Laurentian Bank reports net income of $28.3 million for the second quarter of
2010

MONTREAL, May 26 /CNW Telbec/ -

    
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    Highlights of the second quarter 2010

    - Net income of $28.3 million, up 34% from $21.2 million for the second
      quarter of 2009
    - Return on common shareholders' equity of 10.9%, compared to 8.5% for
      the second quarter of 2009
    - Total revenue of $178.1 million, an increase of 15% from $154.8 million
      a year ago
    - Loan losses of $16 million, unchanged from the first quarter of 2010,
      and up from $12 million in the second quarter of 2009
    - Total loans and bankers' acceptances increased by more than
      $2.4 billion, or 16%, over the last twelve months
    - Significant year-over-year improvement of the efficiency ratio to 69.4%
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Laurentian Bank of Canada reported net income of $28.3 million, or $1.06 diluted per common share, for the second quarter ended April 30, 2010, compared to net income of $21.2 million, or $0.76 diluted per common share, for the second quarter of 2009. Return on common shareholders' equity was 10.9% for the quarter, compared to 8.5% for the corresponding period in 2009.

For the six months ended April 30, 2010, net income totalled $60.4 million or $2.26 diluted per common share, compared with net income of $46.2 million or $1.68 diluted per common share in 2009. Return on common shareholders' equity was 11.6% for the six months ended April 30, 2010, compared to 9.3% for the same period in 2009.

Commenting on second-quarter results, Réjean Robitaille, President and Chief Executive Officer, mentioned: "We have maintained our momentum this quarter with earnings per share and ROE improving by 39% and 27% respectively compared to the second quarter of 2009. Year-over-year, revenue growth of 15% once again demonstrated our ability to grow organically and contributed to strong positive operating leverage. Furthermore, we continued to generate significant growth in our loan portfolio and improved the contribution from non-interest income. Overall, credit quality has stabilized in the quarter and certain portfolios, mainly on the retail side, have started to improve."

"All our business segments contributed to the strong quarter. Net income in the Real Estate and Commercial and B2B Trust segments increased by 80% and 45% respectively, as they benefitted from the improvement in net interest margins as well as higher loan and deposit volumes."

Review of Business Highlights

Laurentian Bank has yet again delivered significant loan growth during the quarter. Since the beginning of the year, loans have increased by 8%. This growth furthers the diversification of our portfolios and always conforms to our prudent approach to risk management. With approximately 40% of loans originating outside of Quebec, the Bank is geographically well diversified. Similarly, the distribution of the loan portfolio provides good balance and reduces credit risk.

Laurentian Bank has been pursuing its growth across all of its activities over the past few years, guided by the strategies and business development initiatives that have been put into place. This is exemplified by our loan and deposit portfolios which, over the past 3 years, have grown on average per year by more than 9% and 13% respectively. This growth is due to the agility that our business model offers.

More specifically, in the second quarter of 2010, business lines demonstrated solid performance. Moreover, their profitability is core, strong and sustainable. This year, the RRSP campaign in the Retail and SME Quebec sector again reached a record level, despite economic conditions making it difficult for many to invest for their retirement. This successful campaign demonstrates the Bank's ability to seize opportunities to strengthen and deepen client relationships. Similarly, the expansion of our sales teams serving businesses has helped to improve the quality of service and strengthen the client-Bank bond. This in turn contributed to business loans increasing by almost $300 million since the beginning of the year. Furthermore, B2B Trust continues to maintain its leadership position among financial intermediaries. The strong relationships that are being forged translate into steadily increasing loans and deposits. Finally, Laurentian Bank Securities is reaching more clients with the number of advisors now totalling 85.

The Bank is continuing its efforts to increase its profile. Advertising campaigns in the Retail and SME Quebec segment and at B2B Trust are raising the level of awareness in the Bank's target markets. The Bank is also involved, on a grass roots level, with several of the communities in which it operates. This too enhances the Bank's profile and puts into practice one of its core values, that of proximity.

It wouldn't be possible to forge strong client relationships, raise the profile of the Bank and build a well diversified institution without employees who are flexible and share in the entrepreneurial spirit. Thus, it is not only the agility of the business model but also the agility of all employees that will continue to contribute to the growth of Laurentian Bank.

Non-GAAP Financial Measures

The Bank uses both generally accepted accounting principles ("GAAP") and certain non-GAAP measures to assess performance, such as return on common shareholders' equity, net interest margin and efficiency ratios. With regard to the calculation of the return on common shareholders' equity, the Bank considers that net income is the best measure of profitability and that common shareholders' equity, excluding accumulated other comprehensive income, would be used as a measure of capital. The calculation of the Bank's book value is also based on common shareholders' equity, excluding accumulated other comprehensive income. Tangible common equity is defined as common shareholders' equity, excluding accumulated other comprehensive income, less goodwill and contractual and customer relationship intangible assets.

Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are unlikely to be comparable to any similar measures presented by other companies. The Bank believes that these non-GAAP financial measures provide investors and analysts with useful information so that they can better understand financial results and analyze the Bank's growth and profit potential more effectively.

Caution Regarding Forward-looking Statements

In this document and in other documents filed with Canadian regulatory authorities or in other communications, Laurentian Bank of Canada may from time to time make written or oral forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements include, but are not limited to, statements regarding the Bank's business plan and financial objectives. The forward-looking statements contained in this document are used to assist the Bank's security holders and financial analysts in obtaining a better understanding of the Bank's financial position and the results of operations as at and for the periods ended on the dates presented and may not be appropriate for other purposes. Forward-looking statements typically use the conditional, as well as words such as prospects, believe, estimate, forecast, project, expect, anticipate, plan, may, should, could and would, or the negative of these terms, variations thereof or similar terminology.

By their very nature, forward-looking statements are based on assumptions and involve inherent risks and uncertainties, both general and specific in nature. It is therefore possible that the forecasts, projections and other forward-looking statements will not be achieved or will prove to be inaccurate. Although the Bank believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct.

The Bank cautions readers against placing undue reliance on forward-looking statements when making decisions, as the actual results could differ considerably from the opinions, plans, objectives, expectations, forecasts, estimates and intentions expressed in such forward-looking statements due to various material factors. Among other things, these factors include capital market activity, changes in government monetary, fiscal and economic policies, changes in interest rates, inflation levels and general economic conditions, legislative and regulatory developments, competition, credit ratings, scarcity of human resources and technological environment. The Bank further cautions that the foregoing list of factors is not exhaustive. For more information on the risks, uncertainties and assumptions that would cause the Bank's actual results to differ from current expectations, please also refer to the Bank's public filings available at www.sedar.com.

The Bank does not undertake to update any forward-looking statements, whether oral or written, made by itself or on its behalf, except to the extent required by securities regulations.

    
    FINANCIAL
    HIGHLIGHTS

                                     FOR THE THREE MONTHS ENDED
    IN MILLIONS OF DOLLARS,          --------------------------
     UNLESS OTHERWISE INDICATED         APRIL 30      APRIL 30
    (UNAUDITED)                             2010          2009      VARIANCE
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    Earnings
    Net income                       $      28.3   $      21.2            34%
    Net income available to
     common shareholders             $      25.3   $      18.2            39%
    Return on common shareholders'
     equity(1)                              10.9%          8.5%
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    Per common share
    Diluted net income               $      1.06   $      0.76            39%
    Dividends declared               $      0.36   $      0.34             6%
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    FINANCIAL RATIOS
    Dividend yield                          3.26  %   4.72  %
    Dividend payout ratio                   34.1  %   44.7  %
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    As a percentage of average
     assets
    Net interest income                     2.10  %   1.92  %
    Provision for loan losses               0.29  %   0.24  %
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    Profitability
    Efficiency ratio (non-interest
     expenses as a % of total
     revenue)                               69.4  %   73.7  %
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                                      FOR THE SIX MONTHS ENDED
    IN MILLIONS OF DOLLARS,          --------------------------
     UNLESS OTHERWISE INDICATED         APRIL 30      APRIL 30
    (UNAUDITED)                             2010          2009      VARIANCE
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    Earnings
    Net income                       $      60.4   $      46.2            31%
    Net income available to
     common shareholders             $      54.2   $      40.0            36%
    Return on common shareholders'
     equity(1)                              11.6%          9.3%
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    Per common share
    Diluted net income               $      2.26   $      1.68            35%
    Dividends declared               $      0.72   $      0.68             6%
    Book value(1)                    $     40.22   $     36.83             9%
    Share price - close              $     44.12   $     28.80            53%
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    Financial position
    Balance sheet assets             $    23,089   $    20,403            13%
    Loans, bankers' acceptances
     and assets purchased under
     reverse repurchase agreements,
     net                             $    17,555   $    15,172            16%
    Personal deposits                $    15,413   $    14,490             6%
    Shareholders' equity and
     debentures                      $     1,334   $     1,282             4%
    Number of common shares -
     end of period (in thousands)         23,921        23,849             -%
    Net impaired loans as a % of
     loans, bankers' acceptances
     and assets purchased under
     reverse repurchase agreements          0.21%         0.08%
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    Capital ratios
    Tier I BIS capital ratio                10.9%         10.0%
    Total BIS capital ratio                 12.8%         12.0%
    Assets to capital multiple              18.3x         17.3x
    Tangible common equity as a
     percentage of risk-weighted
     assets(2)                               9.0%          8.2%
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    FINANCIAL RATIOS
    Per common share
    Price / earnings ratio
     (trailing four quarters)                9.2x          7.4x
    Market to book value                     110%           78%
    Dividend yield                          3.26%         4.72%
    Dividend payout ratio                   31.8%         40.6%
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    As a percentage of average
     assets
    Net interest income                     2.12          1.96%
    Provision for loan losses               0.28%         0.24%
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    Profitability
    Efficiency ratio (non-interest
     expenses as a % of total
     revenue)                               68.0%         72.2%
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    OTHER INFORMATION
    Number of full-time equivalent
     employees                             3,632         3,453
    Number of branches                       156           156
    Number of automated banking
     machines                                407           351
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    (1) With regard to the calculation of the Return on common shareholders'
        equity ratio, the Bank considers that net income is the best measure
        of profitability and that common shareholders' equity, excluding
        accumulated other comprehensive income, would be used as a capital
        measure. The calculation of the Bank's book value is also based on
        common shareholders' equity, excluding accumulated other
        comprehensive income.
    (2) Tangible common equity is defined as common shareholders' equity,
        excluding accumulated other comprehensive income, less goodwill and
        contractual and customer relationship intangible assets.
    

Management's Discussion and Analysis

This Management's Discussion and Analysis (MD&A) is a narrative explanation, through the eyes of management, of the Bank's financial condition as at April 30, 2010, and of how it performed during the three-month and six-month periods then ended. This MD&A, dated May 26, 2010, should be read in conjunction with the unaudited interim consolidated financial statements for the second quarter of 2010. Supplemental information on risk management, critical accounting policies and estimates, and off-balance sheet arrangements is also provided in the Bank's 2009 Annual Report.

Additional information about the Laurentian Bank of Canada, including the Annual Information Form, is available on the Bank's website www.laurentianbank.ca and on SEDAR at www.sedar.com.

Performance and Financial Objectives

The following table presents management's financial objectives for 2010 and the Bank's performance to date. These financial objectives are based on the same assumptions noted on page 21 of the Bank's 2009 Annual Report under the title "Key assumptions supporting the Bank's objectives".

    
    2010 FINANCIAL OBJECTIVES
                                                                     FOR THE
                                                                  SIX MONTHS
                                                                       ENDED
                                                                    APRIL 30,
                                               2010 OBJECTIVES          2010
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    Revenue growth                                    5% to 10%           15%
    Efficiency ratio                                 70% to 67%         68.0%
    Return on common shareholders' equity        10.0% to 12.0%         11.6%
    Diluted net income per common share       $ 4.00 to $ 4.70        $ 2.26
    Tier I BIS capital ratio                    Minimum of 9.5%         10.9%
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After six months, management believes that the Bank is well positioned to meet the 2010 objectives set at the beginning of the year, as shown in the table above.

Consolidated Results

Three months ended April 30, 2010 compared to three months ended April 30, 2009

Net income was $28.3 million, or $1.06 diluted per common share, for the second quarter ended April 30, 2010, compared with $21.2 million, or $0.76 diluted per common share, for the second quarter of 2009.

Total revenue

Total revenue increased by more than 15% year-over-year to $178.1 million in the second quarter of 2010, compared with $154.8 million in the second quarter of 2009. The Bank's net interest income increased to $117.6 million for the second quarter of 2010, from $94.1 million in the second quarter of 2009. The strong loan and deposit growth year-over-year combined with higher interest margins contributed to the 25.0% increase in net interest income. The low interest rate environment in 2009 had significantly hampered profitability last year. However, loan repricing measures introduced in 2009 have contributed to improve margins starting in the second half of last year.

Other income was $60.5 million in the second quarter of 2010, compared to $60.7 million in the second quarter of 2009. Securitization income decreased $8.3 million compared to the same quarter a year ago, as a result of lower securitization gains ensuing from the tightening of credit spreads, as well as the effect of mark-to-market revaluations on retained interests and related economic hedges (see note 3 to the interim financial statements for further details on securitization activities). However, offsetting the decline in securitization income, fees and commissions on loans and deposits, as well as credit insurance income improved appreciably. These increases further demonstrate the Bank's ability to grow its core business and represent a significant achievement as they largely compensated for the decrease in more volatile market driven income. Revenues from brokerage operations also increased markedly during the quarter, benefitting from the overall improvements in market conditions.

Provision for loan losses

The provision for loan losses amounted to $16.0 million in the second quarter of 2010, compared with $12.0 million in the second quarter of 2009. The increase mainly reflects losses associated with a limited number of commercial accounts, which were impacted by the late consequences of the economic slowdown, as well as the significantly higher loan volumes. Nonetheless, overall credit quality has remained satisfactory to date, with some improvements in retail portfolios as retail borrowers benefitted from the recovering economic conditions. The Risk Management section below provides additional information on the credit quality of the Bank's loan portfolios.

Non-interest expenses

Non-interest expenses totaled $123.5 million for the second quarter of 2010, compared to $114.0 million for the second quarter of 2009; an 8.3% year-over-year increase as the Bank continued to invest in its development. Salaries and employee benefits rose by $7.2 million, mainly as a result of salary increases and growth initiatives. Premises and technology costs also increased from $29.8 million for the second quarter of 2009 to $32.0 million for the second quarter of 2010. This increase is mainly explained by higher amortization expense related to IT development projects and overall increases in technology costs to support growth. Other non-interest expenses remained relatively unchanged.

As a result of the strong increase in revenues which more than offset the increase in expenses, the efficiency ratio (non-interest expenses divided by total revenue) significantly improved to 69.4% in the second quarter of 2010, compared with 73.7% in the second quarter of 2009.

Income taxes

For the quarter ended April 30, 2010, the income tax expense was $10.2 million and the effective tax rate was 26.5%. The lower tax rate, compared to the statutory rate, mainly resulted from the favourable effect of holding investments in Canadian securities that generate non-taxable dividend income and the lower taxation level on revenues from credit insurance operations. For the quarter ended April 30, 2009, the income tax expense was $7.6 million and the effective tax rate was 26.4%.

Six months ended April 30, 2010 compared to six months ended April 30, 2009

For the six months ended April 30, 2010, net income totalled $60.4 million or $2.26 diluted per common share, compared with net income of $46.2 million or $1.68 diluted per common share in 2009.

Total revenue

Total revenue improved to $358.6 million for the six months ended April 30, 2010, compared to $311.3 million for the six months ended April 30, 2009. Net interest income increased from $192.8 million for the six months ended April 30, 2009 to $238.3 million for the same period in 2010, as a combined result of higher net interest margins and higher loan and deposit volumes. Other income improved slightly, as higher fees and commissions resulting from overall business growth and higher brokerage revenues more than offset lower securitization income.

Provision for loan losses

The provision for loan losses amounted to $32.0 million for the six months ended April 30, 2010, compared to $24.0 million for the six months ended April 30, 2009. The increase essentially relates to commercial loan portfolios, while the credit quality of consumer loan portfolios has continued to improve.

Non-interest expenses

Non-interest expenses totaled $243.9 million for the six months ended April 30, 2010, compared to $224.8 million for the six months ended April 30, 2009. The increase is principally attributable to higher salaries and growth initiatives. Premises and technology costs also increased as a result of higher amortization expense related to IT development projects and overall increases in technology costs to support higher business activity levels. Other non-interest expenses remained relatively unchanged. For the six months ended April 30, 2010, the efficiency ratio improved significantly to 68.0%, compared to 72.2% for the six months ended April 30, 2009.

Income taxes

For the six months ended April 30, 2010, the income tax expense was $22.3 million and the effective tax rate was 26.9%, compared to $16.3 million and 26.1% for the six months ended April 30, 2009. The lower tax rate, compared to the statutory rate, mainly resulted from the favourable effect of holding investments in Canadian securities that generate non-taxable dividend income, as well as the lower taxation level on revenues from credit insurance operations, as noted above. In addition, income taxes for the six-month period ended April 30, 2010 included the unfavourable effect on future tax assets of the reduction to Ontario's provincial business tax rates which became effective during the first quarter.

Second quarter 2010 compared to first quarter 2010

Net income was $28.3 million for the second quarter of 2010, compared to $32.0 million for the first quarter ended January 31, 2010. Net interest income decreased by $3.1 million, mainly as a result of three fewer days in the quarter. Net interest margin stood at 2.10% in the second quarter of 2010, only slightly lower than for the first quarter of 2010 where it stood at 2.13%. This decrease was mainly due to changes in business mix and pressure on pricing. Other revenue increased slightly compared to the first quarter of 2010, as higher fees and commissions on loans and deposits, as well as higher income from treasury and financial market operations more than offset lower securitization income.

The provision for loan losses amounted to $16.0 million in the second quarter of 2010, unchanged compared to the first quarter of 2010. Higher losses in commercial loans and commercial mortgages during the second quarter of 2010 were offset by improvements in retail portfolios, when compared to the first quarter of 2010.

Non-interest expenses increased by $3.2 million compared with the first quarter of 2010. The increase mainly relates to salaries and employee benefits partially reflecting the effect of annual increases effective as of January 1st.

Financial Condition

    
    CONDENSED BALANCE SHEET

                                           AS AT         AS AT         AS AT
    In thousands of dollars             APRIL 30    OCTOBER 31      APRIL 30
    (Unaudited)                             2010          2009          2009
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    ASSETS
      Cash resources                 $   258,061   $   300,616   $   301,947
      Securities                       4,143,430     4,432,183     3,789,812
      Assets purchased under reverse
       repurchase agreements             569,066       536,064       539,859
      Loans, net                      16,837,773    15,601,307    14,499,055
      Other assets                     1,280,683     1,294,610     1,272,464
                                     ----------------------------------------
                                     $23,089,013   $22,164,780   $20,403,137
                                     ----------------------------------------
                                     ----------------------------------------
    LIABILITIES AND SHAREHOLDERS'
     EQUITY
      Deposits                       $18,736,752   $18,299,966   $17,260,763
      Other liabilities                3,018,525     2,543,588     1,860,796
      Subordinated debentures            150,000       150,000       150,000
      Shareholders' equity             1,183,736     1,171,226     1,131,578
                                     ----------------------------------------
                                     $23,089,013   $22,164,780   $20,403,137
                                     ----------------------------------------
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Balance sheet assets increased by more than $0.9 billion from year-end 2009 and stood at $23.1 billion at April 30, 2010. Over the last twelve months, balance sheet assets increased by $2.7 billion or 13.2%.

Liquid assets

Liquid assets, including cash, deposits with other banks, securities and assets purchased under reverse repurchase agreements, decreased by $298.3 million from year-end 2009, as the Bank gradually reduced its level of liquid assets to fund loan disbursements. Nonetheless, the Bank continues to maintain a relatively high level of liquidity to further support its growth.

Loan portfolio

The portfolio of loans and bankers' acceptances stood at $17.1 billion at April 30, 2010, up $1.2 billion from October 31, 2009. The Bank had another solid quarter of loan growth, up $533.4 million after new securitizations of $182.6 million. Since the beginning of the year, residential mortgages, including securitized loans, increased by $769.6 million, as detailed below.

    
    RESIDENTIAL MORTGAGE PORTFOLIO

                                           AS AT         AS AT
    In thousands of dollars             APRIL 30    OCTOBER 31
    (Unaudited)                             2010          2009      VARIANCE
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    On-balance sheet residential
     mortgage loans                  $ 8,101,340   $ 7,219,830   $   881,510
    Securitized residential
     mortgage loans
    (off-balance sheet)                2,590,808     2,702,762      (111,954)
                                     ----------------------------------------
    Total residential mortgage
     loans, including securitized
     loans                           $10,692,148   $ 9,922,592   $   769,556
                                     ----------------------------------------
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Commercial mortgages and commercial loans, including bankers' acceptances increased by $124.0 million and $98.5 million, respectively, as the Bank continues to capitalize on growth opportunities in the Canadian market. Personal loans increased by $73.7 million, mainly reflecting growth in investment loans and home equity lines of credit.

Deposits

Total personal deposits increased by $274.6 million since the beginning of the year to $15.4 billion as at April 30, 2010, as growth of more than $300 million during the second quarter of 2010 more than compensated the slight decrease of the first quarter. The Bank continues to actively manage its liquidity levels to meet funding requirements, while exercising rigorous control on pricing. As a result, deposit growth remains tightly managed, with the focus kept on retail deposit gathering. Retail deposits continue to be a particularly stable source of financing for the Bank, owing to their availability and lower cost when compared to institutional deposits. Since the beginning of the year, business and other deposits increased by $162.2 million, for a total $436.8 million increase in deposits. As at April 30, 2010, personal deposits accounted for 82.3% of total deposits of $18.7 billion.

Shareholders' equity

Shareholders' equity stood at $1,183.7 million as at April 30, 2010, compared with $1,171.2 million as at October 31, 2009. The increase in shareholders' equity mainly results from net income accumulated during the first six months of the year; partly offset by a decrease in accumulated other comprehensive income.

The Bank's book value per common share, excluding accumulated other comprehensive income, was $40.22 as at April 30, 2010, compared to $38.68 as at October 31, 2009. There were 23,920,962 common shares and 54,075 share purchase options outstanding as at May 18, 2010.

Assets under administration

Assets under administration increased by $0.4 billion from October 31, 2009 and amounted to $14.7 billion as at April 30, 2010, and increased by $1.0 billion from April 30, 2009 where they stood at $13.7 billion. The increase compared with April 30, 2009 is attributable to the recovery in market value of the assets under administration, mainly as they relate to self-directed RRSPs, client brokerage assets and mutual funds.

Capital Management

The regulatory Tier I capital of the Bank reached $1,081.6 million as at April 30, 2010, compared with $1,045.8 million as at October 31, 2009. The BIS Tier 1 and total capital ratios stood at 10.9% and 12.8%, respectively, as at April 30, 2010, compared to 11.0% and 13.0%, respectively, as at October 31, 2009. These ratios remain strong. The tangible common equity ratio of 9.0% also reflects the high quality of the Bank's capital.

    
    REGULATORY CAPITAL - BIS

    In thousands of dollars,               AS AT         AS AT         AS AT
     except percentage amounts          APRIL 30    OCTOBER 31      APRIL 30
    (Unaudited)                             2010          2009          2009
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    Total - Tier 1 capital (A)       $ 1,081,593   $ 1,045,824   $   989,048
    Tier I BIS capital ratio (A/C)          10.9%         11.0%         10.0%
    Total - capital (B)              $ 1,270,338   $ 1,235,866   $ 1,181,510
    Total BIS capital ratio (B/C)           12.8%         13.0%         12.0%
    Total risk-weighted assets (C)   $ 9,924,365   $ 9,480,823   $ 9,869,714
    Assets to capital multiple              18.3x         18.0x         17.3x
    Tangible common equity as a
     percentage of risk-weighted
     assets(1)                               9.0%          9.1%          8.2%
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    (1) Tangible common equity is defined as common shareholders' equity,
        excluding accumulated other comprehensive income, less goodwill and
        contractual and customer relationship intangible assets.


    RISK-WEIGHTED ASSETS

                                           AS AT         AS AT         AS AT
    In thousands of dollars             APRIL 30    OCTOBER 31      APRIL 30
    (Unaudited)                             2010          2009          2009
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    Balance sheet items
      Cash resources                 $     9,822   $    12,697   $    43,110
      Securities                         285,836       220,257       229,296
      Mortgage loans                   3,528,327     3,222,867     2,874,258
      Other loans and customers'
       liabilities under acceptances   3,818,244     3,807,878     4,834,747
      Other assets                       527,396       516,561       458,061
                                     ----------------------------------------
    Total - balance sheet items        8,169,625     7,780,260     8,439,472
    Off-balance sheet items              557,302       547,050       326,254
    Operational risk                   1,197,438     1,153,513     1,103,988
                                     ----------------------------------------
    Total - risk-weighted assets     $ 9,924,365   $ 9,480,823   $ 9,869,714
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Basel Committee on Banking Supervision new proposed capital and liquidity regulation

In December 2009, the Basel Committee on Banking Supervision published proposals on new capital and liquidity requirements. The Bank participated during the quarter in a worldwide quantitative impact study (QIS) whose purpose is to help global regulators refine their proposals and define new minimum capital and liquidity requirements. These new guidelines are not expected to become regulation until late 2012 at the earliest. Therefore, at this stage, it is too early to determine the definitive impact on capital ratios and liquidity requirements, considering the proposals are likely to change between now and when final rules take effect.

Dividends

At its meeting on May 26, 2010, the Board of Directors declared regular dividends on the various series of preferred shares to shareholders of record on June 9, 2010. Also at the same meeting, the Board of Directors declared a dividend of $0.36 per common share, payable on August 1, 2010, to shareholders of record on July 2, 2010.

Risk Management

The Bank is exposed to various types of risks owing to the nature of its activities. These risks are mainly related to the use of financial instruments. In order to manage these risks, controls such as risk management policies and various risk limits have been implemented. These measures aim to optimize the risk/return ratio in all operating segments. For additional information regarding the Bank's Risk Management Framework, please refer to the 2009 Annual Report.

Credit risk

The following sections provide further details on the credit quality of the Bank's loan portfolios. Note 2 to these interim consolidated financial statements also provides detailed information on the Bank's loan portfolios and related credit exposures.

    
    PROVISION FOR LOAN LOSSES RECORDED IN THE CONSOLIDATED STATEMENT OF
    INCOME

                                                  FOR THE THREE MONTHS ENDED
                                      ---------------------------------------
    In thousands of dollars             APRIL 30    JANUARY 31      APRIL 30
    (Unaudited)                             2010          2010          2009
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    Loan portfolios
      Personal loans                 $     7,591   $     8,658   $     7,969
      Residential mortgages                  170           263           126
      Commercial mortgages                 3,069           794             6
      Commercial and other loans           5,170         6,285         3,899
                                      ---------------------------------------
    Total                            $    16,000   $    16,000   $    12,000
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                                                    FOR THE SIX MONTHS ENDED
                                                    -------------------------
    In thousands of dollars                           APRIL 30      APRIL 30
    (Unaudited)                                           2010          2009
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    Loan portfolios
      Personal loans                               $    16,249   $    17,142
      Residential mortgages                                433           796
      Commercial mortgages                               3,863            25
      Commercial and other loans                        11,455         6,037
                                                   --------------------------
    Total                                          $    32,000   $    24,000
                                                   --------------------------
                                                   --------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The provision for loan losses amounted to $16.0 million in the second quarter of 2010, unchanged compared to the first quarter of 2010 and increased from $12.0 million in the second quarter of 2009.

The increase year-over-year mainly reflects the higher losses in commercial loans and commercial mortgages, where certain commercial businesses were relatively more impacted by the late consequences of the economic slowdown, as well as the significantly higher loan volumes. Compared to the first quarter of 2010, higher losses in commercial mortgages were offset by improvements in retail portfolios. Losses on commercial loans and commercial mortgages during the second quarter of 2010 resulted from a limited number of accounts.

    
    ALLOWANCE FOR LOAN LOSSES

    In thousands of
     dollars, except         AS AT         AS AT         AS AT         AS AT
     percentage amounts   APRIL 30    JANUARY 31    OCTOBER 31      APRIL 30
    (Unaudited)               2010          2010          2009          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gross impaired
     loans             $   161,930   $   157,373   $   137,494   $   125,677
    Allowance for
     loan losses           124,178       121,364       114,546       113,129
                       ------------------------------------------------------
    Net impaired
     loans             $    37,752   $    36,009   $    22,948   $    12,548
                       ------------------------------------------------------
                       ------------------------------------------------------
    Impaired loans as
     a % of loans,
     bankers'
     acceptances and
     assets purchased
     under reverse
     repurchase
     agreements
      Gross                   0.92%         0.90%         0.83%         0.82%
      Net                     0.21%         0.21%         0.14%         0.08%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Gross impaired loans stood at $161.9 million at April 30, 2010, compared to $157.4 million as at January 31, 2010 and $137.5 million at October 31, 2009. The increase since October 31, 2009 essentially results from commercial loans and mortgages, as the credit quality of retail portfolios has improved significantly. Net impaired loans stood at $37.8 million at April 30, 2010 (representing 0.21% of total loans, bankers' acceptances and assets purchased under reverse repurchase agreements), compared to $23.0 million (0.14%) at October 31, 2009. The lower level of relative provisioning mainly results from the good quality of the underlying collateral of the newly impaired loans.

Market risk

Market risk corresponds to the financial losses that the Bank could incur due to unfavourable fluctuations in the value of financial instruments following variations in the parameters underlying their valuation, such as interest rates, exchange rates or quoted stock market prices. This risk is inherent to the Bank's financing, investment, trading and asset and liability management (ALM) activities.

The purpose of ALM activities is to control structural interest rate risk, which corresponds to the potential negative impact of interest rate movements on the Bank's revenues and economic value. Dynamic management of structural risk is intended to maximize the Bank's profitability while preserving the economic value of common shareholders' equity. As at April 30, 2010, the effect on the economic value of common shareholders' equity and on net interest income before taxes of a sudden and sustained 1% increase in interest rates remained low and was as follows.

    
    STRUCTURAL INTEREST RATE SENSITIVITY

                                                         AS AT         AS AT
    In thousands of dollars                           APRIL 30    OCTOBER 31
    (Unaudited)                                           2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Increase (decrease) in net interest income
     before taxes over the next 12 months          $     2,600   $    (4,779)
    Change in the economic value of common
     shareholders' equity (Net of income taxes)    $   (12,034)  $   (19,626)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

While keeping the overall level of risk well under control, the Bank is actively managing its interest rate sensitivity position in order to benefit from current interest rate conditions.

Segmented Information

This section outlines the Bank's operations according to its organizational structure. Services to individuals, businesses, financial intermediaries and institutional clients are offered through the following business segments:

    
    - Retail & SME Quebec             - Laurentian Bank Securities and
    - Real Estate & Commercial          Capital Markets
    - B2B Trust                       - Other
    

As of November 1, 2009, certain capital market activities which were previously reported in the Other segment are now reported with Laurentian Bank Securities activities under the newly formed Laurentian Bank Securities and Capital Markets business segment. In addition, foreign exchange and international services, which were also formerly reported in the Other segment, are now reported in the Real Estate & Commercial segment. The Retail & SME Quebec and B2B Trust business segments were not affected by this reorganization. Comparative figures were reclassified to conform to the current period presentation.

Retail & SME Quebec

    
                                             FOR THE THREE MONTHS ENDED
    In thousands of dollars,         ----------------------------------------
     except percentage amounts          APRIL 30    JANUARY 31      APRIL 30
    (Unaudited)                             2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue                    $   111,382   $   112,503   $   103,770
    Provision for loan losses        $    11,542   $     9,790   $     8,129
    Net income                       $    10,082   $    12,552   $     9,756
    Efficiency ratio                        78.4%         76.9%         80.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                    FOR THE SIX MONTHS ENDED
    In thousands of dollars,                       --------------------------
     except percentage amounts                        APRIL 30      APRIL 30
    (Unaudited)                                           2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue                                  $   223,885   $   208,569
    Provision for loan losses                      $    21,332   $    17,664
    Net income                                     $    22,634   $    19,936
    Efficiency ratio                                      77.6%         79.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The Retail & SME Quebec business segment's contribution to net income improved 3%, totalling $10.1 million for the second quarter of 2010, compared with $9.8 million for the second quarter of 2009.

Total revenue increased by $7.6 million, from $103.8 million in the second quarter of 2009 to $111.4 million in the second quarter of 2010, as a result of higher loan and deposit volumes, as well as higher fee income. However, net interest margins were under pressure during the quarter, due to the particularly low interest rate environment and sustained competition on fixed term retail products. Loan losses increased from $8.1 million in the second quarter of 2009 to $11.5 million in the second quarter of 2010, essentially as a result of a single commercial account, as otherwise, the credit quality of retail loan portfolios has improved. Non-interest expenses increased by 5% or $4.2 million, from $83.1 million in the second quarter of 2009 to $87.3 million in the second quarter of 2010, mainly as a result of annual increases in salaries, as well as an increase in the number of employees.

For the six months ended April 30, 2010, net income improved by 14% to $22.6 million, as higher revenue more than offset increases in loan losses and expenses.

Balance sheet highlights

    
    - Loans up 9% or $ 950 million over the last 12 months
    - Increase in deposits of $ 750 million over the last 12 months, to
      $8.7 billion as at April 30, 2010
    

Real Estate & Commercial

Foreign exchange and international services, which were reported in the Other segment, are now reported in the Real Estate & Commercial segment. Comparative figures were reclassified to conform to the current period presentation.

    
                                            FOR THE THREE MONTHS ENDED
    In thousands of dollars,         ----------------------------------------
     except percentage amounts          APRIL 30    JANUARY 31      APRIL 30
    (Unaudited)                             2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue                    $    29,125   $    27,590   $    21,124
    Provision for loan losses        $     3,984   $     5,150   $     3,161
    Net income                       $    13,655   $    12,688   $     7,600
    Efficiency ratio                        19.1%         15.4%         32.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                    FOR THE SIX MONTHS ENDED
    In thousands of dollars,                        -------------------------
     except percentage amounts                        APRIL 30      APRIL 30
    (Unaudited)                                           2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue                                  $    56,715   $    41,110
    Provision for loan losses                      $     9,134   $     4,815
    Net income                                     $    26,343   $    15,640
    Efficiency ratio                                      17.3%         32.9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The Real Estate & Commercial business segment's contribution to net income improved 80%, reaching $13.7 million for the second quarter of 2010, compared with $7.6 million for the second quarter of 2009.

Total revenue increased by $8.0 million, from $21.1 million in the second quarter of 2009 to $29.1 million in the second quarter of 2010. Higher loan volumes, better interest margins resulting from repricing measures initiated last year, and overall strong business growth contributed to improve revenues. Loan losses were slightly higher at $4.0 million (6.2 basis points to average loans and bankers' acceptances) in the second quarter of 2010, compared to $3.2 million (6.0 basis points to average loans and bankers' acceptances) in the second quarter of 2009 as a result of a limited number of accounts requiring provisions and higher loan volumes. Nonetheless, management remains cautiously optimistic about credit quality in the commercial book for the remainder of the year. Non-interest expenses decreased by $1.3 million to $5.6 million in the second quarter of 2010, from $6.9 million in the second quarter of 2009.

For the six months ended April 30, 2010, net income improved by 68% to $26.3 million. Revenues for the six months ended April 30, 2010 increased essentially for the same reasons as noted above. In addition, expenses for the six months ended April 30, 2010 decreased, as a result of good cost control and certain operational loss provisions amounting to $2.8 million were reversed during the first six months of 2010. Also, loan losses increased as noted above.

Balance sheet highlight

- Loans and BAs up 22% or more than $ 500 million over the last 12 months

B2B Trust

    
                                            FOR THE THREE MONTHS ENDED
    In thousands of dollars,         ----------------------------------------
     except percentage amounts          APRIL 30    JANUARY 31      APRIL 30
    (Unaudited)                             2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue                    $    29,635   $    29,837   $    23,913
    Provision for loan losses        $       474   $     1,060   $       710
    Net income                       $    11,359   $    11,061   $     7,833
    Efficiency ratio                        43.0%         42.3%         49.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                    FOR THE SIX MONTHS ENDED
    In thousands of dollars,                       --------------------------
     except percentage amounts                        APRIL 30      APRIL 30
    (Unaudited)                                           2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue                                  $    59,472   $    47,414
    Provision for loan losses                      $     1,534   $     1,521
    Net income                                     $    22,420   $    15,959
    Efficiency ratio                                      42.6%         47.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The B2B Trust business segment's contribution to net income improved 45%, reaching $11.4 million in the second quarter of 2010, compared with $7.8 million in the second quarter of 2009.

Total revenue increased by $5.7 million, from $23.9 million in the second quarter of 2009, to $29.6 million in the second quarter of 2010. Net interest income increased markedly by $5.4 million as a combined result of volume growth and improved margins. Results for the second quarter of 2009 were particularly affected by the lower interest rate environment, as well as the promotional pricing related to the launch of the High Interest Investment Account. Loan losses, including losses on investment lending activities, remained low at $0.5 million in the second quarter of 2010, compared with $0.7 million in the second quarter of 2009. Non-interest expenses increased slightly to $12.8 million in the second quarter of 2010, compared with $11.7 million in the second quarter of 2009, mainly as a result of higher salary and employee benefits.

For the six months ended April 30, 2010, net income improved by 40% to $22.4 million, as higher revenue more than offset increases in expenses, essentially for the same reasons as noted above.

Balance sheet highlights

    
    - Loans up 19% or $800 million over the last 12 months
    - Increase in deposits of $1.0 billion over the last 12 months,
      to $9.4 billion as at April 30, 2010
    

Laurentian Bank Securities and Capital Markets

As of November 1, 2009, certain Bank's capital market activities which were previously reported in the Other segment are now reported with Laurentian Bank Securities activities under the newly formed Laurentian Bank Securities and Capital Markets business segment. Comparative figures were reclassified to conform to the current period presentation.

    
                                            FOR THE THREE MONTHS ENDED
    In thousands of dollars,         ----------------------------------------
     except percentage amounts          APRIL 30    JANUARY 31      APRIL 30
    (Unaudited)                             2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue                    $    15,280   $    14,487   $    14,013
    Net income                       $     2,586   $     1,834   $     3,344
    Efficiency ratio                        76.3%         80.6%         65.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                    FOR THE SIX MONTHS ENDED
    In thousands of dollars,                       --------------------------
     except percentage  amounts                       APRIL 30      APRIL 30
    (Unaudited)                                           2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue                                  $    29,767   $    26,275
    Net income                                     $     4,420   $     5,867
    Efficiency ratio                                      78.4%         68.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The Laurentian Bank Securities and Capital Markets business segment's contribution to net income amounted to $2.6 million in the second quarter of 2010, compared with $3.3 million in the second quarter of 2009. Revenues continued their progression and increased by 9% to $15.3 million in the second quarter of 2010, mainly as a result of the strong performance from Laurentian Bank Securities Institutional Equity and Retail operations, which more than compensated the decline from the other capital markets operations. Non-interest expenses increased to $11.7 million in the second quarter of 2010, from $9.2 million in the second quarter of 2009, due primarily to an increase in variable compensation in the brokerage business.

For the six months ended April 30, 2010, net income decreased by 25% or $1.5 million compared to the same period last year, as the increase in revenues from Laurentian Bank Securities was offset by lower income from other capital market operations and higher non-interest expenses. The increase in expenses essentially results from variable compensation in the brokerage business.

Balance sheet highlight

- Assets under management up 27% or $468 million over the last 12 months

Other Sector

Certain Bank capital market activities, as well as foreign exchange and international services, which were previously reported in the Other segment, are now reported with the Laurentian Bank Securities and Capital Markets and Real Estate & Commercial business segments. Comparative figures were reclassified to conform to the current period presentation.

    
                                            FOR THE THREE MONTHS ENDED
                                     ---------------------------------------
     In thousands of dollars            APRIL 30    JANUARY 31      APRIL 30
    (Unaudited)                             2010          2010          2009
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------
    Total revenue                    $    (7,309)  $    (3,968)  $    (8,052)
    Net loss                         $    (9,333)  $    (6,121)  $    (7,378)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    FOR THE SIX MONTHS ENDED
                                                  --------------------------
    In thousands of dollars                           APRIL 30      APRIL 30
    (Unaudited)                                           2010          2009
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------
    Total revenue                                  $   (11,277)  $   (12,063)
    Net loss                                       $   (15,454)  $   (11,200)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The Other sector posted a negative contribution to net income of $9.3 million in the second quarter of 2010, compared with a negative contribution of $7.4 million in the second quarter of 2009. Net interest income improved to negative $8.7 million in the second quarter of 2010, compared to negative $17.8 million in the second quarter of 2009. In the second quarter of 2009, net interest income had been particularly affected by higher funding costs and lower margins on liquid assets. Other income for the second quarter of 2010 was $1.4 million, compared to $9.7 million for the second quarter of 2009. This decrease mainly results from lower income from securitization.

For the six months ended April 30, 2010, the negative contribution stood at $15.5 million, compared to negative $11.2 million for the six months ended April 30, 2009. Net interest income improved, as noted above, as the interest rate conditions were more favourable. However, securitization income declined as credit spreads narrowed and the Bank focused less on securitization for funding purposes, having witnessed a solid inflow of retail deposits.

Additional Financial Information - Quarterly Results

    
    In thousands of
     dollars, except
     per share and
     percentage amounts   APRIL 30    JANUARY 31    OCTOBER 31       JULY 31
     (Unaudited)              2010          2010          2009          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue      $   178,113   $   180,449   $   178,540   $   176,657
    Income from
     continuing
     operations        $    28,349   $    32,014   $    26,779   $    28,683
    Net income         $    28,349   $    32,014   $    38,248   $    28,683
    Income per common
     share from
     continuing
     operations
      Basic            $      1.06   $      1.21   $      0.99   $      1.08
      Diluted          $      1.06   $      1.21   $      0.99   $      1.08
    Net income per
     common share
      Basic            $      1.06   $      1.21   $      1.47   $      1.08
      Diluted          $      1.06   $      1.21   $      1.47   $      1.08
    Return on common
     shareholders'
     equity(1)                10.9%         12.3%         15.3%         11.6%
    Balance sheet
     assets (in
     millions of
     dollars)          $    23,089   $    23,184   $    22,165   $    21,316
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    In thousands of
     dollars, except
     per share and
     percentage amounts   APRIL 30    JANUARY 31    OCTOBER 31       JULY 31
     (Unaudited)              2009          2009          2008          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue      $   154,768   $   156,537   $   152,811   $   171,095
    Income from
     continuing
     operations        $    21,155   $    25,047   $    22,910   $    30,937
    Net income         $    21,155   $    25,047   $    27,333   $    30,937
    Income per common
     share from
     continuing
     operations
      Basic            $      0.76   $      0.92   $      0.84   $      1.17
      Diluted          $      0.76   $      0.91   $      0.84   $      1.17
    Net income per
     common share
      Basic            $      0.76   $      0.92   $      1.02   $      1.17
      Diluted          $      0.76   $      0.91   $      1.02   $      1.17
    Return on common
     shareholders'
     equity(1)                 8.5%         10.0%         11.5%         13.4%
    Balance sheet
     assets (in
     millions of
     dollars)          $    20,403   $    19,868   $    19,579   $    19,301
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) With regard to the calculation of the Return on common shareholders'
        equity ratio, the Bank considers that net income is the best measure
        of profitability and that common shareholders' equity, excluding
        accumulated other comprehensive income, would be used as a capital
        measure. The calculation of the Bank's book value is also based on
        common shareholders' equity, excluding accumulated other
        comprehensive income.
    

Accounting Policies

A summary of the Bank's significant accounting policies is presented in notes 2 and 3 of the 2009 audited annual consolidated financial statements. Pages 51 to 53 of the 2009 Annual Report also contain a discussion of critical accounting policies and estimates which refers to material amounts reported in the consolidated financial statements or require management's judgment. The interim consolidated financial statements for the second quarter of 2010 have been prepared in accordance with these accounting policies.

Future changes in accounting policy

International Financial Reporting Standards

In February 2008, the AcSB confirmed the convergence of financial reporting standards for Canadian public companies with International Financial Reporting Standards (IFRS). The Bank will use IFRS for interim and annual financial statements relating to fiscal periods beginning on or after November 1, 2011.

The Bank has prepared a conversion plan and assembled a project team, including both internal and external resources, to coordinate and execute the conversion to IFRS. The Bank considers having the appropriate resources to finalize the IFRS conversion plan on schedule.

The conversion plan consists of the following phases:

    
    - Preliminary assessment - This phase serves to heighten management's
      awareness of the key conversion issues and establish a timeline mapping
      out the Bank's priorities with regard to analyses and significant
      issues.
    - Financial standards analysis - This phase consists of a detailed
      assessment of the quantitative, qualitative and technological impact of
      IFRS implementation.
    - Selection of key accounting policies - The initial adoption of IFRS
      will require the Bank to make certain elections.
    - Implementation - This phase consists of implementing the necessary
      information systems to comply with the new IFRS requirements.
    

The Bank completed its preliminary assessment of the IFRS impact during the planning stage of the project in early 2009. Work on the financial standards analysis is well underway and nearly completed at the end of the second quarter, subject to changes to IFRS by the International Accounting Standards Board (IASB). The selection of key accounting policies are currently being assessed concurrently with standards analysis. The Bank is now progressing to the implementation of the necessary changes to processes and systems. The implementation phase is expected to be completed by the end of fiscal 2011. The Bank has therefore not finalized the estimation and analysis of the expected financial impact on the Bank's reported results from the change to IFRS as at the end of the second quarter of 2010.

Another important component of the IFRS conversion plan consists of training key finance and operational staff. This is an ongoing process which was initiated in 2008. As the Bank progresses in the conversion plan in 2010, it will communicate educational information of the IFRS implications to the various constituents affected by the change. The Bank has put in place a Steering Committee that is responsible to ensure the conversion plan is adequately followed. The Bank's Board of Directors, mainly through the Audit Committee members, are also involved in the IFRS conversion plan. They receive quarterly reviews of the timeline for implementation, the implications of IFRS standards on the business and an overview of the impact on the financial statements. The Audit Committee will continue to receive quarterly project status updates to ensure proper oversight of the conversion project.

The following project statuses have been presented to the Audit Committee:

    
    First quarter of 2010
    - A preliminary IFRS analysis, which consisted of an assessment of the
      quantitative, qualitative and technological impact of IFRS
      implementation;
    - A list of potential accounting policy choices at the transition date
      and going forward;
    - A list of technological changes which have been identified with respect
      to certain items, namely hedging, securitization, impaired loans,
      share-based compensation and customer loyalty programs. The necessary
      adjustments to the information system supporting these items are
      expected to be completed before the end of the year 2010.

    Second quarter of 2010
    - An assessment of the main IFRS disclosure impacts, based on the year
      end October 31 2009 financial statements. This exercise was aimed at
      identifying the areas where additional information of disclosure is
      required.
    - A communication plan highlighting the impact for all the identified
      constituents.
    

The following key areas of difference between the Bank's current accounting practices and the corresponding accounting treatment under IFRS have been identified:

a) Loan provisioning

In line with current Canadian GAAP, the Bank's provisioning for impaired loans is designed to take account incurred losses in the Bank's loan portfolio. This principle will not change as IFRS also currently require that provisioning be based on incurred losses. However, under IFRS, loan losses and allowances will be presented based on whether they are assessed individually or collectively for groups of similar loans. The methodologies to calculate these provisions are still being developed. As a result, there may be changes in the amount of the Bank's collective provisioning, mainly for loans which are not classified as impaired.

Provisions for loan losses must be based on the discounted values of estimated future cash flows. The discount unwinds during the period between the initial recognition of the provision and the eventual recovery of the written down amount, resulting in the recording of interest in the statement of income, within interest income. Under Canadian GAAP, the unwinding is presented as a credit to provision for credit losses.

b) Securitization

The combined effect of financial asset derecognition rules and the consolidation of special purpose entity rules will impact securitization arrangements involving the Bank's off balance sheet loans. The rules provide more stringent criteria for the derecognition of financial assets. Based on initial assessments, the criteria would not be met. This should lead to a significant gross-up of the Bank's balance sheet. In addition, prior gains and losses related to these transactions would be eliminated and the corresponding net interest income recorded in period earnings.

c) Employee benefits

At transition, IFRS generally provide for a retrospective adoption of the Employee Benefits standard (IAS 19). To date, the Bank has not undertaken the task to determine this potential impact given the significant challenge resulting from the complexity of pension benefits and the fact that the Bank has been offering pension plans for more than 30 years. However, IFRS gives the choice to not retrospectively apply IAS 19. If this election is made, gains and losses accumulated to the date of transition will be eliminated. This may have a significant effect on shareholders' equity. Actuarial gains or losses post transition to IFRS can be recognized immediately into earnings, amortized to earnings using a "Corridor Method" similar to Canadian GAAP, or directly into equity (the "SORIE Method"). The Bank is currently assessing the options and will make elections, when new BIS capital requirements are defined, presumably toward the end of the year 2010.

d) Share-based payments

IFRS introduces a new requirement for the Bank to recognize as an expense the fair value of stock appreciation rights. Under Canadian GAAP, these rights are presently accounted for using the intrinsic value method. This should lead to an adjustment of the Bank's financial liabilities and shareholders' equity. With respect to stock option awards granted prior to November 1, 2002, the Bank is not required to apply the standard IFRS 2 - Share based payment retrospectively, therefore, the Bank will continue to apply the previous Canadian GAAP standards under which no compensation cost is recognized for these options. In the second quarter of 2010, a new software application has been implemented that will allow the Bank to automate the calculations and ensure appropriate internal controls.

e) Business combinations

IFRS 3 and section 1582 of the CICA Handbook have been harmonized since January 2009. Henceforth, there will be no accounting differences beyond the IFRS transition date. However, at the transition date, the Bank has to make an election to either apply IFRS 3 retrospectively to all past business acquisitions before a chosen date or apply it prospectively from the transition date. The Bank is currently analyzing the impact of the two options and will make an election in the coming months.

f) Earnings per share

IAS 33 is similar to section 3500 of the CICA Handbook on various elements. However, based on preliminary assessments, the Bank's perpetual preferred shares must be included in the calculation of the diluted earnings per share as they may be converted into common shares; even though the conversion option lies with the Bank.

Throughout the current year and the period leading up to the transition to IFRS in 2012, the Bank will continue to follow the above-mentioned accounting policies and finalize its assessment of policy decisions available under IFRS in order to prepare the Bank for an orderly transition to IFRS. Moreover, as the review of accounting policies is completed, appropriate changes to ensure the integrity of internal control over financial reporting and disclosure controls and procedures will be made. Based on existing IFRS, the Bank has not identified the need for any significant modifications to its financial information technology architecture or to existing internal controls over financial reporting and disclosure.

The evolving nature of IFRS will likely also result in additional accounting changes, some of which may be significant, in the years following our initial transition. We continue to monitor changes in the standards and to adjust our transition accordingly.

In addition, the Bank is specifically addressing lending practices and capital issues, as summarized below, as well as all other matters to ensure an orderly transition.

Lending practices

The transition to IFRS will not only impact the Bank's financial statements, but also some of its clients' financial statements. This will have repercussions on the various loan covenants monitored by underwriting groups and the credit department. The Bank is currently working on developing information programs for commercial account managers as well as credit analysts, to foster a better internal understanding of IFRS to properly analyze the clients' IFRS financial statements and the impacts on ratios and covenants.

Capital implications

The Bank is closely monitoring the potential impact of IFRS conversion on capital requirements. Securitization and employee benefits are the two main areas which could have a significant impact on capital.

Corporate Governance and Changes in Internal Control over Financial Reporting

The Board of Directors and the Audit Committee of Laurentian Bank reviewed this press release prior to its release today. The disclosure controls and procedures support the ability of the President and Chief Executive Officer and the Executive Vice-President and Chief Financial Officer in assuring that Laurentian Bank's interim consolidated financial statements are fairly presented.

During the quarter ended April 30, 2010, there have been no changes in the Bank's policies or procedures and other processes that comprise its internal control over financial reporting which have materially affected, or are reasonably likely to materially affect, the Bank's internal control over financial reporting.

About Laurentian Bank

Laurentian Bank of Canada is a banking institution operating across Canada and offering its clients diversified financial services. Distinguishing itself through excellence in service, as well as through its simplicity and proximity, the Bank serves individual consumers and small and medium-sized businesses. The Bank also offers its products to a wide network of independent financial intermediaries through B2B Trust, as well as full-service brokerage solutions through Laurentian Bank Securities.

Laurentian Bank is well established in the Province of Quebec, operating the third-largest retail branch network. Elsewhere throughout Canada, it operates in specific market segments where it holds an enviable position. Laurentian Bank of Canada has more than $23 billion in balance sheet assets and more than $14 billion in assets under administration. Founded in 1846, the Bank employs more than 3,600 people.

Conference Call

Laurentian Bank invites media representatives and the public to listen to the conference call with financial analysts to be held at 3:30 p.m. Eastern Time on Wednesday, May 26, 2010. The live, listen-only, toll-free, call-in number is 1-888-789-9572.

You can listen to the call on a delayed basis at any time from 6:00 p.m. on Wednesday, May 26, until midnight on Friday, June 18th, 2010, by dialing the following playback number: 1-800-408-3053 Code 2555817#. The conference call can also be heard through the Investor Relations section of the Bank's Web site at www.laurentianbank.ca. The Bank's Website also offers additional financial information.

    
    INTERIM CONSOLIDATED FINANCIAL STATEMENTS

    CONSOLIDATED BALANCE SHEET

                                           AS AT         AS AT         AS AT
    IN THOUSANDS                        APRIL 30    OCTOBER 31      APRIL 30
     OF DOLLARS (UNAUDITED)    NOTES        2010          2009          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    ASSETS
    Cash and non-interest
     -bearing deposits with
      other banks                    $    63,245   $    61,010   $    60,383
                                     ----------------------------------------
    Interest-bearing
     deposits with other
     banks                               194,816       239,606       241,564
                                     ----------------------------------------
    Securities accounts          9
      Available-for-sale               1,061,319     1,424,043     1,498,457
      Held-for-trading                 1,490,777     1,391,313       856,691
      Designated as
       held-for-trading                1,591,334     1,616,827     1,434,664
                                     ----------------------------------------
                                       4,143,430     4,432,183     3,789,812
                                     ----------------------------------------
    Assets purchased under
     reverse repurchase
     agreements                          569,066       536,064       539,859
                                     ----------------------------------------
    Loans                    2 and 3
      Personal                         5,728,762     5,655,055     5,732,010
      Residential mortgage             8,101,340     7,219,830     6,334,599
      Commercial mortgage              1,408,973     1,285,012     1,053,537
      Commercial and other             1,722,876     1,555,956     1,492,038
                                     ----------------------------------------
                                      16,961,951    15,715,853    14,612,184
      Allowance for loan
       losses                           (124,178)     (114,546)     (113,129)
                                     ----------------------------------------
                                      16,837,773    15,601,307    14,499,055
                                     ----------------------------------------
    Other
      Customers' liabilities
       under acceptances                 148,399       216,817       132,670
      Premises and equipment              57,081        58,163        58,317
      Derivative financial
       instruments                       254,369       253,661       283,590
      Goodwill                            53,790        53,790        53,790
      Software and other
       intangible assets                 103,030       103,386        95,122
      Other assets                       664,014       608,793       648,975
                                     ----------------------------------------
                                       1,280,683     1,294,610     1,272,464
                                     ----------------------------------------
                                     $23,089,013   $22,164,780   $20,403,137
                                     ----------------------------------------
                                     ----------------------------------------

    LIABILITIES AND
     SHAREHOLDERS' EQUITY
    Deposits
     Personal                        $15,413,194   $15,138,637   $14,489,829
     Business, banks and
      other                            3,323,558     3,161,329     2,770,934
                                     ----------------------------------------
                                      18,736,752    18,299,966    17,260,763
                                     ----------------------------------------
    Other
      Obligations related to
       assets sold short               1,220,759     1,054,470       571,182
      Obligations related to
       assets sold under
       repurchase agreements             590,168       284,988       183,424
      Acceptances                        148,399       216,817       132,670
      Derivative financial
       instruments                       231,750       174,859       147,930
      Other liabilities                  827,449       812,454       825,590
                                     ----------------------------------------
                                       3,018,525     2,543,588     1,860,796
                                     ----------------------------------------
    Subordinated debentures              150,000       150,000       150,000
                                     ----------------------------------------
    Shareholders' equity
     Preferred shares            4       210,000       210,000       210,000
     Common shares               4       259,363       259,208       257,496
     Contributed surplus                     226           209           193
     Retained earnings                   702,530       665,538       620,732
     Accumulated other
      comprehensive income       8        11,617        36,271        43,157
                                     ----------------------------------------
                                       1,183,736     1,171,226     1,131,578
                                     ----------------------------------------
                                     $23,089,013   $22,164,780   $20,403,137
                                     ----------------------------------------
                                     ----------------------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT OF INCOME

                                            FOR THE THREE MONTHS ENDED
    IN THOUSANDS OF DOLLARS,         ----------------------------------------
     EXCEPT PER SHARE AMOUNTS           APRIL 30    JANUARY 31      APRIL 30
     (UNAUDITED)               NOTES        2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest income
      Loans                          $   180,142     $ 182,747     $ 171,158
      Securities                          17,241        17,639        16,723
      Deposits with other
       banks                                  60            53           509
      Other, including
       derivative financial
       instruments                        29,434        34,076        34,257
                                     ----------------------------------------
                                         226,877       234,515       222,647
                                     ----------------------------------------
    Interest expense
      Deposits                           106,778       111,498       125,571
      Other, including
       derivative financial
       instruments                           579           351         1,116
      Subordinated debentures              1,887         1,950         1,887
                                     ----------------------------------------
                                         109,244       113,799       128,574
                                     ----------------------------------------
    Net interest income                  117,633       120,716        94,073
                                     ----------------------------------------
    Other income
      Fees and commissions on
       loans and deposits                 28,488        26,979        24,665
      Income from brokerage
       operations                         13,742        12,665        10,754
      Securitization income       3          328         4,180         8,594
      Credit insurance income              4,556         4,183         3,768
      Income from sales of
       mutual funds                        3,786         3,526         2,985
      Income from treasury
       and financial market
       operations                          4,576         4,159         5,979
      Income from registered
       self-directed plans                 2,313         2,088         2,038
      Other                                2,691         1,953         1,912
                                     ----------------------------------------
                                          60,480        59,733        60,695
                                     ----------------------------------------
    Total revenue                        178,113       180,449       154,768
                                     ----------------------------------------
    Provision for loan losses    2        16,000        16,000        12,000
                                     ----------------------------------------
    Non-interest expenses
      Salaries and employee
       benefits                           67,617        65,225        60,414
      Premises and technology             32,017        32,142        29,790
      Other                               23,915        23,016        23,830
                                     ----------------------------------------
                                         123,549       120,383       114,034
                                     ----------------------------------------
    Income before income taxes            38,564        44,066        28,734
    Income taxes                          10,215        12,052         7,579
                                     ----------------------------------------
    Net income                       $    28,349   $    32,014   $    21,155
                                     ----------------------------------------
                                     ----------------------------------------
    Preferred share dividends,
     including applicable
     taxes                                 3,074         3,074         3,004
                                     ----------------------------------------
    Net income available to
     common shareholders             $    25,275   $    28,940   $    18,151
                                     ----------------------------------------
                                     ----------------------------------------
    Average number of common
     shares outstanding
     (in thousands)
      Basic                               23,921        23,919        23,849
      Diluted                             23,937        23,935        23,855
                                     ----------------------------------------
    Net income per common share
      Basic                          $      1.06   $      1.21   $      0.76
      Diluted                        $      1.06   $      1.21   $      0.76
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    FOR THE SIX MONTHS ENDED
                                                   --------------------------
    IN THOUSANDS OF DOLLARS,                          APRIL 30      APRIL 30
    EXCEPT PER SHARE AMOUNTS (UNAUDITED)     NOTES        2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest income
      Loans                                        $   362,889   $   361,806
      Securities                                        34,880        35,188
      Deposits with other
       banks                                               113         3,523
      Other, including
       derivative financial
       instruments                                      63,510        56,532
                                                   --------------------------
                                                       461,392       457,049
                                                   --------------------------
    Interest expense
      Deposits                                         218,276       254,645
      Other, including
       derivative financial
       instruments                                         930         5,794
      Subordinated debentures                            3,837         3,834
                                                   --------------------------
                                                       223,043       264,273
                                                   --------------------------
    Net interest income                                238,349       192,776
                                                   --------------------------
    Other income
      Fees and commissions on
       loans and deposits                               55,467        48,274
      Income from brokerage
       operations                                       26,407        19,445
      Securitization income                    3         4,508        19,119
      Credit insurance income                            8,739         7,828
      Income from sales of
       mutual funds                                      7,312         5,821
      Income from treasury
       and financial market
       operations                                        8,735        10,554
      Income from registered
       self-directed plans                               4,401         4,017
      Other                                              4,644         3,471
                                                   --------------------------
                                                       120,213       118,529
                                                   --------------------------
    Total revenue                                      358,562       311,305
                                                   --------------------------
    Provision for loan losses                  2        32,000        24,000
                                                   --------------------------
    Non-interest expenses
      Salaries and employee
       benefits                                        132,842       120,803
      Premises and technology                           64,159        57,775
      Other                                             46,931        46,188
                                                   --------------------------
                                                       243,932       224,766
                                                   --------------------------
    Income before income taxes                          82,630        62,539
    Income taxes                                        22,267        16,337
                                                   --------------------------
    Net income                                     $    60,363   $    46,202
                                                   --------------------------
                                                   --------------------------
    Preferred share dividends,
     including applicable
     taxes                                               6,148         6,226
                                                   --------------------------
    Net income available to
     common shareholders                           $    54,215   $    39,976
                                                   --------------------------
                                                   --------------------------
    Average number of common
     shares outstanding
     (in thousands)
      Basic                                             23,920        23,849
      Diluted                                           23,936        23,863
                                                   --------------------------
    Net income per common share
      Basic                                        $      2.27   $      1.68
      Diluted                                      $      2.26   $      1.68
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                                  FOR THE THREE MONTHS ENDED
                                                  ---------------------------
                                                      APRIL 30      APRIL 30
    IN THOUSANDS OF DOLLARS (UNAUDITED)      NOTES        2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income                                     $    28,349   $    21,155
                                                   --------------------------
    Other comprehensive income, net of
     income taxes                              8
      Unrealized gains on
       available-for-sale securities                       895         8,369
      Reclassification of (gains) losses
       on available-for-sale securities
       to net income                                    (1,480)          (45)
      Net change in value of derivative
       instruments designated as cash flow
       hedges                                          (24,232)        7,763
                                                   --------------------------
                                                       (24,817)       16,087
                                                   --------------------------
    Comprehensive income                           $     3,532   $    37,242
                                                   --------------------------
                                                   --------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                    FOR THE SIX MONTHS ENDED
                                                   --------------------------
                                                      APRIL 30      APRIL 30
    IN THOUSANDS OF DOLLARS (UNAUDITED)      NOTES        2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income                                     $    60,363   $    46,202
                                                   --------------------------
    Other comprehensive income, net of
     income taxes                              8
      Unrealized gains on
       available-for-sale securities                     3,693           855
      Reclassification of (gains) losses
       on available-for-sale securities
       to net income                                    (1,877)          672
      Net change in value of derivative
       instruments designated as cash flow
       hedges                                          (26,470)       22,804
                                                   --------------------------
                                                       (24,654)       24,331
                                                   --------------------------
    Comprehensive income                           $    35,709   $    70,533
                                                   --------------------------
                                                   --------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

                                                    FOR THE SIX MONTHS ENDED
                                                   --------------------------
                                                      APRIL 30      APRIL 30
    IN THOUSANDS OF DOLLARS (UNAUDITED)     NOTES         2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Preferred shares
      Balance at beginning and end of
       period                                      $   210,000   $   210,000
                                                   --------------------------
    Common shares                             4
      Balance at beginning of period                   259,208       257,462
      Issued during the period under
       share purchase option plan             5            155            34
                                                   --------------------------
      Balance at end of period                         259,363       257,496
                                                   --------------------------
    Contributed surplus
      Balance at beginning of period                       209           173
      Stock-based compensation                5             17            20
                                                   --------------------------
      Balance at end of period                             226           193
                                                   --------------------------
    Retained earnings
      Balance at beginning of period                   665,538       596,974
      Net income                                        60,363        46,202
      Dividends
        Preferred shares, including
         applicable taxes                               (6,148)       (6,226)
        Common shares                                  (17,223)      (16,218)
                                                   --------------------------
      Balance at end of period                         702,530       620,732
                                                   --------------------------
    Accumulated other comprehensive income    8
      Balance at beginning of period                    36,271        18,826
      Other comprehensive income, net of
       income taxes                                    (24,654)       24,331
                                                   --------------------------
      Balance at end of period                          11,617        43,157
                                                   --------------------------
    Shareholders' equity                           $ 1,183,736   $ 1,131,578
                                                   --------------------------
                                                   --------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT
    OF CASH FLOWS
                                                  FOR THE THREE MONTHS ENDED
                                        -------------------------------------
                                        APRIL 30    JANUARY 31      APRIL 30
    IN THOUSANDS OF DOLLARS (UNAUDITED)     2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flows relating to operating
     activities
    Net income                       $    28,349   $    32,014   $    21,155
    Adjustments to determine net
     cash flows relating to
     operating activities:
      Provision for loan losses           16,000        16,000        12,000
      Gains on securitization
       operations                         (5,017)       (3,185)       (9,229)
      Net loss (gain) on disposal of
       non-trading securities               (627)       (1,789)          725
      Future income taxes                  4,155         5,470         4,294
      Depreciation                         2,667         2,621         2,802
      Amortization of software and
       other intangible assets             6,446         6,381         5,391
      Net change in held-for-trading
       securities                        571,817      (671,281)      196,179
      Change in accrued interest
       receivable                        (14,262)       12,463       (14,919)
      Change in assets relating to
       derivative financial
       instruments                       (21,836)       21,128        (5,299)
      Change in accrued interest
       payable                             7,744       (12,886)        4,480
      Change in liabilities relating
       to derivative financial
       instruments                        59,511        (2,620)       13,901
      Other, net                         (46,603)        2,137       (15,561)
                                        -------------------------------------
                                         608,344      (593,547)      215,919
                                        -------------------------------------
    Cash flows relating to financing
     activities
      Net change in deposits             310,418       126,368     1,687,893
      Change in obligations related to
       assets sold short                (294,918)      461,207      (334,147)
      Change in obligations related to
       assets sold under repurchase
       agreements                       (127,699)      432,879      (968,424)
      Issuance of common shares                9           146             -
      Dividends, including applicable
       income taxes                      (11,686)      (11,685)      (11,113)
                                        -------------------------------------
                                        (123,876)    1,008,915       374,209
                                        -------------------------------------
    Cash flows relating to investing
     activities
      Change in securities available-
       for-sale and designated as
       held-for-trading
        Acquisitions                    (951,316)   (1,023,593)   (1,807,299)
        Proceeds on sale and at
         maturities                      894,412     1,448,322     1,497,435
      Change in loans                   (826,470)     (726,143)     (467,955)
      Change in assets purchased
       under reverse repurchase
       agreements                        246,383      (279,385)       35,480
      Proceeds from mortgage loan
       securitizations                   182,256       101,512       171,816
      Additions to premises and
       equipment and software, net of
       disposals                         (11,018)       (5,659)       (8,356)
      Change in interest-bearing
       deposits with other banks         (20,454)       65,244          (596)
      Cash flows from discontinued
       operations                              -         8,308             -
                                        -------------------------------------
                                        (486,207)     (411,394)     (579,475)
                                        -------------------------------------
    Net change in cash and non-
     interest-bearing deposits with
     other banks during the period        (1,739)        3,974        10,653
    Cash and non-interest-bearing
     deposits with other banks at
     beginning of period                  64,984        61,010        49,730
                                        -------------------------------------
    Cash and non-interest-bearing
     deposits with other banks at
     end of period                   $    63,245   $    64,984   $    60,383
                                        -------------------------------------
    Supplemental disclosure
     relating to cash flows:
      Interest paid during the
       period                        $   103,324   $   126,503   $   115,043
      Income taxes paid during the
       period                        $     7,654   $    11,279   $     1,709
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    FOR THE SIX MONTHS ENDED
                                                   --------------------------
                                                      APRIL 30      APRIL 30
    IN THOUSANDS OF DOLLARS (UNAUDITED)                   2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flows relating to operating
     activities
    Net income                                     $    60,363   $    46,202
    Adjustments to determine net
     cash flows relating to
     operating activities:
      Provision for loan losses                         32,000        24,000
      Gains on securitization
       operations                                       (8,202)      (25,901)
      Net loss (gain) on disposal of
       non-trading securities                           (2,416)        3,410
      Future income taxes                                9,625        11,613
      Depreciation                                       5,288         5,556
      Amortization of software and
       other intangible assets                          12,827        10,682
      Net change in held-for-trading
       securities                                      (99,464)      212,506
      Change in accrued interest
       receivable                                       (1,799)       (5,543)
      Change in assets relating to
       derivative financial
       instruments                                        (708)      (45,886)
      Change in accrued interest
       payable                                          (5,142)       (7,169)
      Change in liabilities relating
       to derivative financial
       instruments                                      56,891           461
      Other, net                                       (44,466)      (44,913)
                                                   --------------------------
                                                        14,797       185,018
                                                   --------------------------
    Cash flows relating to financing
     activities
      Net change in deposits                           436,786     1,926,951
      Change in obligations related to
       assets sold short                               166,289      (248,054)
      Change in obligations related to
       assets sold under repurchase
       agreements                                      305,180      (952,672)
      Issuance of common shares                            155            34
      Dividends, including applicable
       income taxes                                    (23,371)      (22,444)
                                                   --------------------------
                                                       885,039       703,815
                                                   --------------------------
    Cash flows relating to investing
     activities
      Change in securities available-
       for-sale and designated as
       held-for-trading
        Acquisitions                                (1,974,909)   (2,806,215)
        Proceeds on sale and at
         maturities                                  2,342,734     2,333,284
      Change in loans                               (1,552,613)     (854,998)
      Change in assets purchased
       under reverse repurchase
       agreements                                      (33,002)      121,532
      Proceeds from mortgage loan
       securitizations                                 283,768       483,932
      Additions to premises and
       equipment and software, net of
       disposals                                       (16,677)      (13,122)
      Change in interest-bearing
       deposits with other banks                        44,790      (147,273)
      Cash flows from discontinued
       operations                                        8,308             -
                                                   --------------------------
                                                      (897,601)     (882,860)
                                                   --------------------------
    Net change in cash and non-
     interest-bearing deposits with
     other banks during the period                       2,235         5,973
    Cash and non-interest-bearing
     deposits with other banks at
     beginning of period                                61,010        54,410
                                                   --------------------------
    Cash and non-interest-bearing
     deposits with other banks at
     end of period                                 $    63,245   $    60,383
                                                   --------------------------
    Supplemental disclosure
     relating to cash flows:
      Interest paid during the
       period                                      $   229,827   $   261,646
      Income taxes paid during the
       period                                      $    18,933   $     9,998
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    NOTES TO THE INTERIM CONSOLIDATED
    FINANCIAL STATEMENTS

    ALL TABULAR AMOUNTS ARE IN THOUSANDS OF DOLLARS, UNLESS OTHERWISE
    INDICATED (UNAUDITED)
    

1. ACCOUNTING POLICIES

These unaudited interim consolidated financial statements of Laurentian Bank of Canada (the "Bank") have been prepared by management who is responsible for the integrity and fairness of the financial information presented. These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") for interim financial statements and follow the same significant accounting policies as those in the Bank's audited annual consolidated financial statements as at October 31, 2009. These accounting policies conform to GAAP. However, these interim consolidated financial statements do not reflect all of the information and disclosures required by GAAP for complete financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements as at October 31, 2009. These interim consolidated financial statements reflect amounts which are based on the best estimates and judgment of management. Actual results may differ from these estimates. Certain comparative figures have been reclassified to conform to the current period presentation.

    
    Future changes to accounting policies
    International Financial Reporting Standards
    

The AcSB confirmed the convergence of financial reporting standards for Canadian public companies with International Financial Reporting Standards (IFRS). The Bank will use IFRS for interim and annual financial statements relating to periods beginning as of November 1, 2011. The Bank is assessing the impact of IFRS on its consolidated financial statements upon adoption in the first quarter of 2012.

2. LOANS

Loans and impaired loans

    
                                                        AS AT APRIL 30, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                  GROSS AMOUNT
                                    GROSS AMOUNT   OF IMPAIRED      SPECIFIC
                                        OF LOANS         LOANS    ALLOWANCES
    -------------------------------------------------------------------------
    Personal loans                   $ 5,728,762   $    20,771   $     6,153
    Residential mortgages              8,101,340        28,377         1,639
    Commercial mortgages               1,408,973        29,130         6,104
    Commercial and other loans         1,722,876        83,652        37,032
                                     ----------------------------------------
                                     $16,961,951   $   161,930   $    50,928
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                        AS AT APRIL 30, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                       GENERAL         TOTAL
                                                    ALLOWANCES    ALLOWANCES
    -------------------------------------------------------------------------
    Personal loans                                 $    31,670   $    37,823
    Residential mortgages                                2,861         4,500
    Commercial mortgages                                 4,599        10,703
    Commercial and other loans                          34,120        71,152
                                                   --------------------------
                                                   $    73,250   $   124,178
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                      AS AT OCTOBER 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                  GROSS AMOUNT
                                    GROSS AMOUNT   OF IMPAIRED      SPECIFIC
                                        OF LOANS         LOANS    ALLOWANCES
    -------------------------------------------------------------------------
    Personal loans                   $ 5,655,055   $    23,738   $     7,048
    Residential mortgages              7,219,830        32,368         1,878
    Commercial mortgages               1,285,012        11,230         2,525
    Commercial and other loans         1,555,956        70,158        29,845
                                     ----------------------------------------
                                     $15,715,853   $   137,494   $    41,296
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                      AS AT OCTOBER 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                       GENERAL         TOTAL
                                                    ALLOWANCES    ALLOWANCES
    -------------------------------------------------------------------------
    Personal loans                                 $    33,713   $    40,761
    Residential mortgages                                2,956         4,834
    Commercial mortgages                                 5,000         7,525
    Commercial and other loans                          31,581        61,426
                                                   --------------------------
                                                   $    73,250   $   114,546
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                        AS AT APRIL 30, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                  GROSS AMOUNT
                                    GROSS AMOUNT   OF IMPAIRED      SPECIFIC
                                        OF LOANS         LOANS    ALLOWANCES
    -------------------------------------------------------------------------
    Personal loans                   $ 5,732,010   $    22,057   $     7,738
    Residential mortgages              6,334,599        24,025         1,986
    Commercial mortgages               1,053,537         6,057         1,908
    Commercial and other loans         1,492,038        73,538        28,247
                                     ----------------------------------------
                                     $14,612,184   $   125,677   $    39,879
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                        AS AT APRIL 30, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                       GENERAL         TOTAL
                                                    ALLOWANCES    ALLOWANCES
    -------------------------------------------------------------------------
    Personal loans                                 $    31,695   $    39,433
    Residential mortgages                                3,976         5,962
    Commercial mortgages                                 5,660         7,568
    Commercial and other loans                          31,919        60,166
                                                   --------------------------
                                                   $    73,250   $   113,129
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Specific allowances for loan losses

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

                                        PERSONAL   RESIDENTIAL    COMMERCIAL
                                           LOANS     MORTGAGES     MORTGAGES
    -------------------------------------------------------------------------

    Balance at beginning of period   $     7,048   $     1,878   $     2,525
    Provision for loan losses
     recorded in the consolidated
     statement of income                  16,249           433         3,863
    Write-offs                           (20,617)         (772)         (284)
    Recoveries                             3,473           100             -
                                     ----------------------------------------
    Balance at end of period         $     6,153   $     1,639   $     6,104
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                        FOR THE SIX MONTHS
                                                          ENDED APRIL 30
                                                   --------------------------
                                                          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                         TOTAL         TOTAL
                                  COMMERCIAL AND      SPECIFIC      SPECIFIC
                                     OTHER LOANS    ALLOWANCES    ALLOWANCES
    -------------------------------------------------------------------------

    Balance at beginning of period   $    29,845   $    41,296   $    39,184
    Provision for loan losses
     recorded in the consolidated
     statement of income                  11,455        32,000        24,000
    Write-offs                            (4,283)      (25,956)      (26,978)
    Recoveries                                15         3,588         3,673
                                     ----------------------------------------
    Balance at end of period         $    37,032   $    50,928   $    39,879
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Loans past due but not impaired

Personal and residential mortgage loans past due shown in the table below are not classified as impaired because they are less than 90 days past due or they are secured such as to reasonably expect full recovery. Commercial loans past due but not impaired are not significant.

    
                                                        AS AT APRIL 30, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                              1 TO         32 TO          OVER
                           31 DAYS       90 DAYS       90 DAYS         TOTAL
    -------------------------------------------------------------------------
    Personal loans     $    92,662   $    28,399   $     6,713   $   127,774
    Residential
     mortgages             238,262        52,618        26,898       317,778
                      -------------------------------------------------------
                       $   330,924   $    81,017   $    33,611   $   445,552
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                      AS AT OCTOBER 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                              1 TO         32 TO          OVER
                           31 DAYS       90 DAYS       90 DAYS         TOTAL
    -------------------------------------------------------------------------
    Personal loans     $    88,479   $    30,522   $     6,275   $   125,276
    Residential
     mortgages             218,282        43,839        25,756       287,877
                      -------------------------------------------------------
                       $   306,761   $    74,361   $    32,031   $   413,153
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

3. LOAN SECURITIZATION

Under the mortgage-backed securitization program governed by the National Housing Act, the Bank securitizes residential mortgage loans secured by the Canadian Mortgage and Housing Corporation (CMHC) through the creation of mortgage-backed securities. The Bank also securitized conventional residential mortgages prior to 2008. Gains before income taxes, net of transaction costs, are recognized in other income.

The following table summarizes the residential mortgage securitization transactions carried out by the Bank.

    
                                            FOR THE THREE MONTHS ENDED
                                     ----------------------------------------
                                        APRIL 30    JANUARY 31      APRIL 30
                                            2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash proceeds, net of
     transaction costs               $   182,256   $   101,512   $   171,816
    Rights to future excess spreads       10,524         4,824        15,180
    Servicing liability                   (1,636)         (689)       (1,301)
    Other                                   (883)         (400)       (2,735)
                                     ----------------------------------------
                                         190,261       105,247       182,960
    Residential mortgages
     securitized and sold               (182,609)     (101,538)     (172,039)
    Write-off of loan origination
     costs                                (2,635)         (524)       (1,692)
                                     ----------------------------------------
    Gains before income taxes        $     5,017   $     3,185   $     9,229
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                    FOR THE SIX MONTHS ENDED
                                                   --------------------------
                                                      APRIL 30      APRIL 30
                                                          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash proceeds, net of
     transaction costs                             $   283,768   $   483,932
    Rights to future excess spreads                     15,348        43,487
    Servicing liability                                 (2,325)       (4,099)
    Other                                               (1,283)       (7,793)
                                                   --------------------------
                                                       295,508       515,527
    Residential mortgages
     securitized and sold                             (284,147)     (484,441)
    Write-off of loan origination
     costs                                              (3,159)       (5,185)
                                                   --------------------------
    Gains before income taxes                      $     8,202   $    25,901
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

With regard to the transfer of residential mortgages, the key assumptions used to determine the initial fair value of retained interests at the securitization date are summarized as follows.

    
                                              DURING THE QUARTER ENDED
                                     ----------------------------------------
                                        APRIL 30    JANUARY 31      APRIL 30
                                            2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average term (months)            36            27            30
    Rate of prepayment                      18.0%         17.6%         20.8%
    Discount rate                            1.9%          1.3%          1.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    No loss is expected on insured residential mortgages.
    

Securitization income, as reported in the consolidated statement of income, is detailed in the following table.

    
                                            FOR THE THREE MONTHS ENDED
                                     ----------------------------------------
                                        APRIL 30    JANUARY 31      APRIL 30
                                            2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gains on securitization
     operations                      $     5,017   $     3,185   $     9,229
    Changes in fair value of
     retained interests related to
     excess spreads, securitization
     swaps and financial instruments
     held for economic hedging purposes   (4,506)          667        (2,042)
    Loan management income                 1,977         1,975         1,820
    Other                                 (2,160)       (1,647)         (413)
                                     ----------------------------------------
                                     $       328   $     4,180   $     8,594
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    FOR THE SIX MONTHS ENDED
                                                   --------------------------
                                                      APRIL 30      APRIL 30
                                                          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gains on securitization
     operations                                    $     8,202   $    25,901
    Changes in fair value of
     retained interests related to
     excess spreads, securitization
     swaps and financial instruments
     held for economic hedging purposes                 (3,839)       (9,351)
    Loan management income                               3,952         3,655
    Other                                               (3,807)       (1,086)
                                     ----------------------------------------
                                                   $     4,508   $    19,119
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

As at April 30, 2010, the Bank held rights to future excess spreads of $87,439,000 (of which $85,489,000 related to insured mortgages) and cash reserve accounts of $10,726,000.

The total principal amount of securitized residential mortgages outstanding amounted to $2,590,808,000 as at April 30, 2010 ($2,702,762,000 as at October 31, 2009).

4. CAPITAL STOCK

Issuance of common shares

During the quarter, 275 common shares were issued to management under the Bank's employee share purchase option plan for a cash consideration of $9,000 (6,999 common shares for a cash consideration of $155,000 during the six-month period ended April 30, 2010).

    
    ISSUED AND OUTSTANDING      AS AT APRIL 30,        AS AT OCTOBER 31,
                                          2010                     2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF
     DOLLARS, EXCEPT       NUMBER OF                 NUMBER OF
     NUMBER OF SHARES         SHARES      AMOUNT        SHARES        AMOUNT
    -------------------------------------------------------------------------
    Class A Preferred
     Shares (1)
      Series 9             4,000,000 $   100,000     4,000,000   $   100,000
      Series 10            4,400,000     110,000     4,400,000       110,000
                          ---------------------------------------------------
    Total preferred
     shares                8,400,000 $   210,000     8,400,000   $   210,000
                          ---------------------------------------------------
    Common shares         23,920,962 $   259,363    23,913,963   $   259,208
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The preferred shares are convertible into common shares at the Bank's
        option. However, the number of shares issuable on conversion is not
        determinable until the date of conversion.
    

Capital management

Capital must meet minimum regulatory requirements, as defined by the Office of the Superintendent of Financial Institutions Canada (OSFI) and internal capital adequacy objectives.

Regulatory guidelines issued by OSFI require banks to maintain a minimum Tier 1 capital ratio of at least 7% and a Total capital ratio of at least 10%. The Bank is monitoring its regulatory capital based on the Standard Approach for credit risk and on the Basic Indicator Approach for operational risk, as proposed by the Bank for International Settlements regulatory risk-based capital framework (Basel II). In addition, Canadian banks are required to ensure that their assets-to-capital multiple, which is calculated by dividing gross adjusted assets by Total capital, does not exceed a maximum level prescribed by OSFI. The Bank has complied with these requirements throughout the six-month period ended April 30, 2010.

5. STOCK-BASED COMPENSATION

Share purchase option plan

There were no new grants during the first six months of 2010. Information on the outstanding number of options is as follows.

    
                                                         AS AT         AS AT
                                                      APRIL 30,   OCTOBER 31,
                                                          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                        NUMBER        NUMBER
    -------------------------------------------------------------------------
    Share purchase options
      Outstanding at end of period                      54,075        61,074
      Exercisable at end of period                      41,575        36,074
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Restricted share unit plan

During the first quarter of 2010, under the restricted share unit plan, annual bonuses for certain employees amounting to $1,651,000 were converted into 38,268 entirely vested restricted share units. Simultaneously, the Bank also granted 22,961 additional restricted share units that will vest in December 2012. There were no new grants during the current quarter.

Performance-based share unit plan

During the first quarter of 2010, under the performance-based share unit plan, the Bank granted 50,426 performance-based share units valued at $43.15 each. Rights to 37.5% of these units will vest after three years. The rights to the remaining units will vest after three years, upon meeting certain financial objectives. There were no new grants during the current quarter.

Stock appreciation rights plan

There were no new grants during the first six months of 2010 under the stock appreciation rights plan.

Stock-based compensation plan expense

The following table presents the expense related to all stock-based compensation plans, net of the effect of related hedging transactions.

    
                                             FOR THE THREE MONTHS ENDED
                                     ----------------------------------------
                                        APRIL 30    JANUARY 31      APRIL 30
                                            2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Stock-based compensation
     plan expense                    $     4,658   $       (71)  $       238
    Effect of hedges                      (4,384)          813           (16)
                                     ----------------------------------------
    Total                            $       274   $       742   $       222
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    FOR THE SIX MONTHS ENDED
                                                   --------------------------
                                                      APRIL 30      APRIL 30
                                                          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Stock-based compensation
     plan expense                                  $     4,587   $    (5,677)
    Effect of hedges                                    (3,571)        8,013
                                                   --------------------------
    Total                                          $     1,016   $     2,336
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

6. EMPLOYEE FUTURE BENEFITS

    
                                             FOR THE THREE MONTHS ENDED
                                     ----------------------------------------
                                        APRIL 30    JANUARY 31      APRIL 30
                                            2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Defined benefit pension
     plan expense                    $     1,992   $     1,907   $     1,140
    Defined contribution pension
     plan expense                          1,132         1,093         1,031
    Other plan expense                       825           853           804
                                     ----------------------------------------
    Total                            $     3,949   $     3,853   $     2,975
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    FOR THE SIX MONTHS ENDED
                                                   --------------------------
                                                      APRIL 30      APRIL 30
                                                          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Defined benefit pension
     plan expense                                  $     3,899   $     2,611
    Defined contribution pension
     plan expense                                        2,225         2,024
    Other plan expense                                   1,678         1,636
                                                   --------------------------
    Total                                          $     7,802   $     6,271
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

7. WEIGHTED AVERAGE NUMBER OF OUTSTANDING COMMON SHARES

    
                                             FOR THE THREE MONTHS ENDED
                                     ----------------------------------------
                                        APRIL 30    JANUARY 31      APRIL 30
                                            2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average number of outstanding
     common shares                    23,920,906    23,919,297    23,849,313
    Dilutive share purchase options       16,035        16,110         5,289
                                     ----------------------------------------
    Weighted average number of
     outstanding common shares        23,936,941    23,935,407    23,854,602
                                     ----------------------------------------
                                     ----------------------------------------
    Average number of share purchase
     options not taken into account
     in the calculation of diluted
     income per common share (1)               -             -       105,400
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                    FOR THE SIX MONTHS ENDED
                                                   --------------------------
                                                      APRIL 30      APRIL 30
                                                          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average number of outstanding
     common shares                                  23,920,088    23,848,894
    Dilutive share purchase options                     16,073        14,508
                                                   --------------------------
    Weighted average number of
     outstanding common shares                      23,936,161    23,863,402
                                                   --------------------------
                                                   --------------------------
    Average number of share purchase
     options not taken into account
     in the calculation of diluted
     income per common share (1)                             -        51,827
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The average number of share purchase options was not taken into
        account in the calculation of diluted net income per common share
        since the average exercise price of these options exceeded the
        average market price of the Bank's shares during these periods.
    

8. ADDITIONAL INFORMATION REGARDING OTHER COMPREHENSIVE INCOME

Other comprehensive income

    
                                              FOR THE THREE MONTHS ENDED
                                     ----------------------------------------
                                                                    APRIL 30
                                                                        2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                          BEFORE                      NET OF
                                          INCOME        INCOME        INCOME
                                           TAXES         TAXES         TAXES
    -------------------------------------------------------------------------
    Unrealized net gains on
     available-for-sale securities   $     1,160   $      (265)  $       895
    Reclassification of net (gains)
     and losses to net income on
     available-for-sale securities        (2,037)          557        (1,480)
                                     ----------------------------------------
                                            (877)          292          (585)
    Net change in value of
     derivative instruments
     designated as cash flow hedges      (34,987)       10,755       (24,232)
                                     ----------------------------------------
    Other comprehensive income       $   (35,864)  $    11,047   $   (24,817)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                             FOR THE THREE MONTHS ENDED
                                     ----------------------------------------
                                                                    APRIL 30
                                                                        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                          BEFORE                      NET OF
                                          INCOME        INCOME        INCOME
                                           TAXES         TAXES         TAXES
    -------------------------------------------------------------------------
    Unrealized net gains on
     available-for-sale securities   $    12,054   $    (3,685)  $     8,369
    Reclassification of net (gains)
     and losses to net income on
     available-for-sale securities           (64)           19           (45)
                                     ----------------------------------------
                                          11,990        (3,666)        8,324
    Net change in value of
     derivative instruments
     designated as cash flow hedges       11,777        (4,014)        7,763
                                     ----------------------------------------
    Other comprehensive income       $    23,767   $    (7,680)  $    16,087
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                              FOR THE SIX MONTHS ENDED
                                     ----------------------------------------
                                                                    APRIL 30
                                                                        2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                          BEFORE                      NET OF
                                          INCOME        INCOME        INCOME
                                           TAXES         TAXES         TAXES
    -------------------------------------------------------------------------
    Unrealized net gains on
     available-for-sale securities   $     5,212   $    (1,519)  $     3,693
    Reclassification of net (gains)
     and losses to net income on
     available-for-sale securities        (2,612)          735        (1,877)
                                     ----------------------------------------
                                           2,600          (784)        1,816
    Net change in value of
     derivative instruments
     designated as cash flow hedges      (38,535)       12,065       (26,470)
                                     ----------------------------------------
    Other comprehensive income       $   (35,935)  $    11,281   $   (24,654)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                              FOR THE SIX MONTHS ENDED
                                     ----------------------------------------
                                                                    APRIL 30
                                                                        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                          BEFORE                      NET OF
                                          INCOME        INCOME        INCOME
                                           TAXES         TAXES         TAXES
    -------------------------------------------------------------------------
    Unrealized net gains on
     available-for-sale securities   $     1,136   $      (281)  $       855
    Reclassification of net (gains)
     and losses to net income on
     available-for-sale securities           977          (305)          672
                                     ----------------------------------------
                                           2,113          (586)        1,527
    Net change in value of
     derivative instruments
     designated as cash flow hedges       34,163       (11,359)       22,804
                                     ----------------------------------------
    Other comprehensive income       $    36,276   $   (11,945)  $    24,331
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Accumulated other comprehensive income (net of income taxes)

    
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                 ACCUMULATED
                                                                       OTHER
                                            CASH     AVAILABLE-    COMPREHEN-
                                            FLOW      FOR-SALE          SIVE
                                          HEDGES    SECURITIES        INCOME
    -------------------------------------------------------------------------
    Balance at October 31, 2009      $    32,596   $     3,675   $    36,271
      Change during the three months
       ended January 31, 2010             (2,238)        2,401           163
      Change during the three months
       ended April 30, 2010              (24,232)         (585)      (24,817)
                                     ----------------------------------------
    Balance at April 30, 2010        $     6,126   $     5,491   $    11,617
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                 ACCUMULATED
                                                                       OTHER
                                            CASH     AVAILABLE-    COMPREHEN-
                                            FLOW      FOR-SALE          SIVE
                                          HEDGES    SECURITIES        INCOME
    -------------------------------------------------------------------------
    Balance at October 31, 2008      $    35,417   $   (16,591)  $    18,826
      Change during the three months
       ended January 31, 2009             15,041        (6,797)        8,244
      Change during the three months
       ended April 30, 2009                7,763         8,324        16,087
                                     ----------------------------------------
    Balance at April 30, 2009             58,221       (15,064)       43,157
      Change during the three months
       ended July 31, 2009               (17,786)       11,797        (5,989)
      Change during the three months
       ended October 31, 2009             (7,839)        6,942          (897)
                                     ----------------------------------------
    Balance at October 31, 2009      $    32,596   $     3,675   $    36,271
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

9. SUPPLEMENTAL INFORMATION ON FINANCIAL INSTRUMENTS

Securities

Gains and losses on the portfolio of available-for-sale securities

The following gains and losses were recognized in net income with regard to the available-for-sale securities.

    

                                           FOR THE THREE MONTHS ENDED
                                   ------------------------------------------
                                        APRIL 30    JANUARY 31      APRIL 30
                                            2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Realized net gains (losses)      $     2,037   $       575   $        64
    Writedowns for impairment
     recognized in net income               (148)            -             -
                                   ------------------------------------------
    Total                            $     1,889   $       575   $        64
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    FOR THE SIX MONTHS ENDED
                                                   --------------------------
                                                      APRIL 30      APRIL 30
                                                          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Realized net gains (losses)                    $     2,612   $      (977)
    Writedowns for impairment
     recognized in net income                             (148)            -
                                                   --------------------------
    Total                                          $     2,464   $      (977)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Unrealized gains and losses on the portfolio of available-for-sale securities

The following table presents the gross unrealized gains and unrealized losses on available-for-sale securities, recognized in other comprehensive income.

    
                                                        AS AT APRIL 30, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                         AMORTIZED    UNREALIZED    UNREALIZED          FAIR
                              COST         GAINS        LOSSES         VALUE
    -------------------------------------------------------------------------
    Securities issued
     or guaranteed
      by Canada (1)    $   405,393   $         4   $        38   $   405,359
      by provinces         428,858         2,384           550       430,692
    Other debt
     securities            119,703         4,383           165       123,921
    Asset-backed
     securities             22,990           763           369        23,384
    Preferred shares        42,135           696           935        41,896
    Common shares and
     other securities       33,628         3,369           930        36,067
                       ------------------------------------------------------
                       $ 1,052,707   $    11,599   $     2,987   $ 1,061,319
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                      AS AT OCTOBER 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                         AMORTIZED    UNREALIZED    UNREALIZED          FAIR
                              COST         GAINS        LOSSES         VALUE
    -------------------------------------------------------------------------
    Securities issued
     or guaranteed
      by Canada (1)    $   686,786   $        69   $        13   $   686,842
      by provinces         535,422         4,913             2       540,333
    Other debt
     securities            107,827         6,213            27       114,013
    Asset-backed
     securities             18,545           159           600        18,104
    Preferred shares        38,839           763         1,262        38,340
    Common shares and
     other securities       26,959         1,062         1,610        26,411
                       ------------------------------------------------------
                       $ 1,414,378   $    13,179   $     3,514   $ 1,424,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Including mortgage-backed securities that are fully guaranteed by
        the CMHC pursuant to the National Housing Act.
    

Available-for-sale securities are assessed for impairment at each reporting date to determine whether it is probable that the amortized cost of the security would be recovered. As at April 30, 2010, gross unrealized losses on available-for-sale securities were $2,987,000. These unrealized losses are mainly related to publicly traded common and preferred shares. Management believes that these unrealized losses are temporary as the underlying financial conditions and prospects of the issuers have remained sound.

Financial instruments designated as held-for-trading

Management can elect to designate financial instruments as held-for-trading instruments, with changes in fair value recorded in income, provided that such designations meet specific criteria. Certain securities, retained interests related to securitization activities and retail deposits were designated as held-for-trading in order to significantly reduce recognition inconsistencies that would otherwise arise from recognizing gains and losses on different bases. These financial instruments provide an economic hedge for other financial instruments that are measured at fair value. Gains and losses on these instruments are therefore generally offset by changes in value of other financial instruments. The following table shows the impact of changes in value of these instruments.

    

                                           FOR THE THREE MONTHS ENDED
                                   ------------------------------------------
                                        APRIL 30    JANUARY 31      APRIL 30
                                            2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Included in securitization
     income                          $   (28,120)  $     6,637   $     3,455
    Included in income from
     treasury and financial market
     operations                                -             -           139
                                   ------------------------------------------
    Total                            $   (28,120)  $     6,637   $     3,594
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    FOR THE SIX MONTHS ENDED
                                                   --------------------------
                                                      APRIL 30      APRIL 30
                                                          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Included in securitization
     income                                        $   (21,483)  $    24,701
    Included in income from
     treasury and financial market
     operations                                              -            94
                                                   --------------------------
    Total                                          $   (21,483)  $    24,795
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Derivative financial instruments

Ineffective portions of hedging relationships

The following tables shows the ineffective portions of the cumulative changes in fair value of hedging instruments recognized in the consolidated statement of income.

    
                                           FOR THE THREE MONTHS ENDED
                                   ------------------------------------------
                                        APRIL 30    JANUARY 31      APRIL 30
                                            2010          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flow hedges                 $      (141)  $       (65)  $        89
    Fair value hedges                       (105)           88          (227)
                                   ------------------------------------------
                                     $      (246)  $        23   $      (138)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    FOR THE SIX MONTHS ENDED
                                                   --------------------------
                                                      APRIL 30      APRIL 30
                                                          2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flow hedges                               $      (206)  $       124
    Fair value hedges                                      (17)         (997)
                                                   --------------------------
                                                   $      (223)  $      (873)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Other information on hedging relationships

Net deferred gains of $3,623,000, included in accumulated other comprehensive income as at April 30, 2010, are expected to be transferred into net income over the next twelve months.

The maximum term of cash flow hedging relationships was ten years as at April 30, 2010.

10. SEGMENTED INFORMATION

As of November 1, 2009, certain capital market activities which were previously reported in the Other segment are now reported with Laurentian Bank Securities activities under the newly formed Laurentian Bank Securities and Capital Markets business segment. In addition, foreign exchange and international services, which were also formerly reported in the Other segment, are now reported in the Real Estate & Commercial segment. The Retail & SME Quebec and B2B Trust business segments were not affected by this reorganization. Comparative figures were reclassified to conform to the current period presentation.

    
                                                   FOR THE THREE MONTHS ENDED
                                                               APRIL 30, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                         R & SME
                                          QUEBEC          RE&C           B2B
    -------------------------------------------------------------------------
    Net interest income              $    78,531   $    20,527   $    26,863
    Other income                          32,851         8,598         2,772
                                     ----------------------------------------
    Total revenue                        111,382        29,125        29,635
    Provision for loan losses             11,542         3,984           474
    Non-interest expenses                 87,305         5,558        12,757
                                     ----------------------------------------
    Income (loss) before
     income taxes                         12,535        19,583        16,404
    Income taxes (recovered)               2,453         5,928         5,045
                                     ----------------------------------------
    Net income (loss)                $    10,082   $    13,655   $    11,359
                                     ----------------------------------------
                                     ----------------------------------------
    Average assets (1)               $11,869,619   $ 2,864,115   $ 4,965,651
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                   FOR THE THREE MONTHS ENDED
                                                               APRIL 30, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                          LBS/CM         OTHER         TOTAL
    -------------------------------------------------------------------------
    Net interest income              $       436   $    (8,724)  $   117,633
    Other income                          14,844         1,415        60,480
                                     ----------------------------------------
    Total revenue                         15,280        (7,309)      178,113
    Provision for loan losses                  -             -        16,000
    Non-interest expenses                 11,657         6,272       123,549
                                     ----------------------------------------
    Income (loss) before
     income taxes                          3,623       (13,581)       38,564
    Income taxes (recovered)               1,037        (4,248)       10,215
                                     ----------------------------------------
    Net income (loss)                $     2,586   $    (9,333)  $    28,349
                                     ----------------------------------------
                                     ----------------------------------------
    Average assets (1)               $ 2,570,640   $   680,037   $22,950,062
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                   FOR THE THREE MONTHS ENDED
                                                             JANUARY 31, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                         R & SME
                                          QUEBEC          RE&C           B2B
    -------------------------------------------------------------------------

    Net interest income              $    81,811   $    19,911   $    27,340
    Other income                          30,692         7,679         2,497
                                     ----------------------------------------
    Total revenue                        112,503        27,590        29,837
    Provision for loan losses              9,790         5,150         1,060
    Non-interest expenses                 86,502         4,242        12,607
                                     ----------------------------------------
    Income (loss) before
     income taxes                         16,211        18,198        16,170
    Income taxes (recovered)               3,659         5,510         5,109
                                     ----------------------------------------
    Net income (loss)                $    12,552   $    12,688   $    11,061
                                     ----------------------------------------
                                     ----------------------------------------
    Average assets (1)               $11,752,657   $ 2,800,270   $ 4,738,833
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                   FOR THE THREE MONTHS ENDED
                                                             JANUARY 31, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                          LBS/CM         OTHER         TOTAL
    -------------------------------------------------------------------------

    Net interest income              $       485   $    (8,831)  $   120,716
    Other income                          14,002         4,863        59,733
                                     ----------------------------------------
    Total revenue                         14,487        (3,968)      180,449
    Provision for loan losses                  -             -        16,000
    Non-interest expenses                 11,680         5,352       120,383
                                     ----------------------------------------
    Income (loss) before
     income taxes                          2,807        (9,320)       44,066
    Income taxes (recovered)                 973        (3,199)       12,052
                                     ----------------------------------------
    Net income (loss)                $     1,834   $    (6,121)  $    32,014
                                     ----------------------------------------
                                     ----------------------------------------
    Average assets (1)               $ 2,461,648   $   741,713   $22,495,121
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                                   FOR THE THREE MONTHS ENDED
                                                               APRIL 30, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                         R & SME
                                          QUEBEC          RE&C           B2B
    -------------------------------------------------------------------------
    Net interest income              $    74,489   $    15,342   $    21,496
    Other income                          29,281         5,782         2,417
                                     ----------------------------------------
    Total revenue                        103,770        21,124        23,913
    Provision for loan losses              8,129         3,161           710
    Non-interest expenses                 83,105         6,901        11,740
                                     ----------------------------------------
    Income (loss) before
     income taxes                         12,536        11,062        11,463
    Income taxes (recovered)               2,780         3,462         3,630
                                     ----------------------------------------
    Net income (loss)                $     9,756   $     7,600   $     7,833
                                     ----------------------------------------
                                     ----------------------------------------
    Average assets (1)               $10,849,661   $ 2,285,291   $ 4,231,056
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                   FOR THE THREE MONTHS ENDED
                                                               APRIL 30, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                          LBS/CM         OTHER         TOTAL
    -------------------------------------------------------------------------
    Net interest income              $       526   $   (17,780)  $    94,073
    Other income                          13,487         9,728        60,695
                                     ----------------------------------------
    Total revenue                         14,013        (8,052)      154,768
    Provision for loan losses                  -             -        12,000
    Non-interest expenses                  9,225         3,063       114,034
                                     ----------------------------------------
    Income (loss) before
     income taxes                          4,788       (11,115)       28,734
    Income taxes (recovered)               1,444        (3,737)        7,579
                                     ----------------------------------------
    Net income (loss)                $     3,344   $    (7,378)  $    21,155
                                     ----------------------------------------
                                     ----------------------------------------
    Average assets (1)               $ 1,855,020   $   890,012   $20,111,040
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                     FOR THE SIX MONTHS ENDED
                                                               APRIL 30, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                         R & SME
                                          QUEBEC          RE&C           B2B
    -------------------------------------------------------------------------
    Net interest income              $   160,342   $    40,438   $    54,203
    Other income                          63,543        16,277         5,269
                                     ----------------------------------------
    Total revenue                        223,885        56,715        59,472
    Provision for loan losses             21,332         9,134         1,534
    Non-interest expenses                173,807         9,800        25,364
                                     ----------------------------------------
    Income (loss) before
     income taxes                         28,746        37,781        32,574
    Income taxes (recovered)               6,112        11,438        10,154
                                     ----------------------------------------
    Net income (loss)                $    22,634   $    26,343   $    22,420
                                     ----------------------------------------
                                     ----------------------------------------
    Average assets (1)               $11,810,169   $ 2,831,663   $ 4,850,362
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                     FOR THE SIX MONTHS ENDED
                                                               APRIL 30, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                          LBS/CM         OTHER         TOTAL
    -------------------------------------------------------------------------
    Net interest income              $       921   $   (17,555)  $   238,349
    Other income                          28,846         6,278       120,213
                                     ----------------------------------------
    Total revenue                         29,767       (11,277)      358,562
    Provision for loan losses                  -             -        32,000
    Non-interest expenses                 23,337        11,624       243,932
                                     ----------------------------------------
    Income (loss) before
     income taxes                          6,430       (22,901)       82,630
    Income taxes (recovered)               2,010        (7,447)       22,267
                                     ----------------------------------------
    Net income (loss)                $     4,420   $   (15,454)  $    60,363
                                     ----------------------------------------
                                     ----------------------------------------
    Average assets (1)               $ 2,515,241   $   711,386   $22,718,821
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                     FOR THE SIX MONTHS ENDED
                                                               APRIL 30, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                         R & SME
                                          QUEBEC          RE&C           B2B
    -------------------------------------------------------------------------
    Net interest income              $   150,743   $    29,621   $    42,611
    Other income                          57,826        11,489         4,803
                                     ----------------------------------------
    Total revenue                        208,569        41,110        47,414
    Provision for loan losses             17,664         4,815         1,521
    Non-interest expenses                165,338        13,527        22,516
                                     ----------------------------------------
    Income (loss) before
     income taxes                         25,567        22,768        23,377
    Income taxes (recovered)               5,631         7,128         7,418
                                     ----------------------------------------
    Net income (loss)                $    19,936   $    15,640   $    15,959
                                     ----------------------------------------
                                     ----------------------------------------
    Average assets (1)               $10,794,330   $ 2,247,415   $ 4,197,356
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                     FOR THE SIX MONTHS ENDED
                                                               APRIL 30, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                          LBS/CM         OTHER         TOTAL
    -------------------------------------------------------------------------
    Net interest income              $     1,344   $   (31,543)  $   192,776
    Other income                          24,931        19,480       118,529
                                     ----------------------------------------
    Total revenue                         26,275       (12,063)      311,305
    Provision for loan losses                  -             -        24,000
    Non-interest expenses                 17,875         5,510       224,766
                                     ----------------------------------------
    Income (loss) before
     income taxes                          8,400       (17,573)       62,539
    Income taxes (recovered)               2,533        (6,373)       16,337
                                     ----------------------------------------
    Net income (loss)                $     5,867   $   (11,200)  $    46,202
                                     ----------------------------------------
                                     ----------------------------------------
    Average assets (1)               $ 1,828,265   $   788,748   $19,856,114
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    R & SME Quebec - The Retail & SME Quebec segment covers the full range of
                     savings, investment, financing and transactional
                     products and services offered through its direct
                     distribution network, which includes branches, the
                     electronic network and the call centre, as well as
                     Point-of-Sale financing across Canada. This business
                     segment also offers Visa credit card services, insurance
                     products and trust services. As well, it offers all
                     commercial financial services to the small and medium
                     enterprises in Quebec.
    RE&C -           The Real Estate & Commercial segment handles real estate
                     financing throughout Canada, commercial financing in
                     Ontario and National accounts, as well as foreign
                     exchange and international services.
    B2B -            The B2B Trust business segment supplies generic and
                     complementary banking and financial products to
                     financial advisors and non-bank financial institutions
                     across Canada. This business segment also encompasses
                     deposit brokerage operations.
    LBS/CM -         Laurentian Bank Securities and Capital Markets segment
                     consists of the Laurentian Bank Securities Inc.
                     subsidiary and capital market activities.
    Other -          The Other segment includes treasury and securitization
                     activities and other activities of the Bank, including
                     revenues and expenses that are not attributable to the
                     above-mentioned segments.
    (1)              Assets are disclosed on an average basis as this measure
                     is most relevant to a financial institution.
    

SOURCE Laurentian Bank of Canada

For further information: For further information: Michel C. Lauzon, Chief Financial Officer, (514) 284-4500 #7997; Gladys Caron, Media and Investor Relations contact, (514) 284-4500 #7511; cell (514) 893-3963

Organization Profile

Laurentian Bank of Canada

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