bank has prepared a conversion plan and assembled a project team to coordinate the conversion.
The Bank has analyzed the new requirements, particularly with respect to the recognition of financial instruments, including securitization transactions, hedging transactions and loan losses. The standards regarding employee future benefits, business combinations, income taxes and stock-based compensation have also been analyzed in detail. In addition, the Bank is closely monitoring the potential impact of such changes on capital requirements.
In 2009, the International Accounting Standards Boards (IASB) proposed major amendments to the accounting standards governing the recognition of financial instruments, including securitization transactions, hedging transactions and loan losses. Since the proposed standards have yet to be finalized, their potential impact cannot be determined at this time.
Our analysis of the accounting consequences for these items, as well as for all other matters related to the Bank's preparedness for an orderly transition to IFRS, will continue throughout the current year.
Corporate Governance and Changes in Internal Control over Financial Reporting
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.
During the last quarter ended January 31, 2010, 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.
About Laurentian Bank
Laurentian Bank of Canada is a banking institution operating across Canada 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.
Laurentian Bank is well established in the Province of Quebec, operating the third-largest retail branch network. Elsewhere throughout Canada, it operates in specific market segments where it holds an enviable position. Laurentian Bank of Canada has more than $23 billion in balance sheet assets and more than $14 billion in assets under administration. Founded in 1846, the Bank employs more than 3,600 people.
Conference Call
Laurentian Bank invites media representatives and the public to listen to the conference call with financial analysts to be held at 2 p.m. Eastern Time on Wednesday, March 3, 2010. The live, listen-only, toll-free, call-in number is 1-866-226-1792.
You can listen to the call on a delayed basis at any time from 6:00 p.m. on Wednesday, March 3, until midnight on March 24, 2010, by dialing the following playback number: 1-800-408-3053 Code 7078361 #. The conference call can also be heard through the Investor Relations section of the Bank's Web site at www.laurentianbank.ca. The Bank's Website also offers additional financial information.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED
BALANCE SHEET
IN THOUSANDS AS AT AS AT AS AT
OF DOLLARS JANUARY 31 OCTOBER 31 JANUARY 31
(UNAUDITED) NOTES 2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ASSETS
Cash and non-
interest-bearing
deposits with other
banks $ 64,984 $ 61,010 $ 49,730
-----------------------------------------------
Interest-bearing
deposits with other
banks 174,362 239,606 240,968
-----------------------------------------------
Securities accounts
Available-for-sale 1,117,045 1,424,043 1,320,675
Held-for-trading 2,062,594 1,391,313 1,052,870
Designated as
held-for-trading 1,509,121 1,616,827 1,280,310
-----------------------------------------------
4,688,760 4,432,183 3,653,855
-----------------------------------------------
Assets purchased
under reverse
repurchase
agreements 815,449 536,064 575,339
-----------------------------------------------
Loans 2 and 3
Personal 5,701,250 5,655,055 5,738,904
Residential
mortgage 7,695,123 7,219,830 6,137,137
Commercial
mortgage 1,345,261 1,285,012 973,519
Commercial and
other 1,589,642 1,555,956 1,477,187
-----------------------------------------------
16,331,276 15,715,853 14,326,747
Allowance for
loan losses (121,364) (114,546) (111,608)
-----------------------------------------------
16,209,912 15,601,307 14,215,139
-----------------------------------------------
Other
Customers'
liabilities
under
acceptances 245,673 216,817 110,421
Premises and
equipment 57,614 58,163 59,171
Derivative
financial
instruments 232,533 253,661 278,291
Goodwill 53,790 53,790 53,790
Software and
other intangible
assets 100,592 103,386 93,972
Other assets 540,238 608,793 537,471
-----------------------------------------------
1,230,440 1,294,610 1,133,116
-----------------------------------------------
$ 23,183,907 $ 22,164,780 $ 19,868,147
-----------------------------------------------
-----------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits
Personal $ 15,095,538 $ 15,138,637 $ 13,168,403
Business, banks
and other 3,330,796 3,161,329 2,404,467
-----------------------------------------------
18,426,334 18,299,966 15,572,870
-----------------------------------------------
Other
Obligations
related to assets
sold short 1,515,677 1,054,470 905,329
Obligations
related to assets
sold under
repurchase
agreements 717,867 284,988 1,151,848
Acceptances 245,673 216,817 110,421
Derivative
financial
instruments 172,239 174,859 134,029
Other liabilities 764,244 812,454 738,209
-----------------------------------------------
3,415,700 2,543,588 3,039,836
-----------------------------------------------
Subordinated
debentures 150,000 150,000 150,000
-----------------------------------------------
Shareholders'
equity
Preferred shares 4 210,000 210,000 210,000
Common shares 4 259,354 259,208 257,496
Contributed surplus 218 209 185
Retained earnings 685,867 665,538 610,690
Accumulated other
comprehensive
income 8 36,434 36,271 27,070
-----------------------------------------------
1,191,873 1,171,226 1,105,441
-----------------------------------------------
$ 23,183,907 $ 22,164,780 $ 19,868,147
-----------------------------------------------
-----------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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 JANUARY 31 OCTOBER 31 JANUARY 31
(UNAUDITED) NOTES 2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Interest income
Loans $ 182,747 $ 179,730 $ 190,648
Securities 17,639 18,154 18,465
Deposits with
other banks 53 102 3,014
Other, including
derivative
financial
instruments 34,076 39,764 22,275
-----------------------------------------------
234,515 237,750 234,402
-----------------------------------------------
Interest expense
Deposits 111,498 117,048 129,074
Other, including
derivative
financial
instruments 351 516 4,678
Subordinated
debentures 1,950 1,951 1,947
-----------------------------------------------
113,799 119,515 135,699
-----------------------------------------------
Net interest income 120,716 118,235 98,703
-----------------------------------------------
Other income
Fees and
commissions on
loans and deposits 26,979 26,403 23,609
Income from
brokerage
operations 12,665 16,926 8,691
Securitization
income 3 4,180 5,551 10,525
Credit insurance
income 4,183 3,399 4,060
Income from sales
of mutual funds 3,526 3,383 2,836
Income from
treasury and
financial market
operations 4,159 (99) 4,575
Income from
registered self-
directed plans 2,088 1,887 1,979
Other 1,953 2,855 1,559
-----------------------------------------------
59,733 60,305 57,834
-----------------------------------------------
Total revenue 180,449 178,540 156,537
-----------------------------------------------
Provision for loan
losses 2 16,000 16,000 12,000
-----------------------------------------------
Non-interest expenses
Salaries and
employee benefits 65,225 66,027 60,389
Premises and
technology 32,142 31,948 27,985
Other 23,016 30,168 22,358
-----------------------------------------------
120,383 128,143 110,732
-----------------------------------------------
Income from
continuing
operations before
income taxes 44,066 34,397 33,805
Income taxes 12,052 7,618 8,758
-----------------------------------------------
Income from
continuing
operations 32,014 26,779 25,047
Income from
discontinued
operations, net of
income taxes - 11,469 -
-----------------------------------------------
Net income $ 32,014 $ 38,248 $ 25,047
-----------------------------------------------
-----------------------------------------------
Preferred share
dividends,
including
applicable taxes 3,074 3,066 3,222
-----------------------------------------------
Net income available
to common
shareholders $ 28,940 $ 35,182 $ 21,825
-----------------------------------------------
-----------------------------------------------
Average number of
common shares
outstanding (in
thousands)
Basic 23,919 23,878 23,848
Diluted 23,935 23,903 23,872
-----------------------------------------------
Income per common
share from
continuing
operations
Basic $ 1.21 $ 0.99 $ 0.92
Diluted $ 1.21 $ 0.99 $ 0.91
-----------------------------------------------
Net income per
common share
Basic $ 1.21 $ 1.47 $ 0.92
Diluted $ 1.21 $ 1.47 $ 0.91
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of the interim consolidated
financial statements.
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED
-------------------------------
JANUARY 31 JANUARY 31
IN THOUSANDS OF DOLLARS (UNAUDITED) NOTES 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income $ 32,014 $ 25,047
-------------------------------
Other comprehensive income, net of
income taxes 8
Unrealized gains (losses) on
available-for-sale securities 2,798 (7,514)
Reclassification of (gains) losses
on available-for-sale securities to
net income (397) 717
Net change in value of derivative
instruments designated as cash flow
hedges (2,238) 15,041
-------------------------------
163 8,244
-------------------------------
Comprehensive income $ 32,177 $ 33,291
-------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of the interim consolidated
financial statements.
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED
-------------------------------
JANUARY 31 JANUARY 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 5 146 34
-------------------------------
Balance at end of period 259,354 257,496
-------------------------------
Contributed surplus
Balance at beginning of period 209 173
Stock-based compensation 5 9 12
-------------------------------
Balance at end of period 218 185
-------------------------------
Retained earnings
Balance at beginning of period 665,538 596,974
Net income 32,014 25,047
Dividends
Preferred shares, including
applicable taxes (3,074) (3,222)
Common shares (8,611) (8,109)
-------------------------------
Balance at end of period 685,867 610,690
-------------------------------
Accumulated other comprehensive
income 8
Balance at beginning of period 36,271 18,826
Other comprehensive income, net
of income taxes 163 8,244
-------------------------------
Balance at end of period 36,434 27,070
-------------------------------
Shareholders' equity $ 1,191,873 $ 1,105,441
-------------------------------
-------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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 JANUARY 31 OCTOBER 31 JANUARY 31
(UNAUDITED) 2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flows relating to
operating activities
Net income $ 32,014 $ 38,248 $ 25,047
Adjustments to determine
net cash flows relating
to operating activities:
Provision for loan
losses 16,000 16,000 12,000
Gains on securitization
operations (3,185) (6,245) (16,672)
Net gain from
discontinued operations - (13,493) -
Net loss (gain) on
disposal of non-trading
securities (1,789) 8,332 2,685
Future income taxes 5,470 12,323 7,319
Depreciation 2,621 2,853 2,754
Amortization of software
and other intangible
assets 6,381 6,097 5,291
Net change in held-for-
trading securities (671,281) (113,549) 16,327
Change in accrued
interest receivable 12,463 (20,370) 9,376
Change in assets
relating to derivative
financial instruments 21,128 (12,422) (40,587)
Change in accrued
interest payable (12,886) 18,861 (11,649)
Change in liabilities
relating to derivative
financial instruments (2,620) 35,511 (13,440)
Other, net 2,137 43,672 (29,352)
-----------------------------------------------
(593,547) 15,818 (30,901)
-----------------------------------------------
Cash flows relating to
financing activities
Net change in deposits 126,368 342,108 239,058
Change in obligations
related to assets sold
short 461,207 354,412 86,093
Change in obligations
related to assets sold
under repurchase
agreements 432,879 33,239 15,752
Issuance of common
shares 146 1,567 34
Dividends, including
applicable income
taxes (11,685) (11,190) (11,331)
-----------------------------------------------
1,008,915 720,136 329,606
-----------------------------------------------
Cash flows relating to
investing activities
Change in securities
available-for-sale
and designated as
held-for-trading
Acquisitions (1,023,593) (2,127,317) (998,916)
Proceeds on sale
and at maturities 1,448,322 1,695,154 835,849
Change in loans (726,143) (656,019) (387,043)
Change in assets
purchased under
reverse repurchase
agreements (279,385) (132,103) 86,052
Proceeds from mortgage
loan securitizations 101,512 268,481 312,116
Additions to premises
and equipment and
software, net of
disposals (5,659) (15,760) (4,766)
Change in interest-
bearing deposits with
other banks 65,244 236,380 (146,677)
Cash flows from
discontinued
operations 8,308 - -
-----------------------------------------------
(411,394) (731,184) (303,385)
-----------------------------------------------
Net change in cash and
non-interest-bearing
deposits with other
banks during the period 3,974 4,770 (4,680)
Cash and non-interest-
bearing deposits with
other banks at beginning
of period 61,010 56,240 54,410
-----------------------------------------------
Cash and non-interest-
bearing deposits with
other banks at end of
period $ 64,984 $ 61,010 $ 49,730
-----------------------------------------------
-----------------------------------------------
Supplemental disclosure
relating to cash flows:
Interest paid during
the period $ 126,503 $ 103,583 $ 146,603
Income taxes paid
(recovered) during
the period $ 11,279 $ (1,026) $ 8,289
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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)
1. ACCOUNTING POLICIES
These unaudited interim consolidated financial statements of Laurentian Bank of Canada (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 October 31, 2009. 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 October 31, 2009. 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.
Future changes to accounting policies
International Financial Reporting Standards
In February 2008, the 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 fiscal periods beginning on or after November 1, 2011. The Bank has prepared a conversion plan and assembled a project team to coordinate the conversion.
The Bank has analyzed the new requirements, particularly with respect to the recognition of financial instruments, including securitization transactions, hedging transactions and loan losses. The standards regarding employee future benefits, business combinations, income taxes and stock-based compensation have also been analyzed in detail. In addition, the Bank is closely monitoring the potential impact of such changes on capital requirements.
In 2009, the IASB proposed major amendments to the accounting standards governing the recognition of financial instruments, including securitization transactions, hedging transactions and loan losses. Since the proposed standards have yet to be finalized, their potential impact cannot be determined at this time.
Our analysis of the accounting consequences for these items, as well as for all other matters related to the Bank's preparedness for an orderly transition to IFRS, will continue throughout the current year.
2. LOANS
Loans and impaired loans
AS AT JANUARY 31, 2010
-------------------------------------------------------------------------
-------------------------------------------------------------------------
GROSS
GROSS AMOUNT OF
AMOUNT IMPAIRED SPECIFIC GENERAL TOTAL
OF LOANS LOANS ALLOWANCES ALLOWANCES ALLOWANCES
-------------------------------------------------------------------------
Personal
loans $ 5,701,250 $ 23,646 $ 7,354 $ 32,326 $ 39,680
Residential
mortgages 7,695,123 33,778 1,958 3,071 5,029
Commercial
mortgages 1,345,261 21,091 3,319 4,246 7,565
Commercial
and other
loans 1,589,642 78,858 35,483 33,607 69,090
--------------------------------------------------------------
$16,331,276 $ 157,373 $ 48,114 $ 73,250 $ 121,364
-------------------------------------------------------------------------
-------------------------------------------------------------------------
AS AT OCTOBER 31, 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
GROSS
GROSS AMOUNT OF
AMOUNT IMPAIRED SPECIFIC GENERAL TOTAL
OF LOANS LOANS ALLOWANCES ALLOWANCES ALLOWANCES
-------------------------------------------------------------------------
Personal
loans $ 5,655,055 $ 23,738 $ 7,048 $ 33,713 $ 40,761
Residential
mortgages 7,219,830 32,368 1,878 2,956 4,834
Commercial
mortgages 1,285,012 11,230 2,525 5,000 7,525
Commercial
and other
loans 1,555,956 70,158 29,845 31,581 61,426
--------------------------------------------------------------
$15,715,853 $ 137,494 $ 41,296 $ 73,250 $ 114,546
-------------------------------------------------------------------------
-------------------------------------------------------------------------
AS AT JANUARY 31, 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
GROSS
GROSS AMOUNT OF
AMOUNT IMPAIRED SPECIFIC GENERAL TOTAL
OF LOANS LOANS ALLOWANCES ALLOWANCES ALLOWANCES
-------------------------------------------------------------------------
Personal
loans $ 5,738,904 $ 21,327 $ 7,564 $ 32,474 $ 40,038
Residential
mortgages 6,137,137 23,308 1,826 3,901 5,727
Commercial
mortgages 973,519 6,199 1,902 5,444 7,346
Commercial
and other
loans 1,477,187 73,785 27,066 31,431 58,497
--------------------------------------------------------------
$14,326,747 $ 124,619 $ 38,358 $ 73,250 $ 111,608
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Specific allowances for loan losses
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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 8,658 263 794
Write-offs (9,992) (238) -
Recoveries 1,640 55 -
-----------------------------------------------
Balance at end of period $ 7,354 $ 1,958 $ 3,319
-------------------------------------------------------------------------
-------------------------------------------------------------------------
FOR THE THREE MONTHS
ENDED JANUARY 31
-------------------------------
2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
COMMERCIAL TOTAL TOTAL
AND OTHER SPECIFIC SPECIFIC
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 6,285 16,000 12,000
Write-offs (653) (10,883) (13,988)
Recoveries 6 1,701 1,162
-----------------------------------------------
Balance at end of period $ 35,483 $ 48,114 $ 38,358
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Loans past due but not impaired
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.
AS AT JANUARY 31, 2010
-------------------------------------------------------------------------
-------------------------------------------------------------------------
1 TO 32 TO OVER
31 DAYS 90 DAYS 90 DAYS TOTAL
-------------------------------------------------------------------------
Personal loans $ 107,609 $ 31,513 $ 6,653 $ 145,775
Residential mortgages 253,639 33,939 23,145 310,723
--------------------------------------------------
$ 361,248 $ 65,452 $ 29,798 $ 456,498
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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
-------------------------------------------------------------------------
-------------------------------------------------------------------------
3. LOAN SECURITIZATION
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.
The following table summarizes the residential mortgage securitization transactions carried out by the Bank:
FOR THE THREE MONTHS ENDED
-----------------------------------------------
JANUARY 31 OCTOBER 31 JANUARY 31
2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash proceeds, net of
transaction costs $ 101,512 $ 268,481 $ 312,116
Rights to future excess
spreads 4,824 13,456 28,307
Servicing liability (689) (2,199) (2,798)
Other (400) (3,212) (5,058)
-----------------------------------------------
105,247 276,526 332,567
Residential mortgages
securitized and sold (101,538) (268,703) (312,402)
Write-off of loan
origination costs (524) (1,578) (3,493)
-----------------------------------------------
Gains before income
taxes, net of
transaction costs $ 3,185 $ 6,245 $ 16,672
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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.
DURING THE QUARTER ENDED
-----------------------------------------------
JANUARY 31 OCTOBER 31 JANUARY 31
2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average term
(months) 27 32 35
Rate of prepayment 17.6 % 18.8 % 17.2 %
Discount rate 1.3 % 1.7 % 1.9 %
-------------------------------------------------------------------------
-------------------------------------------------------------------------
No loss is expected on insured residential mortgages.
Securitization income, as reported in the consolidated statement of income, is detailed in the following table.
FOR THE THREE MONTHS ENDED
-----------------------------------------------
JANUARY 31 OCTOBER 31 JANUARY 31
2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Gains on securitization
operations $ 3,185 $ 6,245 $ 16,672
Changes in fair value of
retained interests
related to excess spreads,
securitization swaps and
financial instruments
held for economic hedging
purposes 667 (165) (7,309)
Management income 1,975 1,729 1,835
Other (1,647) (2,258) (673)
-----------------------------------------------
$ 4,180 $ 5,551 $ 10,525
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As at January 31, 2010, the Bank held rights to future excess spreads of $89,744,000 (of which $87,274,000 related to insured mortgages) and cash reserve accounts of $11,401,000.
The total principal amount of securitized residential mortgages outstanding amounted to $2,641,960,000 as at January 31, 2010 ($2,702,762,000 as at October 31, 2009).
4. CAPITAL STOCK
Issuance of common shares
During the quarter, 6,724 common shares were issued to management under the Bank's employee share purchase option plan for a cash consideration of $146,000.
AS AT AS AT
ISSUED AND OUTSTANDING JANUARY 31, 2010 OCTOBER 31, 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
IN THOUSANDS OF DOLLARS, NUMBER NUMBER
EXCEPT NUMBER OF SHARES OF SHARES AMOUNT OF 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 23,920,687 $ 259,354 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.
Capital management
Capital must meet minimum regulatory requirements, as defined by the Office of the Superintendent of Financial Institutions Canada (OSFI) and internal capital adequacy objectives.
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 (Basel 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 three-month period ended January 31, 2010.
5. STOCK-BASED COMPENSATION
Share purchase option plan
There were no new grants during the first three months of 2010. Information on the outstanding number of options is as follows.
AS AT AS AT
JANUARY 31, OCTOBER 31,
2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NUMBER NUMBER
-------------------------------------------------------------------------
Share purchase options
Outstanding at end of period 54,350 61,074
Exercisable at end of period 41,850 36,074
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Restricted share unit plan
During the first quarter of 2010, under the restricted share unit plan, annual bonuses for certain employees amounting to $1,651,000 were converted into 38,268 entirely vested restricted share units. The Bank also granted 22,961 additional restricted share units that will vest in December 2012.
Performance-based share unit plan
During the first quarter of 2010, under the performance-based share unit plan, the Bank granted 50,426 performance-based share units valued at $43.15 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.
Stock appreciation rights plan
There were no new grants during the first quarter of 2010 under the stock appreciation rights plan.
Stock-based compensation plan expense
The following table presents the expense related to all stock-based compensation plans, net of the effect of related hedging transactions.
FOR THE THREE MONTHS ENDED
-----------------------------------------------
JANUARY 31 OCTOBER 31 JANUARY 31
2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Stock-based compensation
plan expense $ (71) $ 2,968 $ (5,915)
Effect of hedges 813 (2,804) 8,029
-----------------------------------------------
Total $ 742 $ 164 $ 2,114
-------------------------------------------------------------------------
-------------------------------------------------------------------------
6. EMPLOYEE FUTURE BENEFITS
FOR THE THREE MONTHS ENDED
-----------------------------------------------
JANUARY 31 OCTOBER 31 JANUARY 31
2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Defined benefit pension
plan expense $ 1,907 $ 203 $ 1,471
Defined contribution
pension plan expense 1,093 1,066 993
Other plan expense 853 1,174 832
-----------------------------------------------
Total $ 3,853 $ 2,443 $ 3,296
-------------------------------------------------------------------------
-------------------------------------------------------------------------
7. WEIGHTED AVERAGE NUMBER OF OUTSTANDING COMMON SHARES
FOR THE THREE MONTHS ENDED
-----------------------------------------------
JANUARY 31 OCTOBER 31 JANUARY 31
2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Average number of
outstanding common
shares 23,919,297 23,878,495 23,848,489
Dilutive share purchase
options 16,110 24,498 23,426
-----------------------------------------------
Weighted average number
of outstanding common
shares 23,935,407 23,902,993 23,871,915
-----------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
8. ADDITIONAL INFORMATION REGARDING OTHER COMPREHENSIVE INCOME
Other comprehensive income
FOR THE THREE MONTHS ENDED
------------------------------------------------
JANUARY 31
2010
-------------------------------------------------------------------------
-------------------------------------------------------------------------
BEFORE NET OF
INCOME INCOME INCOME
TAXES TAXES TAXES
-------------------------------------------------------------------------
Unrealized net gains
(losses) on available-
for-sale securities $ 4,052 $ (1,254) $ 2,798
Reclassification of net
(gains) and losses to
net income on available-
for-sale securities (575) 178 (397)
------------------------------------------------
3,477 (1,076) 2,401
Net change in value of
derivative instruments
designated as cash flow
hedges (3,548) 1,310 (2,238)
------------------------------------------------
Other comprehensive
income $ (71) $ 234 $ 163
-------------------------------------------------------------------------
-------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
------------------------------------------------
JANUARY 31
2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
BEFORE NET OF
INCOME INCOME INCOME
TAXES TAXES TAXES
-------------------------------------------------------------------------
Unrealized net gains
(losses) on available-
for-sale securities $ (10,918) $ 3,404 $ (7,514)
Reclassification of net
(gains) and losses to
net income on available-
for-sale securities 1,041 (324) 717
------------------------------------------------
(9,877) 3,080 (6,797)
Net change in value of
derivative instruments
designated as cash flow
hedges 22,386 (7,345) 15,041
------------------------------------------------
Other comprehensive
income $ 12,509 $ (4,265) $ 8,244
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated other comprehensive income (net of income taxes)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ACCUMULATED
CASH AVAILABLE- OTHER
FLOW FOR-SALE COMPREHENSIVE
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
------------------------------------------------
Balance at January 31,
2010 $ 30,358 $ 6,076 $ 36,434
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ACCUMULATED
CASH AVAILABLE- OTHER
FLOW FOR-SALE COMPREHENSIVE
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
------------------------------------------------
Balance at January 31,
2009 50,458 (23,388) 27,070
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)
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
-------------------------------------------------------------------------
-------------------------------------------------------------------------
9. SUPPLEMENTAL INFORMATION ON FINANCIAL INSTRUMENTS
Securities
Gains and losses on the portfolio of available-for-sale securities
The following gains and losses were recognized in net income with regard to the available-for-sale securities.
FOR THE THREE MONTHS ENDED
------------------------------------------------
JANUARY 31 OCTOBER 31 JANUARY 31
2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Realized net gains
(losses) $ 575 $ (3,046) $ (1,041)
Writedowns for impairment
recognized in net income - (426) -
------------------------------------------------
Total $ 575 $ (3,472) $ (1,041)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Unrealized gains and losses on the portfolio of available-for-sale securities
The following table presents the gross unrealized gains and unrealized losses on available-for-sale securities, recognized in other comprehensive income.
AS AT JANUARY 31, 2010
-------------------------------------------------------------------------
-------------------------------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------------------------------------------------------------------------
Securities issued or
guaranteed
by Canada(1) $ 470,145 $ 27 $ - $ 470,172
by provinces 432,093 6,414 - 438,507
Other debt securities 111,746 6,999 68 118,677
Asset-backed securities 19,142 254 446 18,950
Preferred shares 39,948 1,227 592 40,583
Common shares and other
securities 30,383 1,255 1,482 30,156
--------------------------------------------------
$ 1,103,457 $ 16,176 $ 2,588 $ 1,117,045
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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 Canada Mortgage and Housing Corporation pursuant to the
National Housing Act.
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 January 31, 2010, gross unrealized losses on available-for-sale securities were $2,588,000. 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 prospects of the issuers have remained sound.
Financial instruments designated as held-for-trading
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.
FOR THE THREE MONTHS ENDED
------------------------------------------------
JANUARY 31 OCTOBER 31 JANUARY 31
2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Included in
securitization
income $ 6,637 $ 9,493 $ 21,246
Included in income from
treasury and financial
market operations - 23 (45)
------------------------------------------------
Total $ 6,637 $ 9,516 $ 21,201
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Derivative financial instruments
Ineffective portions of hedging relationships
The following tables shows the ineffective portions of the cumulative changes in fair value of hedging instruments recognized in the consolidated statement of income.
FOR THE THREE MONTHS ENDED
------------------------------------------------
JANUARY 31 OCTOBER 31 JANUARY 31
2010 2009 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flow hedges $ (65) $ 730 $ 35
Fair value hedges 88 293 (770)
------------------------------------------------
$ 23 $ 1,023 $ (735)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other information on hedging relationships
Net deferred gains of $19,299,000, included in accumulated other comprehensive income as at January 31, 2010, are expected to be transferred into net income over the next twelve months.
The maximum term of cash flow hedging relationships was five years as at January 31, 2010.
10. SEGMENTED INFORMATION
As of November 1, 2009, 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 Quebec and B2B Trust business segments were not affected by this reorganization. Comparative figures were reclassified to conform to the current period presentation.
FOR THE THREE MONTHS ENDED
JANUARY 31, 2010
-------------------------------------------------------------------------
-------------------------------------------------------------------------
R & SME QUEBEC RE&C B2B
-------------------------------------------------------------------------
Net interest income $ 81,811 $ 19,911 $ 27,340
Other income 30,692 7,679 2,497
-------------------------------------------------
Total revenue 112,503 27,590 29,837
Provision for loan
losses 9,790 5,150 1,060
Non-interest expenses 86,502 4,242 12,607
-------------------------------------------------
Income (loss) before
income taxes 16,211 18,198 16,170
Income taxes (recovered) 3,659 5,510 5,109
-------------------------------------------------
Net income (loss) $ 12,552 $ 12,688 $ 11,061
-------------------------------------------------
-------------------------------------------------
Average assets(1) $ 11,752,657 $ 2,800,270 $ 4,738,833
-------------------------------------------------------------------------
-------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
JANUARY 31, 2010
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LBS/CM OTHER TOTAL
-------------------------------------------------------------------------
Net interest income $ 485 $ (8,831) $ 120,716
Other income 14,002 4,863 59,733
-------------------------------------------------
Total revenue 14,487 (3,968) 180,449
Provision for loan
losses - - 16,000
Non-interest expenses 11,680 5,352 120,383
-------------------------------------------------
Income (loss) before
income taxes 2,807 (9,320) 44,066
Income taxes (recovered) 973 (3,199) 12,052
-------------------------------------------------
Net income (loss) $ 1,834 $ (6,121) $ 32,014
-------------------------------------------------
-------------------------------------------------
Average assets(1) $ 2,461,648 $ 741,713 $22,495,121
-------------------------------------------------------------------------
-------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
OCTOBER 31, 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
R & SME QUEBEC RE&C B2B
-------------------------------------------------------------------------
Net interest income $ 77,372 $ 19,622 $ 24,140
Other income 30,902 6,975 2,272
-------------------------------------------------
Total revenue 108,274 26,597 26,412
Provision for loan
losses 11,815 2,897 1,288
Non-interest expenses 83,403 12,621 14,186
-------------------------------------------------
Income (loss) before
income taxes 13,056 11,079 10,938
Income taxes (recovered) 3,043 3,468 3,470
-------------------------------------------------
Income (loss) from
continuing operations 10,013 7,611 7,468
Income from discontinued
operations, net of
income taxes 11,469 - -
-------------------------------------------------
Net income (loss) $ 21,482 $ 7,611 $ 7,468
-------------------------------------------------
-------------------------------------------------
Average assets(1) $ 11,545,381 $ 2,667,797 $ 4,452,795
-------------------------------------------------------------------------
-------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
OCTOBER 31, 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LBS/CM OTHER TOTAL
-------------------------------------------------------------------------
Net interest income $ 509 $ (3,408) $ 118,235
Other income 17,974 2,182 60,305
-------------------------------------------------
Total revenue 18,483 (1,226) 178,540
Provision for loan
losses - - 16,000
Non-interest expenses 13,591 4,342 128,143
-------------------------------------------------
Income (loss) before
income taxes 4,892 (5,568) 34,397
Income taxes (recovered) 2,162 (4,525) 7,618
-------------------------------------------------
Income (loss) from
continuing operations 2,730 (1,043) 26,779
Income from discontinued
operations, net of
income taxes - - 11,469
-------------------------------------------------
Net income (loss) $ 2,730 $ (1,043) $ 38,248
-------------------------------------------------
-------------------------------------------------
Average assets(1) $ 1,823,272 $ 924,398 $21,413,643
-------------------------------------------------------------------------
-------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
JANUARY 31, 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
R & SME QUEBEC RE&C B2B
-------------------------------------------------------------------------
Net interest income $ 76,254 $ 14,279 $ 21,115
Other income 28,545 5,707 2,386
-------------------------------------------------
Total revenue 104,799 19,986 23,501
Provision for loan
losses 9,535 1,654 811
Non-interest expenses 82,233 6,626 10,776
-------------------------------------------------
Income (loss) before
income taxes 13,031 11,706 11,914
Income taxes (recovered) 2,851 3,666 3,788
-------------------------------------------------
Net income (loss) $ 10,180 $ 8,040 $ 8,126
-------------------------------------------------
-------------------------------------------------
Average assets(1) $ 10,740,803 $ 2,210,774 $ 4,164,755
-------------------------------------------------------------------------
-------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
JANUARY 31, 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LBS/CM OTHER TOTAL
-------------------------------------------------------------------------
Net interest income $ 818 $ (13,763) $ 98,703
Other income 11,444 9,752 57,834
-------------------------------------------------
Total revenue 12,262 (4,011) 156,537
Provision for loan
losses - - 12,000
Non-interest expenses 8,650 2,447 110,732
-------------------------------------------------
Income (loss) before
income taxes 3,612 (6,458) 33,805
Income taxes (recovered) 1,089 (2,636) 8,758
-------------------------------------------------
Net income (loss) $ 2,523 $ (3,822) $ 25,047
-------------------------------------------------
-------------------------------------------------
Average assets(1) $ 1,802,382 $ 690,787 $ 19,609,501
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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
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 nonbank 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: Michel C. Lauzon, Chief Financial Officer, (514) 284-4500 #7997; Media and Investor Relations: Gladys Caron, (514) 284-4500 #7511; cell (514) 893-3963
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