Laurentian Bank reports strong net income of $32.0 million for the first
quarter of 2010

MONTREAL, March 3 /CNW Telbec/ -

    
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    Highlights of the first quarter 2010

    - Strong net income of $32.0 million, up 28% from $25.0 million for the
      first quarter of 2009
    - Return on common shareholders' equity of 12.3%, compared to 10.0% for
      the first quarter of 2009
    - Total revenue of $180.4 million, an increase of 15% from $156.5 million
      a year ago
    - Loan losses of $16 million, unchanged from the fourth quarter of 2009,
      and up from $12 million in the first quarter of 2009
    - Total loans and bankers' acceptances increased by more than $2 billion
      over the last twelve months
    - Significant improvement of the efficiency ratio to 66.7%
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Laurentian Bank of Canada reported strong net income of $32.0 million, or $1.21 diluted per common share, for the first quarter ended January 31, 2010, compared to net income of $25.0 million, or $0.91 diluted per common share, for the first quarter of 2009. Return on common shareholders' equity was 12.3% for the quarter, compared to 10.0% for the corresponding period in 2009.

Commenting on first-quarter results, Réjean Robitaille, President and Chief Executive Officer, mentioned: "I am particularly pleased with our strong loan and revenue growth during the quarter, which, thanks to positive operating leverage, generated a significant improvement in the Bank's efficiency ratio. We have maintained our momentum and remain well positioned to benefit from improving economic conditions. Moreover, our high level of liquidity and solid capital position provide the flexibility to support our continued growth. Furthermore, although we continue to closely monitor market conditions, the credit quality of our loan portfolios remained satisfactory in the quarter."

Review of Business Highlights

Our solid performance in the first quarter of 2010 was the result of numerous growth and development initiatives that we have been pursuing. These permitted us to generate growth in loans and acceptances of more than two billion dollars over the last twelve months.

This growth was, to a large extent, due to the increase in residential mortgage volumes, thanks to our retail network and to B2B Trust. Not only do we generate mortgages through our branches, but also through the nearly one hundred mobile bankers specializing in mortgages. Thus, our sales force has both expanded and increased its penetration over the past few years. Working in tandem with the branches, our mobile specialists constitute an important lever to ensure the growth of these financial products. B2B Trust's independent advisors distribution channel also contributed to this growth while providing geographic diversification to our loan portfolio. Furthermore, the popular High Interest Investment Account continues to generate growth, with an increase of approximately $80 million in the last quarter alone. These new funds were efficiently deployed as B2B Trust continues to hold a leadership position in investment loans with growth of nearly $100 million in the last quarter.

We are continually working on diversifying our sources of revenue and are increasing the volume of activity of our brokerage, VISA, insurance and mutual funds operations, which resulted in higher fee and commission income.

Each year, during the RRSP investment campaign that takes place until the end of February, there is a great deal of effort concentrated in our branch network in order to respond to the investment needs of our clients. This period is especially important to the Bank given that it provides an excellent opportunity to increase our share of the investment wallet of each client. To this end, we have put into practice one of our core values: that of proximity. By expanding our opening hours during the last two weeks of the campaign, we allow our clients to make their investment decisions as effortless and convenient as possible.

The Real Estate and Commercial sector, as well as the SME Quebec division, continue to develop their activities. In addition to growing commercial mortgages and loans, these groups have been successful in expanding the array of products that clients have with us, particularly in accumulating significant commercial deposits over the past few quarters. Strategically situated across Canada, the Real Estate Financing group recently opened a new office in Quebec City, bringing the number of offices to seven.

Finally, Laurentian Bank Securities continues to expand its activities. The Institutional Fixed Income division remains highly profitable while the other business lines are gradually strengthening their operations. For example, the Retail Brokerage division now has 80 brokers located in 14 offices in Quebec and Ontario. This allows the Bank to offer a full suite of investment products to its clients.

Non-GAAP Financial Measures

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

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

Caution Regarding Forward-looking Statements

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

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

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

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

    
    FINANCIAL
    HIGHLIGHTS
                                 FOR THE THREE MONTHS ENDED
                                ----------------------------
    IN MILLIONS OF DOLLARS,
    UNLESS OTHERWISE INDICATED   JANUARY 31      JANUARY 31
    (UNAUDITED)                        2010            2009        VARIANCE
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    Earnings
    Net income                 $       32.0    $       25.0              28 %
    Net income available to
     common shareholders       $       28.9    $       21.8              33 %
    Return on common
     shareholders' equity(1)           12.3 %          10.0 %
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    Per common share
    Diluted net income         $       1.21    $       0.91              33 %
    Dividends declared         $       0.36    $       0.34               6 %
    Book value(1)              $      39.52    $      36.41               9 %
    Share price - close        $      38.03    $      29.07              31 %
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    Financial position
    Balance sheet assets       $     23,184    $     19,868              17 %
    Loans, bankers'
     acceptances and
     assets purchased
     under reverse
     repurchase agreements,
     net                       $     17,271    $     14,901              16 %
    Personal deposits          $     15,096    $     13,168              15 %
    Shareholders' equity
     and debentures            $      1,342    $      1,255               7 %
    Number of common
     shares - end of period
     (in thousands)                  23,921          23,849               - %
    Net impaired loans as
     a % of loans, bankers'
     acceptances and assets
     purchased under
     reverse repurchase
     agreements                        0.21 %          0.09 %
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    Capital ratios
    Tier I BIS capital ratio           11.0 %          10.1 %
    Total BIS capital ratio            12.9 %          12.1 %
    Assets to capital multiple         18.6 x          17.1 x
    Tangible common equity as
     a percentage of
     risk-weighted assets(2)            9.1 %           8.3 %
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    FINANCIAL RATIOS
    Per common share
    Price / earnings ratio
     (trailing four quarters)           8.4 x           7.2 x
    Market to book value                 96 %            80 %
    Dividend yield                     3.79 %          4.68 %
    Dividend payout ratio              29.8 %          37.2 %
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    As a percentage of
     average assets
    Net interest income                2.13 %          2.00 %
    Provision for loan
     losses                            0.28 %          0.24 %
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    Profitability
    Efficiency ratio (non-
     interest expenses as
     a % of total revenue)             66.7 %          70.7 %
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    OTHER INFORMATION
    Number of full-time
     equivalent employees             3,629           3,454
    Number of branches                  156             156
    Number of automated
     banking machines                   406             348
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    (1) With regard to the calculation of the Return on common shareholders'
        equity ratio, the Bank considers that net income is the best measure
        of profitability and that common shareholders' equity, excluding
        accumulated other comprehensive income, would be used as a capital
        measure. The calculation of the Bank's book value is also based on
        common shareholders' equity, excluding accumulated other
        comprehensive income.
    (2) Tangible common equity is defined as common shareholders' equity,
        excluding accumulated other comprehensive income, less goodwill and
        contractual and customer relationship intangible assets.
    

Management's Discussion and Analysis

This Management's Discussion and Analysis (MD&A) is a narrative explanation, through the eyes of management, of the Bank's financial condition as at January 31, 2010, and of how it performed during the three-month period then ended. This MD&A, dated March 3, 2010, should be read in conjunction with the unaudited interim consolidated financial statements for the first quarter of 2010. Supplemental information on risk management, critical accounting policies and estimates, and off-balance sheet arrangements is also provided in the Bank's 2009 Annual Report.

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

Performance and Financial Objectives

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

    
    2010 FINANCIAL OBJECTIVES

                                                                    FOR THE
                                                               THREE MONTHS
                                                                      ENDED
                                                                 JANUARY 31,
                                            2010 OBJECTIVES            2010
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    Revenue growth                                 5% to 10%             15 %
    Efficiency ratio                              70% to 67%           66.7 %
    Return on common shareholders' equity     10.0% to 12.0%           12.3 %
    Diluted net income per common share      $4.00 to $4.70          $ 1.21
    Tier I BIS capital ratio                 Minimum of 9.5%           11.0 %
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Although it is early in the fiscal year, the Bank's results for the quarter ended January 31, 2010 compare favorably with the 2010 objectives after three months, as shown in the table above.

Consolidated Results

Net income was $32.0 million, or $1.21 diluted per common share, for the first quarter ended January 31, 2010, compared with $25.0 million, or $0.91 diluted per common share, for the first quarter of 2009.

Total revenue

Total revenue increased by more than 15% year-over-year to $180.4 million in the first quarter of 2010, compared with $156.5 million in the first quarter of 2009. The Bank's net interest income increased to $120.7 million for the first quarter of 2010, from $98.7 million in the first quarter of 2009. The strong loan and deposit growth year-over-year combined with higher interest margins contributed to the 22% increase in net interest income. Margins improved from 2.00% in the first quarter of 2009 to 2.13% in the first quarter of 2010. Repricing measures taken in 2009 to strengthen margins continued to provide benefits during the first quarter.

Other income

Other income was $59.7 million in the first quarter of 2010, compared to $57.8 million in the first quarter of 2009. The increase of $3.4 million in fees and commissions on loans and deposits, largely relating to the increase in business activity year-over-year, as well as the continued stronger contribution from brokerage operations, more than offset lower securitization income. Revenues from securitization activities decreased by $6.3 million, from $10.5 million in the first quarter of 2009 to $4.2 million in the first quarter of 2010. This was a result of the lower level of securitization of $101.5 million in the first quarter of 2010, compared to $312.4 million in the first quarter of 2009, as well as the tightening of credit spreads. Note 3 to the interim financial statements provides further details on securitization activities.

Provision for loan losses

The provision for loan losses amounted to $16.0 million in the first quarter of 2010, compared with $12.0 million in the first quarter of 2009 and $16.0 million in the fourth quarter of 2009. The increase essentially relates to commercial loan portfolios, while the credit quality of consumer loan portfolios has stabilized. The Risk Management section below provides additional information on the credit quality of the Bank's loan portfolios.

Non-interest expenses

Non-interest expenses totaled $120.4 million for the first quarter of 2010, compared to $110.7 million for the first quarter of 2009; an 8.7% year-over-year increase. Several factors contributed to this increase. Firstly, salaries and employee benefits rose by $4.8 million, mainly as a result of salary increases and new hires over the last twelve months to support business development initiatives. Secondly, premises and technology costs increased from $28.0 million for the first quarter of 2009 to $32.1 million for the first quarter of 2010. This increase is mainly explained by higher amortization expense related to recently completed IT development projects and overall increases in technology costs to support growth.

As a result of the strong increase in revenues which more than offset the increase in expenses, the efficiency ratio (non-interest expenses divided by total revenue) significantly improved to 66.7% in the first quarter of 2010, compared with 70.7% in the first quarter of 2009.

Income taxes

For the quarter ended January 31, 2010, the income tax expense was $12.1 million and the effective tax rate was 27.3%. The lower tax rate, compared to the statutory rate, mainly resulted from the favourable effect of holding investments in Canadian securities that generate non-taxable dividend income and the lower taxation level on revenues from credit insurance operations. In addition, income taxes for the quarter included the effect on future tax assets related to the reduction to Ontario's tax rates which became effective during the first quarter. For the quarter ended January 31, 2009, the income tax expense was $8.8 million and the effective tax rate was 25.9%.

First quarter 2010 compared to fourth quarter 2009

Net income was $32.0 million for the first quarter of 2010, compared to $38.2 million for the fourth quarter ended October 31, 2009.

Results for the fourth quarter of 2009 included income from discontinued operations of $11.5 million related to the sale of asset management activities in fiscal 2005. Excluding this gain, income from continuing operations was $26.8 million for the fourth quarter of 2009 and increased by 19% to $32.0 million for the first quarter of 2010. Net interest income improved by $2.5 million essentially as a result of higher loan volumes. Net interest margin stood at 2.13% in the first quarter of 2010, six basis points lower than in the fourth quarter of 2009 where it stood at 2.19%, mainly as a result of higher volumes of low-yielding fixed-income trading securities. Other revenue was essentially unchanged compared to the fourth quarter of 2009, as higher revenues from financial market operations offset lower securitization income. Non-interest expenses decreased by $7.8 million compared with the fourth quarter of 2009. A significant portion of the decrease is related to charges for operational issues incurred in the fourth quarter of 2009, of which $2.1 million were recovered in the first quarter. Furthermore, salaries and employee benefits for the first quarter of 2010 only partially reflected the effect of annual increases effective as of January 1st and benefitted from favourable adjustments to variable compensation expenses.

Financial Condition

    
    CONDENSED BALANCE SHEET

    In thousands of dollars           AS AT           AS AT           AS AT
                                 JANUARY 31      OCTOBER 31      JANUARY 31
    (Unaudited)                        2010            2009            2009
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    ASSETS
      Cash resources           $    239,346    $    300,616    $    290,698
      Securities                  4,688,760       4,432,183       3,653,855
      Assets purchased under
       reverse repurchase
       agreements                   815,449         536,064         575,339
      Loans, net                 16,209,912      15,601,307      14,215,139
      Other assets                1,230,440       1,294,610       1,133,116
                              -----------------------------------------------
                               $ 23,183,907    $ 22,164,780    $ 19,868,147
                              -----------------------------------------------
    LIABILITIES AND
     SHAREHOLDERS' EQUITY
      Deposits                 $ 18,426,334    $ 18,299,966    $ 15,572,870
      Other liabilities           3,415,700       2,543,588       3,039,836
      Subordinated debentures       150,000         150,000         150,000
      Shareholders' equity        1,191,873       1,171,226       1,105,441
                              -----------------------------------------------
                               $ 23,183,907    $ 22,164,780    $ 19,868,147
                              -----------------------------------------------
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Balance sheet assets increased by more than $1.0 billion from year-end 2009 and stood at $23.2 billion at January 31, 2010. Over the last twelve months, balance sheet assets increased by $3.3 billion or 17%.

Liquid assets

Liquid assets, including cash, deposits with other banks, securities and assets purchased under reverse repurchase agreements, increased by $0.5 billion, mainly as a result of higher trading inventories. The Bank continues to maintain a high level of liquid assets to support its growth.

Loan portfolio

The portfolio of loans and bankers' acceptances stood at $16.6 billion at January 31, 2010, up $0.6 billion from October 31, 2009. The Bank had another solid quarter, with significant new commitments and disbursed loan volumes. Residential mortgages, including securitized loans, increased by $414.5 million, as detailed below.

    
    RESIDENTIAL MORTGAGE PORTFOLIO

    In thousands of dollars           AS AT           AS AT
                                 JANUARY 31      OCTOBER 31
    (Unaudited)                        2010            2009        VARIANCE
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    On-balance sheet
     residential mortgage
     loans                     $  7,695,123    $  7,219,830    $    475,293
    Securitized residential
     mortgage loans (off-
     balance sheet)               2,641,960       2,702,762         (60,802)
                              -----------------------------------------------
    Total residential
     mortgage loans,
     including securitized
     loans                     $ 10,337,083    $  9,922,592    $    414,491
                              -----------------------------------------------
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Commercial mortgages and commercial loans, including bankers' acceptances increased by more than $60.2 million and $62.5 million, respectively, as the Bank continues to capitalize on growth opportunities in the Canadian market. Personal loans increased by $46.2 million, mainly reflecting growth in investment loans and home equity lines of credit.

Deposits

Considering overall softer market conditions for personal savings, total personal deposits decreased by $43.1 million during the quarter to $15.1 billion as at January 31, 2010, as the Bank actively managed its liquidity levels and funding costs. Retail deposits continue to be a particularly stable source of financing for the Bank, owing to their availability and lower cost when compared to institutional deposits. During the first quarter, the level of business and other deposits increased by $169.5 million, for a net $126.4 million increase in total deposits. Volumes associated with the B2B Trust High Interest Investment Account were up $80.3 million during the quarter, as this product continues to be popular among the financial advisor community. As at January 31, 2010, personal deposits accounted for 82% of total deposits of $18.4 billion.

Shareholders' equity

Shareholders' equity stood at $1,191.9 million as at January 31, 2010, compared with $1,171.2 million as at October 31, 2009. The increase in shareholders' equity mainly results from net income accumulated during the last quarter.

The Bank's book value per common share, excluding accumulated other comprehensive income, was $39.52 as at January 31, 2010, compared to $38.68 as at October 31, 2009. There were 23,920,962 common shares and 54,075 share purchase options outstanding as at February 23, 2010.

Assets under administration

Assets under administration stood at $14.3 billion as at January 31, 2010, unchanged from October 31, 2009, and $1.1 billion higher than as at January 31, 2009 where they stood at $13.2 billion. The increase compared with January 31, 2009 is attributable to the recovery in market value of the assets under administration, mainly as they relate to self-directed RRSPs, client brokerage assets and mutual funds.

Capital Management

The regulatory Tier I capital of the Bank reached $1,066.4 million as at January 31, 2010, compared with $1,045.8 million as at October 31, 2009. The BIS Tier 1 and total capital ratios stood at 11.0% and 12.9%, respectively, as at January 31, 2010, compared to 11.0% and 13.0%, respectively, as at October 31, 2009. These ratios remain strong. The tangible common equity ratio of 9.1% also reflects the high quality of the Bank's capital.

    
    REGULATORY CAPITAL - BIS

    In thousands of dollars,          AS AT           AS AT           AS AT
     except percentage amounts   JANUARY 31      OCTOBER 31      JANUARY 31
    (Unaudited)                        2010            2009            2009
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    Total - Tier 1
     capital (A)               $  1,066,390    $  1,045,824    $    976,343
    Tier I BIS capital ratio
     (A/C)                             11.0 %          11.0 %          10.1 %
    Total - capital (B)        $  1,255,570    $  1,235,866    $  1,169,558
    Total BIS capital ratio
     (B/C)                             12.9 %          13.0 %          12.1 %
    Total risk-weighted
     assets (C)                $  9,708,653    $  9,480,823    $  9,677,216
    Assets to capital
     multiple                          18.6 x          18.0 x          17.1 x
    Tangible common equity
     as a percentage of
     risk-weighted assets(1)            9.1 %           9.1 %           8.3 %
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    (1) Tangible common equity is defined as common shareholders' equity,
        excluding accumulated other comprehensive income, less goodwill and
        contractual and customer relationships.


    RISK-WEIGHTED ASSETS

    In thousands of dollars           AS AT           AS AT           AS AT
                                 JANUARY 31      OCTOBER 31      JANUARY 31
    (Unaudited)                        2010            2009            2009
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    Balance sheet items
      Cash resources           $     17,125    $     12,697    $     36,375
      Securities                    251,415         220,257         265,356
      Mortgage loans              3,385,374       3,222,867       2,516,066
      Other loans and
       customers' liabilities
       under acceptances          3,838,350       3,807,878       5,060,187
      Other assets                  494,654         516,561         416,886
                              -----------------------------------------------
    Total - balance sheet
     items                        7,986,918       7,780,260       8,294,870
    Off-balance sheet items         543,972         547,050         293,121
    Operational risk              1,177,763       1,153,513       1,089,225
                              -----------------------------------------------
    Total - risk-weighted
     assets                    $  9,708,653    $  9,480,823    $  9,677,216
                              -----------------------------------------------
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Basel Committee on Banking Supervision new proposed capital and liquidity regulation

In December 2009, the Basel Committee on Banking Supervision published proposals on new capital and liquidity calculations. The Bank is presently reviewing these new proposals which should not become regulation until late 2012 at the earliest. At this stage, it is too early to determine the impact on capital ratios and liquidity requirements, considering the proposals are likely to change between now and when final rules take effect.

Dividends

At its meeting on February 24, 2010, the Board of Directors declared regular dividends on the various series of preferred shares to shareholders of record on March 9, 2010. Also, at its meeting on March 3, 2010, the Board of Directors declared a dividend of $0.36 per common share, payable on May 1, 2010, to shareholders of record on April 1, 2010.

Risk Management

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

Credit risk

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

    
    PROVISION FOR LOAN LOSSES RECORDED IN THE CONSOLIDATED STATEMENT OF
    INCOME

                                         FOR THE THREE MONTHS ENDED
                              -----------------------------------------------
    In thousands of dollars      JANUARY 31      OCTOBER 31      JANUARY 31
    (Unaudited)                        2010            2009            2009
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    Loan portfolios
      Personal loans           $      8,658    $      9,749    $      9,173
      Residential mortgages             263             524             670
      Commercial mortgages              794             360              19
      Commercial and other
       loans                          6,285           5,367           2,138
                              -----------------------------------------------
    Total                      $     16,000    $     16,000    $     12,000
                              -----------------------------------------------
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The provision for loan losses amounted to $16.0 million in the first quarter of 2010, compared with $12.0 million in the first quarter of 2009 and $16.0 million in the fourth quarter of 2009. The increase largely relates to specific provisions on commercial loan portfolios as the ongoing sluggish economic conditions have affected certain weaker companies; while congruent with the Bank's expectation, the credit losses on the consumer loan portfolios have stabilized.

Gross impaired loans stood at $157.4 million at January 31, 2010, compared to $137.5 million at October 31, 2009. The increase mainly results from commercial loans and mortgages. Impaired residential mortgage loans have also slightly increased during the quarter. Credit quality of other retail portfolios has however stabilized during the quarter, as a result of the improving economic conditions and measures undertaken to reduce the risk profile of the portfolios.

    
    ALLOWANCE FOR LOAN LOSSES

    In thousands of dollars,          AS AT           AS AT           AS AT
     except percentage amounts   JANUARY 31      OCTOBER 31      JANUARY 31
    (Unaudited)                        2010            2009            2009
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    Gross impaired loans       $    157,373    $    137,494    $    124,619
    Allowance for loan losses       121,364         114,546         111,608
                              -----------------------------------------------
    Net impaired loans         $     36,009    $     22,948    $     13,011
                              -----------------------------------------------
    Impaired loans as a % of
     loans, bankers'
     acceptances and assets
     purchased under reverse
     repurchase agreements
      Gross                            0.90 %          0.83 %          0.83 %
      Net                              0.21 %          0.14 %          0.09 %
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Net impaired loans stood at $36.0 million at January 31, 2010 (representing 0.21% of total loans, bankers' acceptances and assets purchased under reverse repurchase agreements), compared to $23.0 million (0.14%) at October 31, 2009.

Market risk

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

The purpose of ALM activities is to control structural interest rate risk, which corresponds to the potential negative impact of interest rate movements on the Bank's revenues and economic value. Dynamic management of structural risk is intended to maximize the Bank's profitability while preserving the economic value of common shareholders' equity. As at January 31, 2010, the effect on the economic value of common shareholders' equity and on net interest income before taxes of a sudden and sustained 1% increase in interest rates remained low and was as follows.

    
    STRUCTURAL INTEREST RATE SENSITIVITY

    In thousands of dollars                           AS AT           AS AT
                                                 JANUARY 31      OCTOBER 31
    (Unaudited)                                        2010            2009
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    Increase in net interest income before
     taxes over the next 12 months             $     (5,302)   $     (4,779)
    Change in the economic value of common
     shareholders' equity (Net of income
     taxes)                                    $    (10,423)   $    (19,626)
    -------------------------------------------------------------------------
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The Bank is actively managing its interest rate sensitivity position in order to benefit from current yield curve conditions.

Segmented Information

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

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

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

Retail & SME Quebec

    
                                         FOR THE THREE MONTHS ENDED
                              -----------------------------------------------
    In thousands of dollars,
     except percentage amounts   JANUARY 31      OCTOBER 31      JANUARY 31
    (Unaudited)                        2010            2009            2009
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    -------------------------------------------------------------------------
    Total revenue              $    112,503    $    108,274    $    104,799
    Provision for loan losses  $      9,790    $     11,815    $      9,535
    Income from continuing
     operations                $     12,552    $     10,013    $     10,180
    Net income                 $     12,552    $     21,482    $     10,180
    Efficiency ratio                   76.9 %          77.0 %          78.5 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The Retail & SME Quebec business segment's contribution to net income improved 23%, totalling $12.6 million for the first quarter of 2010, compared with $10.2 million for the first quarter of 2009.

Total revenue increased by $7.7 million, from $104.8 million in the first quarter of 2009 to $112.5 million in the first quarter of 2010, as a result of higher loan and deposit volumes, improved interest margins, as well as higher fee income. Loan losses were relatively unchanged, at $9.8 million in the first quarter of 2010, compared to $9.5 million in the first quarter of 2009, as the credit quality of retail loan portfolios has stabilized. Loan losses have however improved compared to the fourth quarter of 2009 where they stood at $11.8 million. Non-interest expenses increased by 5% or $4.3 million, from $82.2 million in the first quarter of 2009 to $86.5 million in the first quarter of 2010, mainly as a result of increases in salaries and employee benefits granted in 2009, as well as an increase in the number of employees to support business development.

Balance sheet highlights

    
    - Loans up 9% or $ 984.7 million over the last 12 months
    - Increase in deposits of $ 830.0 million, to $8.5 billion as at
      January 31, 2010
    

Real Estate & Commercial

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

    
                                         FOR THE THREE MONTHS ENDED
                              -----------------------------------------------
    In thousands of dollars,
     except percentage amounts   JANUARY 31      OCTOBER 31      JANUARY 31
    (Unaudited)                        2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue              $     27,590    $     26,597    $     19,986
    Provision for loan losses  $      5,150    $      2,897    $      1,654
    Net income                 $     12,688    $      7,611    $      8,040
    Efficiency ratio                   15.4 %          47.5 %          33.2 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The Real Estate & Commercial business segment's contribution to net income improved 58%, reaching $12.7 million for the first quarter of 2010, compared with $8.0 million for the first quarter of 2009.

Total revenue increased by $7.6 million, from $20.0 million in the first quarter of 2009 to $27.6 million in the first quarter of 2010, mainly as a result of higher net interest income due to growth in loan volumes and repricing measures initiated last year. Loan losses were higher at $5.2 million in the first quarter of 2010, compared to $1.7 million in the first quarter of 2009 as management recorded provisions on certain deteriorating accounts. Nonetheless, at 73 basis points to average loans and bankers' acceptances, losses have remained acceptable and the overall credit quality of the portfolio remained satisfactory. Non-interest expenses decreased by $2.4 million to $4.2 million in the first quarter of 2010, from $6.6 million in the first quarter of 2009, mainly as a result of the partial resolution of certain operational issues during the quarter which generated a $2.1 million favourable adjustment to non-interest expenses.

Balance sheet highlight

- Loans and BAs up 24% or $ 542.4 million over the last 12 months

B2B Trust

    
                                         FOR THE THREE MONTHS ENDED
                              -----------------------------------------------
    In thousands of dollars,
     except percentage amounts   JANUARY 31      OCTOBER 31      JANUARY 31
    (Unaudited)                        2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue              $     29,837    $     26,412    $     23,501
    Provision for loan losses  $      1,060    $      1,288    $        811
    Net income                 $     11,061    $      7,468    $      8,126
    Efficiency ratio                   42.3 %          53.7 %          45.9 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The B2B Trust business segment's contribution to net income improved 36%, reaching $11.1 million in the first quarter of 2010, compared with $8.1 million in the first quarter of 2009.

Total revenue increased by $6.3 million, from $23.5 million in the first quarter of 2009 to $29.8 million in the first quarter of 2010. Net interest income increased markedly by $6.2 million as a combined result of volume growth and recovering margins. Loan losses, including losses on investment lending activities, remained low at $1.1 million in the first quarter of 2010, compared with $0.8 million in the first quarter of 2009. Non-interest expenses increased to $12.6 million in the first quarter of 2010, compared with $10.8 million in the first quarter of 2009, mainly as a result of higher salary and employee benefits, as well as higher technology costs.

Balance sheet highlights

    
    - Loans up 15% or $ 643.9 million over the last 12 months
    - Increase in deposits of $2.3 billion over the last 12 months, to
      $9.0 billion as at January 31, 2010
    

Laurentian Bank Securities and Capital Markets

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

    
                                         FOR THE THREE MONTHS ENDED
                              -----------------------------------------------
    In thousands of dollars,
     except percentage amounts   JANUARY 31      OCTOBER 31      JANUARY 31
    (Unaudited)                        2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue              $     14,487    $     18,483    $     12,262
    Net income                 $      1,834    $      2,730    $      2,523
    Efficiency ratio                   80.6 %          73.5 %          70.5 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The Laurentian Bank Securities and Capital Markets business segment's contribution to net income amounted to $1.8 million in the first quarter of 2010, compared with $2.5 million in the first quarter of 2009. Revenue grew by more than 18% to $14.5 million in the first quarter of 2010, as a result of continued strong performance of the Institutional Fixed Income division and improvements in Retail and Institutional Equity divisions. Non-interest expenses increased to $11.7 million in the first quarter of 2010, from $8.7 million in the first quarter of 2009, due primarily to higher variable compensation costs. Furthermore, the settlement, during the first quarter of 2010, of Laurentian Bank Securities' dispute with the Autorité des marchés financiers related to the Third Party Asset-Backed Commercial Paper did not have a material impact on expenses as the bulk of this cost had been provisioned in prior periods.

Balance sheet highlight

    
    - Asset under management up 31% or $ 490.6 million over the last
      12 months
    

Other Sector

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

    
                                         FOR THE THREE MONTHS ENDED
                              -----------------------------------------------
    In thousands of dollars      JANUARY 31      OCTOBER 31      JANUARY 31
    (Unaudited)                        2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue              $     (3,968)   $     (1,226)   $     (4,011)
    Net loss                   $     (6,121)   $     (1,043)   $     (3,822)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The Other sector posted a negative contribution to net income of $6.1 million in the first quarter of 2010, compared with a negative contribution of $3.8 million in the first quarter of 2009. Net interest income improved to negative $8.8 million in the first quarter of 2010, compared to negative $13.8 million in the first quarter of 2009. In the first quarter of 2009, net interest income had been particularly affected as a result of higher funding costs.

Other income for the first quarter of 2010 was $4.9 million, compared to $9.8 million for the first quarter of 2009. The decrease in profitability mainly results from lower securitization income, which more than offset improvements in other treasury operations.

Non-interest expenses increased to $5.4 million for the first quarter of 2010, compared with $2.4 million for the first quarter of 2009, mainly as a result of higher technology costs and adjustments to capital tax expenses.

Additional Financial Information - Quarterly Results

    
    In thousands of dollars,
     except per share
     and percentage amounts  JANUARY 31  OCTOBER 31     JULY 31    APRIL 30
     (Unaudited)                   2010        2009        2009        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue           $   180,449 $   178,540 $   176,657 $   154,768
    Income from continuing
     operations             $    32,014 $    26,779 $    28,683 $    21,155
    Net income              $    32,014 $    38,248 $    28,683 $    21,155
    Income per common share
     from continuing
     operations
      Basic                 $      1.21 $      0.99 $      1.08 $      0.76
      Diluted               $      1.21 $      0.99 $      1.08 $      0.76
    Net income per common
     share
      Basic                 $      1.21 $      1.47 $      1.08 $      0.76
      Diluted               $      1.21 $      1.47 $      1.08 $      0.76
    Return on common
     shareholders'
     equity(1)                     12.3 %      15.3 %      11.6 %       8.5 %
    Balance sheet assets
     (in millions of
     dollars)               $    23,184 $    22,165 $    21,316 $    20,403
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    In thousands of dollars,
     except per share
     and percentage amounts  JANUARY 31  OCTOBER 31     JULY 31    APRIL 30
     (Unaudited)                   2009        2008        2008        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue           $   156,537 $   152,811 $   171,095 $   155,505
    Income from continuing
     operations             $    25,047 $    22,910 $    30,937 $    25,149
    Net income              $    25,047 $    27,333 $    30,937 $    25,149
    Income per common share
     from continuing
     operations
      Basic                 $      0.92 $      0.84 $      1.17 $      0.93
      Diluted               $      0.91 $      0.84 $      1.17 $      0.93
    Net income per common
     share
      Basic                 $      0.92 $      1.02 $      1.17 $      0.93
      Diluted               $      0.91 $      1.02 $      1.17 $      0.93
    Return on common
     shareholders'
     equity(1)                     10.0 %      11.5 %      13.4 %      11.2 %
    Balance sheet assets
     (in millions of
     dollars)               $    19,868 $    19,579 $    19,301 $    18,383
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) With regard to the calculation of the Return on common shareholders'
        equity ratio, the Bank considers that net income is the best measure
        of profitability and that common shareholders' equity, excluding
        accumulated other comprehensive income, would be used as a capital
        measure. The calculation of the Bank's book value is also based on
        common shareholders' equity, excluding accumulated other
        comprehensive income.
    

Accounting Policies

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

Future changes in accounting policy

International Financial Reporting Standards

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

The Bank has analyzed the new requirements, particularly with respect to the recognition of financial instruments, including securitization transactions, hedging transactions and loan losses. The standards regarding employee future benefits, business combinations, income taxes and stock-based compensation have also been analyzed in detail. In addition, the Bank is closely monitoring the potential impact of such changes on capital requirements.

In 2009, the International Accounting Standards Boards (IASB) proposed major amendments to the accounting standards governing the recognition of financial instruments, including securitization transactions, hedging transactions and loan losses. Since the proposed standards have yet to be finalized, their potential impact cannot be determined at this time.

Our analysis of the accounting consequences for these items, as well as for all other matters related to the Bank's preparedness for an orderly transition to IFRS, will continue throughout the current year.

Corporate Governance and Changes in Internal Control over Financial Reporting

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

During the last quarter ended January 31, 2010, there have been no changes in the Bank's policies or procedures and other processes that comprise its internal control over financial reporting which have materially affected, or are reasonably likely to materially affect, the Bank's internal control over financial reporting.

About Laurentian Bank

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

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

Conference Call

Laurentian Bank invites media representatives and the public to listen to the conference call with financial analysts to be held at 2 p.m. Eastern Time on Wednesday, March 3, 2010. The live, listen-only, toll-free, call-in number is 1-866-226-1792.

You can listen to the call on a delayed basis at any time from 6:00 p.m. on Wednesday, March 3, until midnight on March 24, 2010, by dialing the following playback number: 1-800-408-3053 Code 7078361 #. The conference call can also be heard through the Investor Relations section of the Bank's Web site at www.laurentianbank.ca. The Bank's Website also offers additional financial information.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

    
    CONSOLIDATED
    BALANCE SHEET

    IN THOUSANDS                      AS AT           AS AT           AS AT
     OF DOLLARS                  JANUARY 31      OCTOBER 31      JANUARY 31
     (UNAUDITED)         NOTES         2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    ASSETS
    Cash and non-
     interest-bearing
     deposits with other
     banks                     $     64,984    $     61,010    $     49,730
                              -----------------------------------------------
    Interest-bearing
     deposits with other
     banks                          174,362         239,606         240,968
                              -----------------------------------------------
    Securities accounts
      Available-for-sale          1,117,045       1,424,043       1,320,675
      Held-for-trading            2,062,594       1,391,313       1,052,870
      Designated as
       held-for-trading           1,509,121       1,616,827       1,280,310
                              -----------------------------------------------
                                  4,688,760       4,432,183       3,653,855
                              -----------------------------------------------
    Assets purchased
     under reverse
     repurchase
     agreements                     815,449         536,064         575,339
                              -----------------------------------------------
    Loans              2 and 3
      Personal                    5,701,250       5,655,055       5,738,904
      Residential
       mortgage                   7,695,123       7,219,830       6,137,137
      Commercial
       mortgage                   1,345,261       1,285,012         973,519
      Commercial and
       other                      1,589,642       1,555,956       1,477,187
                              -----------------------------------------------
                                 16,331,276      15,715,853      14,326,747
      Allowance for
       loan losses                 (121,364)       (114,546)       (111,608)
                              -----------------------------------------------
                                 16,209,912      15,601,307      14,215,139
                              -----------------------------------------------
    Other
      Customers'
       liabilities
       under
       acceptances                  245,673         216,817         110,421
      Premises and
       equipment                     57,614          58,163          59,171
      Derivative
       financial
       instruments                  232,533         253,661         278,291
      Goodwill                       53,790          53,790          53,790
      Software and
       other intangible
       assets                       100,592         103,386          93,972
      Other assets                  540,238         608,793         537,471
                              -----------------------------------------------
                                  1,230,440       1,294,610       1,133,116
                              -----------------------------------------------
                               $ 23,183,907    $ 22,164,780    $ 19,868,147
                              -----------------------------------------------
                              -----------------------------------------------
    LIABILITIES AND
     SHAREHOLDERS' EQUITY
    Deposits
      Personal                 $ 15,095,538    $ 15,138,637    $ 13,168,403
      Business, banks
       and other                  3,330,796       3,161,329       2,404,467
                              -----------------------------------------------
                                 18,426,334      18,299,966      15,572,870
                              -----------------------------------------------
    Other
      Obligations
       related to assets
       sold short                 1,515,677       1,054,470         905,329
      Obligations
       related to assets
       sold under
       repurchase
       agreements                   717,867         284,988       1,151,848
      Acceptances                   245,673         216,817         110,421
      Derivative
       financial
       instruments                  172,239         174,859         134,029
      Other liabilities             764,244         812,454         738,209
                              -----------------------------------------------
                                  3,415,700       2,543,588       3,039,836
                              -----------------------------------------------
    Subordinated
     debentures                     150,000         150,000         150,000
                              -----------------------------------------------
    Shareholders'
     equity
      Preferred shares       4      210,000         210,000         210,000
      Common shares          4      259,354         259,208         257,496
      Contributed surplus               218             209             185
      Retained earnings             685,867         665,538         610,690
      Accumulated other
       comprehensive
       income                8       36,434          36,271          27,070
                              -----------------------------------------------
                                  1,191,873       1,171,226       1,105,441
                              -----------------------------------------------
                               $ 23,183,907    $ 22,164,780    $ 19,868,147
                              -----------------------------------------------
                              -----------------------------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT
    OF INCOME

                                        FOR THE THREE MONTHS ENDED
                              -----------------------------------------------
    IN THOUSANDS OF
     DOLLARS, EXCEPT
     PER SHARE AMOUNTS           JANUARY 31      OCTOBER 31      JANUARY 31
     (UNAUDITED)         NOTES         2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest income
      Loans                    $    182,747    $    179,730    $    190,648
      Securities                     17,639          18,154          18,465
      Deposits with
       other banks                       53             102           3,014
      Other, including
       derivative
       financial
       instruments                   34,076          39,764          22,275
                              -----------------------------------------------
                                    234,515         237,750         234,402
                              -----------------------------------------------
    Interest expense
      Deposits                      111,498         117,048         129,074
      Other, including
       derivative
       financial
       instruments                      351             516           4,678
      Subordinated
       debentures                     1,950           1,951           1,947
                              -----------------------------------------------
                                    113,799         119,515         135,699
                              -----------------------------------------------
    Net interest income             120,716         118,235          98,703
                              -----------------------------------------------
    Other income
      Fees and
       commissions on
       loans and deposits            26,979          26,403          23,609
      Income from
       brokerage
       operations                    12,665          16,926           8,691
     Securitization
      income                 3        4,180           5,551          10,525
      Credit insurance
       income                         4,183           3,399           4,060
      Income from sales
       of mutual funds                3,526           3,383           2,836
      Income from
       treasury and
       financial market
       operations                     4,159             (99)          4,575
      Income from
       registered self-
       directed plans                 2,088           1,887           1,979
      Other                           1,953           2,855           1,559
                              -----------------------------------------------
                                     59,733          60,305          57,834
                              -----------------------------------------------
    Total revenue                   180,449         178,540         156,537
                              -----------------------------------------------
    Provision for loan
     losses                  2       16,000          16,000          12,000
                              -----------------------------------------------
    Non-interest expenses
      Salaries and
       employee benefits             65,225          66,027          60,389
      Premises and
       technology                    32,142          31,948          27,985
      Other                          23,016          30,168          22,358
                              -----------------------------------------------
                                    120,383         128,143         110,732
                              -----------------------------------------------
    Income from
     continuing
     operations before
     income taxes                    44,066          34,397          33,805
    Income taxes                     12,052           7,618           8,758
                              -----------------------------------------------
    Income from
     continuing
     operations                      32,014          26,779          25,047
    Income from
     discontinued
     operations, net of
     income taxes                         -          11,469               -
                              -----------------------------------------------
    Net income                 $     32,014    $     38,248    $     25,047
                              -----------------------------------------------
                              -----------------------------------------------
    Preferred share
     dividends,
     including
     applicable taxes                 3,074           3,066           3,222
                              -----------------------------------------------
    Net income available
     to common
     shareholders              $     28,940    $     35,182    $     21,825
                              -----------------------------------------------
                              -----------------------------------------------
    Average number of
     common shares
     outstanding (in
     thousands)
      Basic                          23,919          23,878          23,848
      Diluted                        23,935          23,903          23,872
                              -----------------------------------------------
    Income per common
     share from
     continuing
     operations
      Basic                    $       1.21    $       0.99    $       0.92
      Diluted                  $       1.21    $       0.99    $       0.91
                              -----------------------------------------------
    Net income per
     common share
      Basic                    $       1.21    $       1.47    $       0.92
      Diluted                  $       1.21    $       1.47    $       0.91
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT
    OF COMPREHENSIVE INCOME

                                                 FOR THE THREE MONTHS ENDED
                                              -------------------------------
                                                 JANUARY 31      JANUARY 31
    IN THOUSANDS OF DOLLARS (UNAUDITED)  NOTES         2010            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income                                 $     32,014    $     25,047
                                              -------------------------------
    Other comprehensive income, net of
     income taxes                            8
      Unrealized gains (losses) on
       available-for-sale securities                  2,798          (7,514)
      Reclassification of (gains) losses
       on available-for-sale securities to
       net income                                      (397)            717
      Net change in value of derivative
       instruments designated as cash flow
       hedges                                        (2,238)         15,041
                                              -------------------------------
                                                        163           8,244
                                              -------------------------------
    Comprehensive income                       $     32,177    $     33,291
                                              -------------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT OF CHANGES
    IN SHAREHOLDERS' EQUITY

                                                FOR THE THREE MONTHS ENDED
                                              -------------------------------
                                                 JANUARY 31      JANUARY 31
    IN THOUSANDS OF DOLLARS (UNAUDITED)  NOTES         2010            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Preferred shares
      Balance at beginning and end of
       period                                  $    210,000    $    210,000
                                              -------------------------------
    Common shares                            4
      Balance at beginning of period                259,208         257,462
      Issued during the period under
       share purchase option plan            5          146              34
                                              -------------------------------
      Balance at end of period                      259,354         257,496
                                              -------------------------------
    Contributed surplus
      Balance at beginning of period                    209             173
      Stock-based compensation               5            9              12
                                              -------------------------------
      Balance at end of period                          218             185
                                              -------------------------------
    Retained earnings
      Balance at beginning of period                665,538         596,974
      Net income                                     32,014          25,047
      Dividends
        Preferred shares, including
         applicable taxes                            (3,074)         (3,222)
        Common shares                                (8,611)         (8,109)
                                              -------------------------------
      Balance at end of period                      685,867         610,690
                                              -------------------------------
    Accumulated other comprehensive
     income                                  8
      Balance at beginning of period                 36,271          18,826
      Other comprehensive income, net
       of income taxes                                  163           8,244
                                              -------------------------------
      Balance at end of period                       36,434          27,070
                                              -------------------------------
    Shareholders' equity                       $  1,191,873    $  1,105,441
                                              -------------------------------
                                              -------------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    CONSOLIDATED STATEMENT
    OF CASH FLOWS

                                        FOR THE THREE MONTHS ENDED
                              -----------------------------------------------
    IN THOUSANDS OF DOLLARS      JANUARY 31      OCTOBER 31      JANUARY 31
    (UNAUDITED)                        2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flows relating to
     operating activities
    Net income                 $     32,014    $     38,248    $     25,047
    Adjustments to determine
     net cash flows relating
     to operating activities:
      Provision for loan
       losses                        16,000          16,000          12,000
      Gains on securitization
       operations                    (3,185)         (6,245)        (16,672)
      Net gain from
       discontinued operations            -         (13,493)              -
      Net loss (gain) on
       disposal of non-trading
       securities                    (1,789)          8,332           2,685
      Future income taxes             5,470          12,323           7,319
      Depreciation                    2,621           2,853           2,754
      Amortization of software
       and other intangible
       assets                         6,381           6,097           5,291
      Net change in held-for-
       trading securities          (671,281)       (113,549)         16,327
      Change in accrued
       interest receivable           12,463         (20,370)          9,376
      Change in assets
       relating to derivative
       financial instruments         21,128         (12,422)        (40,587)
      Change in accrued
       interest payable             (12,886)         18,861         (11,649)
      Change in liabilities
       relating to derivative
       financial instruments         (2,620)         35,511         (13,440)
      Other, net                      2,137          43,672         (29,352)
                              -----------------------------------------------
                                   (593,547)         15,818         (30,901)
                              -----------------------------------------------
    Cash flows relating to
     financing activities
      Net change in deposits        126,368         342,108         239,058
      Change in obligations
       related to assets sold
       short                        461,207         354,412          86,093
      Change in obligations
       related to assets sold
       under repurchase
       agreements                   432,879          33,239          15,752
      Issuance of common
       shares                           146           1,567              34
      Dividends, including
       applicable income
       taxes                        (11,685)        (11,190)        (11,331)
                              -----------------------------------------------
                                  1,008,915         720,136         329,606
                              -----------------------------------------------
    Cash flows relating to
     investing activities
      Change in securities
       available-for-sale
       and designated as
       held-for-trading
        Acquisitions             (1,023,593)     (2,127,317)       (998,916)
        Proceeds on sale
         and at maturities        1,448,322       1,695,154         835,849
      Change in loans              (726,143)       (656,019)       (387,043)
      Change in assets
       purchased under
       reverse repurchase
       agreements                  (279,385)       (132,103)         86,052
      Proceeds from mortgage
       loan securitizations         101,512         268,481         312,116
      Additions to premises
       and equipment and
       software, net of
       disposals                     (5,659)        (15,760)         (4,766)
      Change in interest-
       bearing deposits with
       other banks                   65,244         236,380        (146,677)
      Cash flows from
       discontinued
       operations                     8,308               -               -
                              -----------------------------------------------
                                   (411,394)       (731,184)       (303,385)
                              -----------------------------------------------
    Net change in cash and
     non-interest-bearing
     deposits with other
     banks during the period          3,974           4,770          (4,680)
    Cash and non-interest-
     bearing deposits with
     other banks at beginning
     of period                       61,010          56,240          54,410
                              -----------------------------------------------
    Cash and non-interest-
     bearing deposits with
     other banks at end of
     period                    $     64,984    $     61,010    $     49,730
                              -----------------------------------------------
                              -----------------------------------------------
    Supplemental disclosure
     relating to cash flows:
      Interest paid during
       the period              $    126,503    $    103,583    $    146,603
      Income taxes paid
       (recovered) during
       the period              $     11,279    $     (1,026)   $      8,289
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of the interim consolidated
    financial statements.


    NOTES TO THE INTERIM CONSOLIDATED
    FINANCIAL STATEMENTS

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

1. ACCOUNTING POLICIES

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

Future changes to accounting policies

International Financial Reporting Standards

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

The Bank has analyzed the new requirements, particularly with respect to the recognition of financial instruments, including securitization transactions, hedging transactions and loan losses. The standards regarding employee future benefits, business combinations, income taxes and stock-based compensation have also been analyzed in detail. In addition, the Bank is closely monitoring the potential impact of such changes on capital requirements.

In 2009, the IASB proposed major amendments to the accounting standards governing the recognition of financial instruments, including securitization transactions, hedging transactions and loan losses. Since the proposed standards have yet to be finalized, their potential impact cannot be determined at this time.

Our analysis of the accounting consequences for these items, as well as for all other matters related to the Bank's preparedness for an orderly transition to IFRS, will continue throughout the current year.

2. LOANS

Loans and impaired loans

    
                                                      AS AT JANUARY 31, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  GROSS
                      GROSS   AMOUNT OF
                     AMOUNT    IMPAIRED    SPECIFIC     GENERAL       TOTAL
                   OF LOANS       LOANS  ALLOWANCES  ALLOWANCES  ALLOWANCES
    -------------------------------------------------------------------------
    Personal
     loans      $ 5,701,250 $    23,646 $     7,354 $    32,326 $    39,680
    Residential
     mortgages    7,695,123      33,778       1,958       3,071       5,029
    Commercial
     mortgages    1,345,261      21,091       3,319       4,246       7,565
    Commercial
     and other
     loans        1,589,642      78,858      35,483      33,607      69,090
               --------------------------------------------------------------
                $16,331,276 $   157,373 $    48,114 $    73,250 $   121,364
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                      AS AT OCTOBER 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  GROSS
                      GROSS   AMOUNT OF
                     AMOUNT    IMPAIRED    SPECIFIC     GENERAL       TOTAL
                   OF LOANS       LOANS  ALLOWANCES  ALLOWANCES  ALLOWANCES
    -------------------------------------------------------------------------
    Personal
     loans      $ 5,655,055 $    23,738 $     7,048 $    33,713 $    40,761
    Residential
     mortgages    7,219,830      32,368       1,878       2,956       4,834
    Commercial
     mortgages    1,285,012      11,230       2,525       5,000       7,525
    Commercial
     and other
     loans        1,555,956      70,158      29,845      31,581      61,426
               --------------------------------------------------------------
                $15,715,853 $   137,494 $    41,296 $    73,250 $   114,546
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                      AS AT JANUARY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  GROSS
                      GROSS   AMOUNT OF
                     AMOUNT    IMPAIRED    SPECIFIC     GENERAL       TOTAL
                   OF LOANS       LOANS  ALLOWANCES  ALLOWANCES  ALLOWANCES
    -------------------------------------------------------------------------
    Personal
     loans      $ 5,738,904 $    21,327 $     7,564 $    32,474 $    40,038
    Residential
     mortgages    6,137,137      23,308       1,826       3,901       5,727
    Commercial
     mortgages      973,519       6,199       1,902       5,444       7,346
    Commercial
     and other
     loans        1,477,187      73,785      27,066      31,431      58,497
               --------------------------------------------------------------
                $14,326,747 $   124,619 $    38,358 $    73,250 $   111,608
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Specific allowances for loan losses

    
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                   PERSONAL     RESIDENTIAL      COMMERCIAL
                                      LOANS       MORTGAGES       MORTGAGES
    -------------------------------------------------------------------------
    Balance at beginning of
     period                    $      7,048    $      1,878    $      2,525
    Provision for loan losses
     recorded in the
     consolidated statement
     of income                        8,658             263             794
    Write-offs                       (9,992)           (238)              -
    Recoveries                        1,640              55               -
                              -----------------------------------------------
    Balance at end of period   $      7,354    $      1,958    $      3,319
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                      FOR THE THREE MONTHS
                                                         ENDED JANUARY 31
                                              -------------------------------
                                                       2010            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                 COMMERCIAL           TOTAL           TOTAL
                                  AND OTHER        SPECIFIC        SPECIFIC
                                      LOANS      ALLOWANCES      ALLOWANCES
    -------------------------------------------------------------------------
    Balance at beginning of
     period                    $     29,845    $     41,296    $     39,184
    Provision for loan losses
     recorded in the
     consolidated statement
     of income                        6,285          16,000          12,000
    Write-offs                         (653)        (10,883)        (13,988)
    Recoveries                            6           1,701           1,162
                              -----------------------------------------------
    Balance at end of period   $     35,483    $     48,114    $     38,358
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Loans past due but not impaired

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

    
                                                      AS AT JANUARY 31, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                   1 TO       32 TO        OVER
                                31 DAYS     90 DAYS     90 DAYS       TOTAL
    -------------------------------------------------------------------------
    Personal loans          $   107,609 $    31,513 $     6,653 $   145,775
    Residential mortgages       253,639      33,939      23,145     310,723
                           --------------------------------------------------
                            $   361,248 $    65,452 $    29,798 $   456,498
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

3. LOAN SECURITIZATION

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

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

    
                                         FOR THE THREE MONTHS ENDED
                              -----------------------------------------------
                                 JANUARY 31      OCTOBER 31      JANUARY 31
                                       2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash proceeds, net of
     transaction costs         $    101,512    $    268,481    $    312,116
    Rights to future excess
     spreads                          4,824          13,456          28,307
    Servicing liability                (689)         (2,199)         (2,798)
    Other                              (400)         (3,212)         (5,058)
                              -----------------------------------------------
                                    105,247         276,526         332,567
    Residential mortgages
     securitized and sold          (101,538)       (268,703)       (312,402)
    Write-off of loan
     origination costs                 (524)         (1,578)         (3,493)
                              -----------------------------------------------
    Gains before income
     taxes, net of
     transaction costs         $      3,185    $      6,245    $     16,672
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

    
                                         DURING THE QUARTER ENDED
                              -----------------------------------------------
                                 JANUARY 31      OCTOBER 31      JANUARY 31
                                       2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average term
     (months)                            27              32              35
    Rate of prepayment                 17.6 %          18.8 %          17.2 %
    Discount rate                       1.3 %           1.7 %           1.9 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    No loss is expected on insured residential mortgages.
    

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

    
                                         FOR THE THREE MONTHS ENDED
                              -----------------------------------------------
                                 JANUARY 31      OCTOBER 31      JANUARY 31
                                       2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gains on securitization
     operations                $      3,185    $      6,245    $     16,672
    Changes in fair value of
     retained interests
     related to excess spreads,
     securitization swaps and
     financial instruments
     held for economic hedging
     purposes                           667            (165)         (7,309)
    Management income                 1,975           1,729           1,835
    Other                            (1,647)         (2,258)           (673)
                              -----------------------------------------------
                               $      4,180    $      5,551    $     10,525
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

As at January 31, 2010, the Bank held rights to future excess spreads of $89,744,000 (of which $87,274,000 related to insured mortgages) and cash reserve accounts of $11,401,000.

The total principal amount of securitized residential mortgages outstanding amounted to $2,641,960,000 as at January 31, 2010 ($2,702,762,000 as at October 31, 2009).

4. CAPITAL STOCK

Issuance of common shares

During the quarter, 6,724 common shares were issued to management under the Bank's employee share purchase option plan for a cash consideration of $146,000.

    
                                              AS AT                   AS AT
    ISSUED AND OUTSTANDING         JANUARY 31, 2010        OCTOBER 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    IN THOUSANDS OF DOLLARS,     NUMBER                  NUMBER
     EXCEPT NUMBER OF SHARES  OF SHARES      AMOUNT   OF SHARES      AMOUNT
    -------------------------------------------------------------------------
    Class A Preferred
     Shares(1)
      Series 9                4,000,000 $   100,000   4,000,000 $   100,000
      Series 10               4,400,000     110,000   4,400,000     110,000
                           --------------------------------------------------
    Total preferred shares    8,400,000 $   210,000   8,400,000 $   210,000
                           --------------------------------------------------
                           --------------------------------------------------
    Common shares            23,920,687 $   259,354  23,913,963 $   259,208
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The preferred shares are convertible into common shares at the Bank's
        option. However, the number of shares issuable on conversion is not
        determinable until the date of conversion.
    

Capital management

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

Regulatory guidelines issued by OSFI require banks to maintain a minimum Tier 1 capital ratio of at least 7% and a Total capital ratio of at least 10%. The Bank is monitoring its regulatory capital based on the Standard Approach for credit risk and on the Basic Indicator Approach for operational risk, as proposed by the Bank for International Settlements regulatory risk-based capital framework (Basel II). In addition, Canadian banks are required to ensure that their assets-to-capital multiple, which is calculated by dividing gross adjusted assets by Total capital, does not exceed a maximum level prescribed by OSFI. The Bank has complied with these requirements throughout the three-month period ended January 31, 2010.

5. STOCK-BASED COMPENSATION

Share purchase option plan

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

    
                                                      AS AT           AS AT
                                                 JANUARY 31,     OCTOBER 31,
                                                       2010            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                     NUMBER          NUMBER
    -------------------------------------------------------------------------
    Share purchase options
      Outstanding at end of period                   54,350          61,074
      Exercisable at end of period                   41,850          36,074
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Restricted share unit plan

During the first quarter of 2010, under the restricted share unit plan, annual bonuses for certain employees amounting to $1,651,000 were converted into 38,268 entirely vested restricted share units. The Bank also granted 22,961 additional restricted share units that will vest in December 2012.

Performance-based share unit plan

During the first quarter of 2010, under the performance-based share unit plan, the Bank granted 50,426 performance-based share units valued at $43.15 each. Rights to 37.5% of these units will vest after three years. The rights to the remaining units will vest after three years, upon meeting certain financial objectives.

Stock appreciation rights plan

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

Stock-based compensation plan expense

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

    
                                         FOR THE THREE MONTHS ENDED
                              -----------------------------------------------
                                 JANUARY 31      OCTOBER 31      JANUARY 31
                                       2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Stock-based compensation
     plan expense              $        (71)   $      2,968    $     (5,915)
    Effect of hedges                    813          (2,804)          8,029
                              -----------------------------------------------
    Total                      $        742    $        164    $      2,114
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

6. EMPLOYEE FUTURE BENEFITS

    
                                        FOR THE THREE MONTHS ENDED
                              -----------------------------------------------
                                 JANUARY 31      OCTOBER 31      JANUARY 31
                                       2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Defined benefit pension
     plan expense              $      1,907    $        203    $      1,471
    Defined contribution
     pension plan expense             1,093           1,066             993
    Other plan expense                  853           1,174             832
                              -----------------------------------------------
    Total                      $      3,853    $      2,443    $      3,296
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

7. WEIGHTED AVERAGE NUMBER OF OUTSTANDING COMMON SHARES

    
                                        FOR THE THREE MONTHS ENDED
                              -----------------------------------------------
                                 JANUARY 31      OCTOBER 31      JANUARY 31
                                       2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average number of
     outstanding common
     shares                      23,919,297      23,878,495      23,848,489
    Dilutive share purchase
     options                         16,110          24,498          23,426
                              -----------------------------------------------
    Weighted average number
     of outstanding common
     shares                      23,935,407      23,902,993      23,871,915
                              -----------------------------------------------
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

8. ADDITIONAL INFORMATION REGARDING OTHER COMPREHENSIVE INCOME

Other comprehensive income

    
                                                 FOR THE THREE MONTHS ENDED
                             ------------------------------------------------
                                                                 JANUARY 31
                                                                       2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                     BEFORE                          NET OF
                                     INCOME          INCOME          INCOME
                                      TAXES           TAXES           TAXES
    -------------------------------------------------------------------------
    Unrealized net gains
     (losses) on available-
     for-sale securities       $      4,052    $     (1,254)   $      2,798
    Reclassification of net
     (gains) and losses to
     net income on available-
     for-sale securities               (575)            178            (397)
                             ------------------------------------------------
                                      3,477          (1,076)          2,401
    Net change in value of
     derivative instruments
     designated as cash flow
     hedges                          (3,548)          1,310          (2,238)
                             ------------------------------------------------
    Other comprehensive
     income                    $        (71)   $        234    $        163
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                 FOR THE THREE MONTHS ENDED
                             ------------------------------------------------
                                                                 JANUARY 31
                                                                       2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                     BEFORE                          NET OF
                                     INCOME          INCOME          INCOME
                                      TAXES           TAXES           TAXES
    -------------------------------------------------------------------------
    Unrealized net gains
     (losses) on available-
     for-sale securities       $    (10,918)    $     3,404     $    (7,514)
    Reclassification of net
     (gains) and losses to
     net income on available-
     for-sale securities              1,041            (324)            717
                             ------------------------------------------------
                                     (9,877)          3,080          (6,797)
    Net change in value of
     derivative instruments
     designated as cash flow
     hedges                          22,386          (7,345)         15,041
                             ------------------------------------------------
    Other comprehensive
     income                    $     12,509     $    (4,265)    $     8,244
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Accumulated other comprehensive income (net of income taxes)

    
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                ACCUMULATED
                                       CASH       AVAILABLE-          OTHER
                                       FLOW        FOR-SALE   COMPREHENSIVE
                                     HEDGES      SECURITIES          INCOME
    -------------------------------------------------------------------------
    Balance at October 31,
     2009                      $     32,596     $     3,675     $    36,271
      Change during the
       three months ended
       January 31, 2010              (2,238)          2,401             163
                             ------------------------------------------------
    Balance at January 31,
     2010                      $     30,358     $     6,076     $    36,434
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                ACCUMULATED
                                       CASH       AVAILABLE-          OTHER
                                       FLOW        FOR-SALE   COMPREHENSIVE
                                     HEDGES      SECURITIES          INCOME
    -------------------------------------------------------------------------
    Balance at October 31,
     2008                      $     35,417     $   (16,591)    $    18,826
      Change during the
       three months ended
       January 31, 2009              15,041          (6,797)          8,244
                             ------------------------------------------------
    Balance at January 31,
     2009                            50,458         (23,388)         27,070
      Change during the
       three months ended
       April 30, 2009                 7,763           8,324          16,087
      Change during the
       three months ended
       July 31, 2009                (17,786)         11,797          (5,989)
      Change during the
       three months ended
       October 31, 2009              (7,839)          6,942            (897)
                             ------------------------------------------------
    Balance at October 31,
     2009                      $     32,596     $     3,675     $    36,271
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

9. SUPPLEMENTAL INFORMATION ON FINANCIAL INSTRUMENTS

Securities

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

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

    
                                          FOR THE THREE MONTHS ENDED
                             ------------------------------------------------
                                 JANUARY 31      OCTOBER 31      JANUARY 31
                                       2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Realized net gains
     (losses)                  $        575     $    (3,046)    $    (1,041)
    Writedowns for impairment
     recognized in net income             -            (426)              -
                             ------------------------------------------------
    Total                      $        575     $    (3,472)    $    (1,041)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

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

    
                                                     AS AT JANUARY 31, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                              AMORTIZED  UNREALIZED  UNREALIZED        FAIR
                                   COST       GAINS      LOSSES       VALUE
    -------------------------------------------------------------------------
    Securities issued or
     guaranteed
      by Canada(1)          $   470,145 $        27 $         - $   470,172
      by provinces              432,093       6,414           -     438,507
    Other debt securities       111,746       6,999          68     118,677
    Asset-backed securities      19,142         254         446      18,950
    Preferred shares             39,948       1,227         592      40,583
    Common shares and other
     securities                  30,383       1,255       1,482      30,156
                           --------------------------------------------------
                            $ 1,103,457 $    16,176 $     2,588 $ 1,117,045
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

Available-for-sale securities are assessed for impairment at each reporting date to determine whether it is probable that the amortized cost of the security would be recovered. As at January 31, 2010, gross unrealized losses on available-for-sale securities were $2,588,000. These unrealized losses are mainly related to publicly traded common and preferred shares. Management believes that these unrealized losses are temporary as the underlying financial conditions and prospects of the issuers have remained sound.

Financial instruments designated as held-for-trading

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

    
                                          FOR THE THREE MONTHS ENDED
                             ------------------------------------------------
                                 JANUARY 31      OCTOBER 31      JANUARY 31
                                       2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Included in
     securitization
     income                    $      6,637     $     9,493     $    21,246
    Included in income from
     treasury and financial
     market operations                    -              23             (45)
                             ------------------------------------------------
    Total                      $      6,637     $     9,516     $    21,201
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Derivative financial instruments

Ineffective portions of hedging relationships

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

    
                                          FOR THE THREE MONTHS ENDED
                             ------------------------------------------------
                                 JANUARY 31      OCTOBER 31      JANUARY 31
                                       2010            2009            2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flow hedges           $        (65)    $       730     $        35
    Fair value hedges                    88             293            (770)
                             ------------------------------------------------
                               $         23     $     1,023     $      (735)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Other information on hedging relationships

Net deferred gains of $19,299,000, included in accumulated other comprehensive income as at January 31, 2010, are expected to be transferred into net income over the next twelve months.

The maximum term of cash flow hedging relationships was five years as at January 31, 2010.

10. SEGMENTED INFORMATION

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

    
                                                 FOR THE THREE MONTHS ENDED
                                                           JANUARY 31, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                             R & SME QUEBEC            RE&C             B2B
    -------------------------------------------------------------------------
    Net interest income        $     81,811     $    19,911     $    27,340
    Other income                     30,692           7,679           2,497
                            -------------------------------------------------
    Total revenue                   112,503          27,590          29,837
    Provision for loan
     losses                           9,790           5,150           1,060
    Non-interest expenses            86,502           4,242          12,607
                            -------------------------------------------------
    Income (loss) before
     income taxes                    16,211          18,198          16,170
    Income taxes (recovered)          3,659           5,510           5,109
                            -------------------------------------------------
    Net income (loss)          $     12,552     $    12,688     $    11,061
                            -------------------------------------------------
                            -------------------------------------------------

    Average assets(1)          $ 11,752,657     $ 2,800,270     $ 4,738,833
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                 FOR THE THREE MONTHS ENDED
                                                           JANUARY 31, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                     LBS/CM           OTHER           TOTAL
    -------------------------------------------------------------------------
    Net interest income        $        485     $    (8,831)    $   120,716
    Other income                     14,002           4,863          59,733
                            -------------------------------------------------
    Total revenue                    14,487          (3,968)        180,449
    Provision for loan
     losses                               -               -          16,000
    Non-interest expenses            11,680           5,352         120,383
                            -------------------------------------------------
    Income (loss) before
     income taxes                     2,807          (9,320)         44,066
    Income taxes (recovered)            973          (3,199)         12,052
                            -------------------------------------------------
    Net income (loss)          $      1,834     $    (6,121)    $    32,014
                            -------------------------------------------------
                            -------------------------------------------------

    Average assets(1)          $  2,461,648     $   741,713     $22,495,121
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                 FOR THE THREE MONTHS ENDED
                                                           OCTOBER 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                             R & SME QUEBEC            RE&C             B2B
    -------------------------------------------------------------------------
    Net interest income        $     77,372     $    19,622     $    24,140
    Other income                     30,902           6,975           2,272
                            -------------------------------------------------
    Total revenue                   108,274          26,597          26,412
    Provision for loan
     losses                          11,815           2,897           1,288
    Non-interest expenses            83,403          12,621          14,186
                            -------------------------------------------------
    Income (loss) before
     income taxes                    13,056          11,079          10,938
    Income taxes (recovered)          3,043           3,468           3,470
                            -------------------------------------------------
    Income (loss) from
     continuing operations           10,013           7,611           7,468
    Income from discontinued
     operations, net of
     income taxes                    11,469               -               -
                            -------------------------------------------------
    Net income (loss)          $     21,482     $     7,611     $     7,468
                            -------------------------------------------------
                            -------------------------------------------------

    Average assets(1)          $ 11,545,381     $ 2,667,797     $ 4,452,795
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                 FOR THE THREE MONTHS ENDED
                                                           OCTOBER 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                     LBS/CM           OTHER           TOTAL
    -------------------------------------------------------------------------
    Net interest income        $        509     $    (3,408)    $   118,235
    Other income                     17,974           2,182          60,305
                            -------------------------------------------------
    Total revenue                    18,483          (1,226)        178,540
    Provision for loan
     losses                               -               -          16,000
    Non-interest expenses            13,591           4,342         128,143
                            -------------------------------------------------
    Income (loss) before
     income taxes                     4,892          (5,568)         34,397
    Income taxes (recovered)          2,162          (4,525)          7,618
                            -------------------------------------------------
    Income (loss) from
     continuing operations            2,730          (1,043)         26,779
    Income from discontinued
     operations, net of
     income taxes                         -               -          11,469
                            -------------------------------------------------
    Net income (loss)           $     2,730     $    (1,043)    $    38,248
                            -------------------------------------------------
                            -------------------------------------------------

    Average assets(1)           $ 1,823,272     $   924,398     $21,413,643
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                 FOR THE THREE MONTHS ENDED
                                                           JANUARY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                             R & SME QUEBEC            RE&C             B2B
    -------------------------------------------------------------------------
    Net interest income        $     76,254     $    14,279     $    21,115
    Other income                     28,545           5,707           2,386
                            -------------------------------------------------
    Total revenue                   104,799          19,986          23,501
    Provision for loan
     losses                           9,535           1,654             811
    Non-interest expenses            82,233           6,626          10,776
                            -------------------------------------------------
    Income (loss) before
     income taxes                    13,031          11,706          11,914
    Income taxes (recovered)          2,851           3,666           3,788
                            -------------------------------------------------
    Net income (loss)          $     10,180     $     8,040     $     8,126
                            -------------------------------------------------
                            -------------------------------------------------

    Average assets(1)          $ 10,740,803     $ 2,210,774     $ 4,164,755
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                 FOR THE THREE MONTHS ENDED
                                                           JANUARY 31, 2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                     LBS/CM           OTHER           TOTAL
    -------------------------------------------------------------------------
    Net interest income        $        818     $   (13,763)    $    98,703
    Other income                     11,444           9,752          57,834
                            -------------------------------------------------
    Total revenue                    12,262          (4,011)        156,537
    Provision for loan
     losses                               -               -          12,000
    Non-interest expenses             8,650           2,447         110,732
                            -------------------------------------------------
    Income (loss) before
     income taxes                     3,612          (6,458)         33,805
    Income taxes (recovered)          1,089          (2,636)          8,758
                            -------------------------------------------------
    Net income (loss)          $      2,523     $    (3,822)    $    25,047
                            -------------------------------------------------
                            -------------------------------------------------

    Average assets(1)          $ 1,802,382      $   690,787     $ 19,609,501
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

SOURCE Laurentian Bank of Canada

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

Organization Profile

Laurentian Bank of Canada

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