Laurentian Bank reports net income of $28.7 million for the third quarter of 2009



    MONTREAL, Sept. 3 /CNW Telbec/ -

    
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    Highlights of the third quarter 2009

    - Net income of $28.7 million
    - Return on common shareholders' equity of 11.6%
    - Strong recovery of net interest margin at 2.15%
    - Solid levels of capital
    - Continued solid growth in loan and deposit portfolios
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    Laurentian Bank of Canada reported net income of $28.7 million, or $1.08
diluted per common share, for the third quarter ended July 31, 2009, compared
to net income of $30.9 million, or $1.17 diluted per common share, for the
third quarter of 2008. Return on common shareholders' equity was 11.6% for the
quarter, compared to 13.4% for the corresponding period in 2008. Results for
the third quarter of 2008 included the gain on sale of Montréal Exchange
shares partly offset by an increase in the general allowance for loan losses,
as further detailed in the Management Discussion and Analysis on page 3.
Excluding these special items net income and earnings per share increased by
13% and 15% respectively, year-over-year.
    For the nine months ended July 31, 2009, net income totalled $74.9
million, or $2.76 diluted per common share, compared to $75.2 million, or
$2.78 diluted per common share, in 2008. Results for the nine months ended
July 31, 2008 also included certain offsetting items as detailed below.
    Commenting on the Bank's financial results, Réjean Robitaille, President
and Chief Executive Officer, mentioned: "We are pleased with the excellent
progress achieved during the quarter. Measures taken since the beginning of
the year to offset the impact of the financial and economic crisis have
clearly contributed to the improvement in earnings, particularly in restoring
our net interest margin and top-line growth."
    Mr. Robitaille added, with regards to operations: "The economic and
credit conditions remain challenging. However, our prudent approach has served
us well to date and the quality of our assets remains solid. Furthermore, our
strong capital and liquidity positions, should continue to provide flexibility
to benefit from future opportunities. Again this quarter, the excellent loan
and deposit growth experienced in our business segments provides further
evidence of our business development ability."

    Review of Business Development Initiatives

    All business segments demonstrated their ability to grow their businesses
during the quarter. With a 44% year-over-year increase in profitability, the
Real Estate and Commercial sector reported very strong results. Successful
business development activities allowed the group to take advantage of
opportunities in the market which resulted in loan and acceptances portfolios
increasing by 20% over the last twelve months and more than 8% in the third
quarter alone.
    B2B Trust achieved solid revenue growth. While deposit growth slowed
compared to the last quarter, it nonetheless remained impressive, with average
deposits increasing 8% during the quarter, and 36% year-over-year. Despite the
gradual reduction in the introductory promotional pricing on B2B Trust's High
Interest Investment Accounts, the growth and retention of these deposits
remain strong. The success of this product, as well as the continued growth in
the other areas of the business line, specifically, investment loans and
mortgages, testifies to the relevance of B2B Trust's strategy as well as its
leadership position in the independent advisor community.
    In Retail and SME Quebec, net income reached $9.7 million. Growth in most
loan categories continued as a result of effective marketing and sales
efforts. The diversification of strategies to better serve clients, be it
through mobile mortgage representatives or financial planners, is proving to
be successful in developing stronger and deeper relationships, especially
young families who are a priority clientele.
    Last June, the Bank was awarded the exclusive contract to operate the
automatic banking machines network in the Montreal Metro stations. Given the
importance of the Bank's retail franchise, this is considered to be a
significant achievement. Under this new agreement, the Bank will install 44
machines, adding to the 26 the Bank is already operating in the Metro. With
exposure to the 1.2 million daily commuters who use the Montreal public
transit system, this represents an excellent opportunity to increase the
Bank's visibility with its target market.
    In July 2009, Standard & Poor's confirmed the Bank's BBB counterparty
credit rating with a positive outlook, reflecting the sustainable core
operating profitability, stable asset quality, good capital adequacy and
strong liquidity and funding positions.

    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 July 31, 2009, and of how it performed during the three- and nine-month
periods then ended. This MD&A, dated September 3, 2009, should be read in
conjunction with the unaudited interim consolidated financial statements for
the third quarter of 2009. Supplemental information on subjects such as risk
management, accounting policies and off-balance sheet arrangements is also
provided in the Bank's 2008 Annual Report.

    Performance and Financial Objectives

    The following table presents management's financial objectives for 2009
and the Bank's performance to date.

    
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                                                               Nine months
                                                      2009   ended July 31,
    Performance indicators                      objectives    2009 (actual)
    -------------------------------------  ---------------- -----------------
    Return on common shareholders' equity    10.0% to 12.0%           10.1%
    Diluted net income per share            $3.70 to $4.40           $2.76
    Total revenue                                + 2% to 5%          + 2.2%
                                             ($645 to $665           ($488
                                                   million)        million)
    Efficiency ratio                             73% to 70%           70.5%
    Tier 1 capital ratio(1)                 Minimum of 9.5%           10.8%
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    Note 1: During the third quarter, the Bank changed how it accounts for
    credit risk mitigation. See page 7 for further detail.

    Considering the prevailing economic conditions, results for the first nine
months of 2009 are quite satisfactory and the Bank is well positioned to meet
the objectives which were set at the end of last year.

    Analysis of Consolidated Results

    Three months ended July 31, 2009 compared to three months ended July 31,
    2008
    

    Net income for the third quarter ended July 31, 2009 was $28.7 million,
or $1.08 diluted per common share, compared to $30.9 million, or $1.17 diluted
per common share, for the third quarter of 2008. Return on common
shareholders' equity was 11.6% for the third quarter of 2009, compared to
13.4% for the corresponding period in 2008. Results for the third quarter of
2008 included certain specific items, as detailed in the table below.

    
    Special items affecting results for 2008
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    In millions                              Items,      Items,    Diluted,
     of dollars,                            before      net of         per
     except per                             income      income      common
     share amounts             Segment       taxes       taxes       share
    -------------------------------------------------------------------------
                                                    Favourable (unfavourable)
                                                   --------------------------

    Three months ended
     January 31, 2008
    Decrease in future tax
     assets arising from
     the reduction in federal
     income tax rates            Other          $-       $(5.6)     $(0.23)
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    Three months ended
     July 31, 2008
    Gain on sale of Montréal
     Exchange shares             Other        12.9        11.1        0.46
    Increase in the general
     allowance for loan
     losses                      Other        (8.0)       (5.5)      (0.23)
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                                               4.9         5.6        0.23
    -------------------------------------------------------------------------
    Nine months ended
     July 31, 2008                            $4.9       $(0.0)     $(0.00)
    -------------------------------------------------------------------------
    

    Excluding these special items, net income and diluted earnings per share
for the three months ended July 31, 2009 would have improved by $3.4 million
and $0.14 respectively, when compared to the third quarter of 2008.
    Total revenue increased 3% to $176.7 million in the third quarter of
2009, from $171.1 million in the third quarter of 2008, mainly as a result of
a strong increase in net interest income, as detailed below.
    The Bank's net interest income increased $9.4 million to $112.8 million
for the third quarter of 2009, from $103.4 million in the third quarter of
2008, essentially as a result of higher loan and deposit volumes. After
reaching a low of 1.92% in the second quarter of 2009, margins improved to
2.15% for the third quarter of 2009, a level still slightly lower than the
level of 2.20% reached for the same period a year ago. Loan repricing measures
introduced earlier this year and the gradual reduction in the introductory
promotional pricing on B2B Trust's High Interest Investment Account
contributed to this sharp recovery. Sustained competition for retail customers
and the lower interest rate environment have however continued to put some
pressure on margins.
    Other income totalled $63.9 million during the third quarter of 2009,
compared to $67.7 million in the third quarter of 2008. Income from brokerage
operations improved markedly by $6.4 million for the third quarter of 2009,
compared to the third quarter of 2008, as a result of continued strong
performance from the Institutional Fixed Income division and recovering equity
markets. Fees and commissions on loans and deposits also improved $3.1
million, as a result of the overall increase in business activity. These
increases were partially offset by the $12.3 million decrease in income from
treasury and financial market operations, which essentially results from the
$12.9 million gain on sale of Montreal Exchange shares recorded a year ago. In
the third quarter of 2009, income from treasury and financial market
operations was also affected by a $4.7 million charge related to the
write-down of certain available-for-sale equity investments which continued to
suffer from a prolonged decline in their fair value despite recent stronger
equity markets. Income from treasury and financial market operations for the
third quarter of 2008 also included $5.3 million in losses on sales of certain
securities. Revenues from securitization activities stood at $9.8 million for
the third quarter of 2009, including a $5.2 million net gain on sale of $253
million of residential mortgages, compared to securitization revenues of $10.8
million for the third quarter of 2008. Note 3 to the interim financial
statements provides further details on securitization activities. Other
activities yielded generally comparable year-over-year results.
    The provision for loan losses amounted to $16.0 million in the third
quarter of 2009, compared to $18.5 million in the third quarter of 2008. The
provision for loan losses in the third quarter of 2008 included an $8.0
million increase in general provisions to improve the overall provision level.
The year-over-year increase in specific provisions resulted mainly from a
deterioration in consumer loan portfolios (particularly point-of-sale
financing), and increased provisioning in SME Quebec lending, as well as in
commercial lending. The deterioration in consumer loan portfolios is mainly
attributable to the current economic cycle and ensuing higher unemployment and
bankruptcy levels. Gross impaired loans, which had increased at the beginning
of the year, remained relatively unchanged since the end of the first quarter
and stood at $123.1 million as at July 31, 2009. Net impaired loans amounted
to $8.4 million at July 31, 2009 (representing 0.05% of total loans, bankers'
acceptances and assets purchased under reverse repurchase agreements),
compared to $12.5 million at April 30, 2009 and -$10.6 million at October 31,
2008. Compared to April 2009, the improvement reflects the increased
provisioning, mainly in commercial loans. Overall, and in light of the current
economic conditions, the loan portfolio performance remains nonetheless
satisfying. See Note 2 to the interim consolidated financial statements for
more details.
    Non-interest expenses totalled $119.1 million for the third quarter of
2009, compared to $113.5 million for the third quarter of 2008; a 4.9%
year-over-year increase. Salaries and employee benefits increased $2.2
million, essentially as a result of higher salaries and continued hiring in
support of growth in selected priority areas, partially offset by lower
pension expenses. Premises and technology costs remained relatively unchanged
year-over-year. Other expenses increased $3.0 million mainly as a result of
higher professional fees and a one-time adjustment to capital taxes. The
efficiency ratio (non-interest expenses divided by total revenue) was 67.4% in
the third quarter of 2009, compared with 66.4% in the third quarter of 2008.
    For the quarter ended July 31, 2009, income tax expense was $12.9 million
and the effective tax rate was 31.0%. Income taxes for the third quarter of
2009 included a $1.5 million charge resulting from adjustments to future
income tax assets. For the quarter ended July 31, 2008, income tax expense was
$8.1 million and the effective tax rate was 20.8%. This lower effective income
tax rate essentially resulted from the lower income taxes on the gain on sale
of the Montréal Exchange securities.

    
    Nine months ended July 31, 2009 compared to nine months ended July 31,
    2008
    

    For the nine-month period ended July 31, 2009, net income totalled $74.9
million, or $2.76 diluted per common share, compared to $75.2 million, or
$2.78 diluted per common share, in 2008.
    Total revenue improved to $488.0 million for the nine months ended July
31, 2009, compared to $477.7 million for the nine months ended July 31, 2008.
The increase results in part from higher net interest income, which
essentially stemmed from loan and deposit volume growth, while the repricing
measures undertaken since the beginning of the year effectively offset the
negative impact of generally lower interest rates. Increases in fees and
commissions on loans and deposits, as well as significant growth in brokerage
revenues and higher securitization income more than offset the decrease in
income from treasury and financial market operations resulting from the gain
on sale of the Montréal Exchange shares in 2008.
    The provision for loan losses amounted to $40.0 million for the nine
months ended July 31, 2009, compared to $38.0 million for the nine months
ended July 31, 2008, which included an $8.0 million increase in general
provisions. The increase reflects the ongoing challenging credit environment
and higher loan volumes.
    Non-interest expenses totalled $343.8 million for the nine months ended
July 31, 2009, compared to $333.0 million for the nine months ended July 31,
2008. The increase is principally attributable to higher salaries in retail
banking and technology, as well as to higher advertising expenses, partially
offset by lower pension costs. For the nine months ended July 31, 2009, the
efficiency ratio stood at 70.5%, compared to 69.7% for the nine months ended
July 31, 2008.
    For the nine months ended July 31, 2009, the income tax expense was $29.2
million and the effective income tax rate was 28.1%, compared to $31.5 million
and 29.5% for the nine months ended July 31, 2008. Results for the nine months
ended July 31, 2008, included the effect of a $5.6 million unfavourable tax
adjustment resulting from federal income tax rate reductions recorded in the
first quarter and the lower income taxes on certain capital gains in the third
quarter.

    
    Three months ended July 31, 2009 compared to three months ended April 30,
    2009
    

    Net income was $28.7 million, or $1.08 diluted per common share, for the
third quarter ended July 31, 2009, compared to net income of $21.2 million, or
$0.76 diluted per common share, for the second quarter of 2009. The increase
in profitability mainly results from the sharp increase in net interest
income, as average assets were $678 million higher quarter-over-quarter and
net interest income as a percentage of average assets rose 23 basis points, as
well as from the effect of the longer quarter. These items were partially
offset by higher loan losses and other expenses.

    Analysis of Financial Condition

    Balance sheet assets stood at $21.3 billion at July 31, 2009, compared to
$19.6 billion at October 31, 2008.
    Liquid assets, including cash, deposits with other banks, securities and
assets purchased under reverse repurchase agreements, increased $525 million,
mainly as a result of continued strong deposit growth, as detailed below. This
higher level of liquid assets provides additional flexibility in meeting
funding requirements and preserves the Bank's ability to capitalize on growth
opportunities as they arise.
    The portfolio of loans and bankers' acceptances stood at $15.6 billion at
July 31, 2009, up $1.2 billion from October 31, 2008. Residential mortgages,
including securitized loans, increased $1.0 billion over the last nine months,
as detailed below, benefitting from a very strong level of activity during the
recent mortgage renewal period in Quebec.

    
    Residential Mortgage Portfolio     July 31,     April 30,   October 31,
    (in millions of dollars)              2009          2009          2008
    -------------------------------------------------------------------------
    Residential mortgage loans, as
     reported on the balance sheet      $6,978        $6,335        $6,183
    Securitized loans                    2,610         2,615         2,399
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    Total residential mortgage loans,
     including securitized loans        $9,588        $8,950        $8,582
    -------------------------------------------------------------------------
    

    Commercial mortgages and commercial loans increased more than $215
million and $155 million, respectively, since the beginning of the year.
Personal loans decreased slightly as a result of management's decision to
reduce the Bank's exposure to point-of-sale financing.
    Total personal deposits increased a further $0.3 billion during the third
quarter and $2.3 billion cumulatively since the beginning of the year, to
reach $14.8 billion as at July 31, 2009. B2B Trust's new High Interest
Investment Account (HIIA) continued to generate significant growth during the
quarter and accounted for $2.0 billion of this total growth since the
beginning of the year. Personal deposits sourced through the retail branch
operations improved as well, up $533 million since the beginning of the year.
Business and other deposits increased $421 million during the third quarter,
benefitting from the new HIIA account and various other initiatives. These
increases enabled a reduction in commercial and institutional funding since
the beginning of the year. As at July 31, 2009, personal deposits accounted
for 82% of total deposits of $18.0 billion.
    Shareholders' equity stood at $1,143.5 million as at July 31, 2009,
compared with $1,083.4 million as at October 31, 2008. The increase in
shareholders' equity results from accumulated retained earnings since the
beginning of the year and from an increase in other comprehensive income.
    The Bank's book value per common share, excluding accumulated other
comprehensive income, was $37.57 as at July 31, 2009, compared to $35.84 as at
October 31, 2008. There were 23,855,926 common shares and 119,112 share
purchase options outstanding as at August 26, 2009.
    During the quarter, the Bank opted to use the Comprehensive approach to
account for credit risk mitigation under the Standardized Basel II Framework,
instead of the Simple approach. The Comprehensive approach allows fuller
offset of collateral against exposures. In addition, the risk weight
associated with certain credit commitments was also reviewed. These changes
led to a net reduction in risk-weighted assets of approximately $869 million
as at July 31, 2009 and generated increases in BIS Tier 1 and total capital
ratios of 91 basis points and 108 basis points, respectively. As at July 31,
2009, the BIS Tier 1 and total capital ratios now stood at 10.8% and 12.8%,
respectively. The Bank's regulatory Tier I capital reached $1,015 million as
at July 31, 2009, as compared to $965.4 million as at October 31, 2008. These
ratios fully reflect the Bank's strong capital and its ability to further
develop its business. The tangible common equity ratio, one of the highest in
the industry, at 8.8%, also testifies to the high quality of the Bank's
capital.
    During the quarter, Standard & Poor's confirmed the Bank's Deposits &
Senior Debt counterparty credit rating at BBB with a positive outlook and the
Short-Term Instruments rating at A-2, reflecting sustainable core operating
profitability, stable asset quality, good capital adequacy and strong
liquidity and funding position.
    At its August 26, 2009 meeting, the Board of Directors declared regular
dividends on the various series of preferred shares to shareholders of record
on September 8, 2009. Also, at its September 3, 2009 meeting, the Board of
Directors declared a dividend of $0.34 per common share, payable on November
1, 2009, to shareholders of record on October 1, 2009.
    Assets under administration stood at $14.2 billion as at July 31, 2009,
compared to $14.4 billion at October 31, 2008. Recoveries in market values
during the last six months helped partly offset decreases in assets under
administration recorded earlier this year, as well as a reduction in
institutional assets under administration.

    Segmented Information

    The table below presents the net income contribution of each business
segment of the Bank. Compared to the second quarter of 2009, results for the
third quarter of 2009 generally benefited from the three additional days in
the quarter.

    
    Net income contribution
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                              Real              Lauren-
                            Estate                tian
                  Retail         &                Bank
    (in millions   & SME    Commer-      B2B      Secu-
     of $)        Quebec      cial     Trust    rities     Other     Total
    -------------------------------------------------------------------------
                                                                   (note 1)
    Q3-2009          9.7      11.1       8.7       3.2      (4.0)     28.7
                      30%       34%       26%       10%      n/a       100%

    Q2-2009          9.8       7.5       7.8       1.9      (5.8)     21.2
                      36%       28%       29%        7%      n/a       100%

    Q3-2008         11.6       7.7       9.2       1.1       1.3      30.9
                      39%       26%       31%        4%      n/a       100%
    -------------------------------------------------------------------------
    Note 1: Percentage of net income contribution from the four business
    segments, excluding the Other segment.
    

    Retail & SME Quebec

    The Retail & SME Quebec business segment's contribution to net income
declined to $9.7 million for the third quarter of 2009, compared with $11.6
million for the third quarter of 2008.
    Total revenue increased $1.6 million, from $107.5 million in the third
quarter of 2008 to $109.1 million in the third quarter of 2009, as a result of
continued growth in loan and deposit volumes. Loan losses were higher, at
$12.4 million in the third quarter of 2009, compared to $9.3 million in the
third quarter of 2008, reflecting ongoing weaker credit conditions in point of
sale financing and SME lending. Non-interest expenses increased 2.3% or $1.9
million, from $82.8 million in the third quarter of 2008 to $84.7 million in
the third quarter of 2009, due mainly to increases in salaries and advertising
expenses.

    Real Estate & Commercial

    The Real Estate & Commercial business segment's contribution to net
income improved $3.4 million, or 44%, to $11.1 million for the third quarter
of 2009, compared to $7.7 million for the third quarter of 2008.
    Total revenue increased 37%, or $6.7 million, from $18.3 million in the
third quarter of 2008 to $25.0 million in the third quarter of 2009, as a
result of higher net interest income due to growth in both loan volumes and
margins, as well as higher fees. Loan losses, essentially in Commercial
lending increased to $2.1 million in the third quarter of 2009, compared to
$1.0 million in the third quarter of 2008. Given current economic conditions,
loan losses in these portfolios remained well under control during the
quarter. Non-interest expenses increased $1.0 million to $6.8 million in the
third quarter of 2009, from $5.8 million in the third quarter of 2008.

    B2B Trust

    The B2B Trust business segment's contribution to net income declined by
$0.6 million, to $8.7 million in the third quarter of 2009, compared with $9.2
million in the third quarter of 2008.
    Total revenue increased $1.7 million, from $24.7 million in the third
quarter of 2008 to $26.4 million in the third quarter of 2009. Net interest
income increased $2.0 million year-over-year, mainly as a result of higher
loan and deposit volumes. The recent easing of funding conditions and the
gradual reduction in the introductory promotional pricing on B2B Trust's HIIA
also partly restored net interest margins compared with prior quarters.
    Deposits reached $8.7 billion as at July 31, 2009, up $2.7 billion since
the beginning of the year and $334 million since April 30, 2009. The sharp
increase resulted mainly from the new HIIA, which provided the Bank with
additional flexibility in meeting funding requirements and supporting growth
initiatives. Loans also continued their progression, with the quarterly
average level increasing by $298 million over the last nine months.
    Loan losses increased to $1.5 million in the third quarter of 2009,
compared with $0.2 million in the third quarter of 2008. While these losses
reflect a deterioration in credit conditions, their level remains low given
the size of the underlying portfolios. Non-interest expenses increased to
$12.3 million in the third quarter of 2009, compared with $10.6 million in the
third quarter of 2008.

    Laurentian Bank Securities

    The Laurentian Bank Securities (LBS) business segment's contribution to
net income improved noticeably to $3.2 million in the third quarter of 2009,
compared with $1.1 million in the third quarter of 2008. The strong
performance of the Institutional Fixed Income division and improved results in
other activities resulting from recovering equity markets contributed to the
excellent quarter. Non-interest expenses increased to $11.5 million in the
third quarter of 2009, from $8.3 million in the third quarter of 2008,
primarily due to higher variable compensation costs.

    Other Segment

    The Other segment posted a negative contribution to net income of $4.0
million in the third quarter of 2009, compared with a positive contribution of
$1.3 million in the corresponding quarter of 2008.
    Net interest income improved to -$7.9 million for the third quarter of
2009, compared to -$10.6 million for the third quarter of 2008. The negative
income is mainly attributable to the offsetting adjustment to net interest
income resulting from securitization activities in this segment, to the lower
margins from liquid assets, and the lower overall interest rate environment.
Other income stood at $7.9 million for the third quarter of 2009, consisting
primarily of securitization income. The contribution to other income from
treasury and financial market operations was negligible, as revenues earned
during the quarter were offset by a $4.7 million charge related to the
write-down of certain available-for-sale equity investments. Results for the
third quarter of 2008 included the $12.9 million gain on the sale of Montréal
Exchange shares, partly offset by losses of $5.3 million on the sale of other
securities.
    Results for the third quarter of 2008 also included the additional
general provision for loan losses of $8.0 million.

    Additional Disclosures - Investment in Asset-Backed Securities

    As detailed below, the Bank holds investments in asset-backed securities
in its investment and trading portfolios.

    
    As at July 31, 2009                          Term Notes
                                            ----------------------
    (at market value,                                    Other
     in millions of dollars)      ABCP        CMBS         ABS(1)     Total
    -------------------------------------------------------------------------
    Securities issued by
     conduits previously
     covered by the
     Montréal Accord(2)              -           -          13          13
    Other securities                 -          15           6          21
    -------------------------------------------------------------------------
    Total - Asset-backed
     securities                      -          15          19          34
    -------------------------------------------------------------------------
    (1) Excluding mortgage-backed securities that are fully guaranteed by the
        Canada Mortgage and Housing Corporation under the National Housing
        Act (NHA).
    (2) During the first quarter of 2009, all ABCP issued by conduits covered
        by the Montréal Accord were converted into term notes. The new
        securities have not traded actively to date. As a result, valuation
        techniques were used to estimate fair values. Compared to previous
        carrying amounts, the cumulative reductions in the value of these
        securities amount to $5.6 million, or approximately 30%.

    ABCP - Asset-backed commercial paper
    CMBS - Commercial mortgage-backed securities
    ABS -  Asset-backed securities


    Additional Financial Information - Quarterly Results

    (in millions
     of dollars,
     except per
     share amounts                            2009
     (unaudited))                               Q3          Q2          Q1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue                           $176.7      $154.8      $156.5
    Income from
     continuing
     operations                               28.7        21.2        25.0
    Net income                                28.7        21.2        25.0
    Income per
     common
     share from
     continuing
     operations
      Basic                                   1.08        0.76        0.92
      Diluted                                 1.08        0.76        0.91
    Net income per
     common share
      Basic                                   1.08        0.76        0.92
      Diluted                                 1.08        0.76        0.91
    Return on common
     shareholders'
     equity                                   11.6%        8.5%       10.0%
    Balance sheet
     assets                                $21,295     $20,382     $19,847
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (in millions
     of dollars,
     except per
     share amounts    2008                                            2007
     (unaudited))       Q4          Q3          Q2          Q1          Q4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue   $152.8      $171.1      $155.5      $151.1      $145.6
    Income from
     continuing
     operations       22.9        30.9        25.1        19.1        25.7
    Net income        27.3        30.9        25.1        19.1        30.2
    Income per
     common
     share from
     continuing
     operations
      Basic           0.84        1.17        0.93        0.68        0.96
      Diluted         0.84        1.17        0.93        0.68        0.95
    Net income per
     common share
      Basic           1.02        1.17        0.93        0.68        1.14
      Diluted         1.02        1.17        0.93        0.68        1.14
    Return on common
     shareholders'
     equity           11.5%       13.4%       11.2%        8.1%       13.8%
    Balance sheet
     assets        $19,559     $19,301     $18,383     $18,270     $17,787
    -------------------------------------------------------------------------
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    Accounting Policies

    A summary of the Bank's significant accounting policies is presented in
notes 2 and 3 of the 2008 audited consolidated financial statements. Pages 54
to 56 of the 2008 Annual Report also contain a discussion of certain
significant critical accounting policies which refer to material amounts
reported in the consolidated financial statements or require management's
judgment. The interim consolidated financial statements for the third quarter
of 2009 have been prepared in accordance with these accounting policies,
except as noted below.

    New accounting standards adopted during fiscal 2009

    Earlier in 2009, the Bank adopted Section 3064, Goodwill and Intangible
Assets, and Abstract EIC-173, Credit Risk and the Fair Value of Financial
Assets and Financial Liabilities. These changes, detailed in note 1 to the
interim consolidated financial statements, had no significant effect on the
interim consolidated financial statements.

    Future changes in accounting policies

    Impairment of financial assets

    On July 29, 2009, the Canadian Accounting Standards Board (AcSB) posted
the typescript related to the amendments that will be incorporated to Section
3025, Impaired Loans and Section 3855, Financial Instruments - Recognition and
Measurement. Details of the amendments are presented in note 1 to the interim
consolidated financial statements. The amendments apply to annual financial
statements relating to fiscal years beginning on or after November 1, 2008,
but are not required for interim financial statements relating to periods
within the fiscal year of adoption. The Bank has opted to defer the adoption
to October 31, 2009 and does not anticipate that the new requirements will
have a significant effect on the Bank's financial statements upon adoption.

    Financial instruments disclosures

    In June 2009, the AcSB issued amendments to Section 3862 - Financial
instruments disclosures to improve disclosure requirements on fair value
measurement and liquidity risk. The amendments are effective for the Bank's
October 31, 2009 annual financial statements. As the amendments only concern
disclosure requirements, they will not have a significant impact on results or
financial position.

    International Financial Reporting Standards

    In January 2006, the AcSB released its new Strategic Plan, which includes
the decision to converge financial reporting for Canadian public entities with
International Financial Reporting Standards (IFRS). Under the AcSB's plan,
this new framework will be effective for fiscal years beginning on or after
January 1, 2011, that is, for the Bank's fiscal year ending October 31, 2012.
    In light of the recent economic turmoil, the International Accounting
Standards Board has proposed significant changes to accounting principles with
respect to the accounting for financial instruments, including securitization
activities, hedging transactions and loan losses. Analysis of accounting
consequences related to these matters, as well as to the overall conversion to
IFRS is in progress. A timetable has been prepared to assess the impact on
financial disclosures, information systems and internal controls. The Bank is
also closely monitoring potential implications of changes on capital
requirements.

    
    Corporate Governance and Changes in Internal Control over Financial
    Reporting
    

    The Board of Directors and the Audit Committee of the Bank reviewed this
press release prior to its release today. The disclosure controls and
procedures support the ability of the President and Chief Executive Officer
and the Executive Vice-President and Chief Financial Officer in assuring that
Laurentian Bank's interim consolidated financial statements are fairly
presented.
    During the last quarter ended July 31, 2009, 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.
Differentiating 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 $21 billion in balance sheet assets
and more than $14 billion in assets under administration. Founded in 1846, the
Bank employs more than 3,500 people.

    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, book value per common share and
efficiency ratios. In addition, net income excluding significant items has
been presented at certain points in this document. 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 profitability 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, including statements regarding
the Bank's business plan and financial objectives. These statements typically
use the conditional, as well as words such as prospects, believe, estimate,
forecast, project, 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 inaccurate.
Although the Bank believes that the expectations reflected in these
forward-looking statements are reasonable, it provides 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.

    Conference Call

    Laurentian Bank invites media representatives and the public to listen to
the conference call with financial analysts to be held at 2 p.m. Eastern Time
on Thursday, September 3, 2009. The live, listen-only, toll-free call-in
number is 1-866-231-8192.
    You can listen to the call on a delayed basis at any time from 6:00 p.m.
on Thursday, September 3, 2009, until midnight on September 25, 2009, by
dialling the following playback number: 1-800-374-6971 Code 24703041. 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.


    
    FINANCIAL
    HIGHLIGHTS
                                  FOR THE THREE MONTHS ENDED
    IN MILLIONS OF DOLLARS,      -----------------------------
    UNLESS OTHERWISE INDICATED         JULY 31       JULY 31
     (UNAUDITED)                          2009          2008     VARIATION
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings
    Net income                    $       28.7  $       30.9            (7)%
    Net income available to
     common shareholders          $       25.9  $       28.0            (8)%
    Return on common
     shareholders' equity(1)              11.6 %        13.4 %
    Per common share
    Diluted net income            $       1.08  $       1.17            (8)%
    Dividends declared            $       0.34  $       0.32             6 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FINANCIAL RATIOS
    Per common share
    Dividend yield                        3.80 %        3.05 %
    Dividend payout ratio                 31.4 %        27.3 %
    As a percentage of average
     assets
    Net interest income                   2.15 %        2.20 %
    Provision for credit losses           0.31 %        0.39 %
    Profitability
    Efficiency ratio (non-
     interest expenses as a % of
     total revenue)                       67.4 %        66.4 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                   FOR THE NINE MONTHS ENDED
    IN MILLIONS OF DOLLARS,      -----------------------------
    UNLESS OTHERWISE INDICATED         JULY 31       JULY 31
     (UNAUDITED)                          2009          2008     VARIATION
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings
    Net income                    $       74.9  $       75.2             - %
    Net income available to
     common shareholders          $       65.8  $       66.3            (1)%
    Return on common
     shareholders' equity(1)              10.1 %        10.9 %
    Per common share
    Diluted net income            $       2.76  $       2.78            (1)%
    Dividends declared            $       1.02  $       0.96             6 %
    Book value(1)                 $      37.57  $      35.15             7 %
    Share price - close           $      35.75  $      42.00           (15)%
    Financial position
    Balance sheet assets          $     21,295  $     19,301            10 %
    Assets under administration   $     14,156  $     15,490            (9)%
    Loans, bankers' acceptances
     and assets purchased under
     reverse repurchase
     agreements, net              $     15,853  $     14,825             7 %
    Personal deposits             $     14,766  $     12,466            18 %
    Shareholders' equity and
     debentures                   $      1,293  $      1,211             7 %
    Number of common shares -
     end of period (in
     thousands)                         23,856        23,844             - %
    Net impaired loans as a % of
     loans, bankers' acceptances
     and assets purchased under
     reverse repurchase
     agreements                           0.05 %       (0.09)%
    Risk-weighted assets          $      9,410  $      9,505            (1)%
    Capital ratios
    Tier I BIS capital ratio              10.8 %        10.1 %
    Total BIS capital ratio               12.8 %        12.1 %
    Assets to capital multiple            17.8 x        16.9 x
    Tangible common equity as a
     percentage of risk-weighted
     assets(2)                             8.8 %         8.1 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FINANCIAL RATIOS
    Per common share
    Price / earnings ratio
     (trailing four quarters)              9.5 x        10.7 x
    Market to book value                    95 %         119 %
    Dividend yield                        3.80 %        3.05 %
    Dividend payout ratio                 37.0 %        34.5 %
    As a percentage of average
     assets
    Net interest income                   2.03 %        2.23 %
    Provision for credit losses           0.27 %        0.28 %
    Profitability
    Efficiency ratio (non-
     interest expenses as a % of
     total revenue)                       70.5 %        69.7 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    OTHER INFORMATION
    Number of full-time
     equivalent employees                3,571         3,521
    Number of branches                     156           156
    Number of automated banking
     machines                              362           340
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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
        other intangible assets.


    CONSOLIDATED
    BALANCE SHEET
                                         AS AT         AS AT         AS AT
    IN THOUSANDS OF                    JULY 31    OCTOBER 31       JULY 31
     DOLLARS (UNAUDITED)   NOTES          2009          2008          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    ASSETS
    Cash and non-
     interest-bearing
     deposits with other
     banks                        $     56,240  $     54,410  $     63,756
                                 --------------------------------------------
    Interest-bearing
     deposits with other
     banks                             475,986        94,291       292,085
                                 --------------------------------------------
    Securities accounts
      Available-for-sale             1,061,666     1,327,504     1,111,747
      Held-for-trading               1,277,764     1,069,197     1,129,552
      Designated as
       held-for-trading              1,574,909     1,118,838     1,018,698
                                 --------------------------------------------
                                     3,914,339     3,515,539     3,259,997
                                 --------------------------------------------
    Assets purchased
     under reverse
     repurchase
     agreements                        403,961       661,391       843,068
                                 --------------------------------------------
    Loans                2 and 3
      Personal                       5,214,906     5,302,046     5,265,562
      Residential
       mortgage                      6,978,469     6,182,871     6,109,648
      Commercial
       mortgage                      1,148,071       932,688       883,401
      Commercial and
       other                         2,003,217     1,847,327     1,727,105
                                 --------------------------------------------
                                    15,344,663    14,264,932    13,985,716
      Allowance for loan
       losses                         (114,672)     (112,434)     (115,504)
                                 --------------------------------------------
                                    15,229,991    14,152,498    13,870,212
                                 --------------------------------------------
    Other
      Customers'
       liabilities under
       acceptances                     219,533       110,342       111,966
      Tangible capital
       assets and
       software                        142,494       143,489       138,000
      Derivative
       financial
       instruments                     241,239       237,704       110,370
      Goodwill                          53,790        53,790        53,790
      Other intangible
       assets                           11,982        12,896        13,201
      Other assets                     545,925       522,202       544,539
                                 --------------------------------------------
                                     1,214,963     1,080,423       971,866
                                 --------------------------------------------
                                  $ 21,295,480  $ 19,558,552  $ 19,300,984
                                 --------------------------------------------
                                 --------------------------------------------
    LIABILITIES AND
     SHAREHOLDERS' EQUITY
    Deposits
      Personal                    $ 14,765,581  $ 12,430,038  $ 12,465,740
      Business, banks and
       other                         3,192,277     2,903,774     2,688,225
                                 --------------------------------------------
                                    17,957,858    15,333,812    15,153,965
                                 --------------------------------------------
    Other
      Obligations related
       to assets sold
       short                           700,058       819,236       933,839
      Obligations related
       to assets sold
       under repurchase
       agreements                      251,749     1,136,096     1,013,995
      Acceptances                      219,533       110,342       111,966
      Derivative
       financial
       instruments                     139,348       147,469        70,981
      Other liabilities                733,444       778,162       805,422
                                 --------------------------------------------
                                     2,044,132     2,991,305     2,936,203
                                 --------------------------------------------
    Subordinated
     debentures                        150,000       150,000       150,000
                                 --------------------------------------------
    Shareholders' equity
      Preferred shares         4       210,000       210,000       210,000
      Common shares            4       257,641       257,462       257,360
      Contributed surplus                  201           173           158
      Retained earnings                638,480       596,974       580,703
      Accumulated other
       comprehensive
       income                  8        37,168        18,826        12,595
                                 --------------------------------------------
                                     1,143,490     1,083,435     1,060,816
                                 --------------------------------------------
                                  $ 21,295,480  $ 19,558,552  $ 19,300,984
                                 --------------------------------------------
                                 --------------------------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT
    OF INCOME

    IN THOUSANDS OF                      FOR THE THREE MONTHS ENDED
     DOLLARS,                    --------------------------------------------
    EXCEPT PER SHARE                   JULY 31      APRIL 30       JULY 31
     AMOUNTS (UNAUDITED)   NOTES          2009          2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest income
      Loans                       $    178,002  $    171,158  $    204,237
      Securities                        18,031        16,723        16,161
      Deposits with other
       banks                               278           509         6,815
      Other, including
       derivative
       financial
       instruments                      40,979        34,257        13,148
                                 --------------------------------------------
                                       237,290       222,647       240,361
                                 --------------------------------------------
    Interest expense
      Deposits                         122,119       125,571       128,264
      Other, including
       derivative
       financial
       instruments                         455         1,116         6,739
      Subordinated
       debentures                        1,950         1,887         1,945
                                 --------------------------------------------
                                       124,524       128,574       136,948
                                 --------------------------------------------
    Net interest income                112,766        94,073       103,413
                                 --------------------------------------------
    Other income
      Fees and commissions
       on loans and
       deposits                         26,768        24,665        23,660
      Income from
       brokerage
       operations                       15,417        10,754         8,973
      Income from treasury
       and financial
       market operations                    17         5,979        12,328
      Income from sales of
       mutual funds                      3,225         2,985         3,943
      Credit insurance
       income                            4,767         3,768         3,957
      Income from
       registered self-
       directed plans                    2,056         2,038         2,249
      Securitization
       income                  3         9,771         8,594        10,764
      Other                              1,870         1,912         1,808
                                 --------------------------------------------
                                        63,891        60,695        67,682
                                 --------------------------------------------
    Total revenue                      176,657       154,768       171,095
                                 --------------------------------------------
    Provision for loan
     losses                    2        16,000        12,000        18,500
                                 --------------------------------------------
    Non-interest expenses
      Salaries and
       employee benefits                62,828        60,414        60,668
      Premises and
       technology                       30,331        29,790        29,937
      Other                             25,922        23,830        22,942
                                 --------------------------------------------
                                       119,081       114,034       113,547
                                 --------------------------------------------
    Income before income
     taxes                              41,576        28,734        39,048
    Income taxes                        12,893         7,579         8,111
                                 --------------------------------------------
    Net income                    $     28,683  $     21,155  $     30,937
                                 --------------------------------------------
                                 --------------------------------------------
    Preferred share
     dividends, including
     applicable taxes                    2,824         3,004         2,967
                                 --------------------------------------------
    Net income available
     to common
     shareholders                 $     25,859  $     18,151  $     27,970
                                 --------------------------------------------
                                 --------------------------------------------
    Average number of
     common shares
     outstanding (in
     thousands)
      Basic                             23,854        23,849        23,842
      Diluted                           23,872        23,855        23,888
                                 --------------------------------------------
    Net income per common
     share
      Basic                       $       1.08  $       0.76  $       1.17
      Diluted                     $       1.08  $       0.76  $       1.17
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    IN THOUSANDS OF                              FOR THE NINE MONTHS ENDED
     DOLLARS,                    --------------------------------------------
    EXCEPT PER SHARE                                 JULY 31       JULY 31
     AMOUNTS (UNAUDITED)   NOTES                        2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest income
      Loans                                     $    539,808  $    631,375
      Securities                                      53,219        44,398
      Deposits with other
       banks                                           3,801        21,187
      Other, including
       derivative
       financial
       instruments                                    97,511        17,539
                                 --------------------------------------------
                                                     694,339       714,499
                                 --------------------------------------------
    Interest expense
      Deposits                                       376,764       380,233
      Other, including
       derivative
       financial
       instruments                                     6,249        26,500
      Subordinated
       debentures                                      5,784         5,796
                                 --------------------------------------------
                                                     388,797       412,529
                                 --------------------------------------------
    Net interest income                              305,542       301,970
                                 --------------------------------------------
    Other income
      Fees and commissions
       on loans and
       deposits                                       75,042        67,775
      Income from
       brokerage
       operations                                     34,862        23,330
      Income from treasury
       and financial
       market operations                              10,571        25,753
      Income from sales of
       mutual funds                                    9,046        10,841
      Credit insurance
       income                                         12,595        10,230
      Income from
       registered self-
       directed plans                                  6,073         6,797
      Securitization
       income                  3                      28,890        25,619
      Other                                            5,341         5,355
                                 --------------------------------------------
                                                     182,420       175,700
                                 --------------------------------------------
    Total revenue                                    487,962       477,670
                                 --------------------------------------------
    Provision for loan
     losses                    2                      40,000        38,000
                                 --------------------------------------------
    Non-interest expenses
      Salaries and
       employee benefits                             183,631       177,733
      Premises and
       technology                                     88,106        88,321
      Other                                           72,110        66,897
                                 --------------------------------------------
                                                     343,847       332,951
                                 --------------------------------------------
    Income before income
     taxes                                           104,115       106,719
    Income taxes                                      29,230        31,521
                                 --------------------------------------------
    Net income                                  $     74,885  $     75,198
                                 --------------------------------------------
                                 --------------------------------------------
    Preferred share
     dividends, including
     applicable taxes                                  9,050         8,864
                                 --------------------------------------------
    Net income available
     to common
     shareholders                               $     65,835  $     66,334
                                 --------------------------------------------
                                 --------------------------------------------
    Average number of
     common shares
     outstanding (in
     thousands)
      Basic                                           23,851        23,834
      Diluted                                         23,866        23,877
                                 --------------------------------------------
    Net income per common
     share
      Basic                                     $       2.76  $       2.78
      Diluted                                   $       2.76  $       2.78
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT
    OF COMPREHENSIVE INCOME
                                           FOR THE                 FOR THE
                                THREE MONTHS ENDED       NINE MONTHS ENDED
    IN THOUSANDS OF          ----------------------  ------------------------
     DOLLARS                   JULY 31     JULY 31     JULY 31     JULY 31
     (UNAUDITED)       NOTES      2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income                $ 28,683    $ 30,937    $ 74,885    $ 75,198
                             ------------------------------------------------
    Other comprehensive
     income (loss), net
     of income taxes       8
      Net change in
       unrealized
       gains (losses)
       on available-
       for-sale
       securities                8,674      (2,851)      9,529      (5,583)
      Reclassification
       of realized
       (gains) and
       losses on
       available-for-
       sale securities
       to net income             3,123      (7,938)      3,795     (10,068)
      Net gains
       (losses) on
       derivative
       instruments
       designated as
       cash flow hedges        (17,786)       (641)      5,018      27,369
                             ------------------------------------------------
                                (5,989)    (11,430)     18,342      11,718
                             ------------------------------------------------
    Comprehensive income      $ 22,694    $ 19,507    $ 93,227    $ 86,916
                             ------------------------------------------------
                             ------------------------------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT OF CHANGES
    IN SHAREHOLDERS' EQUITY
                                                 FOR THE NINE MONTHS ENDED
                                               ------------------------------
                                                     JULY 31       JULY 31
    IN THOUSANDS OF DOLLARS (UNAUDITED)  NOTES          2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Preferred shares
      Balance at beginning and end of
       period                                   $    210,000  $    210,000
                                               ------------------------------
    Common shares                            4
      Balance at beginning of period                 257,462       256,445
      Issued during the period under
       share purchase option plan            5           179           915
                                               ------------------------------
      Balance at end of period                       257,641       257,360
                                               ------------------------------
    Contributed surplus
      Balance at beginning of period                     173           105
      Stock-based compensation               5            28            53
                                               ------------------------------
      Balance at end of period                           201           158
                                               ------------------------------
    Retained earnings
      Balance at beginning of period                 596,974       537,254
      Net income                                      74,885        75,198
      Dividends
        Preferred shares, including
         applicable taxes                             (9,050)       (8,864)
        Common shares                                (24,329)      (22,885)
                                               ------------------------------
      Balance at end of period                       638,480       580,703
                                               ------------------------------
    Accumulated other comprehensive
     income                                  8
      Balance at beginning of period                  18,826           877
      Other comprehensive income, net of
       income taxes                                   18,342        11,718
                                               ------------------------------
      Balance at end of period                        37,168        12,595
                                               ------------------------------
    Shareholders' equity                        $  1,143,490  $  1,060,816
                                               ------------------------------
                                               ------------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT
    OF CASH FLOWS
                                            FOR THE THREE MONTHS ENDED
                                 --------------------------------------------
    IN THOUSANDS OF DOLLARS            JULY 31      APRIL 30       JULY 31
     (UNAUDITED)                          2009          2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flows relating to
     operating activities
    Net income                    $     28,683  $     21,155  $     30,937
    Adjustments to determine net
     cash flows relating to
     operating activities:
      Provision for loan losses         16,000        12,000        18,500
      Gains on securitization
       operations                       (5,234)       (9,229)       (8,208)
      Net loss (gain) on
       disposal of non-trading
       securities                          404           725       (11,637)
      Future income taxes                5,007         4,294         6,505
      Depreciation and
       amortization                      8,411         8,193         7,708
      Net change in held-for-
       trading securities             (421,073)      196,179         1,597
      Change in accrued interest
       receivable                       13,120       (14,919)        8,592
      Change in assets relating
       to derivative financial
       instruments                      42,351        (5,299)       14,987
      Change in accrued interest
       payable                         (42,979)        4,480        (8,783)
      Change in liabilities
       relating to derivative
       financial instruments            (8,582)       13,901       (10,886)
      Other, net                        19,353       (12,209)        5,574
                                 --------------------------------------------
                                      (344,539)      219,271        54,886
                                 --------------------------------------------
    Cash flows relating to
     financing activities
      Net change in deposits           697,095     1,687,893       712,043
      Change in obligations
       related to assets sold
       short                           128,876      (334,147)      (11,916)
      Change in obligations
       related to assets sold
       under repurchase
       agreements                       68,325      (968,424)      126,272
      Issuance of common shares            145             -            82
      Dividends, including
       applicable income taxes         (10,935)      (11,113)      (10,599)
                                 --------------------------------------------
                                       883,506       374,209       815,882
                                 --------------------------------------------
    Cash flows relating to
     investing activities
      Change in securities
       available-for-sale and
       designated as held-for-
       trading
        Acquisitions                (1,235,710)   (1,810,651)   (1,113,345)
        Proceeds on sale and at
         maturities                  1,547,606     1,497,435     1,058,878
      Change in loans               (1,000,405)     (467,955)     (722,644)
      Change in assets purchased
       under reverse repurchase
       agreements                      135,898        35,480      (363,748)
      Proceeds from mortgage
       loan securitizations            253,234       171,816       262,707
      Additions to tangible
       capital assets and
       software                         (9,311)       (8,356)       (8,725)
      Proceeds from disposal of
       tangible capital assets
       and software                          -             -             -
      Net change in interest-
       bearing deposits with
       other banks                    (234,422)         (596)       14,567
      Net cash flows from sale
       of asset                              -             -             -
                                 --------------------------------------------
                                      (543,110)     (582,827)     (872,310)
                                 --------------------------------------------
    Net change in cash and non-
     interest-bearing deposits
     with other banks during the
     period                             (4,143)       10,653        (1,542)
    Cash and non-interest-
     bearing deposits with other
     banks at beginning of
     period                             60,383        49,730        65,298
                                 --------------------------------------------
    Cash and non-interest-
     bearing deposits with other
     banks at end of period       $     56,240  $     60,383  $     63,756
                                 --------------------------------------------
                                 --------------------------------------------

    Supplemental disclosure
     relating to cash flows:
      Interest paid during the
       period                     $    172,336  $    112,728  $    140,480
      Income taxes paid
       (recovered) during the
       period                     $      3,303  $      1,709  $     (4,568)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                 FOR THE NINE MONTHS ENDED
                                 --------------------------------------------
    IN THOUSANDS OF DOLLARS                          JULY 31       JULY 31
     (UNAUDITED)                                        2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flows relating to
     operating activities
    Net income                                  $     74,885  $     75,198
    Adjustments to determine net
     cash flows relating to
     operating activities:
      Provision for loan losses                       40,000        38,000
      Gains on securitization
       operations                                    (31,135)      (23,393)
      Net loss (gain) on
       disposal of non-trading
       securities                                      3,814       (15,340)
      Future income taxes                             16,620        26,655
      Depreciation and
       amortization                                   24,649        23,048
      Net change in held-for-
       trading securities                           (208,567)      (42,594)
      Change in accrued interest
       receivable                                      7,577         1,830
      Change in assets relating
       to derivative financial
       instruments                                    (3,535)      (47,625)
      Change in accrued interest
       payable                                       (50,148)      (14,289)
      Change in liabilities
       relating to derivative
       financial instruments                          (8,121)          130
      Other, net                                     (18,513)       45,035
                                 --------------------------------------------
                                                    (152,474)       66,655
                                 --------------------------------------------
    Cash flows relating to
     financing activities
      Net change in deposits                       2,624,046     1,275,257
      Change in obligations
       related to assets sold
       short                                        (119,178)       65,164
      Change in obligations
       related to assets sold
       under repurchase
       agreements                                   (884,347)       85,008
      Issuance of common shares                          179           915
      Dividends, including
       applicable income taxes                       (33,379)      (31,750)
                                 --------------------------------------------
                                                   1,587,321     1,394,594
                                 --------------------------------------------
    Cash flows relating to
     investing activities
      Change in securities
       available-for-sale and
       designated as held-for-
       trading
        Acquisitions                              (4,048,972)   (2,326,740)
        Proceeds on sale and at
         maturities                                3,880,890     1,789,738
      Change in loans                             (1,855,403)   (1,690,453)
      Change in assets purchased
       under reverse repurchase
       agreements                                    257,430      (302,764)
      Proceeds from mortgage
       loan securitizations                          737,166     1,068,956
      Additions to tangible
       capital assets and
       software                                      (22,437)      (22,380)
      Proceeds from disposal of
       tangible capital assets
       and software                                        4           103
      Net change in interest-
       bearing deposits with
       other banks                                  (381,695)       (8,830)
      Net cash flows from sale
       of asset                                            -        29,632
                                 --------------------------------------------
                                                  (1,433,017)   (1,462,738)
                                 --------------------------------------------
    Net change in cash and non-
     interest-bearing deposits
     with other banks during the
     period                                            1,830        (1,489)
    Cash and non-interest-
     bearing deposits with other
     banks at beginning of
     period                                           54,410        65,245
                                 --------------------------------------------
    Cash and non-interest-
     bearing deposits with other
     banks at end of period                     $     56,240  $     63,756
                                 --------------------------------------------
                                 --------------------------------------------

    Supplemental disclosure
     relating to cash flows:
      Interest paid during the
       period                                   $    434,405  $    428,133
      Income taxes paid
       (recovered) during the
       period                                   $     13,301  $     (3,470)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS

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

    1. ACCOUNTING POLICIES

    The 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. The significant accounting policies used in
the preparation of these interim consolidated financial statements, except for
changes to accounting policies stated below, are the same as those in the
Bank's audited annual consolidated financial statements as at October 31,
2008. 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,
2008. 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.

    Changes to accounting policies

    Goodwill and other intangible assets

    In November 2007, the Canadian Accounting Standards Board (AcSB) approved
new Section 3064, Goodwill and Intangible Assets, which supersedes Section
3062, Goodwill and Other Intangible Assets, and Section 3450, Research and
Development Costs. New Section 3064 reinforces a principle-based approach to
the recognition of costs as assets in accordance with the definition of an
asset and the criteria for asset recognition in Section 1000. It also
specifically addresses the recognition of internally developed intangible
assets. In addition, EIC-27, Revenues and Expenditures during the
Pre-operating Period, will no longer apply following the adoption of Section
3064. These changes, effective for the Bank as of November 1, 2008, had no
significant effect on the interim consolidated financial statements.

    
    Credit risk and the fair value of financial assets and financial
    liabilities
    

    On January 20, 2009, the Emerging Issue Committee of the Canadian
Institute of Chartered Accountants issued Abstract EIC-173, Credit Risk and
the Fair Value of Financial Assets and Financial Liabilities, applicable for
the Bank retroactively as of November 1, 2008. The Abstract confirms that an
entity's own credit risk and the credit risk of the counterparty should be
taken into account in determining the fair value of financial assets and
liabilities, including derivative instruments. This Abstract had no
significant effect on the interim consolidated financial statements.

    Financial instruments disclosures

    In June 2009, the AcSB issued amendments to Section 3862 - Financial
instruments disclosures to improve disclosure requirements on fair value
measurement and liquidity risk. The amendments are effective for the Bank's
October 31, 2009 annual financial statements. As the amendments only concern
disclosure requirements, they will not have a significant impact on results or
financial position.

    Impairment of financial assets

    On July 29, 2009, the AcSB posted the typescript related to the
amendments that will be incorporated to Section 3025, Impaired loans, and
Section 3855, Financial Instruments - Recognition and Measurement.
    The amendments will mainly: (i) eliminate the distinction between debt
securities and other debt instruments, a distinction based more on legal form
than economic substance; as a result, it will be possible to classify debt
instruments not quoted in an active market as loans and receivables, and to
assess impairment using the incurred credit loss model of Section 3025; (ii)
change the impairment model for held-to-maturity financial assets to the
incurred credit loss model of Section 3025; (iii) require the reversal of an
impairment loss relating to an available-for-sale debt instrument when, in a
subsequent period, the fair value of the instrument increases and the increase
can be objectively related to an event occurring after the loss was
recognized.
    The amendments apply to annual financial statements relating to fiscal
years beginning on or after November 1, 2008, but are not required for interim
financial statements relating to periods within the fiscal year of adoption.
The Bank has opted to defer the adoption to October 31, 2009 and does not
anticipate that it will then have a significant effect.

    
    2. LOANS

    Loans and impaired loans

                                                       AS AT JULY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                GROSS AMOUNT
                                  GROSS AMOUNT   OF IMPAIRED      SPECIFIC
                                      OF LOANS         LOANS    ALLOWANCES
    -------------------------------------------------------------------------
    Personal loans                $  5,214,906  $     21,102  $      7,333
    Residential mortgages            6,978,469        24,633         1,643
    Commercial mortgages             1,148,071         9,316         2,503
    Commercial and other loans       2,003,217        68,058        29,943
                                 --------------------------------------------
                                  $ 15,344,663  $    123,109  $     41,422
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                       AS AT JULY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                     GENERAL         TOTAL
                                                  ALLOWANCES    ALLOWANCES
    -------------------------------------------------------------------------
    Personal loans                              $     28,949  $     36,282
    Residential mortgages                              4,091         5,734
    Commercial mortgages                               5,879         8,382
    Commercial and other loans                        34,331        64,274
                                 --------------------------------------------
                                                $     73,250  $    114,672
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    AS AT OCTOBER 31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                GROSS AMOUNT
                                  GROSS AMOUNT   OF IMPAIRED      SPECIFIC
                                      OF LOANS         LOANS    ALLOWANCES
    -------------------------------------------------------------------------
    Personal loans                $  5,302,046  $     19,250  $      6,634
    Residential mortgages            6,182,871        16,579         1,405
    Commercial mortgages               932,688         6,275         1,883
    Commercial and other loans       1,847,327        59,769        29,262
                                 --------------------------------------------
                                  $ 14,264,932  $    101,873  $     39,184
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                    AS AT OCTOBER 31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                     GENERAL         TOTAL
                                                  ALLOWANCES    ALLOWANCES
    -------------------------------------------------------------------------
    Personal loans                              $     33,052  $     39,686
    Residential mortgages                              4,211         5,616
    Commercial mortgages                               4,760         6,643
    Commercial and other loans                        31,227        60,489
                                 --------------------------------------------
                                                $     73,250  $    112,434
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                       AS AT JULY 31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                GROSS AMOUNT
                                  GROSS AMOUNT   OF IMPAIRED      SPECIFIC
                                      OF LOANS         LOANS    ALLOWANCES
    -------------------------------------------------------------------------
    Personal loans                $  5,265,562  $     18,973  $      6,431
    Residential mortgages            6,109,648        21,033         1,625
    Commercial mortgages               883,401         4,029         1,657
    Commercial and other loans       1,727,105        58,639        32,541
                                 --------------------------------------------
                                  $ 13,985,716  $    102,674  $     42,254
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                       AS AT JULY 31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                     GENERAL         TOTAL
                                                  ALLOWANCES    ALLOWANCES
    -------------------------------------------------------------------------
    Personal loans                              $     32,289  $     38,720
    Residential mortgages                              4,433         6,058
    Commercial mortgages                               4,716         6,373
    Commercial and other loans                        31,812        64,353
                                 --------------------------------------------
                                                $     73,250  $    115,504
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Specific allowances for loan losses
                                                        FOR THE NINE MONTHS
                                                            ENDED JULY 31
                                                      -----------------------
                                                            2009      2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                           RESIDEN-   COMMER-   COMMER-    TOTAL     TOTAL
                              TIAL      CIAL  CIAL AND  SPECIFIC  SPECIFIC
                PERSONAL    MORTGA-   MORTGA-    OTHER   ALLOWAN-  ALLOWAN-
                   LOANS       GES       GES     LOANS       CES       CES
    -------------------------------------------------------------------------
    Balance at
     beginning
     of period  $  6,634  $  1,405  $  1,883  $ 29,262  $ 39,184  $ 50,072
    Provision
     for loan
     losses
     recorded
     in the
     consoli-
     dated
     statement
     of income    27,363     1,003       620    11,014    40,000    30,000
    Write-offs   (32,731)   (1,120)        -   (10,409)  (44,260)  (41,942)
    Recoveries     6,067       355         -        76     6,498     4,124
               --------------------------------------------------------------
    Balance at
     end of
     period     $  7,333  $  1,643  $  2,503  $ 29,943  $ 41,422  $ 42,254
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    General allowance for loans losses

    Loan losses for the nine months period ended July 31, 2008 include an
$8,000,000 charge resulting from an increase in the general allowance for loan
losses.

    Loans past due but not impaired

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

    
                                                       AS AT JULY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  1 TO       32 TO        OVER
                               31 DAYS     90 DAYS     90 DAYS       TOTAL
    -------------------------------------------------------------------------
    Personal loans           $  88,364   $  27,345   $   5,912   $ 121,621
    Residential mortgages      164,405      47,809      28,067     240,281
                            -------------------------------------------------
                             $ 252,769   $  75,154   $  33,979   $ 361,902
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    AS AT OCTOBER 31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  1 TO       32 TO        OVER
                               31 DAYS     90 DAYS     90 DAYS       TOTAL
    -------------------------------------------------------------------------
    Personal loans           $  86,850   $  26,298   $   3,665   $ 116,813
    Residential mortgages      151,524      27,861      16,368     195,753
                            -------------------------------------------------
                             $ 238,374   $  54,159   $  20,033   $ 312,566
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    3. LOAN SECURITIZATION

    The Bank securitizes residential mortgage loans insured by the Canadian
Mortgage and Housing Corporation, under the Canada Mortgage Back Program and
the Government of Canada NHA MBS auction process. As well, the Bank has
securitized conventional mortgages prior to 2008. The gains before income
taxes, net of transaction-related costs, are recognized in securitization
income.
    The following table summarizes the residential mortgage loan
securitization transactions carried out by the Bank.

                                            FOR THE THREE MONTHS ENDED
                                 --------------------------------------------
                                       JULY 31      APRIL 30       JULY 31
                                          2009          2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash proceeds, net of
     transaction costs            $    253,234  $    171,816  $    262,707
    Rights to future excess
     spreads                             9,366        15,180        14,353
    Servicing liability                 (2,317)       (1,301)       (2,225)
    Other                                   61        (2,735)         (220)
                                 --------------------------------------------
                                       260,344       182,960       274,615
    Residential mortgages
     securitized and sold             (253,469)     (172,039)     (263,588)
    Write-off of loan
     origination costs                  (1,641)       (1,692)       (2,819)
                                 --------------------------------------------
    Securitization gains          $      5,234  $      9,229  $      8,208
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                 FOR THE NINE MONTHS ENDED
                                               ------------------------------
                                                     JULY 31       JULY 31
                                                        2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash proceeds, net of
     transaction costs                          $    737,166  $  1,068,956
    Rights to future excess
     spreads                                          52,853        48,978
    Servicing liability                               (6,416)       (8,875)
    Other                                             (7,732)       (8,468)
                                               ------------------------------
                                                     775,871     1,100,591
    Residential mortgages
     securitized and sold                           (737,910)   (1,069,271)
    Write-off of loan
     origination costs                                (6,826)       (7,927)
                                               ------------------------------
    Securitization gains                        $     31,135  $     23,393
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    With regard to the transfer of residential mortgages, the key assumptions
used to determine the initial fair value of retained interests at the
securitization date for transactions carried out during the third quarter of
2009 are summarized as follows.

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average term (months)                                      38
    Rate of prepayment                                                22.1 %
    Discount rate                                                      1.7 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    No loss is expected on insured residential mortgages.

    The following table details securitization income as reported in the
consolidated statement of income.

                                            FOR THE THREE MONTHS ENDED
                                 --------------------------------------------
                                       JULY 31      APRIL 30       JULY 31
                                          2009          2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Securitization gains          $      5,234  $      9,229  $      8,208
    Changes in fair value of
     retained interests, seller
     swaps and financial
     instruments held as
     economic hedges                     4,879        (2,042)        1,709
    Servicing income                     1,938         1,820         1,716
    Other                               (2,280)         (413)         (869)
                                 --------------------------------------------
                                  $      9,771  $      8,594  $     10,764
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                 FOR THE NINE MONTHS ENDED
                                               ------------------------------
                                                     JULY 31       JULY 31
                                                        2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Securitization gains                         $    31,135   $    23,393
    Changes in fair value of
     retained interests, seller
     swaps and financial
     instruments held as
     economic hedges                                  (4,472)        1,315
    Servicing income                                   5,593         4,697
    Other                                             (3,366)       (3,786)
                                               ------------------------------
                                                 $    28,890   $    25,619
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    As at July 31, 2009, the Bank held rights to future excess spreads of
$85,557,000 (of which $81,921,000 related to insured mortgages) and cash
reserve accounts of $13,304,000.
    The total principal amount of securitized residential mortgages
outstanding amounted to $2,610,188,000 as at July 31, 2009 ($2,398,564,000 as
at October 31, 2008).

    4.CAPITAL STOCK

    Issuance of common shares

    During the quarter, 6,613 common shares were issued to management under
the Bank's employee share purchase option plan for a cash consideration of
$145,000 (8,226 common shares for a cash consideration of $179,000 during the
nine-month period ended July 31, 2009).

    
    ISSUED AND
     OUTSTANDING               AS AT JULY 31, 2009  AS AT OCTOBER 31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF
     DOLLARS, EXCEPT            NUMBER                  NUMBER
     NUMBER OF SHARES        OF SHARES      AMOUNT   OF SHARES      AMOUNT
    -------------------------------------------------------------------------
    Class A Preferred
     Shares(1)
      Series 9               4,000,000  $  100,000   4,000,000  $  100,000
      Series 10              4,400,000     110,000   4,400,000     110,000
                           --------------------------------------------------
    Total preferred
     shares                  8,400,000   $ 210,000   8,400,000  $  210,000
                           --------------------------------------------------
                           --------------------------------------------------
    Common shares           23,855,926   $ 257,641  23,847,700  $  257,462
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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

    The Bank's objective is to maintain an optimal level of capital to
support activities while generating an acceptable return for its shareholders,
considering the Bank's specific risk profile. Capital must be sufficient to
demonstrate the Bank's solvency and its ability to deal with all of its
operating risks, as well as to offer depositors and creditors the requisite
safety. Capital must also meet minimum regulatory requirements, as defined by
the Office of the Superintendent of Financial Institutions Canada (OSFI),
internal capital adequacy objectives and be aligned with targeted credit
ratings.
    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). The Bank has complied with these requirements
throughout the nine-month period ended July 31, 2009.

    
    Regulatory capital

                                         AS AT         AS AT         AS AT
                                       JULY 31    OCTOBER 31       JULY 31
                                          2009          2008          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Tier 1 capital
      Common shares               $    257,641  $    257,462   $   257,360
      Contributed surplus                  201           173           158
      Retained earnings                638,480       596,974       580,703
      Non-cumulative preferred
       shares                          210,000       210,000       210,000
      Less : goodwill,
       securitization and other        (91,071)      (99,239)      (91,498)
                                 --------------------------------------------
    Total - Tier 1 capital           1,015,251       965,370       956,723
                                 --------------------------------------------
    Tier 2 capital
      Subordinated debentures          150,000       150,000       150,000
      General allowances                72,476        73,250        73,250
      Less : securitization
       and other                       (32,007)      (31,738)      (31,447)
                                 --------------------------------------------
    Total - Tier 2 capital             190,469       191,512       191,803
                                 --------------------------------------------
    Total capital                 $  1,205,720  $  1,156,882  $  1,148,526
                                 --------------------------------------------
                                 --------------------------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    5.STOCK-BASED COMPENSATION

    Share purchase option plan

    There were no new grants during the first nine months of 2009. Information
on the outstanding number of options is as follows.

                                                       AS AT         AS AT
                                                     JULY 31,   OCTOBER 31,
                                                        2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                      NUMBER        NUMBER
    -------------------------------------------------------------------------
    Share purchase options
      Outstanding at end of period                   119,112       127,338
      Exercisable at end of period                    94,112        89,838
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Restricted share unit plan

    During the first quarter of 2009, under the restricted share unit plan,
annual bonuses for certain employees amounting to $1,528,000 were converted
into 42,537 entirely vested restricted share units. The Bank also granted
25,522 additional restricted share units that will vest in December 2011.

    Performance-based share unit plan

    During the first quarter of 2009, under the performance-based share unit
plan, the Bank granted 42,724 performance-based share units valued at $35.93
each. Rights to 37.5% of these units will vest after three years. The rights
to the remaining units will vest after three years, upon meeting certain
financial objectives.

    Stock appreciation rights plan

    There were no new grants during the third quarter of 2009 under the stock
appreciation rights plan (the Bank granted 27,000 stock appreciation rights
during the nine-month period ended July 31, 2009).

    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                 FOR THE
                                THREE MONTHS ENDED       NINE MONTHS ENDED
                  ---------------------------------   -----------------------
                   JULY 31    APRIL 30     JULY 31     JULY 31     JULY 31
                      2009        2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Stock-based
     compensation
     plan expense  $ 4,024      $  238     $   595     $(1,653)    $   801
    Effect of
     hedges         (4,979)        (16)        121       3,034       1,374
                  -----------------------------------------------------------
    Total          $  (955)     $  222     $   716     $ 1,381     $ 2,175
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    6.EMPLOYEE FUTURE BENEFITS

                                           FOR THE                 FOR THE
                                THREE MONTHS ENDED       NINE MONTHS ENDED
                  ---------------------------------   -----------------------
                   JULY 31    APRIL 30     JULY 31     JULY 31     JULY 31
                      2009        2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Defined benefit
     pension plan
     expense       $ 1,194     $ 1,140     $ 2,659     $ 3,805     $ 7,882
    Defined
     contribution
     pension plan
     expense         1,077       1,031       1,000       3,101       2,745
    Other plan
     expense           832         804         830       2,468       2,472
                  -----------------------------------------------------------
    Total          $ 3,103     $ 2,975     $ 4,489     $ 9,374     $13,099
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    7. WEIGHTED AVERAGE NUMBER OF OUTSTANDING COMMON SHARES

                                                FOR THE THREE MONTHS ENDED
                                  -------------------------------------------
                                       JULY 31      APRIL 30       JULY 31
                                          2009          2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average number of outstanding
     common shares                  23,853,725    23,849,313    23,841,767
    Dilutive share purchase
     options                            18,488         5,289        46,261
                                  -------------------------------------------
    Weighted average number of
     outstanding common shares      23,872,213    23,854,602    23,888,028
                                  -------------------------------------------
                                  -------------------------------------------
    Average number of share
     purchase options not taken
     into account in the
     calculation of diluted net
     income per common share(1)              -       105,400             -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                 FOR THE NINE MONTHS ENDED
                                  -------------------------------------------
                                                     JULY 31       JULY 31
                                                        2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average number of outstanding
     common shares                                23,850,522    23,834,150
    Dilutive share purchase
     options                                          15,849        43,106
                                  -------------------------------------------
    Weighted average number of
     outstanding common shares                    23,866,371    23,877,256
                                  -------------------------------------------
                                  -------------------------------------------
    Average number of share
     purchase options not taken
     into account in the
     calculation of diluted net
     income per common share (1)                      34,361             -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The average number of share purchase options was not taken into
        account in the calculation of diluted net income per common share
        since the average exercise price of these options exceeded the
        average market price of the Bank's shares during these periods.


    8. SUPPLEMENTAL INFORMATION ON OTHER COMPREHENSIVE INCOME

    Other comprehensive income (loss)

                                                FOR THE THREE MONTHS ENDED
                                  -------------------------------------------
                                                                   JULY 31
                                                                      2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                        BEFORE                      NET OF
                                        INCOME        INCOME        INCOME
                                         TAXES         TAXES         TAXES
    -------------------------------------------------------------------------
    Unrealized gains (losses)
     on available-for-sale
     securities
      Net unrealized gains
       (losses) during the
       period                     $     12,276  $     (3,602) $      8,674
      Less : reclassification
       of realized (gains) and
       losses to net income
       during the period                 4,523        (1,400)        3,123
                                  -------------------------------------------
                                        16,799        (5,002)       11,797
    Net (loss) on derivatives
     designated as cash flow
     hedges                            (26,214)        8,428       (17,786)
                                  -------------------------------------------
    Other comprehensive income
     (loss)                       $     (9,415) $      3,426  $     (5,989)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                FOR THE THREE MONTHS ENDED
                                  -------------------------------------------
                                                                   JULY 31
                                                                      2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                        BEFORE                      NET OF
                                        INCOME        INCOME        INCOME
                                         TAXES         TAXES         TAXES
    -------------------------------------------------------------------------
    Unrealized gains (losses)
     on available-for-sale
     securities
      Net unrealized gains
       (losses) during the
       period                     $    (4,202) $       1,351  $     (2,851)
      Less : reclassification
       of realized (gains) and
       losses to net income
       during the period               (8,325)           387        (7,938)
                                  -------------------------------------------
                                      (12,527)         1,738       (10,789)
    Net (loss) on derivatives
     designated as cash flow
     hedges                              (894)           253          (641)
                                  -------------------------------------------
    Other comprehensive income
     (loss)                       $   (13,421) $       1,991  $    (11,430)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                 FOR THE NINE MONTHS ENDED
                                  -------------------------------------------
                                                                   JULY 31
                                                                      2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                        BEFORE                      NET OF
                                        INCOME        INCOME        INCOME
                                         TAXES         TAXES         TAXES
    -------------------------------------------------------------------------
    Unrealized gains (losses)
     on available-for-sale
     securities
      Net unrealized gains
       (losses) during the
       period                     $     13,412  $    (3,883)  $      9,529
      Less : reclassification
       of realized (gains) and
       losses to net income
       during the period                 5,500       (1,705)         3,795
                                  -------------------------------------------
                                        18,912       (5,588)        13,324
    Net gains on derivatives
     designated as cash flow
     hedges                              7,949       (2,931)         5,018
                                  -------------------------------------------
    Other comprehensive income    $     26,861  $    (8,519)  $     18,342
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                 FOR THE NINE MONTHS ENDED
                                  -------------------------------------------
                                                                   JULY 31
                                                                      2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                        BEFORE                      NET OF
                                        INCOME        INCOME        INCOME
                                         TAXES         TAXES         TAXES
    -------------------------------------------------------------------------
    Unrealized gains (losses)
     on available-for-sale
     securities
      Net unrealized gains
       (losses) during the
       period                     $     (8,117) $      2,534  $     (5,583)
      Less : reclassification
       of realized (gains) and
       losses to net income
       during the period               (10,850)          782       (10,068)
                                  -------------------------------------------
                                       (18,967)        3,316       (15,651)
    Net gains on derivatives
     designated as cash flow
     hedges                             40,518       (13,149)       27,369
                                  -------------------------------------------
    Other comprehensive income    $     21,551  $     (9,833) $     11,718
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Accumulated other comprehensive income (net of income taxes)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                               ACCUMULATED
                                                                     OTHER
                                          CASH     AVAILABLE-    COMPREHEN-
                                          FLOW      FOR-SALE          SIVE
                                       HEDGING    SECURITIES        INCOME
    -------------------------------------------------------------------------
    Balance at October 31, 2008   $     35,417  $    (16,591) $     18,826
      Change during the three
       months ended January 31,
       2009                             15,041        (6,797)        8,244
      Change during the three
       months ended April 30,
       2009                              7,763         8,324        16,087
      Change during the three
       months ended July 31,
       2009                            (17,786)       11,797        (5,989)
                                  -------------------------------------------
    Balance at July 31, 2009      $     40,435  $     (3,267) $     37,168
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                               ACCUMULATED
                                                                     OTHER
                                          CASH     AVAILABLE-    COMPREHEN-
                                          FLOW      FOR-SALE          SIVE
                                       HEDGING    SECURITIES        INCOME
    -------------------------------------------------------------------------
    Balance at October 31, 2007   $    (10,255) $     11,132  $        877
      Change during the three
       months ended January 31,
       2008                             22,732        (3,931)       18,801
      Change during the three
       months ended April 30,
       2008                              5,278          (931)        4,347
      Change during the three
       months ended July 31,
       2008                               (641)      (10,789)      (11,430)
                                  -------------------------------------------
    Balance at July 31, 2009            17,114        (4,519)       12,595
      Change during the three
       months ended October 31,
       2008                             18,303       (12,072)        6,231
                                  -------------------------------------------
    Balance at October 31, 2008   $     35,417  $    (16,591) $     18,826
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    9. RISK MANAGEMENT

    The Bank is exposed to various types of risks owing to the nature of the
business activities it carries on, including those related to the use of
financial instruments. In order to manage the risks associated with using
financial instruments, including loan and deposit, security and derivative
financial instrument portfolios, controls such as risk management policies and
various risk limits have been implemented. These measures aim to optimize the
return/risk ratio in all operating segments. A corporate governance structure
was also designed to ensure global risk tolerance is consistent with the
Bank's strategies and objectives. The main risks to which the Bank is exposed
are set out below.

    Market risk

    Market risk corresponds to the financial losses that the Bank could incur
because of 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.
    As at July 31, 2009 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 is as follows.

    
                                                       AS AT         AS AT
                                                     JULY 31,   OCTOBER 31,
                                                        2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Increase in net interest
     income before taxes over the next
     12 months                                  $      2,475  $      8,901
    Change in the economic
     value of common shareholders' equity       $    (15,436) $    (27,060)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Credit risk

    The use of financial instruments, including derivatives, can result in
credit risk exposures representing the risk of financial loss arising from
counterparties' inability or refusal to fully honour their contractual
obligations.
    Note 2 to these interim consolidated financial statements provides
detailed information on the Bank's loan portfolios and related credit
exposures.
    With respect to derivative financial instruments, the majority of the
Bank's credit concentration is with financial institutions, primarily Canadian
banks.
    The amount that best represents the maximum exposure to credit risk of
the Bank as at July 31, 2009, without taking account of any collateral held or
other credit enhancements, is essentially the sum of financial assets on the
consolidated financial statement, plus credit-related commitments, as set-out
below.

    
                                                       AS AT         AS AT
                                                     JULY 31,   OCTOBER 31,
    IN MILLIONS OF DOLLARS                              2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Financial assets, as reported on
     balance sheet                              $     20,926  $     19,255
    Credit commitments and other off-balance
     sheet items(1)                                    4,626         4,153
                                               ------------------------------
    Total                                       $     25,552  $     23,408
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Including $2,244,000,000 as at July 31, 2009 ($2,083,000,000 as at
        October 31, 2008) related to personal credit facilities and credit
        card lines.

    Liquidity risk

    Liquidity risk represents the possibility that the Bank may not be able to
gather sufficient cash resources, when required and under reasonable
conditions, to meet its financial obligations. Liquidity management pays
particular attention to deposit and loan maturities, as well as to funding
availability and demand when planning financing.

    Contractual maturities of financial liabilities

    The following table presents the principal obligations related to
financial liabilities by contractual maturity.

                                                       AS AT JULY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                       TERM
                          DEMAND   ------------------------------------------
                             AND        WITHIN        1 TO 5          OVER
                          NOTICE        1 YEAR         YEARS       5 YEARS
    -------------------------------------------------------------------------
    Deposits        $  6,059,281  $  5,003,797  $  6,884,429  $     10,351
    Obligations
     related to
     assets sold
     short                     -       645,523        54,535             -
    Obligations
     related to
     assets sold
     under
     repurchase
     agreements                -       251,749             -             -
    Subordinated
     debentures                -             -       150,000             -
                   ----------------------------------------------------------
                     $ 6,059,281  $  5,901,069  $  7,088,964  $     10,351
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                       AS AT JULY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                     TOTAL
    -------------------------------------------------------------------------
    Deposits                                                  $ 17,957,858
    Obligations
     related to
     assets sold
     short                                                         700,058
    Obligations
     related to
     assets sold
     under
     repurchase
     agreements                                                    251,749
    Subordinated
     debentures                                                    150,000
                   ----------------------------------------------------------
                                                              $ 19,059,665
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    10. SUPPLEMENTAL INFORMATION ON FINANCIAL INSTRUMENTS

    Fair value of financial instruments

    The fair value of a financial instrument is defined as the amount of
consideration for a financial instrument that would be agreed upon in an arm's
length transaction between knowledgeable, willing parties who are under no
compulsion to act. Quoted market prices are not available for a significant
portion of the Bank's financial instruments. As a result, for these
instruments, the fair values presented are estimates derived using present
value or other valuation techniques and may not be indicative of the net
realizable value.
    When fair value is determined using valuation models, it may be necessary
to use assumptions as to the amount and timing of estimated future cash flows
and discount rates. These assumptions reflect the risks inherent in financial
instruments.
    As at July 31, 2009, the fair value of financial assets and liabilities
approximate their carrying amount, except for the assets and liabilities
presented below.

    
                                                       AS AT JULY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                 FAVOURABLE
                                      CARRYING          FAIR  (UNFAVOURABLE)
    IN MILLIONS OF DOLLARS              AMOUNT         VALUE      VARIANCE
    -------------------------------------------------------------------------
    Assets
      Loans                       $     15,230  $     15,463  $        233

    Liabilities
      Deposits                          17,958        18,182          (224)
      Subordinated debentures     $        150  $        156  $         (6)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                    AS AT OCTOBER 31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                 FAVORABLE
                                      CARRYING          FAIR  (UNFAVORABLE)
    IN MILLIONS OF DOLLARS              AMOUNT         VALUE      VARIANCE
    -------------------------------------------------------------------------
    Assets
      Loans                       $     14,153  $     14,272  $        119

    Liabilities
      Deposits                          15,334        15,418           (84)
      Subordinated debentures     $        150  $        155  $         (5)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Methods and assumptions used in estimating the fair value of financial
    instruments
    

    Loans

    The fair value of loans is estimated by discounting cash flows adjusted
to reflect prepayments, if any, at the prevailing interest rates in the
marketplace for new loans with substantially similar terms. For certain
variable rate loans subject to frequent rate resets and loans with
indeterminate maturities, the fair value is deemed to represent the carrying
amount.

    Deposits

    The fair value of fixed rate deposits is estimated using discounted cash
flows based on current market interest rates for deposits with substantially
similar terms. The fair value of deposits without stated maturities or
variable rate deposits is deemed to represent their carrying amount.

    Subordinated debentures

    The fair value of subordinated debentures is estimated using discounted
cash flows based on current market interest rates for similar issues or rates
currently offered for debt securities with the same term to maturity.

    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                 FOR THE
                                THREE MONTHS ENDED       NINE MONTHS ENDED
                  ---------------------------------   -----------------------
                   JULY 31    APRIL 30     JULY 31     JULY 31     JULY 31
                      2009        2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Realized
     net gains    $    211    $     64    $  8,325(1) $   (766)   $ 11,374(1)
    Writedowns
     for
     impairment
     recognized
     in net
     income         (4,734)          -        (436)     (4,734)       (436)
                  -----------------------------------------------------------
    Total         $ (4,523)   $     64    $  7,889    $ (5,500)   $ 10,938
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes a $12.9 million gain on the sale of shares of the Montreal
        Exchange.

    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 JULY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                       AMORTIZED    UNREALIZED    UNREALIZED          FAIR
                            COST         GAINS        LOSSES         VALUE
    -------------------------------------------------------------------------
    Securities issued
     or guaranteed
      by Canada     $    267,314  $         38  $          -  $    267,352
      by provinces       540,955         4,869           259       545,565
    Other debt
     securities          115,921         5,035           468       120,488
    Asset-backed
     securities           20,183             -         2,560        17,623
    Preferred shares      74,751           440         1,524        73,667
    Common shares
     and other
     securities           41,270           215         4,514        36,971
               --------------------------------------------------------------
                    $  1,060,394  $     10,597  $      9,325  $  1,061,666
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    AS AT OCTOBER 31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                       AMORTIZED    UNREALIZED    UNREALIZED          FAIR
                            COST         GAINS        LOSSES         VALUE
    -------------------------------------------------------------------------
    Securities issued
     or guaranteed
      by Canada     $    977,724  $        575  $         31  $    978,268
      by provinces        26,604             -           303        26,301
    Other debt
     securities          200,342           287         3,650       196,979
    Asset-backed
     securities           20,323             1         1,036        19,288
    Preferred shares      75,329             6         6,263        69,072
    Common shares and
     other securities     46,966            29         9,399        37,596
               --------------------------------------------------------------
                    $  1,347,288  $        898  $     20,682  $  1,327,504
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    As at July 31, 2009, unrealized losses mainly related to publicly traded
securities of Canadian financial institutions and energy sector trusts. The
market values of these securities have generally declined earlier in 2008 and
2009 due to market conditions. However, these companies have maintained good
financial conditions and their business plans remain sound. As a result,
management has determined that these declines in fair value were temporary in
nature and that it had the ability and the intent to hold these securities
until their fair value recovers. These declines in value are included in
accumulated other comprehensive income.

    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 a
recognition inconsistency that would otherwise have arisen from recognizing
gains and losses on different bases. These financial instruments are used as
part of the Bank's overall asset-liability management and 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 presents the effect
on net income of fair valuing these instruments:

    
                                           FOR THE                 FOR THE
                                THREE MONTHS ENDED       NINE MONTHS ENDED
                  ---------------------------------   -----------------------
                   JULY 31    APRIL 30     JULY 31     JULY 31     JULY 31
                      2009        2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Included in
     securiti-
     zation
     income       $(26,498)   $  3,455    $ (4,540)   $ (1,797)   $ 19,318
    Included in
     income from
     treasury
     and
     financial
     market
     operations        137         139         193         231        (233)
                  -----------------------------------------------------------
    Total         $(26,361)   $  3,594    $ (4,347)   $ (1,566)   $ 19,085
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The nominal amount of deposits designated as held-for-trading was
$6,000,000 as at July 31, 2009 ($68,560,000 as at July 31, 2008). The
difference between the amount the Bank would be contractually required to pay
at maturity to the holders of these deposits and their carrying amount of
$6,023,000 as at July 31, 2009 ($68,704,000, as at July 31, 2008), is $23,000
($144,000, as at July 31, 2008).

    Derivative financial instruments

    Ineffectiveness related to hedging relationships

    The following table presents the ineffective portion of accumulated
changes in the fair value of hedging instruments recognized in the
consolidated statement of income.

    
                                           FOR THE                 FOR THE
                                THREE MONTHS ENDED       NINE MONTHS ENDED
                  ---------------------------------   -----------------------
                   JULY 31    APRIL 30     JULY 31     JULY 31     JULY 31
                      2009        2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Favourable
     (unfavourable)
     ineffectiveness
      on cash
       flow
       hedging    $     87    $     89    $     12    $    211    $    275
      on fair
       value
       hedging         242        (227)       (317)       (755)       (569)
                  -----------------------------------------------------------
                  $    329    $   (138)   $   (305)   $   (544)   $   (294)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Breakdown of swap contracts designated as hedging instruments, by
    category
    

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

    
                           AS AT JULY 31, 2009      AS AT OCTOBER 31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                         NOMINAL    FAIR VALUE       NOMINAL    FAIR VALUE
                          AMOUNT    NET AMOUNT        AMOUNT    NET AMOUNT
    -------------------------------------------------------------------------
    Interest rate
     swap contracts
     designated as
     hedging
     instruments
      Swaps used for
       cash flow
       hedging      $  3,968,000  $     42,922  $  2,557,000  $     46,118
      Swaps used for
       fair value
       hedging         2,585,000        68,930     3,021,750        68,148
                  -----------------------------------------------------------
                    $  6,553,000  $    111,852  $  5,578,750  $    114,266
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Other information on hedging relationships

    Net deferred gains of $33,287,000, included in accumulated other
comprehensive income as at July 31, 2009, are expected to be transferred into
net income over the next twelve months.
    The maximum term of cash flow hedging relationships was five years as at
July 31, 2009.

    11. CONTINGENCIES

    Class action Marcotte v. Banks

    On June 11, 2009, the Superior Court of the Province of Quebec granted a
class action against ten Canadian financial institutions, including Laurentian
Bank, with regards to mark-ups charged by banks to credit-cardholders upon
conversion in Canadian dollars of foreign currency transactions. The judgment
condemned the Bank to pay mark-ups earned, with interest and additional
indemnity. Along with the other Canadian financial institutions sued, the Bank
submits that the judgment contains many errors of fact and in law which are
significant to the point of invalidating the judgment, and therefore elected
to appeal the decision rendered. Given the current situation, the Bank is not
in a position to determine the outcome of this litigation and consequently, no
provision was set to date.

    
    12. SEGMENTED INFORMATION

                                                FOR THE THREE MONTHS ENDED
                                                             JULY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                R & SME QUEBEC          RE&C           B2B
    -------------------------------------------------------------------------
    Net interest income           $     77,844  $     18,355  $     23,945
    Other income                        31,237         6,645         2,485
                                 --------------------------------------------
    Total revenue                      109,081        25,000        26,430
    Provision for loan losses           12,408         2,105         1,487
    Non-interest expenses               84,734         6,792        12,293
                                 --------------------------------------------
    Income (loss) before
     income taxes                       11,939        16,103        12,650
    Income taxes (recovered)             2,265         5,040         3,985
                                 --------------------------------------------
    Net income                    $      9,674  $     11,063  $      8,665
                                 --------------------------------------------
                                 --------------------------------------------
    Average assets(1)             $ 11,210,055  $  2,476,318  $  4,326,084
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                FOR THE THREE MONTHS ENDED
                                                             JULY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                           LBS         OTHER         TOTAL
    -------------------------------------------------------------------------
    Net interest income           $        492  $     (7,870)  $   112,766
    Other income                        15,647         7,877        63,891
                                 --------------------------------------------
    Total revenue                       16,139             7       176,657
    Provision for loan losses                -             -        16,000
    Non-interest expenses               11,530         3,732       119,081
                                 --------------------------------------------
    Income (loss) before
     income taxes                        4,609        (3,725)       41,576
    Income taxes (recovered)             1,366           237        12,893
                                 --------------------------------------------
    Net income                    $      3,243  $     (3,962) $     28,683
                                 --------------------------------------------
                                 --------------------------------------------
    Average assets(1)             $  1,511,343  $  1,265,222  $ 20,789,022
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                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         5,033         2,417
                                 --------------------------------------------
    Total revenue                      103,770        20,375        23,913
    Provision for loan losses            8,129         3,161           710
    Non-interest expenses               83,105         6,346        11,740
                                 --------------------------------------------
    Income (loss) before
     income taxes                       12,536        10,868        11,463
    Income taxes (recovered)             2,780         3,401         3,630
                                 --------------------------------------------
    Net income                    $      9,756  $      7,467  $      7,833
                                 --------------------------------------------
                                 --------------------------------------------
    Average assets(1)             $ 10,849,661  $  2,274,033  $  4,231,056
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                FOR THE THREE MONTHS ENDED
                                                            APRIL 30, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                           LBS         OTHER         TOTAL
    -------------------------------------------------------------------------
    Net interest income           $        526  $    (17,780)   $   94,073
    Other income                        10,833        13,131        60,695
                                 --------------------------------------------
    Total revenue                       11,359        (4,649)      154,768
    Provision for loan losses                -             -        12,000
    Non-interest expenses                8,721         4,122       114,034
                                 --------------------------------------------
    Income (loss) before
     income taxes                        2,638        (8,771)       28,734
    Income taxes (recovered)               772        (3,004)        7,579
                                 --------------------------------------------
    Net income                    $      1,866  $     (5,767) $     21,155
                                 --------------------------------------------
                                 --------------------------------------------
    Average assets(1)             $  1,315,395  $  1,440,895  $ 20,111,040
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                FOR THE THREE MONTHS ENDED
                                                             JULY 31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                R & SME QUEBEC          RE&C           B2B
    -------------------------------------------------------------------------
    Net interest income           $     77,033  $     14,256  $     21,992
    Other income(2)                     30,467         4,044         2,740
                                 --------------------------------------------
    Total revenue                      107,500        18,300        24,732
    Provision for loan losses(3)         9,343         1,003           154
    Non-interest expenses               82,789         5,786        10,628
                                 --------------------------------------------
    Income (loss) before
     income taxes                       15,368        11,511        13,950
    Income taxes (recovered)             3,812         3,808         4,710
                                 --------------------------------------------
    Net income                    $     11,556  $      7,703  $      9,240
                                 --------------------------------------------
                                 --------------------------------------------
    Average assets(1)             $ 10,250,590  $  2,117,407  $  3,966,095
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                FOR THE THREE MONTHS ENDED
                                                             JULY 31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                           LBS         OTHER         TOTAL
    -------------------------------------------------------------------------
    Net interest income           $        709  $    (10,577) $    103,413
    Other income(2)                      9,203        21,228        67,682
                                 --------------------------------------------
    Total revenue                        9,912        10,651       171,095
    Provision for loan losses(3)             -         8,000        18,500
    Non-interest expenses                8,346         5,998       113,547
                                 --------------------------------------------
    Income (loss) before
     income taxes                        1,566        (3,347)       39,048
    Income taxes (recovered)               458        (4,677)        8,111
                                 --------------------------------------------
    Net income                    $      1,108  $      1,330  $     30,937
                                 --------------------------------------------
                                 --------------------------------------------
    Average assets(1)             $  1,587,308  $    802,582  $ 18,723,982
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                 FOR THE NINE MONTHS ENDED
                                                             JULY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                R & SME QUEBEC          RE&C           B2B
    -------------------------------------------------------------------------
    Net interest income           $    228,587  $     47,976  $     66,556
    Other income                        89,063        16,543         7,288
                                 --------------------------------------------
    Total revenue                      317,650        64,519        73,844
    Provision for loan losses           30,072         6,920         3,008
    Non-interest expenses              250,072        19,070        34,809
                                 --------------------------------------------
    Income (loss) before
     income taxes                       37,506        38,529        36,027
    Income taxes (recovered)             7,896        12,058        11,403
                                 --------------------------------------------
    Net income                    $     29,610  $     26,471  $     24,624
                                 --------------------------------------------
                                 --------------------------------------------
    Average assets(1)             $ 10,934,428  $  2,319,217  $  4,240,737
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                 FOR THE NINE MONTHS ENDED
                                                             JULY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                           LBS         OTHER         TOTAL
    -------------------------------------------------------------------------
    Net interest income           $      1,768  $    (39,345) $    305,542
    Other income                        35,303        34,223       182,420
                                 --------------------------------------------
    Total revenue                       37,071        (5,122)      487,962
    Provision for loan losses                -             -        40,000
    Non-interest expenses               28,442        11,454       343,847
                                 --------------------------------------------
    Income (loss) before
     income taxes                        8,629       (16,576)      104,115
    Income taxes (recovered)             2,529        (4,656)       29,230
                                 --------------------------------------------
    Net income                    $      6,100  $    (11,920) $     74,885
                                 --------------------------------------------
                                 --------------------------------------------
    Average assets(1)             $  1,369,452  $  1,306,667  $ 20,170,501
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                 FOR THE NINE MONTHS ENDED
                                                             JULY 31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                R & SME QUEBEC          RE&C           B2B
    -------------------------------------------------------------------------
    Net interest income           $    222,707  $     41,581  $     66,293
    Other income(4)                     86,177        11,447         8,138
                                 --------------------------------------------
    Total revenue                      308,884        53,028        74,431
    Provision for loan losses(3)        25,726         3,497           777
    Non-interest expenses              244,362        16,850        31,623
                                 --------------------------------------------
    Income (loss) before
     income taxes                       38,796        32,681        42,031
    Income taxes(5)                      9,596        10,815        14,182
                                 --------------------------------------------
    Net income                    $     29,200  $     21,866  $     27,849
                                 --------------------------------------------
                                 --------------------------------------------
    Average assets(1)             $  9,985,127  $  2,107,511  $  3,817,668
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                 FOR THE NINE MONTHS ENDED
                                                             JULY 31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                           LBS         OTHER         TOTAL
    -------------------------------------------------------------------------
    Net interest income           $      2,146  $    (30,757)  $   301,970
    Other income(4)                     23,894        46,044       175,700
                                 --------------------------------------------
    Total revenue                       26,040        15,287       477,670
    Provision for loan losses(3)             -         8,000        38,000
    Non-interest expenses               23,286        16,830       332,951
                                 --------------------------------------------
    Income (loss) before
     income taxes                        2,754        (9,543)      106,719
    Income taxes(5)                        797        (3,869)       31,521
                                 --------------------------------------------
    Net income                    $      1,957  $     (5,674)  $    75,198
                                 --------------------------------------------
                                 --------------------------------------------
    Average assets(1)             $  1,481,166  $    702,311  $ 18,093,783
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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.
    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 -            LBS segment consists of the activities of the Laurentian
                     Bank Securities Inc. subsidiary.
    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.
    (2)              Other income in the Other segment includes a
                     $12.9 million gain ($11.1 million net of income taxes)
                     on the sale of shares of the Montreal Exchange as a
                     result of the business combination of the Montreal
                     Exchange with the TSX Group.
    (3)              The provision for credit losses in the Other segment
                     includes an $8.0 million charge ($5.5 million net of
                     income taxes) resulting from an increase in the general
                     allowance for loan losses.
    (4)              Other income in the Other segment includes a
                     $0.4 million loss ($0.3 million net of income taxes) on
                     the sale of a $30.1 million personal line of credit
                     portfolio. The Bank has not retained any rights or
                     obligations in respect of these loans.
    (5)              The Other segment's income taxes include a $5.6 million
                     tax adjustment reflecting the decrease in the Bank's
                     future income tax assets as a result of reductions in
                     federal income tax rates.
    




For further information:

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

Organization Profile

Laurentian Bank of Canada

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