2014

Laurentian Bank reports 2011 results under International Financial Reporting Standards

MONTREAL, March 7, 2012 /PRNewswire/ - Laurentian Bank of Canada released today its unaudited quarterly and full year financial results for 2011 prepared in accordance with International Financial Reporting Standards (IFRS). The Bank adopted IFRS on November 1, 2011 and released, concurrently with this press release, its first interim financial statements under IFRS for the quarter ended January 31, 2012.

The release of the Bank's 2011 IFRS quarterly financial results, as well as the additional information in the Supplementary Information for the period ended January 31, 2012, provides a comprehensive view of the key impacts of the Bank's adoption of IFRS on its financial results for 2011, which will prove useful when analyzing the Bank's financial results for the upcoming quarters. The following information summarizes the impact of adopting IFRS on the results for 2011 and reflects the Bank's choice of elections on first-time adoption and choice of accounting policies available under IFRS, and should be read in conjunction with the Bank's 2011 Annual Report section Future Changes to Accounting Policies - IFRS on pages 60 to 66, as well as the supplementary information for the period ended January 31, 2012.

Note that the transition to IFRS is only an accounting change and does not reflect a change in the underlying business or strategies of the Bank.

The following table provides a summary of the differences between Canadian Generally Accepted Accounting Principles (Canadian GAAP)1 and IFRS in measuring the Bank's financial performance for each quarter and year ended in 2011.

Key Performance Indicators for 2011 [1]

  FOR THE THREE MONTHS ENDED     FOR THE YEAR
ENDED
 
In thousands of Canadian dollars (Unaudited) OCTOBER 31
2011
  JULY 31
2011
  APRIL 30
2011
  JANUARY 31
2011
    OCTOBER 31
2011
 
Net income - Canadian GAAP  $ 28,572   $ 35,282   $ 30,142   $ 33,493     $ 127,489  
Adjustments - net of income taxes   (1,863)     (6,210)     874     3,427       (3,772)  
Net income - IFRS $ 26,709   $ 29,072   $ 31,016   $ 36,920     $ 123,717  
                                 
Diluted earnings per share                                
  Canadian GAAP $ 1.06   $ 1.34   $ 1.13   $ 1.27     $ 4.81  
  IFRS $ 0.99   $ 1.08   $ 1.17   $ 1.41     $ 4.65  
                                 
Return on common shareholders' equity 
  Canadian GAAP   9.4 %   12.1 %   10.7 %   11.9 %     11.0 %
  IFRS   10.0 %   11.2 %   12.7 %   15.2 %     12.2 %
                                 
Adjusted metrics - Excluding Transaction and Integration Costs [2]
Adjusted net income - Canadian GAAP $ 34,412   $ 35,282   $ 30,142   $ 33,493     $ 133,329  
Adjustments - net of income taxes   (1,037)     (6,210)     874     3,427       (2,946)  
Adjusted net income - IFRS $ 33,375   $ 29,072   $ 31,016   $ 36,920     $ 130,383  
                                 
Adjusted diluted earnings per share                                
  Canadian GAAP $ 1.31   $ 1.34   $ 1.13   $ 1.27     $ 5.05  
  IFRS [3] $ 1.26   $ 1.08   $ 1.17   $ 1.41     $ 4.93  
                                 
Adjusted return on common shareholders' equity 
  Canadian GAAP   11.6 %   12.1 %   10.7 %   11.9 %     11.6 %
  IFRS   12.8 %   11.2 %   12.7 %   15.2 %     12.9 %

[1] See the non-GAAP financial measures below.
[2] Excluding the integration costs related to the recently acquired MRS Companies (which include M.R.S. Inc.; MRS Trust Company; M.R.S. Securities Services Inc.; and M.R.S. Correspondent Corporation) and the compensation for termination in 2012 of the distribution agreement of IA Clarington funds related to the signing of a new distribution agreement of Mackenzie mutual funds.
[3] The impact of Transaction and Integration Costs on a per share basis does not add due to rounding.

As shown in the table above, for the year ended October 31, 2011, net income was $123.7 million or $4.65 diluted per share under IFRS, compared to $127.5 million or $4.81 diluted per share, under previous Canadian GAAP. Return on common shareholders' equity was 12.2% under IFRS in 2011, compared to 11.0% in 2011 under previous Canadian GAAP.

Excluding the integration costs related to the recently acquired MRS Companies and the compensation for termination in 2012 of the distribution agreement of IA Clarington funds related to the signing of a new distribution agreement of Mackenzie mutual funds (Transaction and Integration Costs or T&I Costs), for the year ended October 31, 2011, net income was $130.4 million or $4.93 diluted per share under IFRS, compared to $133.3 million or $5.05 diluted per share, under previous Canadian GAAP. Excluding these one-time costs, return on common shareholders' equity was 12.9% under IFRS in 2011, compared to 11.6% in 2011 under previous Canadian GAAP.

As detailed below, the main adjustments relate to securitization activities and employee benefits with regards to pension plans.

IFRS Quarterly Earnings Impact

The following table presents the reconciliation between the net income reported under Canadian GAAP and net income reported in accordance with IFRS, for each 2011 quarter.

  FOR THE THREE MONTHS ENDED   FOR THE YEAR
ENDED
In thousands of Canadian dollars (Unaudited) OCTOBER 31
2011
  JULY 31
2011
  APRIL 30
2011
  JANUARY 31
2011
  OCTOBER 31
2011
                             
Net income - Canadian GAAP $ 28,572   $ 35,282   $ 30,142   $ 33,493   $ 127,489
Adjustments                            
  Securitization   (3,343)     (4,066)     (2,588)     (3,003)     (13,000)
  Hedge accounting   (282)     83     69     280     150
  Employee benefits   2,110     1,898     1,897     1,898     7,803
  Loan loss provisioning   -     (4,147)     879     3,292     24
  Business combination   (826)     -     -     -     (826)
  Consolidation of B2B Trust   217     218     217     218     870
  Share-based payments   393     (390)     (286)     704     421
  Securities   (53)     51     246     75     319
  Tax accounting   (40)     232     604     -     796
  Other   (39)     (89)     (164)     (37)     (329)
    (1,863)     (6,210)     874     3,427     (3,772)
Net income - IFRS $ 26,709   $ 29,072   $ 31,016   $ 36,920   $ 123,717

 

Nature of Adjustments

The following paragraphs present both the quarterly impact on the income statement's line items as well as the impact on net income for the year ended October 31, 2011.

a) Securitization
The Bank securitizes residential mortgage loans primarily by participating to the Canada Mortgage Bonds Program (CMB Program) and through multi-seller conduits set up by large Canadian banks. According to Canadian GAAP, these securitization transactions met derecognition criteria and therefore were accounted for as transfers of receivables. Under IFRS, these transactions do not meet derecognition criteria and therefore were recorded as financing transactions.

The difference in accounting treatment between Canadian GAAP and IFRS for these securitization transactions has resulted in the following adjustments to the Bank's consolidated statement of income:

  • Reversal of gains and losses on securitization, including gains and losses on seller swaps2, on securities previously designated as at fair value through profit or loss3 and on retained interests, as well as amortization of servicing liability previously recognized in net income under Canadian GAAP;
  • Recognition of interest income earned on the securitized mortgages and Replacement Assets4 not previously recognized under Canadian GAAP;
  • Recognition of interest expense on the debt related to securitization activities not previously recognized under Canadian GAAP; and
  • As of the first quarter of 2011, as a result of these changes, the Bank also modified certain hedging relationships in order to realign income recognition on derivatives used to hedge securitization activities.

The adjustments to the income statements are summarized as follows:

    FOR THE THREE MONTHS ENDED     FOR THE YEAR
ENDED
 
In thousands of Canadian dollars (Unaudited)   OCTOBER 31
2011
  JULY 31
2011
  APRIL 30
2011
  JANUARY 31
2011
    OCTOBER 31
2011
 
Increase in interest income                                  
  Increase in interest income due to the recording of the securitized
residential mortgage loans and Replacement Assets
  $ 41,441   $ 42,623   $ 39,733   $ 37,853     $ 161,650  
  Decrease in other interest income, including derivatives     (74)     (1,932)     (1,311)     (1,813)       (5,130)  
      41,367     40,691     38,422     36,040       156,520  
Increase in interest expense                                  
  Increase in interest expense due to the recording of the debt related
to securitization activities
    38,552     36,333     33,983     31,875       140,743  
Increase in net interest income     2,815     4,358     4,439     4,165       15,777  
Decrease in other income                                  
  Reversal of gains on sales and other income related to
securitization activities
    (8,831)     (10,201)     (7,564)     (8,890)       (35,486)  
  Other     1,037     178     (448)     543       1,310  
Decrease in other income     (7,794)     (10,023)     (8,012)     (8,347)       (34,176)  
Increase in other expenses     93     37     55     27       212  
Decrease in income taxes     (1,729)     (1,636)     (1,040)     (1,206)       (5,611)  
Decrease in net income   $ (3,343)   $ (4,066)   $ (2,588)   $ (3,003)     $ (13,000)  
Average assets related to securitization activities - adjustment   $ 4,471,621   $ 4,149,135   $ 3,855,686   $ 3,581,304     $ 4,014,436  
Net interest income as a percentage of average assets related to
securitization activities
    0.25 %   0.42 %   0.46 %   0.46 %     0.39 %


b) Hedge accounting
In accordance with Canadian GAAP, the Bank used the shortcut method and the variable cash flow method to measure the ineffectiveness of certain hedging relationships. As these methods cannot be used under IFRS, the Bank has developed admissible substitute quantitative methods. Other hedging relationships that were already using methods admissible under IFRS have not been modified and did not require any adjustments on the transition date.

In addition, the Bank reviewed and modified certain hedging relationships designated under Canadian GAAP due to changes in accounting for securitization transactions as explained above. The impact of these changes is included in the securitization adjustments above.

c) Employee benefits
Actuarial gains and losses
Under Canadian GAAP, actuarial gains and losses were amortized through income using a corridor approach over the estimated average remaining service life (EARSL) of employees. At the transition date, the Bank elected to use the exemption from retrospective application permitted by IFRS 1 and recorded the accumulated actuarial losses in retained earnings. Under IFRS, the Bank has elected that additional actuarial gains and losses recognized after the transition date will be amortized using a corridor approach.

Vested past service costs and transitional obligation
Under Canadian GAAP, vested past service costs of defined benefit plans and transitional obligation resulting from the initial application of the accounting standard with respect to employee future benefits were amortized over the EARSL of plan participants. Under IFRS, these deferred costs were recognized in retained earnings at the transition date.

As a result of the above, amortization of actuarial losses and other deferred amounts, previously recognized in salaries and employee benefits, was reversed under IFRS.

d) Loan loss provisioning
As part of the IFRS conversion, the Bank improved its methodology to assess provisions for groups of similar loans (collective allowances). Collective allowances are established based on the risk rating of credit facilities and on parameters such as the related probability of default (loss frequency) and the loss given default (extent of losses) associated with each type of facility. The improved methodology relies more heavily on the current status of the portfolios in accordance with IFRS requirements. The Bank had already estimated the collective allowance as of July 31, 2011 using the adjusted methodology in its Canadian GAAP financial statements. As a result, from July 31, 2011, the calculation of the provision for loan losses is harmonized under IFRS and Canadian GAAP, except for the presentation items noted below.

Under IFRS, as under Canadian GAAP, loan loss provisions must reflect the time value of money. Under Canadian GAAP, the accretion of the net present value of the written down amount of the loan due to the passage of time was recognized as a reduction of the provision for loan losses. Under IFRS, the accretion must be recognized as interest income based on the original effective interest rate of the loan.

In addition, the allowance for undrawn amounts under approved credit facilities was reclassified from the general allowance to the other liabilities and the related expense is now presented as part of other non-interest expenses.

The adjustments to the provision for loan losses presented in the table below reflect the variation of the allowance due to the improved methodology for the three-month periods ended January 31, 2011,  April 30, 2011 and July 31, 2011, as well as the effect of reclassifications to net interest income and other non-interest expenses for all periods presented.

  FOR THE THREE MONTHS ENDED   FOR THE YEAR
ENDED
In thousands of Canadian dollars (Unaudited) OCTOBER 31
2011
  JULY 31
2011
  APRIL 30
2011
  JANUARY 31
2011
  OCTOBER 31
2011
Increase in net interest income (accretion on impaired loans) $ 1,082   $ 1,130   $ 985   $ 900   $ 4,097
Decrease (increase) in provision for loan losses   (999)     (6,640)     16     3,543     (4,080)
Decrease (increase) in other non-interest expenses (allowance for undrawn amounts)   (83)     (174)     231     169     143
    -     (5,684)     1,232     4,612     160
Decrease (increase) in income taxes   -     1,537     (353)     (1,320)     (136)
Increase (decrease) in net income $ -   $ (4,147)   $ 879   $ 3,292   $ 24


e) Business combination
Under Canadian GAAP, acquisition-related costs, such as legal fees, were recognized as costs of the business combination. Under IFRS, these costs are expensed. As a result, the costs previously deferred under Canadian GAAP with regards to the acquisition of the MRS Companies were charged to non-interest expenses.

f) Consolidation of B2B Trust
Under Canadian GAAP, the acquisition of the minority shareholders of B2B Trust in June 2004 was accounted for as a step acquisition and resulted in the accounting of an intangible asset related to contractual relationships with financial intermediaries and customer relationships. Under IFRS, the repurchase of the minority shareholders is considered an equity transaction as the Bank already had control of its subsidiary prior to the repurchase. As a result, under IFRS the excess of the purchase price over the book value of the minority interest was recognized in retained earnings, rather than allocated to the contractual and customer relationships intangible asset as required under Canadian GAAP. Consequently, the related amortization expense of that intangible recorded under Canadian GAAP was eliminated under IFRS.The restatement of the repurchase of the minority shareholders of B2B Trust resulted in a decrease in non-interest expense.

g) Share-based payments
Under Canadian GAAP, for the stock appreciation rights (SARs) settled in cash, the excess of the share price over the exercise price, reviewed on an ongoing basis, was recognized in income during the SARs' vesting period. Under IFRS, the Bank is required to recognize as an expense the fair value of SARs during the vesting period. The Bank measures the fair value of the SARs using the Black and Scholes option pricing model, taking into account the terms and conditions upon which the SARs were granted. The impact of the revaluation was recorded in salaries and benefits.

h) Securities
Under Canadian GAAP, an impairment expense was recognized on available-for-sale securities when there was objective evidence of impairment and when that impairment was considered to be other than temporary. Under IFRS, an impairment of these securities should be recognized as soon as there is objective evidence of the impairment. As a result, unrealized gains and losses on identified securities recorded in accumulated other comprehensive income were adjusted to other income.

i) Tax accounting
Under Canadian GAAP, changes in income taxes in a subsequent period were generally charged to the income statement regardless of where the underlying transaction was initially recorded. Under IFRS, deferred taxes that are related to items that have been charged to equity in previous periods are charged directly to equity in a manner consistent with the underlying transaction. The impact was recorded in income tax expense.

Expected Regulatory Capital Implications as a Result of the Adoption of IFRS

The IFRS conversion has had a significant impact on capital. Had the adjustments resulting from the IFRS transition been applied to the Bank's financial statements as at October 31, 2011, they would have had negative impacts of 90 basis points on the Tier 1 capital ratio and 90 basis points on the total capital ratio. The Office of the Superintendent of Financial Institutions Canada issued in March 2010 an Advisory that permits a five-quarter phase-in of the adjustment to retained earnings arising from the first-time adoption of certain IFRS changes for purposes of calculating certain ratios. The Bank has elected to phase-in the adjustments. Therefore, the impact of the IFRS transition on the Bank's capital ratios will only be fully reflected as of January 31, 2013.

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 Annual Report under the title "Integrated Risk Management Framework" and other public filings available at www.sedar.com.

With respect to the MRS Companies transaction, such factors also include, but are not limited to: the anticipated benefits from the transaction such as it being accretive to earnings and synergies may not be realized in the time frame anticipated; the ability to promptly and effectively integrate the businesses; reputational risks and the reaction of B2B Trust's or MRS Companies' customers to the transaction; and diversion of management time on acquisition-related issues.

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.

Non-GAAP Financial Measures

The Bank has adopted IFRS as its accounting framework. IFRS are the generally accepted accounting principles (GAAP) for Canadian publicly accountable enterprises for years beginning on or after January 1, 2011. The Bank uses both GAAP and certain non-GAAP measures to assess performance. 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. These non-GAAP financial measures are considered useful to investors and analysts in obtaining a better understanding of the Bank's financial results and analyzing its growth and profit potential more effectively. The Bank's non-GAAP financial measures are defined as follows:

Book value per common share

The Bank's book value per common share is defined as common shareholders' equity, excluding accumulated other comprehensive income, divided by the number of common shares outstanding at the end of the period.

Return on common shareholders' equity

Return on common shareholders' equity is a profitability measure calculated as the net income available to common shareholders as a percentage of average common shareholders' equity, excluding accumulated other comprehensive income.

Net interest margin

Net interest margin is the ratio of net interest income to total average assets, expressed as a percentage or basis points.

Efficiency ratio and operating leverage

The Bank uses the efficiency ratio as a measure of its productivity and cost control. This ratio is defined as non-interest expenses as a percentage of total revenue. The Bank also uses operating leverage as a measure of efficiency. Operating leverage is the difference between total revenue and non-interest expenses growth rates.

Adjusted GAAP and non-GAAP measures

Certain analyses presented in this document are based on the Bank's core activities and therefore exclude the effect of the integration costs related to the recently acquired MRS Companies and the compensation for termination in 2012 of the distribution agreement of IA Clarington funds related to the signing of a new distribution agreement of Mackenzie mutual funds.

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 Québec, 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 more than $29 billion in balance sheet assets and more than $32 billion in assets under administration. Founded in 1846, it has been selected as the Québec and Atlantic Canada regional winner of the Canada's 10 Most Admired Corporate CulturesTM program presented by Waterstone Human Capital. The Bank employs close to 4,000 people.

Access to Quarterly Results Materials

Interested investors, the media and others may review this press release, interim consolidated financial statements, supplementary financial information and our report to shareholders which are posted on our web site at www.laurentianbank.ca.

Conference Call

Laurentian Bank invites media representatives and the public to listen to the conference call with financial analysts to be held at 2:00 p.m. Eastern Time on Wednesday, March 7, 2012. The live, listen-only, toll-free, call-in number is 514-861-2255 or 1-866-696-5910 Code 1035375#.

You can listen to the call on a delayed basis at any time from 6:00 p.m. on Wednesday, March 7, 2012 until 11:59 p.m. on April 6, 2012, by dialing the following playback number: 514-861-2272 or 1-800-408-3053 Code 1063231#. 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.

_____________________________________________

1 Reference to Canadian GAAP throughout this release relates to Canadian GAAP prior to the adoption of IFRS.
2 As part of securitization transactions, the Bank enters into seller swaps which are designed to protect the conduits against interest rate and pre-payment risks. These seller swaps are derivatives and were therefore marked-to-market through the consolidated statement of income. Gains and losses on the seller swaps that were recognized in net income under Canadian GAAP were reversed under IFRS as the cash flows associated with these swaps are captured in the interest income recognized on the securitized mortgages and Replacement Assets and the interest expense recognized on the securitization liabilities under IFRS.
3 These securities were designated as at fair value through profit or loss under Canadian GAAP in order to offset changes in the fair value of seller swaps. As seller swaps are no longer recognized under IFRS, the designation of these securities was amended.
4 Replacement Assets consist of cash, deposits with other banks, securities purchased under reverse repurchase agreements and securities which were previously off balance sheet to manage the maturity mismatch between the amortizing securitized mortgages and the off-balance sheet securitization liabilities related to the CMB Program.

 

RECONCILIATION OF INCOME STATEMENT BETWEEN CANADIAN GAAP AND IFRS
                                       
In thousands of Canadian dollars, except per share amounts (Unaudited) FOR THE THREE MONTHS ENDED OCTOBER 31, 2011     FOR THE THREE MONTHS ENDED JULY 31, 2011  
  CANADIAN
GAAP [1]
  ADJUSTMENTS [2]   IFRS     CANADIAN
GAAP [1]
  ADJUSTMENTS [2]   IFRS  
                                       
Interest income                                      
  Loans $ 202,915   $ 39,048   $ 241,963     $ 203,304   $ 40,704   $ 244,008  
  Securities   15,340     3,457     18,797       15,737     3,040     18,777  
  Deposits with other banks   1,066     18     1,084       1,584     10     1,594  
  Other, including derivatives   15,826     (74)     15,752       18,221     (1,932)     16,289  
    235,147     42,449     277,596       238,846     41,822     280,668  
Interest expense                                      
  Deposits   110,069     -     110,069       112,032     -     112,032  
  Debt related to securitization activities   -     38,552     38,552       -     36,333     36,333  
  Subordinated debt   2,432     -     2,432       2,411     -     2,411  
  Other, including derivatives   152     -     152       466     -     466  
    112,653     38,552     151,205       114,909     36,333     151,242  
Net interest income   122,494     3,897     126,391       123,937     5,489     129,426  
Other income                                      
  Fees and commissions on loans and deposits   29,960     (627)     29,333       30,240     (792)     29,448  
  Income from brokerage operations   8,332     -     8,332       10,221     -     10,221  
  Securitization income   8,831     (8,831)     -       10,201     (10,201)     -  
  Credit insurance income   4,994     -     4,994       4,104     -     4,104  
  Income from treasury and financial market operations   5,328     569     5,897       4,555     364     4,919  
  Income from sales of mutual funds   4,258     -     4,258       4,483     -     4,483  
  Income from registered self-directed plans   1,505     -     1,505       1,674     -     1,674  
  Other income   1,712     -     1,712       1,558     -     1,558  
    64,920     (8,889)     56,031       67,036     (10,629)     56,407  
Total revenue   187,414     (4,992)     182,422       190,973     (5,140)     185,833  
Provision for loan losses   12,000     999     12,999       8,000     6,640     14,640  
Non-interest expenses                                      
  Salaries and employee benefits   73,716     (3,285)     70,431       72,466     (2,112)     70,354  
  Premises and technology   35,332     43     35,375       36,198     84     36,282  
  Other   23,077     (737)     22,340       28,108     (848)     27,260  
  Costs related to an acquisition and other [3]   8,180     826     9,006       -     -     -  
    140,305     (3,153)     137,152       136,772     (2,876)     133,896  
Income before income taxes   35,109     (2,838)     32,271       46,201     (8,904)     37,297  
Income taxes   6,537     (975)     5,562       10,919     (2,694)     8,225  
Net income $ 28,572   $ (1,863)   $ 26,709     $ 35,282   $ (6,210)   $ 29,072  
Preferred share dividends, including applicable taxes   3,111     -     3,111       3,107     -     3,107  
Net income available to common shareholders $ 25,461   $ (1,863)   $ 23,598     $ 32,175   $ (6,210)   $ 25,965  
Average number of common shares outstanding (in thousands)                                      
  Basic   23,925     -     23,925       23,925     -     23,925  
  Diluted   23,941     -     23,941       23,943     -     23,943  
Earnings per share                                      
  Basic $ 1.06   $ (0.07)   $ 0.99     $ 1.34   $ (0.25)   $ 1.09  
  Diluted $ 1.06   $ (0.07)   $ 0.99     $ 1.34   $ (0.26)   $ 1.08  
                                       
Net interest margin   2.00 %   (0.24) %   1.76 %     2.03 %   (0.20) %   1.83 %
Efficiency ratio   74.9 %   0.3 %   75.2 %     71.6 %   0.5 %   72.1 %
Return on common shareholders' equity   9.4 %   0.6 %   10.0 %     12.1 %   (0.9) %   11.2 %
Excluding Transaction and Integration Costs [3]                                      
  Adjusted diluted earnings per share $ 1.31   $ (0.05)   1.26     $ 1.34   $ (0.26)   $ 1.08  
  Adjusted efficiency ratio   70.5 %   (0.3) %   70.2 %     71.6 %   0.5 %   72.1 %
  Adjusted return on common shareholders' equity   11.6 %   1.2 %   12.8 %     12.1 %   (0.9) %   11.2 %
                                       
                                       
In thousands of Canadian dollars, except per share amounts (Unaudited) FOR THE THREE MONTHS ENDED APRIL 30, 2011     FOR THE THREE MONTHS ENDED JANUARY 31, 2011  
  CANADIAN
GAAP [1]
  ADJUSTMENTS [2]   IFRS     CANADIAN
GAAP [1]
  ADJUSTMENTS [2]   IFRS    
                                       
Interest income                                      
  Loans $ 196,505   $ 37,928   $ 234,433     $ 206,271   $ 36,145   $ 242,416  
  Securities   15,418     2,781     18,199       15,686     2,600     18,286  
  Deposits with other banks   1,581     8     1,589       1,002     8     1,010  
  Other, including derivatives   15,507     (1,311)     14,196       16,921     (1,813)     15,108  
    229,011     39,406     268,417       239,880     36,940     276,820  
Interest expense                                      
  Deposits   108,851     -     108,851       113,511     -     113,511  
  Debt related to securitization activities   -     33,983     33,983       -     31,875     31,875  
  Subordinated debt   2,352     -     2,352       4,379     -     4,379  
  Other, including derivatives   1,166     -     1,166       452     -     452  
    112,369     33,983     146,352       118,342     31,875     150,217  
Net interest income   116,642     5,423     122,065       121,538     5,065     126,603  
Other income                                      
  Fees and commissions on loans and deposits   28,211     (329)     27,882       28,184     159     28,343  
  Income from brokerage operations   16,592     -     16,592       13,284     -     13,284  
  Securitization income   7,564     (7,564)     -       8,890     (8,890)     -  
  Credit insurance income   4,290     -     4,290       5,203     -     5,203  
  Income from treasury and financial market operations   4,003     (10)     3,993       5,087     1,042     6,129  
  Income from sales of mutual funds   4,460     -     4,460       4,107     -     4,107  
  Income from registered self-directed plans   1,990     -     1,990       2,084     -     2,084  
  Other income   1,965     -     1,965       1,102     -     1,102  
    69,075     (7,903)     61,172       67,941     (7,689)     60,252  
Total revenue   185,717     (2,480)     183,237       189,479     (2,624)     186,855  
Provision for loan losses   12,000     (16)     11,984       15,000     (3,543)     11,457  
Non-interest expenses                                      
  Salaries and employee benefits   75,416     (2,259)     73,157       72,332     (3,644)     68,688  
  Premises and technology   34,845     109     34,954       34,464     137     34,601  
  Other   24,563     (688)     23,875       24,162     (374)     23,788  
  Costs related to an acquisition and other [3]   -     -     -       -     -     -  
    134,824     (2,838)     131,986       130,958     (3,881)     127,077  
Income before income taxes   38,893     374     39,267       43,521     4,800     48,321  
Income taxes   8,751     (500)     8,251       10,028     1,373     11,401  
Net income $ 30,142   $ 874   $ 31,016     $ 33,493   $ 3,427   $ 36,920  
Preferred share dividends, including applicable taxes   3,109     -     3,109       3,109     -     3,109  
Net income available to common shareholders $ 27,033   $ 874   $ 27,907     $ 30,384   $ 3,427   $ 33,811  
Average number of common shares outstanding (in thousands)                                      
  Basic   23,923     -     23,923       23,922     -     23,922  
  Diluted   23,946     -     23,946       23,942     -     23,942  
Earnings per share                                      
  Basic $ 1.13   $ 0.04   $ 1.17     $ 1.27   $ 0.14   $ 1.41  
  Diluted $ 1.13   $ 0.04   $ 1.17     $ 1.27   $ 0.14   $ 1.41  
                                       
Net interest margin   2.01 %   (0.18) %   1.83 %     2.03 %   (0.17) %   1.86 %
Efficiency ratio   72.6 %   (0.6) %   72.0 %     69.1 %   (1.1) %   68.0 %
Return on common shareholders' equity   10.7 %   2.0 %   12.7 %     11.9 %   3.3 %   15.2 %
Excluding Transaction and Integration Costs [3]                                      
  Adjusted diluted earnings per share $ 1.13   $ 0.04   $ 1.17     $ 1.27   $ 0.14   $ 1.41  
  Adjusted efficiency ratio   72.6 %   (0.6) %   72.0 %     69.1 %   (1.1) %   68.0 %
  Adjusted return on common shareholders' equity   10.7 %   2.0 %   12.7 %     11.9 %   3.3 %   15.2 %

In thousands of Canadian dollars, except per share amounts (Unaudited) FOR THE YEAR ENDED OCTOBER 31, 2011  
  CANADIAN
GAAP [1]
  ADJUSTMENTS [2]   IFRS  
                   
Interest income                  
  Loans $ 808,995   $ 153,825   $ 962,820  
  Securities   62,181     11,878     74,059  
  Deposits with other banks   5,233     44     5,277  
  Other, including derivatives   66,475     (5,130)     61,345  
    942,884     160,617     1,103,501  
Interest expense                  
  Deposits   444,463     -     444,463  
  Debt related to securitization activities   -     140,743     140,743  
  Subordinated debt   11,574     -     11,574  
  Other, including derivatives   2,236     -     2,236  
    458,273     140,743     599,016  
Net interest income   484,611     19,874     504,485  
Other income                  
  Fees and commissions on loans and deposits   116,595     (1,589)     115,006  
  Income from brokerage operations   48,429     -     48,429  
  Securitization income   35,486     (35,486)     -  
  Credit insurance income   18,591     -     18,591  
  Income from treasury and financial market operations   18,973     1,965     20,938  
  Income from sales of mutual funds   17,308     -     17,308  
  Income from registered self-directed plans   7,253     -     7,253  
  Other income   6,337     -     6,337  
    268,972     (35,110)     233,862  
Total revenue   753,583     (15,236)     738,347  
Provision for loan losses   47,000     4,080     51,080  
Non-interest expenses                  
  Salaries and employee benefits   293,930     (11,300)     282,630  
  Premises and technology   140,839     373     141,212  
  Other   99,910     (2,647)     97,263  
  Costs related to an acquisition and other [3]   8,180     826     9,006  
    542,859     (12,748)     530,111  
Income before income taxes   163,724     (6,568)     157,156  
Income taxes   36,235     (2,796)     33,439  
Net income $ 127,489   $ (3,772)     $ 123,717  
Preferred share dividends, including applicable taxes   12,436     -     12,436  
Net income available to common shareholders $ 115,053   $ (3,772)     $ 111,281  
Average number of common shares outstanding (in thousands)                  
  Basic   23,924     -     23,924  
  Diluted   23,943     -     23,943  
Earnings per share                  
  Basic $ 4.81   $ (0.16)     $ 4.65  
  Diluted $ 4.81   $ (0.16)     $ 4.65  
                   
Net interest margin   2.02 %   (0.20) %   1.82 %
Efficiency ratio   72.0 %   (0.2) %   71.8 %
Return on common shareholders' equity   11.0 %   1.2 %   12.2 %
Excluding Transaction and Integration Costs [3]                  
  Adjusted diluted earnings per share $ 5.05   $ (0.12)   $ 4.93  
  Adjusted efficiency ratio   71.0 %   (0.4) %   70.6 %
  Adjusted return on common shareholders' equity   11.6 %   1.3 %   12.9 %

[1] See Reclassification of comparative figures in Note 2 to the unaudited condensed interim consolidated financial statements as at January 31, 2012 for further details.
[2] See Note 5 to the unaudited condensed interim consolidated financial statements as at January 31, 2012 for further details.
[3] Costs related to the recently acquired MRS Companies and the compensation for termination in 2012 of the distribution agreement of IA Clarington funds.

RECONCILIATION OF BALANCE SHEET BETWEEN CANADIAN GAAP AND IFRS
In thousands of Canadian dollars
(Unaudited)
AS AT OCTOBER 31, 2011   AS AT JULY 31, 2011
  CANADIAN GAAP [1]   ADJUSTMENTS [2]   RECLASSIFICATIONS [2]   IFRS   CANADIAN GAAP [1]    ADJUSTMENTS [2]   RECLASSIFICATIONS [2]   IFRS
                                               
ASSETS                                              
Cash and non-interest-bearing deposits with other banks $ 81,600   $ -   $ -   $ 81,600   $ 69,820   $ 193   $ -   $ 70,013
Interest-bearing deposits with other banks   276,429     9,030     -     285,459     596,979     2,773     -     599,752
Securities                                              
  Available-for-sale   1,096,333     -     1,011,742     2,108,075     1,028,953     868     1,013,003     2,042,824
  Held-to-maturity   -     885,822     -     885,822     -     830,964     -     830,964
  Held-for-trading   2,181,969     -     -     2,181,969     2,044,465     -     -     2,044,465
  Designated as at fair value through profit or loss   1,011,742     -     (1,011,742)     -     1,013,003     -     (1,013,003)     -
    4,290,044     885,822     -     5,175,866     4,086,421     831,832     -     4,918,253
Securities purchased under reverse repurchase agreements   318,753     401,564     -     720,317     312,647     227,573     -     540,220
Loans                                              
  Personal   5,768,787     -     5,420     5,774,207     5,728,317     -     4,553     5,732,870
  Residential mortgage   8,378,029     3,394,017     97,366     11,869,412     8,183,447     3,299,905     95,578     11,578,930
  Commercial mortgage   2,363,808     -     -     2,363,808     2,302,562     -     -     2,302,562
  Commercial and other   1,900,977     -     -     1,900,977     1,863,448     -     -     1,863,448
  Customers' liabilities under acceptances   179,140     -     -     179,140     198,429     -     -     198,429
    18,590,741     3,394,017     102,786     22,087,544     18,276,203     3,299,905     100,131     21,676,239
  Allowances for loan losses   (149,743)     1,000     5,593     (143,150)     (147,663)     1,000     5,510     (141,153)
    18,440,998     3,395,017     108,379     21,944,394     18,128,540     3,300,905     105,641     21,535,086
Other                                              
  Premises and equipment   64,752     (3,044)     -     61,708     63,616     (3,036)     -     60,580
  Derivatives   228,704     (443)     -     228,261     147,009     (866)     -     146,143
  Goodwill   53,790     (24,566)     -     29,224     53,790     (24,566)     -     29,224
  Software and other intangible assets   123,357     (9,408)     -     113,949     114,812     (9,730)     -     105,082
  Deferred tax assets   -     19,876     (15,716)     4,160     -     19,570     (11,834)     7,736
  Other assets   612,024     (186,806)     (106,946)     318,272     509,054     (180,762)     (101,751)     226,541
    1,082,627     (204,391)     (122,662)     755,574     888,281     (199,390)     (113,585)     575,306
  $ 24,490,451   $ 4,487,042   $ (14,283)   $ 28,963,210   $ 24,082,688   $ 4,163,886   $ (7,944)   $ 28,238,630
                                               
LIABILITIES AND SHAREHOLDERS' EQUITY                                              
Deposits                                              
  Personal $ 15,610,012   $ (159)   $ -   $ 15,609,853   $ 15,606,705   $ (72,176)   $ -   $ 15,534,529
  Business, banks and other   4,457,406     (50,978)     -     4,406,428     3,891,333     -     -     3,891,333
    20,067,418     (51,137)     -     20,016,281     19,498,038     (72,176)     -     19,425,862
Other                                              
  Obligations related to securities sold short   1,471,254     -     -     1,471,254     1,436,439     -     -     1,436,439
  Obligations related to securities sold under repurchase agreements   36,770     -     -     36,770     367,814     -     -     367,814
  Acceptances   179,140     -     -     179,140     198,429     -     -     198,429
  Derivatives   246,475     (116,506)     -     129,969     181,758     (77,731)     -     104,027
  Deferred tax liabilities   -     (17,244)     23,606     6,362     -     (17,241)     18,260     1,019
  Other liabilities   912,190     27,419     (37,889)     901,720     854,628     4,403     (26,204)     832,827
    2,845,829     (106,331)     (14,283)     2,725,215     3,039,068     (90,569)     (7,944)     2,940,555
Debt related to securitization activities   -     4,760,847     -     4,760,847     -     4,442,256     -     4,442,256
Subordinated debt   242,512     39     -     242,551     242,072     41     -     242,113
Shareholders' equity                                              
  Preferred shares   210,000     -     -     210,000     210,000     -     -     210,000
  Common shares   259,492     -     -     259,492     259,492     -     -     259,492
  Share-based payment reserve   227     -     -     227     227     -     -     227
  Retained earnings   818,207     (135,200)     -     683,007     802,795     (133,337)     -     669,458
  Accumulated other comprehensive income   46,766     18,824     -     65,590     30,996     17,671     -     48,667
    1,334,692     (116,376)     -     1,218,316     1,303,510     (115,666)     -     1,187,844
  $ 24,490,451   $ 4,487,042   $ (14,283)   $ 28,963,210   $ 24,082,688   $ 4,163,886   $ (7,944)   $ 28,238,630
                                               
Average assets (For the three months period) $ 24,270,292   $ 4,243,355   $ -   $ 28,513,647   $ 24,146,118   $ 3,912,825   $ -   $ 28,058,943
Book value per common share $ 45.05   $ (5.65)   $ -   $ 39.40   $ $ 44.41   $ (5.57)   $ -   $ 38.84
                                               
                                                 
In thousands of Canadian dollars (Unaudited) AS AT APRIL 30, 2011   AS AT JANUARY 31, 2011
  CANADIAN GAAP [1]     ADJUSTMENTS [2]     RECLASSIFICATIONS [2]     IFRS     CANADIAN GAAP [1]     ADJUSTMENTS [2]     RECLASSIFICATIONS [2]     IFRS
                                               
ASSETS                                              
Cash and non-interest-bearing deposits with other banks $ 69,287   $ 1,975   $ -   $ 71,262   $ 74,322   $ 2,104   $ -   $ 76,426
Interest-bearing deposits with other banks   641,777     4,756     -     646,533     454,600     2,607     -     457,207
Securities                                              
  Available-for-sale   1,041,380     796     1,012,327     2,054,503     1,015,174     1,216     1,018,239     2,034,629
  Held-to-maturity   -     646,713     -     646,713     -     638,276     -     638,276
  Held-for-trading   2,248,007     -     -     2,248,007     1,889,086     -     -     1,889,086
  Designated as at fair value through profit or loss   1,012,327     -     (1,012,327)     -     1,023,680     -     (1,018,239)     5,441
    4,301,714     647,509     -     4,949,223     3,927,940     639,492     -     4,567,432
Securities purchased under reverse repurchase agreements   443,456     182,712     -     626,168     331,935     183,920     -     515,855
Loans                                              
  Personal   5,677,165     -     4,362     5,681,527     5,622,733     -     4,886     5,627,619
  Residential mortgage   7,976,899     3,185,279     90,566     11,252,744     7,998,024     2,950,019     89,567     11,037,610
  Commercial mortgage   2,213,760     -     -     2,213,760     2,205,736     -     -     2,205,736
  Commercial and other   1,823,234     -     -     1,823,234     1,742,889     -     -     1,742,889
  Customers' liabilities under acceptances   187,400     -     -     187,400     170,098     -     -     170,098
    17,878,458     3,185,279     94,928     21,158,665     17,739,480     2,950,019     94,453     20,783,952
  Allowances for loan losses   (148,225)     6,684     5,336     (136,205)     (146,562)     5,452     5,567     (135,543)
    17,730,233     3,191,963     100,264     21,022,460     17,592,918     2,955,471     100,020     20,648,409
Other                                              
  Premises and equipment   63,952     (2,986)     -     60,966     63,549     (2,911)     -     60,638
  Derivatives   120,201     (1,482)     -     118,719     132,776     (3,911)     -     128,865
  Goodwill   53,790     (24,566)     -     29,224     53,790     (24,566)     -     29,224
  Software and other intangible assets   110,467     (10,053)     -     100,414     110,349     (10,376)     -     99,973
  Deferred tax assets   -     23,010     (1,838)     21,172     -     22,342     1,330     23,672
  Other assets   524,547     (174,803)     (99,903)     249,841     587,543     (173,246)     (103,360)     310,937
    872,957     (190,880)     (101,741)     580,336     948,007     (192,668)     (102,030)     653,309
  $ 24,059,424   $ 3,838,035   $ (1,477)   $ 27,895,982   $ 23,329,722   $ 3,590,926   $ (2,010)   $ 26,918,638
                                               
LIABILITIES AND SHAREHOLDERS' EQUITY                                              
Deposits                                              
  Personal $ 15,563,425   $ (52,733)   $ -   $ 15,510,692   $ 15,418,261   $ (36,895)   $ -   $ 15,381,366
  Business, banks and other   4,063,085     -     -     4,063,085     3,545,739     -     -     3,545,739
    19,626,510     (52,733)     -     19,573,777     18,964,000     (36,895)     -     18,927,105
Other                                              
  Obligations related to securities sold short   1,437,259     -     -     1,437,259     1,170,817     -     -     1,170,817
  Obligations related to securities sold under repurchase agreements   205,923     -     -     205,923     469,021     -     -     469,021
  Acceptances   187,400     -     -     187,400     170,098     -     -     170,098
  Derivatives   180,805     (51,217)     -     129,588     186,061     (54,082)     -     131,979
  Deferred tax liabilities   -     (12,909)     13,199     290     -     (12,727)     13,978     1,251
  Other liabilities   913,780     16,088     (14,676)     915,192     877,912     19,151     (15,988)     881,075
    2,925,167     (48,038)     (1,477)     2,875,652     2,873,909     (47,658)     (2,010)     2,824,241
Debt related to securitization activities   -     4,051,889     -     4,051,889     -     3,786,336     -     3,786,336
Subordinated debt   241,640     43     -     241,683     241,075     41     -     241,116
Shareholders' equity                                              
  Preferred shares   210,000     -     -     210,000     210,000     -     -     210,000
  Common shares   259,484     -     -     259,484     259,388     -     -     259,388
  Share-based payment reserve   227     -     -     227     227     -     -     227
  Retained earnings   780,668     (127,127)     -     653,541     762,966     (128,001)     -     634,965
  Accumulated other comprehensive income   15,728     14,001     -     29,729     18,157     17,103     -     35,260
    1,266,107     (113,126)     -     1,152,981     1,250,738     (110,898)     -     1,139,840
  $ 24,059,424   $ 3,838,035   $ (1,477)   $ 27,895,982   $ 23,329,722   $ 3,590,926   $ (2,010)   $ 26,918,638
                                               
Average assets (For the three months period) $ 23,786,039   $ 3,629,237   $ -   $ 27,415,276   $ 23,711,163   $ 3,362,645   $ -   $ 27,073,808
Book value per common share $ 43.49   $ (5.32)   $   $ 38.17   $ 42.75   $ (5.35)   $ -   $ 37.40

 

In thousands of Canadian dollars (Unaudited) AS AT NOVEMBER 1, 2010
    CANADIAN
GAAP [1]
    ADJUSTMENTS [2]     RECLASSIFICATIONS [2]     IFRS
                       
ASSETS                      
Cash and non-interest-bearing deposits with other banks $ 70,537   $ 1,907   $ -   $ 72,444
Interest-bearing deposits with other banks   95,561     3,833     -     99,394
Securities                      
  Available-for-sale   1,103,744     1,281     1,033,836     2,138,861
  Held-to-maturity   -     559,457     -     559,457
  Held-for-trading   1,496,583     -     -     1,496,583
  Designated as at fair value through profit or loss   1,658,478     -     (1,033,836)     624,642
    4,258,805     560,738     -     4,819,543
Securities purchased under reverse repurchase agreements   803,874     190,800     -     994,674
Loans                      
  Personal   5,630,788     -     5,415     5,636,203
  Residential mortgage   8,055,034     2,715,535     89,078     10,859,647
  Commercial mortgage   2,166,375     -     -     2,166,375
  Commercial and other   1,691,190     -     -     1,691,190
  Customers' liabilities under acceptances   165,450     -     -     165,450
    17,708,837     2,715,535     94,493     20,518,865
  Allowances for loan losses   (138,143)     840     5,736     (131,567)
    17,570,694     2,716,375     100,229     20,387,298
Other                      
  Premises and equipment   58,536     (2,809)     -     55,727
  Derivatives   162,610     (4,544)     -     158,066
  Goodwill   53,790     (24,566)     -     29,224
  Software and other intangible assets   112,369     (10,698)     -     101,671
  Deferred tax assets   -     18,416     29,579     47,995
  Other assets   585,362     (172,001)     (124,072)     289,289
    972,667     (196,202)     (94,493)     681,972
  $ 23,772,138   $ 3,277,451   $ 5,736   $ 27,055,325
                       
LIABILITIES AND SHAREHOLDERS' EQUITY                      
Deposits                      
  Personal   15,396,911     (42,060)     -     15,354,851
  Business, banks and other   4,250,819     -     -     4,250,819
    19,647,730     (42,060)     -     19,605,670
Other                      
  Obligations related to securities sold short   1,362,336     -     -     1,362,336
  Obligations related to securities sold under repurchase agreements   60,050     -     -     60,050
  Acceptances   165,450     -     -     165,450
  Derivatives   199,278     (84,043)     -     115,235
  Deferred tax liabilities   -     (13,977)     41,520     27,543
  Other liabilities   947,879     33,844     (35,784)     945,939
    2,734,993     (64,176)     5,736     2,676,553
Debt related to securitization activities   -     3,486,634     -     3,486,634
Subordinated debt   150,000     -     -     150,000
Shareholders' equity                      
  Preferred shares   210,000     -     -     210,000
  Common shares   259,363     -     -     259,363
  Share-based payment reserve   243     -     -     243
  Retained earnings   741,911     (131,428)     -     610,483
  Accumulated other comprehensive income   27,898     28,481     -     56,379
    1,239,415     (102,947)     -     1,136,468
  $ 23,772,138   $ 3,277,451   $ 5,736   $ 27,055,325
                       
Average assets (For the three months period)   n.a.     n.a.     n.a.     n.a.
Book value per common share 41.87   $ (5.50)   $   $ 36.37

[1] See Reclassification of comparative figures in Note 2 to the unaudited condensed interim consolidated financial statements as at January 31, 2012 for further details.
[2] See Note 5 to the unaudited condensed interim consolidated financial statements as at January 31, 2012 for further details.

 

SOURCE LAURENTIAN BANK OF CANADA



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