Laurentian Bank of Canada reports net income of $20.7 million for the second quarter of 2007



    MONTREAL, June 1 /CNW Telbec/ - Laurentian Bank of Canada reported net
income of $20.7 million or $0.75 diluted per common share for the second
quarter ended April 30, 2007, compared to $24.6 million or $0.91 diluted per
common share for the same period in 2006. Return on common shareholders'
equity was 9.7% for the quarter, compared to 12.5% for the same period in
2006. Results for the second quarter of 2007 included favorable tax
adjustments of $1.6 million ($0.07 diluted per common share), while 2006
results included a net favorable tax adjustment of $10.7 million resulting
from various tax-related issues ($0.45 diluted per common share). Excluding
these tax adjustments, net income improved by more than $5.0 million or 37%
and diluted net income per common share rose by $0.22 or 48%.
    For the six-month period ended April 30, 2007, net income totaled
$41.2 million or $1.49 diluted per common share, compared to net income of
$41.6 million or $1.51 diluted per common share in 2006, including the effect
of the favorable tax adjustments. Return on common shareholders' equity was
9.6% for the six-month period ended April 30, 2007, compared to 10.1% for the
same period in 2006.
    Réjean Robitaille, President and Chief Executive Officer, commented on
the results of operations: "We had good second quarter results and the Bank
continued to steadily increase its revenues and profitability. Growth in loan
and deposit volumes, combined with the focus on our three priorities, namely:
the improvement of our efficiency, profitability and the development of our
human capital, enabled us to continue our progression. This performance
reflects both our sound strategy of developing the Bank's activities in
markets and segments where we can compete advantageously and the strong
commitment of our people."

    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 April 30, 2007, and of how it performed during the three-month and
six-month periods then ended. This MD&A should be read in conjunction with the
unaudited interim consolidated financial statements for the second quarter of
2007.
    Complementary information, on subjects such as risk management,
accounting policies and off-balance sheet arrangements, is also provided in
the Bank's 2006 Annual Report.

    Performance and financial objectives

    Laurentian Bank publishes its financial objectives at the beginning of
each financial year and then reports actual results quarterly. The Bank's
practice is not to provide interim guidance. The following table presents,
strictly for information purposes, a comparison of the actual performance with
the objectives set by management for 2007.

    Performance for 2007

    
    -------------------------------------------------------------------------
                                                     Six-month period ended
                                2007 Objectives       April 30, 2007 Actual
    -------------------------------------------------------------------------
    Return on common
     shareholders' equity          8% to 9%                   9.6%

    Diluted net income
     per share              $2.55 to $2.85 (annual)          $1.49

    Total revenue        $550 to $560 million (annual)   $287.3 million

    Efficiency ratio            75% to 73.5%                  74.2%

    Tier 1 Capital
     ratio                    Minimum of 9.5%                 10.1%

    Credit quality
    (loan losses as a % of
     average assets)           0.24% to 0.21%                 0.24%
    -------------------------------------------------------------------------


    Highlights

    This section presents the highlights of the second quarter ended April 30,
2007 and provides details on significant items affecting results, when
compared to the second quarter of 2006.

    - Total revenue stood at $145.7 million in the second quarter of 2007,
      compared to $131.0 million in the second quarter of 2006. The increase
      results from growth in net interest income of $9.8 million and growth
      in other income of $4.9 million.
    - Non-interest expenses increased to $109.0 million in the second quarter
      of 2007 from $100.0 million in the second quarter of 2006, mainly in
      performance-based compensation, salaries and employee benefits.
    - The provision for credit losses was $10.0 million in the second quarter
      of 2007, the same level as a year ago.
    - Income taxes stood at $6.1 million in the second quarter of 2007,
      compared to a recovery of $3.6 million in the second quarter of 2006.
      Income taxes included the favorable effect of certain transactions and
      adjustments of $1.6 million ($0.07 diluted per common share) in 2007
      and $10.7 million ($0.45 diluted per common share) in 2006, as detailed
      below. Income taxes in the second quarter of 2007 also benefited from
      lower taxes on dividends from Canadian securities and credit insurance
      income.

    Analysis of consolidated results

    Summary results

    Net income was $20.7 million, or $0.75 diluted per common share, for the
second quarter ended April 30, 2007, compared to $24.6 million, or $0.91
diluted per common share, for the same period in 2006. Results of the second
quarter of 2007 included the favorable effect of transactions and adjustments
of $1.6 million to income taxes, while results of the second quarter of 2006
included a $10.7 million net favorable tax adjustment resulting from various
tax-related issues. Excluding these tax adjustments, net income improved by
more than $5 million or 37% and diluted net income per common share increased
by $0.22 or 48%. For the first six months of 2007, net income totaled
$41.2 million, or $1.49 diluted per common share, compared to net income of
$41.6 million, or $1.51 diluted per common share, in 2006.
    Total revenue increased by $14.7 million or 11% to $145.7 million in the
second quarter of 2007, compared to $131.0 million in the second quarter of
2006. The variation reflects the combined effect of of a $9.8 million increase
in net interest income and a $4.9 million increase in other income, compared
to the same quarter a year ago.
    The higher net interest income in the second quarter of 2007 results
largely from the growth of loan and deposit portfolios, combined with the
reduction in cash resources and securities. Net interest margin increased from
2.11% in the second quarter of 2006 to 2.34% in the second quarter of 2007.
    The $4.9 million increase in other income is principally attributable to
higher fees and commissions on loans and deposits, income from mutual fund
sales, revenues from treasury and financial markets activities and income from
brokerage operations. During the quarter, the Bank sold a portion of its
holding in the Montréal Exchange, following the listing of its common shares,
and realized a $4.4 million ($3.7 million net of income taxes; $0.16 diluted
per common share) gain to the statement of income. As at April 30, 2007, the
Bank still held 385,000 shares of the Montréal Exchange worth approximately
$16.7 million in its available-for-sale account. The ensuing unrealized gain
was recorded in other comprehensive income. During the quarter, the Bank
incurred a loss of $4.3 million ($2.9 million net of income taxes; $0.12
diluted per common share) on liquidities that it decided to sell prior to
maturity in order to take advantage of the interest rate environment (inverted
yield curve) currently prevailing and to further improve margins on
liquidities.
    In the first quarter of 2007, total revenue was $141.6 million and net
interest income $95.2 million, while net interest margin was 2.27%. The
quarter-over-quarter growth is mainly due to higher securitization income in
the second quarter of 2007 resulting from gains on sale of mortgage loans of
$2.6 million. Furthermore, the higher loan and deposit volumes and higher
yield on liquidities enabled the Bank to post a slight increase in net
interest income, despite the shorter quarter.
    Compared to the same period for 2006, total revenue for the six-month
period ended April 30, 2007, increased by $22.5 million to $287.3 million,
mainly as a result of the items noted above.
    The provision for credit losses was stable at $10.0 million or 0.25% of
average assets in the second quarter of 2007 when compared to the second
quarter of 2006, as improvements in commercial loan portfolios and a B2B Trust
line of credit portfolio offset slight deteriorations in personal loan
portfolios. Net impaired loans improved to -$7.0 million (representing -0.05%
of total loans, bankers' acceptances and assets purchased under reverse
repurchase agreements), while they stood at $5.4 million (0.04%) as at October
31, 2006. Gross impaired loans stood at $113.3 million as at April 30, 2007,
while they stood at $130.6 million as at October 31, 2006. Benefiting from the
prevailing economic environment, overall credit quality remained stable during
the quarter.
    Non-interest expenses increased by 9% to $109.0 million in the second
quarter of 2007, up from $100.0 million in the second quarter of 2006. At
$58.1 million for the second quarter of 2007, salaries and employee benefits
increased by $7.7 million, compared to the same quarter a year ago. The
increase in salary charges is due to higher performance-based compensation of
$4.7 million, as well as from the increase in salaries and in the number of
employees stemming from the Bank's expansion for $2.2 million.
    At $28.6 million for the second quarter of 2007, premises and technology
costs increased by $1.3 million, compared to the same quarter a year ago.
Higher technology costs resulting from increases in maintenance and
depreciation, as well as higher rental expenses for premises essentially
explain the variation. At $22.3 million for the second quarter of 2007, other
expenses remained relatively stable compared to the same quarter a year ago,
despite the higher advertising and business development expenses aimed at
supporting the Bank's growth initiatives.
    The efficiency ratio (non-interest expenses divided by total revenue) was
74.8% in the second quarter of 2007 compared to 76.3% for the second quarter
of 2006.
    For the six-month period ended April 30, 2007, non-interest expenses
increased by $10.5 million, mainly as a result of higher salaries and employee
benefits, including performance-based compensation, since other costs remained
relatively stable.
    The income tax expense was $6.1 million (22.7% effective tax rate) for the
second quarter of 2007, compared to a $3.6 million income tax recovery (n/a
effective tax rate) for the second quarter of 2006. Income taxes for the
second quarter of 2007 included the favorable effect of the reduced income
taxes on the gain on sale of a portion of the holding in the Montréal Exchange
for $0.7 million, as explained above, and of a $0.9 million favorable
adjustment relative to the repatriation of accumulated foreign retained
earnings from credit insurance operations during fiscal 2006. Excluding the
effect of these favorable adjustments, the income tax expense would have stood
at $7.7 million (28.5% effective tax rate) for the second quarter of 2007. The
lower effective tax rate also resulted from lower taxes on dividend income
generated by the Canadian securities portfolio and on revenues from credit
insurance operations. Results of the second quarter of 2006 included a
$10.7 million net recovery that was attributable mainly to the resolution of
various income tax exposures. Excluding the effect of this favorable
adjustment, the income tax expense would have stood at $7.1 million (33.6%
effective tax rate) in 2006.
    For the six-month period ended April 30, 2007, the income tax expense was
$12.8 million (23.7% effective tax rate), while it stood at $0.7 million (1.7%
effective tax rate) in 2006. The lower tax rate in 2007, compared to the
statutory rate, results from the above items, as well as from a $0.9 million
favorable impact resulting from the adoption of certain amendments to federal
minimum tax on financial institutions during the first quarter. The lower tax
rate in 2006 results from the net income tax recovery discussed above, as well
as from the favorable adjustment to future tax assets of $2.4 million,
resulting from the increase in Quebec income tax rates and the lower taxes on
the gain on sale of Brome Financial Corporation during the first quarter.

    Analysis of financial condition

    Balance sheet assets stood at $17.8 billion at April 30, 2007, compared to
$17.3 billion at October 31, 2006.
    As at April 30, 2007, liquidities, including cash resources, securities
and assets purchased under reverse repurchase agreements, were relatively
stable, compared to levels as at October 31, 2006, as inflows from
securitization and deposits more or less offset loan growth. Strategic
liquidity management has been one of the key reasons for the improvement of
net interest margin in 2007, as the Bank focused on the liquidity portfolio
mix and level. As noted below, the securities are now classified as
Available-for-sale, Held-for-trading or Designated as held-for-trading, as of
November 1, 2006, to conform to the new accounting standards.
    The loans and bankers' acceptances portfolio increased by $435 million to
$12.9 billion at April 30, 2007, compared to $12.4 billion at October 31,
2006. The $280.6 million ($418.7 million considering securitized loans)
increase in the residential mortgage portfolio for the six-month period ended
April 30, 2007, compares favourably to the $174.0 million decline
($357.9 million increase considering securitized loans) for the same period a
year ago. Commercial mortgages increased by $18.4 million for the six-month
period ended April 30, 2007, despite the sale of a $40.3 million loan
portfolio through a CMBS transaction during the second quarter. Personal loans
increased by $147.5 million for the six-month period ended April 30, 2007,
mainly as a result of growth in home equity lines of credit and B2B Trust's
investment loan portfolio. Commercial loans, including bankers' acceptances,
declined by $11.3 million for the six-month period ended April 30, 2007,
mainly in Ontario and Western Canada.
    The overall growth in loan portfolios results from the ongoing efforts and
initiatives of all lines of business, ranging from better execution of
operations to improved business development, as well as prevailing market
conditions. It further demonstrates the ability of the Bank to pursue its
development in various markets and segments where it can compete effectively.
    Total personal deposits grew by $301.5 million for the six-month period
ended April 30, 2007 to $11.3 billion, while business and other deposits
increased by $99.9 million during the same period. Client development
initiatives, as well as the availability of certain short-term deposits
essentially explain the growth. At April 30, 2007, personal deposits accounted
for 83% of total deposits of $13.5 billion. These deposits constitute the
preferred funding source of the Bank because of their lower cost and relative
stability compared to wholesale deposits.
    Shareholders' equity, since the beginning of the year, includes
Accumulated other comprehensive income (AOCI), as a result of the adoption of
the new accounting standards on financial instruments on November 1, 2006, and
stood at $963.3 million as at April 30, 2007, compared to $946.4 million at
October 31, 2006. The adoption of the new accounting standards initially
reduced opening Retained earnings by $3.2 million and opening AOCI by
$18.6 million. These decreases were, however, more than offset by the net
income of the period, net of declared dividends, as well as by the favorable
adjustment to AOCI resulting from the revaluation of the Montréal Exchange
shares held by the Bank, as discussed above. The Bank's book value per common
share, excluding AOCI, was $31.95 as at April 30, 2007, compared to $31.18 as
at October 31, 2006. The consolidated statement of changes in shareholders'
equity and note 1 to the interim consolidated financial statements provide
further details. There were 23,641,687 common shares outstanding as at
April 30, 2007.
    The total capital of the Bank, comprised of shareholders' equity and
debentures, reached $1,113 million at April 30, 2007 compared to
$1,096 million at October 31, 2006. The increase of $17 million results from
the same items as noted above. The BIS Tier 1 and Total capital ratios stood
at 10.1% and 12.3%, respectively, at April 30, 2007, compared to 10.3% and
12.4% at October 31, 2006.
    At its meeting on May 23, 2007, the Board of Directors declared regular
dividends on the various series of preferred shares to shareholders of record
on June 8, 2007. As well, at its meeting on June 1, 2007, the Board of
Directors declared a dividend of $0.29 per common share, payable on August 1,
2007, to shareholders of record on July 3, 2007.
    Assets under administration stood at $15.2 billion at April 30, 2007,
compared to $14.7 billion at October 31, 2006, and $15.0 billion at April 30,
2006. The increase is attributable to the growth in self-directed RRSP
accounts and mutual funds under administration resulting from market
revaluation and business development.

    Adoption of CICA's accounting standards on Financial Instruments -
    Recognition and Measurement, Hedges and Comprehensive Income

    On November 1, 2006, the Bank adopted the new accounting standards on
financial instruments issued by the CICA. The effect of the adoption of these
standards on shareholders' equity as at November 1, 2006 was mainly
attributable to the reclassification of unrealized gains and losses, amounting
to $21.7 million, related to hedging relationships. The effect on net income
for the three-month and six-month periods ended April 30, 2007 was not
significant. The comparative financial statements were not restated, in
accordance with the transitional provisions.
    Note 1 to the interim consolidated financial statements provides
additional information on the new standards and on the effect of their
adoption.
    With regard to the calculation of the Return on common shareholders'
equity ratio, the Bank has considered that Net income was the best measure of
profitability and that Common shareholders' equity, excluding the Accumulated
other comprehensive income, would be used as a measure of capital. The
calculation of the Bank's book value will also be based on Common
shareholders' equity, excluding Accumulated other comprehensive income.

    Segmented information

    Revenues for the second quarter of 2007 improved for all business segments
when compared to the same quarter of 2006, leading to an overall increase in
profitability. The gain on sale on a portion of the Montréal Exchange shares
held by the Bank contributed to the strong performance of Laurentian Bank
Securities during the quarter, while lower loan losses also contributed
positively to the Commercial Financial Services and B2B Trust segments.
Despite a decline in reported net income, results for the Other segment were
excellent for the second quarter of 2007, mainly as a result of the
significant increase in net interest income.
    Compared to the first quarter of 2007, net income for the lines of
business was generally affected by the shorter second quarter.

    Net income contributions

                             Commer-             Lauren-
                   Retail      cial                tian
    (in             Finan-    Finan-               Bank
     millions        cial      cial       B2B      Secu-
     of $)       Services  Services     Trust    rities     Other     Total
    -------------------------------------------------------------------------
                                                                    (note 1)

    Q2-2007
    Net income        6.8       6.0       7.1       5.3      (4.6)     20.7
                       27%       24%       28%       21%      n/a       100%

    Q1-2007
    Net income        9.3       6.4       7.4       1.0      (3.5)     20.6
                       39%       26%       31%        4%      n/a       100%

    Q2-2006
    Net income        7.1       4.6       5.7       1.1       6.1      24.6
                       38%       25%       31%        6%      n/a       100%
    -------------------------------------------------------------------------
    Note 1: Percentage of net income contribution from the four business
            segments, excluding the Other segment.


    Retail Financial Services

    Results for the Retail Financial Services business segment declined
slightly to $6.8 million for the second quarter of 2007, down from
$7.1 million for the second quarter of 2006.
    The $2.5 million increase in net interest income reflects the growth in
loan and deposit portfolios. Other income also rose by $2.3 million, mainly as
a result of the increase in revenues from mutual fund sales, additional fees
on deposits and the Visa credit card activity level. At $6.7 million, loan
losses were higher than for the second quarter of 2006 as a result of
deteriorations in certain personal loan portfolios. The level of losses
remains nonetheless at an acceptable level.
    Non-interest expenses increased to $74.9 million for the second quarter of
2007, compared to $70.2 million for the same quarter of 2006. The increase is
mainly due to the higher salary charge resulting from the expansion in the
retail banking operations combined with regular salary increases. Higher
advertising expenses also contributed to the increase in non-interest
expenses.
    The income tax expense was $1.9 million (22.2% effective tax rate) for the
second quarter of 2007, compared to $3.5 million (33.3% effective tax rate)
for the second quarter of 2006. This improvement results essentially from the
lower taxes on revenues from credit insurance operations.
    Once again this year, the RRSP campaign reached new record heights with
contributions of 2007 exceeding those of 2006 by 4%. New products were added,
with a strong emphasis on helping customers have a better view of their
financial retirement needs.
    One of the outstanding events of the quarter was the third place awarded
to the Laurentian Bank's new website according to a Secor study published in
Commerce magazine in Quebec. The study reviewed the sites of the 500 largest
companies in Quebec. Laurentian Bank's site was completely overhauled over the
past year. It is now much more comprehensive and better reflects the Bank's
new image and dynamism, as well as its approach based on simplicity and
proximity.
    The exclusive banking partnership with the Montreal subway authority was
expanded to include the three new Laval subway stations that opened in May,
bringing to 24 the number of ABMs in the metro. The Bank's presence in the
Montreal subway is part of its value of proximity and accessibility.

    Commercial Financial Services

    Net income improved by more than 30% at $6.0 million in the second quarter
of 2007, compared to $4.6 million for the second quarter of 2006. Total
revenue grew by $1.3 million year over year, mainly as a result of higher loan
volumes and of the $0.4 million gain resulting from the securitization of
commercial mortgages.
    Loan losses in the second quarter of 2007 were $2.2 million, compared to
$3.9 million in the second quarter of 2006. The lower loan losses in 2007
reflects the improvement in the portfolios' quality, which continue to benefit
from the sound Canadian economy.
    The $0.8 million increase in non-interest expenses over the second quarter
of 2006 is mainly due to the greater number of employees and the higher
variable compensation.
    Average loans of the line of business increased by 7% year over year,
mainly as a result of the strong performance of the Real Estate Financing
group, which grew its portfolio by 17% over the period.

    B2B Trust

    In the B2B Trust business segment, net income improved by 24% to
$7.1 million in the second quarter of 2007, up from $5.7 million in the second
quarter of 2006. Growth of $237 million in average loan volumes and of
$190 million in average deposit volumes directly contributed to the increase
in net interest income, which more than offset the lower revenues from
registered self-directed plans.
    For the second quarter of 2007, loan losses, essentially in a line of
credit portfolio, totalled $1.0 million, significantly better than for the
same period a year ago, when they stood at $1.4 million. Non-interest expenses
remained relatively stable at $10.8 million for the second quarter of 2007,
compared to $11.2 million for the second quarter of 2006.
    Investments loans distributed by B2B Trust also generated excellent
results, with an increase of $254 millions, or 19%, since April 2006. At the
end of the quarter, the business line launched an offensive, offering a
promotional rate on investment loans under $50,000. This promotion was aimed
at allowing clients to take advantage of investment opportunities in the
post-RRSP season.

    Laurentian Bank Securities

    The Laurentian Bank Securities business improved its contribution to net
income to $5.3 million in the second quarter of 2007, up from $1.1 million in
the second quarter of 2006. This strong performance is mainly due to the
$4.4 million ($3.7 million net of income taxes) gain on sale on a portion of
the Montréal Exchange shares held by the Bank. Excluding this transaction, the
contribution from Laurentian Bank Securities nevertheless rose by
$0.5 million, or 45%, mainly as a result of the performance of the
institutional brokerage division.
    Non-interest expenses increased to $8.0 million in the second quarter of
2007, up from $7.0 million in the same quarter of 2006. This increase is
mainly due to the hiring of several employees over the past 12 months.
    Laurentian Bank Securities is growing at a sustained pace. Assets under
administration increased by 9% over the last 12 months. While the
institutional segment continues to improve, the retail brokerage activities
are gradually reaping the benefits of significant investments made to enlarge
the team and open new offices.

    Other sector

    The Other sector reported a negative contribution of $4.6 million for the
second quarter of 2007, compared to a positive contribution of $6.1 million
for the second quarter of 2006. Excluding unusual transactions described
above, the Other sector performance shows an improvement:

    - Net interest income increased by $4.9 million to -$4.1 million for the
      second quarter of 2007, up from -$9.0 million in 2006, mainly as a
      result of the continuous efforts to improve liquidity and asset-
      liability management.

    - Other revenues, at $1.7 million for the second quarter of 2007,
      included losses amounting to $4.3 million from the fixed income
      securities portfolio. Excluding these losses, other revenues would have
      been $6.0 million and compare favorably to the revenues of $5.2 million
      for 2006.

    - In 2006, there was a net tax favorable adjustment of $10.7 million
      resulting from the reduction of certain tax exposures.

    Additional financial information - Quarterly results

                       2007                            2006            2005
    in millions
     of dollars,
     except per
     share
     amounts
    (unaudited)  Q2      Q1      Q4      Q3      Q2      Q1      Q4      Q3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total
     revenue $145.7  $141.6  $137.1  $138.0  $131.0  $133.7  $135.9  $133.0
    Income
     from
     conti-
     nuing
     opera-
     tions     20.7    20.6    18.1     6.2    24.6    16.7    17.4    15.2
    Net
     income    20.7    20.6    22.6     6.2    24.6    17.0    21.6    15.8
    Income
     per
     common
     share
     from
     conti-
     nuing
     opera-
     tions
      Basic    0.75    0.74    0.65    0.13    0.92    0.58    0.61    0.52
      Diluted  0.75    0.74    0.65    0.13    0.91    0.58    0.61    0.52
    Net
     income
     per
     common
     share
      Basic    0.75    0.74    0.84    0.13    0.92    0.59    0.79    0.54
      Diluted  0.75    0.74    0.84    0.13    0.91    0.59    0.79    0.54
    Return on
     common
     share-
     holders'
     equity     9.7%    9.4%   10.8%    1.7%   12.5%    7.9%   10.6%    7.4%
    Balance
     sheet
     assets  17,809  17,177  17,296  17,062  17,307  16,742  16,507  16,125
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Dividends - new taxation regime

    Effective January 1, 2006, the Federal Government implemented a new
dividend tax regime for dividends paid by Canadian corporations to their
shareholders. The result of these changes is that the top federal personal
income tax rate on eligible dividends received by individuals (investors)
decreased by 5% in 2006. Some provinces have replicated the new federal
regulations governing such dividends.
    Eligible dividends generally include dividends paid after 2005 by Canadian
corporations out of income subject to the general corporate income tax rate.
For 2006, all common and preferred share dividends paid by Laurentian Bank of
Canada are considered eligible dividends. For 2007, the designation of
dividends as eligible or non-eligible will be done at the declaration date of
each dividend. All dividends declared on May 23 and June 1, 2007 are eligible
dividends for income tax purposes.
    Please contact a tax advisor for help or for further information on this
subject.

    About Laurentian Bank

    Laurentian Bank of Canada, is a Quebec banking institution operating
across Canada and is dedicated to meeting its clients' financial needs through
excellence in service, as well as through its simplicity and proximity. The
Bank serves individual consumers and small and medium-sized businesses, as
well as financial advisors through B2B Trust. It also provides full-service
brokerage solutions through its Laurentian Bank Securities subsidiary.
    Laurentian Bank is well established in the Province of Quebec, operating
the third largest retail branch network and is also a performing player in
specific market segments elsewhere in the country. Laurentian Bank of Canada
has over $17 billion in balance sheet assets and $15 billion in assets under
administration. Founded in 1846, the Bank employs more than 3,300 people. Its
common shares are listed on the Toronto Stock Exchange (TSX: LB). For more
information, please visit www.laurentianbank.ca.

    Corporate governance

    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 Senior Executive Vice-President and Chief Financial Officer to ensure
that Laurentian Bank's interim consolidated financial statements are fairly
presented.

    Caution regarding forward-looking statements

    The Bank may from time to time, in this press release, in other documents
filed with Canadian regulatory authorities or in other communications, make
forward-looking statements within the meaning of applicable securities
legislation, whether written or oral, including statements regarding the
Bank's business plan and financial objectives. These statements typically use
the conditional, as well as words such as "prospects", "believe", "estimate",
"forecast", "project", "should", "could" and "would", etc.
    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 realized or will be proved inaccurate.
    The Bank cautions readers against placing undue reliance on
forward-looking statements when making decisions, since the actual results
could differ appreciably from the opinions, plans, objectives, expectations,
forecasts, estimates and intentions expressed in such forward-looking
statements due to various material factors. These factors include, among other
things, 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 cautions that the foregoing list of factors is not exhaustive.
    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.

    Conference call

    Laurentian Bank invites media representatives and the public to listen to
the financial analysts conference call to be held Friday June 1, 2007 at
2 p.m. Eastern Time. The live, listen only, toll free call-in number is
1-866-898-9626.
    You may listen to a playback of the call at any time from 6:00 p.m. Friday
June 1, 2007 until midnight June 22, 2007, by dialling the following number:
1-800-408-3053 Code 3221256 #.
    The conference call can also be heard through the Investors' Relations
section of the Laurentian Bank website at www.laurentianbank.ca.

    The website also offers additional financial information.


    FINANCIAL
    HIGHLIGHTS

    IN MILLIONS
     OF DOLLARS,
     UNLESS                                     FOR THE SIX-MONTH
     OTHERWISE                                      PERIODS ENDED
     INDICATED                                 APRIL 30  APRIL 30
     (UNAUDITED)    Q2-07     Q2-06 VARIATION      2007      2006 VARIATION
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings
    Net income    $  20.7   $  24.6       (16)% $  41.2   $  41.6        (1)%
    Income from
     continuing
     operations   $  20.7   $  24.6       (16)% $  41.2   $  41.3         - %
    Net income
     available
     to common
     share-
     holders      $  17.7   $  21.6       (18)% $  35.2   $  35.6        (1)%
    Return on
     common
     share-
     holders'
     equity          9.7%     12.5%                 9.6%     10.1%
    Per common
     share
    Diluted net
     income       $  0.75   $  0.91       (18)% $  1.49   $  1.51        (1)%
    Diluted
     income
     from
     continuing
     operations   $  0.75   $  0.91       (18)% $  1.49   $  1.49         - %
    Dividends     $  0.29   $  0.29         - % $  0.58   $  0.58         - %
    Book value                                  $ 31.95   $ 30.78         4 %
    Share price
     - close                                    $ 32.24   $ 32.58        (1)%
    Financial
     position
    Balance
     sheet
     assets                                     $17,809   $17,307         3 %
    Assets
     under
     adminis-
     tration                                    $15,206   $14,954         2 %
    Loans,
     bankers'
     acceptances
     and assets
     purchased
     under reverse
     repurchase
     agreements,
     net                                        $13,766   $12,896         7 %
    Personal
     deposits                                   $11,251   $10,892         3 %
    Shareholders'
     equity and
     debentures                                 $ 1,113   $ 1,237       (10)%
    Number of
     common
     shares
     (in
     thousands)                                  23,642    23,613         - %
    Net impaired
     loans as
     a % of
     loans,
     bankers'
     acceptances
     and assets
     purchased
     under reverse
     repurchase
     agreements                                    (0.1)%       - %
    Risk-weighted
     assets                                     $ 8,991   $ 8,612         4 %
    Capital
     ratios
    Tier I BIS                                     10.1 %    10.3 %
    Total BIS
     capital                                       12.3 %    13.9 %
    Assets to
     capital
     multiple                                      16.2 x    14.6 x
    Tangible
     common
     equity
     as a
     percentage
     of
     risk-
     weighted
     assets                                         7.6 %     7.6 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    FINANCIAL RATIOS
    Per common
     share
    Price /
     earnings
     ratio
     (trailing
     four
     quarters)                                     13.1 x    11.5 x
    Market to
     book value                                     101 %     106 %
    Dividend
     yield           3.60 %    3.56 %              3.60 %    3.56 %
    Dividend
     payout
     ratio           38.8 %    31.6 %              38.9 %    38.4 %
    As a
     percentage
     of average
     assets
    Net
     interest
     income          2.34 %    2.11 %              2.31 %    2.11 %
    Provision
     for credit
     losses          0.25 %    0.25 %              0.24 %    0.24 %
    Net income       0.51 %    0.61 %              0.50 %    0.50 %
    Net income
     available
     to common
     share-
     holders         0.43 %    0.53 %              0.43 %    0.43 %
    Profitability
    Other income
     (as a % of
     total
     revenue)        34.4 %    34.6 %              33.6 %    34.4 %
    Efficiency
     ratio
     (non-interest
     expenses
     as a % of
     total revenue)  74.8 %    76.3 %              74.2 %    76.6 %

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    OTHER INFORMATION
    Number of
     full-time
     equivalent
     employees                                    3,300     3,230
    Number of
     branches                                       158       157
    Number of
     automated
     banking
     machines                                       337       318
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED
    BALANCE SHEET

    IN THOUSANDS OF DOLLARS            APRIL 30    OCTOBER 31      APRIL 30
     (UNAUDITED)            NOTES          2007(1)       2006          2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    ASSETS
    Cash resources
      Cash and non-
       interest-bearing
       deposits with
       other banks                 $     66,511  $     70,907  $     52,174
      Interest-
       bearing deposits
       with other banks                 218,185        98,722       344,347
                                   ------------------------------------------
                                        284,696       169,629       396,521
                                   ------------------------------------------

    Securities
      Available-for-
       sale account                   1,300,429             -             -
      Account held-
       for-trading                    1,124,736     1,675,058     1,657,575
      Account designated
       as held-for-
       trading                          489,210             -             -
      Investment
       account                                -     1,567,222     1,547,834
                                   ------------------------------------------
                                      2,914,375     3,242,280     3,205,409
                                   ------------------------------------------
    Assets purchased
     under reverse
     repurchase
     agreements                       1,011,208       802,546     1,050,507
                                   ------------------------------------------
    Loans                 3 and 4
      Personal                        4,315,553     4,168,026     4,099,860
      Residential
       mortgages                      6,266,251     5,985,656     5,632,871
      Commercial
       mortgages                        677,383       659,014       598,505
      Commercial
       and other                      1,453,814     1,476,977     1,530,424
                                   ------------------------------------------
                                     12,713,001    12,289,673    11,861,660
    Allowance for
     loan losses                       (120,311)     (125,153)     (127,913)
                                   ------------------------------------------
                                     12,592,690    12,164,520    11,733,747
                                   ------------------------------------------
    Other
      Customers'
       liabilities
       under
       acceptances                      161,676       149,818       111,778
      Property,
       plant and
       equipment                        119,248       111,291        98,414
      Derivative
       financial
       instruments                       53,724        96,980       148,080
      Future tax assets         8       100,812       101,048       114,069
      Goodwill                           53,790        53,790        53,790
      Other intangible
       assets                            14,724        15,333        15,942
      Other assets                      502,343       388,724       378,865
                                   ------------------------------------------
                                      1,006,317       916,984       920,938
                                   ------------------------------------------
                                   $ 17,809,286  $ 17,295,959  $ 17,307,122
                                   ------------------------------------------
                                   ------------------------------------------
    LIABILITIES AND
     SHAREHOLDERS' EQUITY
    Deposits
      Personal                     $ 11,250,950  $ 10,949,473  $ 10,891,554
      Business, banks
       and other                      2,244,945     2,145,028     2,216,302
                                   ------------------------------------------
                                     13,495,895    13,094,501    13,107,856
                                   ------------------------------------------
    Other
      Obligations related to
       assets sold short                907,998     1,077,009     1,267,123
      Obligations related to
       assets sold under
       repurchase agreements          1,307,172     1,100,385       753,129
      Acceptances                       161,676       149,818       111,778
      Derivative financial
       instruments                       67,571        81,807       141,652
      Other liabilities                 755,699       696,019       688,828
                                   ------------------------------------------
                                      3,200,116     3,105,038     2,962,510
                                   ------------------------------------------
    Subordinated debentures             150,000       150,000       300,000
                                   ------------------------------------------
    Shareholders' equity
      Preferred shares          5       210,000       210,000       210,000
      Common shares             5       251,667       251,158       250,948
      Contributed surplus                    45           518           295
      Retained earnings                 503,674       485,334       476,103
      Treasury shares           5             -          (590)         (590)
      Accumulated other
       comprehensive
       income (loss)            1        (2,111)            -             -
                                   ------------------------------------------
                                        963,275       946,420       936,756
                                   ------------------------------------------
                                   $ 17,809,286  $ 17,295,959  $ 17,307,122
                                   ------------------------------------------
                                   ------------------------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Changes to accounting policies related to financial instruments.
        Refer to note 1.

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


    CONSOLIDATED STATEMENT
    OF INCOME

    IN THOUSANDS OF
     DOLLARS,
     EXCEPT PER SHARE             FOR THE THREE-MONTH     FOR THE SIX-MONTH
     AMOUNTS                            PERIODS ENDED         PERIODS ENDED
     (UNAUDITED)       APRIL 30 JANUARY 31   APRIL 30   APRIL 30   APRIL 30
               NOTES       2007       2007       2006(1)    2007     2006(1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest
     income
      Loans           $ 198,582  $ 201,690  $ 180,062  $ 400,272  $ 360,369
      Securi-
       ties              15,468     16,142     16,802     31,610     33,520
      Deposits
       with
       other
       banks              3,347      1,885      3,893      5,232      5,593
                      -------------------------------------------------------
                        217,397    219,717    200,757    437,114    399,482
                      -------------------------------------------------------
    Interest
     expense
      Deposits
       and
       other
       liabili-
       ties             120,004    122,569    110,352    242,573    218,157
      Subordi-
       nated
       deben-
       tures              1,887      1,951      4,721      3,838      7,692
                      -------------------------------------------------------
                        121,891    124,520    115,073    246,411    225,849
                      -------------------------------------------------------
    Net interest
     income              95,506     95,197     85,684    190,703    173,633
    Provision
     for credit
     losses        3     10,000     10,000     10,000     20,000     20,000
                      -------------------------------------------------------
                         85,506     85,197     75,684    170,703    153,633
                      -------------------------------------------------------
    Other income
      Fees and
       commi-
       ssions on
       loans and
       deposits          21,607     21,570     20,212     43,177     41,256
      Brokerage
       operations         9,693      8,548      8,280     18,241     15,502
      Income from
       treasury
       and
       financial
       market
       operations         4,274      4,584      2,889      8,858      5,936
      Credit
       insurance
       income             3,030      3,582      3,249      6,612      6,225
      Income from
       sales of
       mutual
       funds              3,318      3,074      2,636      6,392      5,009
      Income from
       registered
       self-
       directed
       plans              2,572      2,359      2,893      4,931      5,650
      Securiti-
       zation
       income             3,215        560      3,554      3,775      6,692
      Gain on
       disposal               -          -          -          -        931
      Other               2,456      2,117      1,587      4,573      3,889
                      -------------------------------------------------------
                         50,165     46,394     45,300     96,559     91,090
                      -------------------------------------------------------
                        135,671    131,591    120,984    267,262    244,723
                      -------------------------------------------------------
    Non-interest
     expenses
      Salaries and
       employee
       benefits          58,120     56,266     50,374    114,386    104,653
      Premises and
       technology        28,568     26,756     27,250     55,324     54,060
      Other              22,263     21,307     22,365     43,570     44,039
                      -------------------------------------------------------
                        108,951    104,329     99,989    213,280    202,752
                      -------------------------------------------------------
    Income from
     continuing
     operations
     before
     income
     taxes               26,720     27,262     20,995     53,982     41,971
    Income
     taxes
     (recovered)   8      6,067      6,706     (3,610)    12,773        707
                      -------------------------------------------------------
    Income from
     continuing
     operations          20,653     20,556     24,605     41,209     41,264
    Income from
     discon-
     tinued
     operations,
     net of
     income
     taxes         2          -          -         30          -        354
                      -------------------------------------------------------
    Net income        $  20,653  $  20,556  $  24,635  $  41,209  $  41,618
                      -------------------------------------------------------
                      -------------------------------------------------------
    Preferred
     share
     dividends,
     including
     applicable
     income taxes         2,990      2,990      2,987      5,980      5,969
                      -------------------------------------------------------
    Net income
     available
     to common
     shareholders     $  17,663  $  17,566  $  21,648  $  35,229  $  35,649
                      -------------------------------------------------------
                      -------------------------------------------------------
    Average
     number
     of common
     shares
     outstanding
     (in thousands)
      Basic              23,638     23,627     23,612     23,633     23,596
      Diluted            23,685     23,656     23,673     23,670     23,656
                      -------------------------------------------------------
    Income per
     common share
     from
     continuing
     operations
      Basic           $    0.75  $    0.74  $    0.92  $    1.49  $    1.50
      Diluted         $    0.75  $    0.74  $    0.91  $    1.49  $    1.49
                      -------------------------------------------------------
    Net income
     per common
     share
      Basic           $    0.75  $    0.74  $    0.92   $   1.49  $    1.51
      Diluted         $    0.75  $    0.74  $    0.91   $   1.49  $    1.51
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Comparatives were reclassified as a result of recognition on a gross
        basis of income related to brokerage activities. Refer to Note 1.

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


    CONSOLIDATED STATEMENT
    OF COMPREHENSIVE INCOME

                                                      FOR THE       FOR THE
                                                  THREE-MONTH     SIX-MONTH
                                                      PERIODS        PERIOD
                                                        ENDED         ENDED
     IN THOUSANDS OF DOLLARS           APRIL 30    JANUARY 31      APRIL 30
     (UNAUDITED)            NOTES          2007          2007          2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income                     $     20,653  $     20,556  $     41,209

    Other comprehensive
     income (loss),
     net of income taxes        1
      Change in unrealized
       gains (losses) on
       available-for-sale
       securities                        19,719          (427)       19,292
      Reclassification to
       income of realized
       gains and losses on
       available-for-sale
       securities                        (1,701)           247       (1,454)
      Change in gains
       (losses) on
       derivatives
       designated as cash
        flow hedges                      (1,039)         (358)       (1,397)
                                   ------------------------------------------
                                         16,979          (538)       16,441
                                   ------------------------------------------
    Comprehensive income           $     37,632  $     20,018  $     57,650
                                   ------------------------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT OF CHANGES
    IN SHAREHOLDERS' EQUITY

                                                          FOR THE SIX-MONTH
                                                              PERIODS ENDED
                                                        APRIL 30   APRIL 30
    IN THOUSANDS OF DOLLARS (UNAUDITED)       NOTES         2007       2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Preferred shares
      Balance at beginning and end of period          $  210,000  $ 210,000
                                                      -----------------------
    Common shares                                 5
      Balance at beginning of period                     251,158    249,633
      Issued during the period                               509      1,315
                                                      -----------------------
      Balance at end of period                           251,667    250,948
                                                      -----------------------
    Contributed surplus
      Balance at beginning of period                         518         73
      Stock-based compensation                    6         (473)       222
                                                      -----------------------
      Balance at end of period                                45        295
                                                      -----------------------
    Retained earnings
      Previous balance at beginning of period            485,334    454,124
      Impact of adopting the new accounting
       policy regarding financial instruments,
        net of income taxes                       1       (3,185)         -
                                                      -----------------------
      Restated balance at beginning of period            482,149    454,124
      Net income                                          41,209     41,618
      Dividends
        Preferred shares, including
         applicable income taxes                          (5,980)    (5,969)
        Common shares                                    (13,704)   (13,670)
                                                      -----------------------
        Balance at end of period                         503,674    476,103
                                                      -----------------------
    Treasury shares
      Balance at beginning of period                        (590)      (590)
      Attribution of shares                       6          590          -
                                                      -----------------------
      Balance at end of period                                 -       (590)
                                                      -----------------------
    Accumulated other comprehensive
     income (loss)                                1
      Balance at beginning of period                           -          -
      Impact of adopting the new
       accounting policy regarding
       financial instruments,
       net of income taxes                               (18,552)         -
      Other comprehensive income (loss),
       net of income taxes                                16,441          -
                                                      -----------------------
      Balance at end of period                            (2,111)         -
                                                      -----------------------
    Shareholders' equity                              $  963,275  $ 936,756
                                                      -----------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT
    OF CASH FLOWS

                                  FOR THE THREE-MONTH     FOR THE SIX-MONTH
    IN THOUSANDS OF                           PERIODS               PERIODS
    DOLLARS (UNAUDITED)                         ENDED                 ENDED
                       APRIL 30 JANUARY 31   APRIL 30   APRIL 30   APRIL 30
               NOTES       2007       2007       2006       2007       2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flows
     relating
     to opera-
     ting
     activities
      Net income      $  20,653  $  20,556  $  24,635  $  41,209  $  41,618
    Adjustments
     to determine
     net cash
     flows
     relating to
     operating
     activities:
      Provision
       for credit
       losses            10,000     10,000     10,000     20,000     20,000
      Gains on
       securitiza-
       tion
       operations  4     (2,625)         -     (2,664)    (2,625)    (4,910)
      Net loss
       (gain) on
       disposal
       of property,
       plant and
       equipment           (277)      (103)        28       (380)        26
      Net gain
       from
       disconti-
       nued
       operations  2          -          -        (46)         -       (533)
      Gain on
       disposal               -          -          -          -       (931)
      Net loss
       (gain) on
       sale of
       held-for-
       trading
       securities         4,386     (1,304)    (1,470)     3,082      1,646
      Future income
       taxes              4,353      5,687     (7,311)    10,040     (7,614)
      Depreciation
       and amorti-
       zation             7,119      6,874      6,654     13,993     13,461
      Net change
       in held-for-
       trading
       securities       457,788   (257,353)  (280,162)   200,435   (575,456)
      Change in
       accrued
       interest
       receivable        (7,849)    11,067     (4,283)     3,218      6,871
      Change in
       assets
       relating to
       derivative
       financial
       instruments       24,306     18,950     (9,253)    43,256     (4,627)
      Change in
       accrued
       interest
       payable          (19,109)    14,151        470     (4,958)     6,982
      Change in
       liabilities
       relating to
       derivative
       financial
       instruments      (18,778)     4,542     23,261    (14,236)    36,326
      Other, net        (46,991)   (30,093)    23,811    (77,084)    83,431
                      -------------------------------------------------------
                        432,976   (197,026)  (216,330)   235,950   (383,710)
                      -------------------------------------------------------
    Cash flows
     relating to
     financing
     activities
      Net change
      in deposits       327,785     73,609   (192,609)   401,394   (589,082)
      Change in
       obligations
       related to
       assets sold
       short           (450,416)   281,405    313,243   (169,011)   541,060
      Change in
       obligations
       related to
       assets sold
       under
       repurchase
       agreements       717,605   (510,818)   480,057    206,787    693,064
      Issuance of
       subordinated
       debentures             -          -          -          -    150,000
      Issuance of
       common
       shares               237        272        425        509      1,315
      Dividends,
       including
       applicable
       income taxes      (9,846)    (9,838)    (9,822)   (19,684)   (19,639)
                      -------------------------------------------------------
                        585,365   (165,370)   591,294    419,995    776,718
                      -------------------------------------------------------
    Cash flows
     relating to
     investing
     activities
      Change in
       available-
       for-sale
       and
       designated
       as held-for-
       trading
       securities
        Acquisi-
         tions       (2,703,298)(1,735,019)         - (4,438,317)         -
        Proceeds
         from
         sales        2,317,896  2,258,763          -  4,576,659          -
      Change in
       investment
       securities
        Acquisi-
         tions                -          - (3,371,757)         - (8,017,202)
        Proceeds
         from
         sales
         and
         maturity             -          -  3,437,335          -  8,326,009
      Change in
       loans           (424,793)  (202,911)  (386,887)  (627,704)  (583,900)
      Change in
       assets
       purchased
       under
       reverse
       repurchase
       agreements      (424,241)   215,579   (375,934)  (208,662)  (542,434)
      Proceeds
       from
       mortgage
       loan
       securiti-
       zations          177,857          -    297,614    177,857    520,809
      Additions
       to property,
       plant and
       equipment        (9,059)    (12,876)    (9,114)   (21,935)   (17,562)
      Proceeds
       from
       disposal
       of property,
       plant and
       equipment            401        823          5      1,224        405
      Net change in
       interest-
       bearing
       deposits
       with other
       banks             34,067   (153,530)    22,610   (119,463)   (84,556)
      Net cash
       flows from
       the sale of
       a subsidiary           -          -          -          -       (140)
                      -------------------------------------------------------
                     (1,031,170)   370,829   (386,128)  (660,341)  (398,571)
                      -------------------------------------------------------
    Net change in
     cash and
     non-interest-
     bearing
     deposits with
     other banks
     during the
     period             (12,829)     8,433    (11,164)    (4,396)    (5,563)
    Cash and non-
     interest-
     bearing
     deposits
     with other
     banks at
     beginning
     of period           79,340     70,907     63,338     70,907     57,737
                      -------------------------------------------------------
    Cash and non-
     interest-
     bearing
     deposits
     with other
     banks at
     end of
     period           $  66,511  $  79,340  $  52,174  $  66,511  $  52,174
                      -------------------------------------------------------
                      -------------------------------------------------------
    Supplemental
     disclosure
     relating to
     cash flows:
      Interest
       paid
       during
       the period     $ 152,193  $ 107,120  $ 116,890  $ 259,313  $ 221,677
      Income
       taxes
       paid during
       the period     $   1,094  $   8,096  $   5,428  $   9,190  $  13,331
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)

    1. ACCOUNTING POLICIES

    The unaudited interim consolidated financial statements of Laurentian 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. The
significant accounting policies used in the preparation of these interim
consolidated financial statements, except for changes to accounting policies
stated below, are the same as those in the Bank's annual consolidated audited
financial statements as at October 31, 2006. 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 annual consolidated audited
financial statements as at October 31, 2006. These interim consolidated
financial statements reflect amounts, which are based on the best estimates
and judgement of management. Actual results may differ from these estimates.
Certain comparative figures have been reclassified to conform to the current
period presentation.

    Changes to accounting policies

    Income related to brokerage activities

    Other income for 2006 was adjusted to reflect the presentation on a gross
basis of brokerage operations, which previously were presented net of
commissions and other expenses. The impact of the reclassification is as
follows:

                                                         FOR THE    FOR THE
                                                     THREE-MONTH  SIX-MONTH
                                                          PERIOD     PERIOD
                                                           ENDED      ENDED
                                                        APRIL 30   APRIL 30
    IN THOUSANDS OF DOLLARS                                 2006       2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjustments for 2006
      Other income - Brokerage operations               $  2,468   $  4,701

      Non-interest expenses - Salaries and employee
       benefits                                         $  2,114   $  4,051
      Non-interest expenses - Premises and technology   $    354   $    650
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Financial instruments

    On April 1, 2005, the CICA issued the accounting standards: Financial
Instruments - Recognition and Measurement, Financial Instruments - Disclosure
and Presentation, Hedges and Comprehensive Income. The Bank prospectively
adopted these standards on November 1, 2006. As a result, the financial
statements presented for comparison purposes have not been restated, in
accordance with the applicable transitional provisions. The accounting
consequences of these new standards on the financial statements of the Bank
are presented below.

    Section 3855, Financial Instruments - Recognition and Measurement

    Under Section 3855, Financial Instruments - Recognition and Measurement,
all financial assets and liabilities are initially carried at fair value with
the Bank using the settlement date for recognizing transactions in the
consolidated balance sheet. Subsequently, they are re-evaluated at fair value,
except for loans and receivables, investments held-to-maturity and non-trading
liabilities, which are recognized at amortized cost using the effective
interest method of amortization. Realized and unrealized gains and losses on
trading assets and liabilities are recognized immediately in the consolidated
statement of income under income from treasury and financial market
operations. Unrealized gains and losses on financial assets that are
available- for-sale are recognized in other comprehensive income until their
realization, after which these amounts will be recognized in the consolidated
statement of income. Interest income earned, amortization of premiums and
discounts as well as dividends received are included in interest income.
Interest income related to loans is accounted for using the accrual basis of
accounting. Commissions received and origination fees in respect of loans,
including restructuring and renegotiation charges, are generally recorded in
interest income over the term of the loans. Loan origination and other fees
paid are charged to interest income over the terms of the loans. The fees
received for mortgage prepayments are included in interest income upon
prepayment. Transaction costs, origination cost and other fees are expensed as
incurred for financial instruments classified or designated as
held-for-trading. Transactions cost, origination cost and other fees related
to acquisition of available-for-sale financial instruments or other financial
liabilities are added to the acquisition costs of the instruments.
    All derivative financial instruments are carried at fair value in the
consolidated balance sheet, including those derivatives that are embedded in
other contracts but are not considered to be closely related to the host
contract.
    Derivative financial instruments used to manage the Bank's interest rate
risk are accounted for using the accrual method. Under this method, interest
income or expense on these derivative instruments is accrued and included in
interest expense in the consolidated statement of income. When these
derivative financial instruments do not meet the requirements for hedge
accounting, as discussed below, the resulting realized and unrealized gains
and losses are recognized immediately in income from treasury and financial
market operations.
    When the derivative financial instruments are used in connection with
trading activities or to serve the needs of customers, the resulting realized
and unrealized gains and losses are also recognized in income from treasury
and financial market operations.
    The fair value of a financial instrument on initial recognition is
normally the transaction price, i.e. the fair value of the consideration given
or received. In certain circumstances, the initial fair value may be based on
other observable current market transactions in the same instrument or on a
valuation technique whose variables include only data from observable markets.
    Subsequent to initial recognition, the fair values of financial
instruments that are quoted in active markets are generally based on bid
prices for financial assets held and offer prices for financial liabilities.
When independent prices are not available, fair values are determined by using
valuation techniques which incorporate current market price and, as
appropriate, contractual prices of the underlying instruments, yield curves
and volatility factors.
    Fair values of derivatives financial instruments are generally determined
by using valuation techniques which incorporate certain observable and non-
observable data, such as, notably, current market prices and contractual
prices of the underlying instruments, yield curves and volatility factors.
    Section 3855 also permits an entity to voluntarily designate a financial
instrument as held-for-trading. The Bank elected this fair value measurement
option:

    - Where the voluntary designation allows the Bank to eliminate or
      significantly reduce a measurement or recognition inconsistency that
      would have otherwise resulted from the fact that the assets or
      liabilities are measured differently, or that gains and losses on these
      items are recognized differently; and
    - Where it is possible to reliably determine the fair value of the
      financial instruments designated as held-for-trading. Instruments that
      are classified as held-for-trading by way of this "fair value option"
      are subject to certain conditions and additional requirements set out
      by OSFI.

    Section 3865, Hedges

    When it uses derivative financial instruments to manage its own exposures,
the Bank determines for each derivative financial instrument whether hedge
accounting is appropriate. When appropriate, the Bank formally documents the
hedging relationship detailing, among other things, the type of hedge (either
fair value or cash flow), the item being hedged, the risk management
objective, the hedging strategy and the method to be used to measure its
effectiveness. The derivative financial instrument must be highly effective in
accomplishing the objective of offsetting the changes in the hedged item's
fair value attributable to the risk being hedged both at inception and over
the life of the hedge. Effectiveness is generally reviewed on a monthly basis
using statistical regression models.

    Fair value hedge

    Fair value hedge transactions predominantly use interest rate swaps to
hedge the changes in the fair value of an asset, liability or firm commitment.
    Effective derivative financial instruments, held for fair value hedging
purposes, are recognized at fair value and the changes in fair value are
recognized in the consolidated statement of income under income from treasury
and financial market operations. Changes in fair value of the hedged items
attributable to the hedged risk are also recognized in the consolidated
statement of income under income from treasury and financial market
operations, with a corresponding adjustment to the carrying amount of the
hedged items in the consolidated balance sheet. When the derivative instrument
no longer qualifies as an effective hedge or the hedging instrument is sold or
terminated prior to maturity, hedge accounting is discontinued prospectively.
The cumulative adjustment of the carrying amount of the hedged item related to
a hedging relationship that ceases to be effective is recognized in net
interest income in the periods during which the hedged item affects income.
Furthermore, if the hedged item is sold or terminated prior to maturity, hedge
accounting is discontinued, and the cumulative adjustment of the carrying
amount of the hedged item is then immediately recognized in other income.

    Cash flow hedge

    Cash flow hedge transactions predominantly use interest rate swaps to
hedge the variability in cash flows related to a variable rate asset or
liability.
    Effective derivative financial instruments, held for cash flow hedging
purposes, are recognized at fair value and the changes in fair value related
to the effective portion of the hedge are recognized in other comprehensive
income. Changes in fair value related to the ineffective portion of the hedge
are immediately recorded in the consolidated statement of income. Changes in
fair value recognized in other comprehensive income are reclassified in the
consolidated statement of income under net interest income in the periods
during which the cash flows constituting the hedged item affect income. When
the derivative instrument no longer qualifies as an effective hedge, or when
the hedging instrument is sold or terminated prior to maturity, hedge
accounting is discontinued prospectively. Changes in fair value recognized in
other comprehensive income related to a cash flow hedging relationship that
ceases to be effective are reclassified in the consolidated statement of
income under net interest income in the periods during which the cash flows
constituting the hedged item affect income. Furthermore, if the hedged item is
sold or terminated prior to maturity, hedge accounting is discontinued, and
the related changes in fair value recognized in other comprehensive income are
then immediately reclassified in the consolidated statement of income under
other income.

    Other considerations

    The derivative financial instruments for which the Bank has ceased
applying hedge accounting remain eligible for designation in future hedging
relationships. Upon redesignation, any previously recognized fair value in the
consolidated balance sheet is amortized to other income over the remaining
life of the derivative financial instrument.

    Section 1530, Comprehensive Income

    Section 1530, Comprehensive Income, requires the presentation of a new
consolidated statement of comprehensive income and the accumulated other
comprehensive income, separately under shareholders' equity in the
consolidated balance sheet. The consolidated statement of comprehensive income
presents net income, as well as other comprehensive income items: the
unrealized gains and losses on the financial instruments classified as
available-for-sale, the effective portion of the changes in value of the
derivative instruments designated as cash flow hedging instruments and the
balance to be reclassified in the consolidated statement of income from
terminated cash flow hedges.

    IMPACT OF ADOPTING SECTIONS 3855, 3865 AND 1530

    The adoption of Sections 3855, 3865 and 1530 had an impact on certain
items of the Bank's consolidated balance sheet:

    a) The reclassification of investment portfolio securities in new
       financial asset classes, i.e. securities available-for-sale,
       securities designated as held-for-trading and securities held-to-
       maturity, with adjustments to the opening balances of retained
       earnings and accumulated other comprehensive income;
    b) The reclassification of the balances in the consolidated balance sheet
       to reflect the new accounting standards regarding hedge accounting,
       with adjustments to the opening balances of retained earnings and
       accumulated other comprehensive income.

    These items are detailed below.


    Reconciliation of opening retained earnings balance
    IN THOUSANDS OF DOLLARS
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Opening retained earnings balance as reported
     as at October 31, 2006, before adoption of
     Sections 3855, 3865 and 1530                                 $ 485,334

    Adjustments, net of income taxes:
      Securities designated as held-for-trading                       1,061
      Hedging relationships for which hedge accounting is
       no longer appropriate and other items                         (4,246)
                                                                  -----------
    Total adjustments                                                (3,185)
                                                                  -----------
    Balance of retained earnings as at November 1, 2006,
        after adoption of Sections 3855, 3865 and 1530            $ 482,149
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Reconciliation of opening of accumulated other comprehensive income
    IN THOUSANDS OF DOLLARS
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Balance of accumulated other comprehensive income
     as reported as at October 31, 2006, before adoption
     of Sections 3855, 3865 and 1530                              $       -

    Adjustments, net of income taxes:
      Securities available-for-sale                                  (2,620)
      Hedge accounting                                              (15,932)
                                                                  -----------
    Total adjustments                                             $ (18,552)
                                                                  -----------
    Balance of accumulated other comprehensive income
     as at November 1, 2006, after adoption of
     Sections 3855, 3865 and 1530                                 $ (18,552)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (a) Securities

    The securities in the investment account have been reclassified in the
following new financial asset classes:

    Securities available-for-sale - The remeasurement reflecting the
unrealized gains and losses on these securities gave rise to a charge to
accumulated other comprehensive income of $3,906,000 ($2,620,000, net of
income taxes).
    Securities designated as financial instruments held-for-trading - The
remeasurement reflecting the unrealized gains and losses on these securities
gave rise to an increase to the opening balance of retained earnings of
$1,581,000 ($1,061,000, net of income taxes).
    No investment account security was reclassified among the securities held-
to-maturity, or transferred into the account of securities held-for-trading.
    The following tables summarizes the reclassifications in the investment
portfolio subsequent to the adoption of Section 3855.


       Consolidated balance sheet
       amounts before adoption of        Consolidated balance sheet amounts
        section 3855, as reported            after adoption of section 3855
           as at October 31, 2006                    as at November 1, 2006
    ----------------------------- -------------------------------------------
    ----------------------------- -------------------------------------------
                                     ACCOUNT OF    ACCOUNT OF         TOTAL
                                    INVESTMENTS   INVESTMENTS    SECURITIES
                                     DESIGNATED    DESIGNATED         OTHER
                                        AS HELD-    AVAILABLE-    THAN HELD
    IN THOUSANDS       INVESTMENT   FOR-TRADING      FOR-SALE FOR TRADING(1)
     OF DOLLARS           ACCOUNT            (A)           (B)         (A+B)
    -------------------------------------------------------------------------
    Securities issued
     or guaranteed by
     the Government
     of Canada        $ 1,277,679   $    13,796   $ 1,260,467   $ 1,274,263
      Provinces             2,674             -         2,672         2,672
    Other debt
     securities           196,312       165,720        30,818       196,538
    Preferred shares       56,556             -        56,678        56,678
    Common and other
     shares                34,001             -        35,049        35,049
                      -------------------------------------------------------
                      $ 1,567,222   $   179,516   $ 1,385,684   $ 1,565,200
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) These amounts now include unrealized gains and losses previously
        unrecognized as at October 31, 2006 in the investment account.

    Trading account securities have been reclassified into the held-for-
trading account, without any effect on opening amounts in the consolidated
balance sheet.

    (b) Hedge accounting

    Fair value hedging

    Unrealized gains and losses on fair value hedges are included in the
opening balance of retained earnings. Prior changes in the fair value of
hedged items attributable to the hedged risk have also been recognized in the
opening balance of retained earnings, with a corresponding adjustment to the
carrying amount of the hedged items in the consolidated balance sheet. These
adjustments did not have any effect on the opening balance of retained
earnings as they offset one another on November 1, 2006.

    Cash flow hedging

    The adoption of Section 3865 gave rise to an adjustment to accumulated
other comprehensive income in the amount of $-23,750,000 ($-15,932,000, net of
income taxes), representing the unrealized loss on interest rate swaps
designated as cash flow hedging instruments of $14,075,000 ($9,442,000, net of
income taxes) and to deferred losses of $9,675,000 ($6,490,000, net of income
taxes) related to previously terminated hedging relationships, which are
amortized.

    Termination of hedging relationships involving hedging instruments other
    than derivatives and accumulated ineffectiveness in hedging relationships

    In accordance with Section 3865, fair value hedges of securities financial
instruments other than derivative financial instruments no longer qualify.
Moreover, the accumulated ineffectiveness of hedging relationships must be
measured, and the ineffective portion of changes in fair value must be
recognized in the consolidated statement of income. The foregoing led to a
charge of $6,337,000 ($4,246,000, net of income taxes) to the opening balance
of retained earnings, as a result of the adoption of Section 3865.

    SUPPLEMENTAL INFORMATION

    Ineffectiveness related to hedging relationships

    During the quarter ended April 30, 2007, the ineffective portion of
accumulated changes in the fair value of hedging instruments recognized in the
income statement amounted to $-92,000 as it relates to cash flow hedging
relationships and $-22,000 as it relates to fair value hedging relationships.

    Breakdown of swap contracts designated as hedging instruments, by
    category

    The following table presents the Bank's swap contracts between those
designated as cash flow hedging instruments and those designated as fair value
hedging instruments.
    The swap contracts designated as hedging instruments are used by the Bank
primarily for balance sheet matching purposes and to mitigate net interest
revenue volatility. The fair value of such swap contracts may vary
considerably. Accordingly, changes in the fair value of the swap contracts
designated as cash flow hedging instruments could result in significant
changes in accumulated other comprehensive income, in shareholders' equity.


                                       APRIL 30                  NOVEMBER 1
                                           2007                        2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS          NOMINAL    FAIR VALUE       NOMINAL    FAIR VALUE
     OF DOLLARS            AMOUNT    NET AMOUNT        AMOUNT    NET AMOUNT
    -------------------------------------------------------------------------
    Contracts
     designated
     as hedging
     instruments
      Interest rate
       swap contracts
        Swaps used
         for cash
         flow
         hedging      $ 3,096,000    $  (12,549)  $ 3,822,000    $  (13,830)
        Swaps used
         for fair
         value
         hedging        1,890,000        (2,964)      130,000           220
                      -------------------------------------------------------
                      $ 4,986,000    $  (15,513)  $ 3,952,000    $  (13,610)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other information on hedging relationships

    Of the amount of net deferred losses included in accumulated other
comprehensive income as at April 30, 2007, the Bank expects to transfer
$4,846,000 into net income over the next twelve months.
    The maximum term of cash flow hedging relationships of anticipated
transactions was five years as at April 30, 2007.

    Financial instruments designated as held-for-trading

    For the three-month period ended April 30, 2007, a gain of $176,000 (a
loss of $1,248,000 for the six-month period ended April 30, 2007) was
recognized in trading income for financial instruments designated as
held-for-trading under the fair value option.
    The Bank designated certain deposits for a nominal amount of $58,060,000
as held-for-trading. The difference between the amount the Bank would be
contractually required to pay at maturity to the holder of the deposits and
the carrying amount of $57,573,000, is $487,000.


    Other comprehensive income

                            FOR THE THREE-MONTH PERIOD ENDED APRIL 30, 2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                     AMOUNT
                                        AMOUNTS                      NET OF
                                  BEFORE INCOME        INCOME        INCOME
    IN THOUSANDS OF DOLLARS               TAXES         TAXES         TAXES
    -------------------------------------------------------------------------
    Unrealized gains and losses
     on available-for-sale
     securities
      Unrealized gains and
       losses during the period    $     23,976  $     (4,257) $     19,719
      Less : reclassification
       to income of realized
       gains losses during the
       period                            (1,430)         (271)       (1,701)
                                  -------------------------------------------
    Unrealized gains and losses
     on available-for-sale
     securities                          22,546        (4,528)       18,018

    Gains and losses on
     derivatives designated as
     cash flow hedges                    (1,565)          526        (1,039)
                                  -------------------------------------------
    Other comprehensive income     $     20,981  $     (4,002) $     16,979
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                              FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                     AMOUNT
                                        AMOUNTS                      NET OF
                                  BEFORE INCOME        INCOME        INCOME
    IN THOUSANDS OF DOLLARS               TAXES         TAXES         TAXES
    -------------------------------------------------------------------------
    Unrealized gains and losses
     on available-for-sale
     securities
      Unrealized gains and
       losses during the period    $     23,334  $     (4,042) $     19,292
      Less : reclassification to
       income of realized gains
       losses during the period          (1,063)         (391)       (1,454)
                                  -------------------------------------------
    Unrealized gains and losses
     on available-for-sale
     securities                          22,271        (4,433)       17,838

    Gains and losses on
     derivatives designated as
     cash flow hedges                    (2,138)          741        (1,397)
                                  -------------------------------------------
    Other comprehensive income     $     20,133  $     (3,692) $     16,441
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Accumulated other comprehensive income

                                                       AS AT APRIL 30, 2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                       LOSSES   ACCUMULATED
                                           CASH  ON AVAILABLE-        OTHER
                                           FLOW      FOR-SALE COMPREHENSIVE
    IN THOUSANDS OF DOLLARS             HEDGING    SECURITIES        INCOME
    -------------------------------------------------------------------------
    Balance at beginning of
     period                        $          -  $          -  $          -
    Impact of adopting the new
     accounting policy, net of
     income taxes                       (15,932)       (2,620)      (18,552)
    Change during the three-
     month period ended
     January 31, 2007                      (358)         (180)         (538)
    Change during the three-
     month period ended
     April 30, 2007                       (1,039)      18,018        16,979
                                  -------------------------------------------
    Balance at end of period       $     (17,329)  $   15,218     $  (2,111)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    2. DISPOSALS

    2005

    Sale of the joint-venture BLC-Edmond de Rothschild Asset Management Inc.

    On December 31, 2004, the Bank completed the sale of the BLC-Edmond de
Rothschild Asset Management Inc. joint-venture (BLCER) to Industrial Alliance
Insurance and Financial Services Inc. (Industrial Alliance).
    During the first quarter ended January 31, 2006, the Bank recognized a
gain of $187,000 ($124,000 net of income taxes) with regards to the recovery
clause related to institutional funds under management. As well, in relation
with the sale of BLCER, it was agreed that investments in seed capital owned
by the Bank at the time of the transaction would be disposed of. During the
first quarter ended January 31, 2006, the Bank completed the sale of these
investments and recorded revenues of $300,000 ($200,000 net of income taxes)
to reflect the realized net gains. These gains were entirely attributed to the
Other segment.
    During the fourth quarter ended October 31, 2006, the Bank recognized the
sale proceeds of $5,183,000 ($4,422,000 net of income taxes) related to net
annual sales threshold of mutual funds. This gain was attributed to the Retail
Financial Services segment.

    Income per common share from discontinued operations

                                  FOR THE THREE-MONTH     FOR THE SIX-MONTH
                                        PERIODS ENDED         PERIODS ENDED
                       APRIL 30 JANUARY 31   APRIL 30   APRIL 30   APRIL 30
    IN DOLLARS             2007       2007       2006       2007       2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic             $       -  $       -  $       -  $       -  $    0.01
    Diluted           $       -  $       -  $       -  $       -  $    0.02
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    3. LOANS

    LOANS AND IMPAIRED LOANS

                                                       AS AT APRIL 30, 2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                     GROSS
                          GROSS  AMOUNT OF   SPECIFIC    GENERAL      TOTAL
    IN THOUSANDS         AMOUNT   IMPAIRED    ALLOWAN-   ALLOWAN-   ALLOWAN-
     OF DOLLARS        OF LOANS      LOANS        CES        CES        CES
    -------------------------------------------------------------------------

    Personal
     loans         $  4,315,553  $  17,896  $   6,739  $  26,443  $  33,182
    Residential
     mortgages        6,266,251     15,678      1,449      4,534      5,983
    Commercial
     mortgages          677,383      6,532      2,645      3,907      6,552
    Commercial and
     other loans      1,453,814     73,175     44,228     30,366     74,594
                  -----------------------------------------------------------
                   $ 12,713,001  $ 113,281  $  55,061  $  65,250  $ 120,311
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                     AS AT OCTOBER 31, 2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                     GROSS
                          GROSS  AMOUNT OF   SPECIFIC    GENERAL      TOTAL
    IN THOUSANDS         AMOUNT   IMPAIRED    ALLOWAN-   ALLOWAN-   ALLOWAN-
     OF DOLLARS        OF LOANS      LOANS        CES        CES        CES
    -------------------------------------------------------------------------

    Personal
     loans         $  4,168,026  $  16,100  $   5,659  $  26,436  $  32,095
    Residential
     mortgages        5,985,656     16,501      3,479      4,771      8,250
    Commercial
     mortgages          659,014      8,393      3,472      2,471      5,943
    Commercial and
     other loans      1,476,977     89,603     47,293     26,900     74,193
    Unallocated
     general
     allowance                -          -          -      4,672      4,672
                  -----------------------------------------------------------
                   $ 12,289,673  $ 130,597  $  59,903  $  65,250  $ 125,153
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                       AS AT APRIL 30, 2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                     GROSS
                          GROSS  AMOUNT OF   SPECIFIC    GENERAL      TOTAL
    IN THOUSANDS         AMOUNT   IMPAIRED    ALLOWAN-   ALLOWAN-   ALLOWAN-
     OF DOLLARS        OF LOANS      LOANS        CES        CES        CES
    -------------------------------------------------------------------------

    Personal
     loans         $  4,099,860  $  16,645  $   5,762  $  24,413  $  30,175
    Residential
     mortgages        5,632,871     10,322      3,703      4,627      8,330
    Commercial
     mortgages          598,505     12,118      5,561      3,548      9,109
    Commercial and
     other loans      1,530,424     84,423     47,637     28,712     76,349
    Unallocated
     general
     allowance                -          -          -      3,950      3,950
                  -----------------------------------------------------------
                   $ 11,861,660  $ 123,508  $  62,663  $  65,250  $ 127,913
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SPECIFIC ALLOWANCES FOR LOAN LOSSES

                                   FOR THE SIX-MONTH PERIODS ENDED APRIL 30
                                                             2007      2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                 COMMER-
                            RESIDEN-   COMMER-     CIAL     TOTAL     TOTAL
                    PERSO-     TIAL      CIAL       AND  SPECIFIC  SPECIFIC
    IN THOUSANDS      NAL    MORTGA-   MORTGA-    OTHER   ALLOWAN-  ALLOWAN-
     OF DOLLARS     LOANS       GES       GES     LOANS       CES       CES
    -------------------------------------------------------------------------

    Balance at
     beginning
     of period   $  5,659  $  3,479  $  3,472  $ 47,293  $ 59,903  $ 64,556
    Provision
     for credit
     losses
     recorded
     in the
     consoli-
     dated
     statement
     of income     14,413       286       195     5,106    20,000    20,000
    Write-offs    (15,456)   (2,332)   (1,024)   (8,264)  (27,076)  (23,424)
    Recoveries      2,123        16         2        93     2,234     1,942
    Provision
     for credit
     losses
     resulting
     from the
     sale of a
     subsidiary         -          -        -         -         -      (411)
                -------------------------------------------------------------
    Balance at
     end of
     period      $  6,739  $  1,449  $  2,645  $ 44,228  $ 55,061  $ 62,663
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    GENERAL ALLOWANCES FOR LOAN LOSSES

                                   FOR THE SIX-MONTH PERIODS ENDED APRIL 30
                                                                       2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                 COMMER-   UNALLO-
                            RESIDEN-   COMMER-     CIAL     CATED     TOTAL
                    PERSO-     TIAL      CIAL       AND   GENERAL   GENERAL
    IN THOUSANDS      NAL    MORTGA-   MORTGA-    OTHER   ALLOWAN-  ALLOWAN-
     OF DOLLARS     LOANS       GES       GES     LOANS        CE       CES
    -------------------------------------------------------------------------

    Balance at
     beginning
     of period   $ 26,436  $  4,771  $  2,471  $ 26,900  $  4,672  $ 65,250
    Change
     during the
     period             7      (237)    1,436     3,466    (4,672)        -
                -------------------------------------------------------------
    Balance at
     end of
     period      $ 26,443  $  4,534  $  3,907  $ 30,366  $      -  $ 65,250
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                   FOR THE SIX-MONTH PERIODS ENDED APRIL 30
                                                                       2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                                      TOTAL
                                                                    GENERAL
    IN THOUSANDS                                                    ALLOWAN-
     OF DOLLARS                                                         CES
    -------------------------------------------------------------------------

    Balance at
     beginning
     of period                                                     $ 65,250
    Change
     during the
     period                                                               -
                -------------------------------------------------------------
    Balance at
     end of
     period                                                        $ 65,250
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    4. LOAN SECURITIZATION

    The Bank securitizes residential mortgage loans insured by the Canadian
Mortgage and Housing Corporation, as well as conventional mortgages. The gains
before income taxes, net of transaction related costs, are recognized in other
income.
    During the quarter, the Bank also securitized commercial mortgages for
$40,338,000 (nil for the quarter ended on April 30, 2006), generating a
$424,000 gain. The Bank has not retained any right or obligation with respect
to the commercial mortgages.
    The following table summarizes the securitization transactions carried out
by the Bank:


                          FOR THE THREE-MONTH PERIODS     FOR THE SIX-MONTH
                                                ENDED         PERIODS ENDED
    IN THOUSANDS       APRIL 30 JANUARY 31   APRIL 30   APRIL 30   APRIL 30
     OF DOLLARS            2007       2007       2006       2007       2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash proceeds,
     net of
     transaction
     related
     costs         $    136,777  $       -  $ 297,614  $ 137,777  $ 520,809
    Rights to
     future excess
     interest             4,730          -      5,018      4,730     11,519
    Servicing
     liabilities         (1,091)         -     (1,964)    (1,091)    (3,668)
    Cash reserve
     accounts             1,076          -      9,215      1,076     10,953
    Other                (1,157)         -       (390)    (1,157)    (2,774)
                  -----------------------------------------------------------
                        140,335          -    309,493    140,335    536,839
    Residential
     loans
     securitized
     and sold           138,134          -    306,829    138,134    531,929
                  -----------------------------------------------------------
    Gains before
     income taxes,
     net of
     transaction
     related
     costs         $      2,201  $       -  $   2,664  $   2,201  $   4,910
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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 for transactions carried out during the quarter are
summarized as follows:


                                                                   APRIL 30
                                                                       2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Rate of prepayment                                                 22.0%
    Discount rate                                                      4.65%
    Rate of credit losses                                              0.05%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    No loss is expected on insured residential mortgages.

    The total principal amount of securitized loans outstanding amounted to
$1,052,147,000 as at April 30, 2007 ($1,079,026,000 as at October 31, 2006).


    5. CAPITAL STOCK

    Issuance of common shares

    During the quarter, 8,740 common shares (21,251 common shares during the
six-month period ended April 30, 2007) were issued under the employee share
purchase option plan for the management of the Bank for a cash consideration
of $24,000 ($51,000 during the six-month period ended April 30, 2007).


    ISSUED AND
     OUTSTANDING           AS AT APRIL 30, 2007      AS AT OCTOBER 31, 2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF
     DOLLARS, EXCEPT       NUMBER                      NUMBER
     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      23,641,687  $    251,667    23,620,436  $    251,158
                     --------------------------------------------------------
                     --------------------------------------------------------
    Treasury shares             -  $          -       (20,000) $       (590)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The preferred shares are convertible into common shares. However, the
        number of shares issuable on conversion is not determinable until the
        date of conversion.


    6. STOCK-BASED COMPENSATION

    Restricted Share Unit Program

    Under the Restricted Share Unit Program, annual bonuses for certain
employees amounting to $612,000 were converted into 19,978 entirely vested
restricted share units during the first quarter of 2007. The Bank also granted
11,987 additional restricted share units which will vest in December 2009.

    Stock option purchase plan

    During the first quarter of 2007, the Bank awarded 50,000 stock options
with an exercise price of $29.47, at a fair value of $4.55 per stock option. A
$29,000 charge to salaries and employee benefits was recorded for the second
quarter of 2007 ($45,000 for the six-month period ended April 30, 2007) with
regards to this grant.
    The fair value of these options was estimated, on the award date, using
the Black-Scholes valuation model, with the following assumptions:


                                    FOR THE SIX-MONTH PERIOD ENDED APRIL 30
                                                                       2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Risk-free interest rate                                            4.10%
    Expected options life                                           7 years
    Expected volatility                                               19.60%
    Expected dividend yield                                            4.00%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Information on outstanding number of options is as follows:


                                                           AS AT      AS AT
                                                           APRIL    OCTOBER
                                                        30, 2007   31, 2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                          NUMBER     NUMBER
    -------------------------------------------------------------------------

    Share purchase options
      Outstanding at end of period                       339,153    339,604
      Exercisable at end of period                       289,153    339,604
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Performance-based share agreement

    In accordance with the performance-based share agreement, all rights to
the 20,000 common shares granted in 2005 vested in January 2007, as objectives
were met. Consequently, the shares were issued to the employee. A
$72,000 charge to salaries and employee benefits was recorded for the first
quarter of 2007 with regards to this grant.


    7. EMPLOYEE FUTURE BENEFITS

                          FOR THE THREE-MONTH PERIODS     FOR THE SIX-MONTH
                                                ENDED         PERIODS ENDED
    IN THOUSANDS       APRIL 30 JANUARY 31   APRIL 30   APRIL 30   APRIL 30
     OF DOLLARS            2007       2007       2006       2007       2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Defined
     benefit
     pension plans
     expense       $      4,022  $   4,337  $   4,542  $   8,359  $   9,235
    Defined
     contribution
     pension plan
     expense                735        695        645      1,430      1,223
    Other plans
     expense                780        807        610      1,587      1,240
                  -----------------------------------------------------------
    Total          $      5,537  $   5,839  $   5,797  $  11,376  $  11,698
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    8. INCOME TAXES

    For the quarter ended April 30, 2007, the effective tax rate was 22.7%.
This lower tax rate, compared to the statutory tax rate of approximately 33%,
results in part from lower income taxes on capital gains for $710,000 and from
a $848,000 favorable adjustment relative to last year's repatriation of
accumulated foreign retained earnings from credit insurance operations. The
investments in Canadian securities that generate tax-exempt dividend income,
as well as the decision not to recognize income taxes on revenues from credit
insurance operations have also enable to reduce the effective tax rate for the
quarter.
    For the six-month period ended April 30, 2007, the effective tax rate was
23.7%. The lower tax rate in 2007 resulted from the items discussed above
during the second quarter, as well as from a $900,000 adjustment which was
recorded during the first quarter to reflect the increase in value of the
future tax assets following the adoption, in December 2006, of Federal fiscal
measures which provided for raising the threshold of the federal minimum tax
on financial institutions to $1 billion.
    For the quarter ended April 30, 2006, the Bank recorded a $3,610,000
income tax recovery, including the effect of the following items: an
$11,327,000 recovery related to the resolution of various income tax
exposures, the recognition of $2,730,000 of previously unrecognized temporary
differences related to the minimum tax on financial institutions and a
$3,385,000 charge on the decision to repatriate capital from foreign credit
insurance operations.
    For the six-month period ended April 30, 2006, the income tax expense was
$707,000 (1.7% effective tax rate). The lower tax rate in 2006 resulted from
the income tax recovery discussed above during the second quarter, as well as
the favorable adjustment to future tax assets of $2,398,000, resulting from
the increase in Quebec income tax rates and the lower taxes on the gain on
sale of Brome Financial Corporation during the first quarter.


    9. WEIGHTED AVERAGE NUMBER OF OUTSTANDING COMMON SHARES


                        FOR THE THREE-MONTH PERIODS       FOR THE SIX-MONTH
                                              ENDED           PERIODS ENDED
                   APRIL 30  JANUARY 31    APRIL 30    APRIL 30    APRIL 30
                       2007        2007        2006        2007        2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average
     number of
     outstanding
     common
     shares      23,638,152  23,627,126  23,611,631  23,632,548  23,595,611
    Dilutive and
     other share
     purchase
     options         47,076      28,788      60,820      37,780      60,456
                -------------------------------------------------------------
    Weighted
     average
     number of
     outstanding
     common
     shares      23,685,228  23,655,914  23,672,451  23,670,328  23,656,067
                -------------------------------------------------------------
    Average
     number of
     share
     purchase
     options not
     taken into
     account
     in the
     calculation
     of diluted
     net income
     per common
     share(1)             -      89,467           -      45,475           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The average number of share purchase options was not taken into
        account in the calculation of diluted net income per common share
        since the average exercise price of these options exceeded the
        average market price of the Bank's share during these periods.


    10. SEGMENTED INFORMATION

                                           FOR THE THREE-MONTH PERIOD ENDED
                                                             APRIL 30, 2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF DOLLARS                 RFS           CFS           B2B
    -------------------------------------------------------------------------

    Net interest income            $     64,633  $     15,003  $     19,551
    Other income(1)                      25,689         5,553         2,998
                                   ------------------------------------------
    Total revenue                        90,322        20,556        22,549
    Provision for credit losses           6,721         2,241         1,038
    Non-interest expenses                74,852         9,225        10,764
                                   ------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes                  8,749         9,090        10,747
    Income taxes
     (recovered)                          1,944         3,045         3,623
                                   ------------------------------------------
    Income (loss) from
     continuing operations                6,805         6,045         7,124
    Income from discontinued
     operations, net of
     income taxes                             -             -             -
                                   ------------------------------------------
    Net income                     $      6,805  $      6,045  $      7,124
                                   ------------------------------------------
                                   ------------------------------------------

    Average assets(2)              $  8,575,446  $  2,413,619  $  2,934,231
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                           FOR THE THREE-MONTH PERIOD ENDED
                                                             APRIL 30, 2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF DOLLARS               LBS(3)        OTHER         TOTAL
    -------------------------------------------------------------------------

    Net interest income            $        376  $     (4,057) $     95,506
    Other income(1)                      14,214         1,711        50,165
                                   ------------------------------------------
    Total revenue                        14,590        (2,346)      145,671
    Provision for credit losses               -             -        10,000
    Non-interest expenses                 7,956         6,154       108,951
                                   ------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes                  6,634        (8,500)       26,720
    Income taxes
     (recovered)                          1,341        (3,886)        6,067
                                   ------------------------------------------
    Income (loss) from
     continuing operations                5,293        (4,614)       20,653
    Income from discontinued
     operations, net of
     income taxes                             -             -             -
                                   ------------------------------------------
    Net income                     $      5,293  $     (4,614) $     20,653
                                   ------------------------------------------
                                   ------------------------------------------

    Average assets(2)              $  1,498,057  $  1,312,860  $ 16,734,213
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                           FOR THE THREE-MONTH PERIOD ENDED
                                                           JANUARY 31, 2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF DOLLARS                 RFS           CFS           B2B
    -------------------------------------------------------------------------

    Net interest income            $     65,726  $     15,426  $     19,756
    Other income                         25,358         5,843         2,794
                                   ------------------------------------------
    Total revenue                        91,084        21,269        22,550
    Provision for credit losses           6,296         2,689         1,015
    Non-interest expenses                72,666         8,973        10,413
                                   ------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes                 12,122         9,607        11,122
    Income taxes
     (recovered)                          2,838         3,218         3,770
                                   ------------------------------------------
    Income (loss) from
     continuing operations                9,284         6,389         7,352
    Income from discontinued
     operations, net of
     income taxes                             -             -             -
                                   ------------------------------------------
    Net income                     $      9,284  $      6,389  $      7,352
                                   ------------------------------------------
                                   ------------------------------------------

    Average assets(2)              $  8,509,322  $  2,342,979  $  2,834,793
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                           FOR THE THREE-MONTH PERIOD ENDED
                                                           JANUARY 31, 2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF DOLLARS               LBS(3)        OTHER         TOTAL
    -------------------------------------------------------------------------

    Net interest income            $        293  $     (6,004) $     95,197
    Other income                          8,712         3,687        46,394
                                   ------------------------------------------
    Total revenue                         9,005        (2,317)      141,591
    Provision for credit losses               -             -        10,000
    Non-interest expenses                 7,639         4,638       104,329
                                   ------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes                  1,366        (6,955)       27,262
    Income taxes
     (recovered)                            379        (3,499)        6,706
                                   ------------------------------------------
    Income (loss) from
     continuing operations                  987        (3,456)       20,556
    Income from discontinued
     operations, net of
     income taxes                             -             -             -
                                   ------------------------------------------
    Net income                     $        987  $     (3,456) $     20,556
                                   ------------------------------------------
                                   ------------------------------------------

    Average assets(2)              $  1,639,013  $  1,283,532  $ 16,609,639
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                           FOR THE THREE-MONTH PERIOD ENDED
                                                             APRIL 30, 2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF DOLLARS                 RFS           CFS           B2B
    -------------------------------------------------------------------------

    Net interest income            $     62,175  $     14,287  $     17,932
    Other income                         23,392         4,933         3,372
                                   ------------------------------------------
    Total revenue                        85,567        19,220        21,304
    Provision for credit losses           4,691         3,864         1,445
    Non-interest expenses                70,237         8,443        11,159
                                   ------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes                 10,639         6,913         8,700
    Income taxes
     (recovered)                          3,540         2,316         2,953
                                   ------------------------------------------
    Income from continuing
     operations                           7,099         4,597         5,747
    Income from discontinued
     operations, net of income
     taxes                                    -             -             -
                                   ------------------------------------------
    Net income                     $      7,099  $      4,597  $      5,747
                                   ------------------------------------------
                                   ------------------------------------------

    Average assets(2)              $  8,109,524  $  2,223,534  $  2,700,361
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                           FOR THE THREE-MONTH PERIOD ENDED
                                                             APRIL 30, 2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF DOLLARS               LBS(3)        OTHER         TOTAL
    -------------------------------------------------------------------------

    Net interest income            $        279  $     (8,989) $     85,684
    Other income                          8,377         5,226        45,300
                                   ------------------------------------------
    Total revenue                         8,656        (3,763)      130,984
    Provision for credit losses               -             -        10,000
    Non-interest expenses                 7,032         3,118        99,989
                                   ------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes                  1,624        (6,881)       20,995
    Income taxes
     (recovered)                            507       (12,926)       (3,610)
                                   ------------------------------------------
    Income from continuing
     operations                           1,117         6,045        24,605
    Income from discontinued
     operations, net of income
     taxes                                    -            30            30
                                   ------------------------------------------
    Net income                     $      1,117  $      6,075  $     24,635
                                   ------------------------------------------
                                   ------------------------------------------

    Average assets(2)              $  1,505,251  $  2,136,266  $ 16,674,936
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                             FOR THE SIX-MONTH PERIOD ENDED
                                                             APRIL 30, 2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF DOLLARS                 RFS           CFS           B2B
    -------------------------------------------------------------------------

    Net interest income            $    130,359  $     30,429  $     39,307
    Other income(1)                      51,047        11,396         5,792
                                   ------------------------------------------
    Total revenue                       181,406        41,825        45,099
    Provision for credit losses          13,017         4,930         2,053
    Non-interest expenses               147,518        18,198        21,177
                                   ------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes                 20,871        18,697        21,869
    Income taxes
     (recovered)                          4,782         6,263         7,393
                                   ------------------------------------------
    Income (loss) from
     continuing operations               16,089        12,434        14,476
    Income from discontinued
     operations, net of
     income taxes                             -             -             -
                                   ------------------------------------------
    Net income                     $     16,089  $     12,434  $     14,476
                                   ------------------------------------------
                                   ------------------------------------------

    Average assets(2)              $  8,541,836  $  2,377,714  $  2,883,688
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                             FOR THE SIX-MONTH PERIOD ENDED
                                                             APRIL 30, 2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF DOLLARS               LBS(3)        OTHER         TOTAL
    -------------------------------------------------------------------------

    Net interest income            $        669  $    (10,061) $    190,703
    Other income(1)                      22,926         5,398        96,559
                                   ------------------------------------------
    Total revenue                        23,595        (4,663)      287,262
    Provision for credit losses               -             -        20,000
    Non-interest expenses                15,595        10,792       213,280
                                   ------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes                  8,000       (15,455)       53,982
    Income taxes
     (recovered)                          1,720        (7,385)       12,773
                                   ------------------------------------------
    Income (loss) from
     continuing operations                6,280        (8,070)       41,209
    Income from discontinued
     operations, net of
     income taxes                             -             -             -
                                   ------------------------------------------
    Net income                     $      6,280  $     (8,070) $     41,209
                                   ------------------------------------------
                                   ------------------------------------------

    Average assets(2)              $  1,569,703  $  1,297,953  $ 16,670,894
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                             FOR THE SIX-MONTH PERIOD ENDED
                                                             APRIL 30, 2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF DOLLARS                 RFS           CFS           B2B
    -------------------------------------------------------------------------

    Net interest income            $    126,790  $     29,345  $     35,571
    Other income                         46,141        11,736         6,619
                                   ------------------------------------------
    Total revenue                       172,931        41,081        42,190
    Provision for credit losses          10,303         6,675         3,022
    Non-interest expenses               142,249        19,015        22,188
                                   ------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes                 20,379        15,391        16,980
    Income taxes
     (recovered)                          6,799         5,154         5,762
                                   ------------------------------------------
    Income from continuing
     operations                          13,580        10,237        11,218
    Income from discontinued
     operations, net of
     income taxes                             -             -             -
                                   ------------------------------------------
    Net income                     $     13,580  $     10,237  $     11,218
                                   ------------------------------------------
                                   ------------------------------------------

    Average assets(2)              $  8,065,827  $  2,239,258  $  2,641,543
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                             FOR THE SIX-MONTH PERIOD ENDED
                                                             APRIL 30, 2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF DOLLARS           LBS(3),(4)        OTHER         TOTAL
    -------------------------------------------------------------------------

    Net interest income            $        583  $    (18,656) $    173,633
    Other income                         15,653        10,941        91,090
                                   ------------------------------------------
    Total revenue                        16,236        (7,715)      264,723
    Provision for credit losses               -             -        20,000
    Non-interest expenses                13,584         5,716       202,752
                                   ------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes                  2,652       (13,431)       41,971
    Income taxes
     (recovered)                            853       (17,861)          707
                                   ------------------------------------------
    Income from continuing
     operations                           1,799         4,430        41,264
    Income from discontinued
     operations, net of
     income taxes                             -           354           354
                                   ------------------------------------------
    Net income                     $      1,799  $      4,784  $     41,618
                                   ------------------------------------------
                                   ------------------------------------------

    Average assets(2)              $  1,481,133  $  2,198,185  $ 16,625,946
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    RFS -     The Retail Financial Services 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 and insurance
              products as well as trust services.
    CFS -     The Commercial Financial Services segment handles commercial
              loans and larger financings as part of banking syndicates, as
              well as commercial mortgage financing, leasing, factoring and
              other services.
    B2B -     The B2B Trust business segment supplies generic and
              complementary banking and financial products to financial
              advisors and non-bank financial institutions across Canada.This
              business segment also consists of deposit brokerage operations.
    LBS -     LBS segment consists of the activities of the subsidiary
              Laurentian Bank Securities Inc.
    Other -   The category "Other" 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)       During the second quarter of 2007, the initial public offering
              of the Montreal Stock Exchange triggered a $21.7 million
              ($18.2 million net of income taxes) revaluation of the shares
              held by the Bank through other comprehensive income. A portion
              of the holding was subsequently sold and a $4.4 million
              ($3.7 million net of income taxes) gain was reclassified to
              other income in the LBS segment. Also during the second
              quarter, $4.3 million loss on sale of securities was incurred
              and reported in the Other segment.
    (2)       Assets are disclosed on an average basis as this measure is
              most relevant to a financial institution.
    (3)       Results for LBS were reclassified for 2006 to present revenues
              gross of certain commissions and other costs which were
              previously netted against revenues.
    (4)       Results for the first quarter of 2006 included a $0.05 million
              contribution to net income from Brome Financial Corporation
              Inc. for the two months prior to the sale of the subsidiary and
              the $0.93 million gain from this sale.


    OTHER INCOME

    IN THOUSANDS OF DOLLARS                                            2007
    (UNAUDITED)                Q4            Q3            Q2            Q1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Fees and
     commissions
     on loans and
     deposits
      Deposit
       service
       charges       $          -  $          -  $     12,599  $     12,291
      Lending fees              -             -         5,663         5,882
      Card service
       revenues                 -             -         3,345         3,397
                     --------------------------------------------------------
    Sub-total - fees
     and commissions
     on loans and
     deposits                   -             -        21,607        21,570
                     --------------------------------------------------------
    Other
      Brokerage
       operations               -             -         9,693         8,548
      Income from
       treasury and
       financial market
       operations               -             -         4,274         4,584
      Credit insurance
       income                   -             -         3,030         3,582
      Income from sales
       of mutual funds          -             -         3,318         3,074
      Income from
       registered
       self-directed
       plans                    -             -         2,572         2,359
      Securitization
       income                   -             -         3,215           560
      Other                     -             -         2,456         2,117
                     --------------------------------------------------------
    Sub-total - other           -             -        28,558        24,824
                     --------------------------------------------------------

    Total - other
     income          $          -  $          -  $     50,165  $     46,394
                     --------------------------------------------------------
                     --------------------------------------------------------

    As a % of average
     assets                     -%            -%         1.23%         1.11%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    IN THOUSANDS OF DOLLARS                                            2006
    (UNAUDITED)                Q4            Q3            Q2            Q1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Fees and
     commissions on
     loans and
     deposits
      Deposit
       service
       charges       $     12,055  $     12,096  $     11,926  $     11,836
      Lending fees          5,865         6,414         5,303         6,096
      Card service
       revenues             3,342         3,587         2,983         3,112
                     --------------------------------------------------------
    Sub-total - fees
     and commissions
     on loans and
     deposits              21,262        22,097        20,212        21,044
                     --------------------------------------------------------
    Other
      Brokerage
       operations           8,896         7,020         8,280         7,222
      Income from
       treasury and
       financial
       market
       operations           4,168         5,102         2,889         3,047
      Credit
       insurance
       income               3,222         3,131         3,249         2,976
      Income from sales
       of mutual funds      2,911         2,717         2,636         2,373
      Income from
       registered
       self-directed
       plans                2,325         2,540         2,893         2,757
      Securitization
       income               1,035         2,245         3,554         3,138
      Gain on disposal          -             -             -           931
      Other                 1,158         1,681         1,587         2,302
                     --------------------------------------------------------
    Sub-total - other      23,715        24,436        25,088        24,746
                     --------------------------------------------------------

    Total - other
     income          $     44,977  $     46,533  $     45,300  $     45,790
                     --------------------------------------------------------
                     --------------------------------------------------------

    As a % of average
     assets                  1.07%         1.10%         1.11%         1.10%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    NON - INTEREST EXPENSES

    IN THOUSANDS OF DOLLARS                                            2007
    (UNAUDITED)                Q4            Q3            Q2            Q1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Salaries and
     employee
     benefits
      Salaries       $          -  $          -  $     36,266  $     36,160
      Employee
       benefits                 -             -        13,809        12,965
      Performance-
       based
       compensation             -             -         8,045         7,141
                     --------------------------------------------------------
    Sub-total -
     salaries and
     employee
     benefits                   -             -        58,120        56,266
                     --------------------------------------------------------

    Premises and
     technology
      Equipment and
       computer
       services                 -             -        11,291        10,103
      Rent and
       property
       taxes                    -             -         8,750         8,461
      Depreciation              -             -         6,814         6,569
      Maintenance
       and repairs              -             -         1,208         1,200
      Public
       utilities                -             -           417           309
      Other                     -             -            88           114
                     --------------------------------------------------------
    Sub-total -
     premises and
     technology                 -             -        28,568        26,756
                     --------------------------------------------------------

    Other expenses
      Taxes and
       insurance                -             -         4,590         5,641
      Fees and
       commissions              -             -         4,845         3,649
      Communications
       and travelling
       expenses                 -             -         4,677         4,373
      Advertising and
       business
       development              -             -         4,433         3,660
      Stationery and
       publications             -             -         1,691         1,705
      Recruitment
       and training             -             -           708           982
      Other                     -             -         1,319         1,297
                     --------------------------------------------------------
    Sub-total -
     other expenses             -             -        22,263        21,307
                     --------------------------------------------------------
    Total -
     non-interest
     expenses          $        -    $        -    $  108,951    $  104,329
                     --------------------------------------------------------
                     --------------------------------------------------------

    As a % of
     average assets             -%            -%         2.67%         2.49%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    IN THOUSANDS OF DOLLARS                                            2006
    (UNAUDITED)                Q4            Q3            Q2            Q1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Salaries and
     employee
     benefits
      Salaries         $   35,225    $   36,647    $   34,102    $   34,814
      Employee
       benefits            12,727        12,426        12,903        11,923
      Performance-
       based
       compensation         7,577         4,328         3,369         7,542
                     --------------------------------------------------------
    Sub-total -
     salaries and
     employee
     benefits              55,529        53,401        50,374        54,279
                     --------------------------------------------------------

    Premises and
     technology
      Equipment and
       computer
       services            10,485        10,526        10,769        10,244
      Rent and
       property
       taxes                8,399         8,345         8,372         8,451
      Depreciation          6,874         6,249         6,348         6,502
      Maintenance
       and repairs          1,327         1,211         1,209         1,177
      Public
       utilities              265           276           364           316
      Other                   (28)          162           188           120
                     --------------------------------------------------------
    Sub-total -
     premises and
     technology            27,322        26,769        27,250        26,810
                     --------------------------------------------------------

    Other expenses
      Taxes and
       insurance            5,983         5,732         6,110         6,090
      Fees and
       commissions          5,357         5,210         4,903         3,688
      Communications
       and travelling
       expenses             4,436         4,666         4,371         4,061
      Advertising and
       business
       development          3,124         3,837         3,728         4,611
      Stationery and
       publications         1,412         1,443         1,490         1,622
      Recruitment and
       training               383           612           490           611
      Other                 1,272         1,575         1,273           991
                     --------------------------------------------------------
    Sub-total -
     other expenses        21,967        23,075        22,365        21,674
                     --------------------------------------------------------

    Total -
     non-interest
     expenses        $    104,818  $    103,245  $     99,989  $    102,763
                     --------------------------------------------------------
                     --------------------------------------------------------

    As a % of
     average assets          2.49%         2.43%         2.46%         2.46%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    REGULATORY CAPITAL - BIS

                                          AS AT         AS AT         AS AT
    IN THOUSANDS OF DOLLARS            APRIL 30    OCTOBER 31      APRIL 30
    (UNAUDITED)                            2007          2006          2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Tier I capital
      Common shares                $    251,667  $    250,568  $    250,358
      Contributed surplus                    45           518           295
      Retained earnings                 503,674       485,334       476,103
      Non-cumulative preferred
       shares                           210,000       210,000       210,000
      Less: goodwill                    (53,790)      (53,790)      (53,790)
                                   ------------------------------------------
    Total - Tier I capital (A)          911,596       892,630       882,966
                                   ------------------------------------------
    Tier II capital
      Subordinated debentures           150,000       150,000       300,000
      General allowances                 65,250        65,250        65,250
      Unrealized gains on
       available for sale equity
       securities                        15,120             -             -
                                   ------------------------------------------
    Total - Tier II capital             230,370       215,250       365,250
                                   ------------------------------------------
    Securitization, investment
     in non-consolidated
     corporations and other             (33,514)      (28,469)      (54,799)
                                   ------------------------------------------
    Regulatory capital - BIS (B)   $  1,108,452  $  1,079,411  $  1,193,417
                                   ------------------------------------------
    Total risk-weighted
     assets (C)                    $  8,990,595  $  8,702,241  $  8,612,247
    Tier I BIS capital
     ratio (A/C)                           10.1%         10.3%         10.3%
    Total BIS capital ratio (B/C)          12.3%         12.4%         13.9%
    Assets to capital multiple             16.2x         16.1x         14.6x
    Tangible common equity as a
     percentage of risk-weighted
     assets                                 7.6%          7.7%          7.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    RISK-WEIGHTED ASSETS

                                          AS AT         AS AT         AS AT
    IN THOUSANDS OF DOLLARS            APRIL 30    OCTOBER 31      APRIL 30
    (UNAUDITED)                            2007          2006          2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Balance sheet items
      Cash resources               $     89,705  $     41,931  $     89,989
      Securities                        459,891       481,035       432,666
      Mortgage loans                  2,540,797     2,400,540     2,232,342
      Other loans and customers'
       liability under acceptances    5,274,007     5,146,909     5,221,378
      Other assets                      460,660       462,541       468,302
      General allowances                 65,250        65,250        65,250
                                   ------------------------------------------
    Total - balance sheet items       8,890,310     8,598,206     8,509,927

    Off-balance sheet items
      Derivative financial
       instruments                       27,195        26,620        29,655
      Credit-related commitments         73,090        77,415        72,665
                                   ------------------------------------------
    Total - risk-weighted assets   $  8,990,595  $  8,702,241  $  8,612,247
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ASSETS UNDER ADMINISTRATION

                                          AS AT         AS AT         AS AT
    IN THOUSANDS OF DOLLARS            APRIL 30    OCTOBER 31      APRIL 30
    (UNAUDITED)                            2007          2006          2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Self-directed RRSPs and RRIFs  $  8,560,524  $  8,415,222  $  8,423,400
    Clients' brokerage assets         2,029,054     1,923,658     1,858,155
    Institutional                     1,768,709     1,724,998     1,819,460
    Mutual funds                      1,596,389     1,405,164     1,392,385
    Mortgage loans under
     management                       1,219,965     1,223,020     1,292,353
    Other - Personal                     31,830        33,246       168,424
                                   ------------------------------------------
    Total - assets under
     administration                $ 15,206,471  $ 14,725,308  $ 14,954,177
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: Robert Cardinal, Chief Financial Officer, (514)
284-4500 Ext. 7535; Media and Investors Relations contact: Gladys Caron, (514)
284-4500 Ext. 7511, cell (514) 893-3963

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Laurentian Bank of Canada

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