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Laurentian Bank Financial Group reports 2017 results

MONTREAL, QUEBEC -- (Marketwired) -- 12/05/17 -- Laurentian Bank of Canada (TSX:LB)


                                                                            
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The financial information reported herein is based on the condensed interim 
consolidated (unaudited) information for the three-month period ended       
October 31, 2017, and on the audited annual consolidated financial          
statements for the year ended October 31, 2017, and has been prepared in    
accordance with International Financial Reporting Standards (IFRS), as      
issued by the International Accounting Standards Board (IASB). All amounts  
are denominated in Canadian dollars.                                        
The Laurentian Bank Financial Group means the Laurentian Bank of Canada and 
its subsidiaries (collectively referred as "Laurentian Bank Financial       
Group", "LBCFG" or the "Group" or the "Bank"), who provide deposit,         
investment, loan, securities, trust and other products or services. The     
Bank's 2017 Annual Report (which includes the Audited Annual Consolidated   
Financial Statements and accompanying Management's Discussion & Analysis)   
will be available today on the Laurentian Bank Financial Group's website at 
http://www.lbcfg.ca/ and on SEDAR at http://www.sedar.com/.                 
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Highlights of year ended October 31, 2017 (1)


--  Adjusted net income of $230.7 million or $6.09 per share, up 23% and 7%
    year-over-year, respectively. Adjusted return on common shareholders'
    equity of 12.3% 
--  Reported net income of $206.5 million or $5.40 per share, including
    items related to business combinations of $23.8 million ($16.6 million
    after income taxes), or $0.47 diluted per share, as well as
    restructuring charges of $10.5 million ($7.7 million after income
    taxes), or $0.22 diluted per share related to Retail Services. Return on
    common shareholders' equity of 10.9% 
--  Adjusted efficiency ratio of 66.1%, a 350 bps improvement year-over-
    year. Reported efficiency ratio of 69.2% 
--  Loans to business customers up 22% year-over-year, from both organic
    growth and the acquisition of NCF (2) 
--  Residential mortgage loans through independent brokers and advisors up
    22% year-over-year 
--  Common Equity Tier 1 capital ratio at 7.9% 

Highlights of fourth quarter 2017


--  Adjusted net income up 32% year-over-year, and reported net income up
    219% 
--  Adjusted return on common shareholders' equity of 12.7% and 11.1% on a
    reported basis  
--  Adjusted efficiency ratio of 64.3%, an improvement of 310 bps year-over-
    year, and reported efficiency ratio of 68.8% 
--  Gain on sale of the Bank's participation in Verico Financial Group Inc.
    of $5.9 million ($5.3 million after income taxes), or $0.14 diluted per
    share 
--  Completed the acquisition of NCF (2) and concurrent common share
    issuance 
--  Quarterly common share dividend raised by $0.01 to $0.63 per share   
    
    

                                                                            
                                            FOR THE THREE MONTHS ENDED      
                                       -------------------------------------
In millions of Canadian dollars, except                                     
 per share and percentage amounts        OCTOBER 31   OCTOBER 31            
 (Unaudited)                                   2017         2016   VARIANCE 
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Reported basis                                                              
  Net income                            $      58.6  $      18.4        219%
  Diluted earnings per share            $      1.42  $      0.45        216%
  Return on common shareholders' equity        11.1%         3.7%           
  Efficiency ratio                             68.8%        85.5%           
  Common Equity Tier 1 capital ratio -                                      
   All-in basis                                 7.9%         8.0%           
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Adjusted basis (1)                                                          
  Adjusted net income                   $      66.5  $      50.5         32%
  Adjusted diluted earnings per share   $      1.63  $      1.47         11%
  Adjusted return on common                                                 
   shareholders' equity                        12.7%        12.1%           
  Adjusted efficiency ratio                    64.3%        67.4%           
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                                                 FOR THE YEAR ENDED         
                                        ------------------------------------
In millions of Canadian dollars, except                                     
 per share and percentage amounts        OCTOBER 31   OCTOBER 31            
 (Unaudited)                                   2017         2016   VARIANCE 
----------------------------------------------------------------------------
Reported basis                                                              
  Net income                            $     206.5  $     151.9         36%
  Diluted earnings per share            $      5.40  $      4.55         19%
  Return on common shareholders' equity        10.9%         9.6%           
  Efficiency ratio                             69.2%        74.2%           
  Common Equity Tier 1 capital ratio -                                      
   All-in basis                                                             
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Adjusted basis (1)                                                          
  Adjusted net income                   $     230.7  $     187.0         23%
  Adjusted diluted earnings per share   $      6.09  $      5.70          7%
  Adjusted return on common                                                 
   shareholders' equity                        12.3%        12.0%           
  Adjusted efficiency ratio                    66.1%        69.6%           
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(1)  Certain measures presented throughout this document exclude the effect 
     of certain amounts designated as adjusting items due to their nature or
     significance. Refer to the Non-GAAP Measures section for further       
     details.                                                               
(2)  Northpoint Commercial Finance.                                         

Laurentian Bank of Canada (the "Bank") reported net income of $58.6 million or $1.42 diluted per share for the fourth quarter of 2017, compared with net income of $18.4 million or $0.45 diluted per share for the same period last year. Return on common shareholders' equity was 11.1% for the fourth quarter of 2017, compared with 3.7% for the fourth quarter of 2016. On an adjusted basis, net income totalled $66.5 million or $1.63 diluted per share for the fourth quarter of 2017, up 32% and 11% respectively, compared with $50.5 million or $1.47 diluted per share for the same period in 2016. Adjusted return on common shareholders' equity was 12.7% for the fourth quarter of 2017, compared with 12.1% a year ago. Reported results in 2017 included adjusting items such as costs related to the Bank's branch mergers, the integration of CIT Canada and costs related to the acquisition of NCF, as detailed in the Non-GAAP measures section. Adjusting items were also included in 2016, mainly with regards to restructuring charges.

For the year ended October 31, 2017, on a reported basis, net income was $206.5 million or $5.40 diluted per share, compared with $151.9 million or $4.55 diluted per share in 2016. On the same basis, return on common shareholders' equity was 10.9% for the year ended October 31, 2017, compared with 9.6% in 2016. Reported results for 2017 took into account adjusting items, such as costs related to the Bank's branch mergers and the integration of CIT, as well as costs related to the acquisition of NCF. Whereas in 2016, reported results included adjusting items such as impairment and restructuring charges related to Retail Services activities and costs related to the acquisition of CIT Canada. Adjusted net income totalled $230.7 million or $6.09 diluted per share, respectively up 23% and 7%, compared with adjusted net income of $187.0 million or $5.70 diluted per share for the year ended October 31, 2016. Adjusted return on common shareholders' equity improved to 12.3% for the year ended October 31, 2017, compared to 12.0% for the year ended October 31, 2016, as detailed in the Non-GAAP measures section.

Francois Desjardins, President and Chief Executive Officer, commented on the Bank's results and financial condition: "2017 has been a successful year in which we have made significant progress on our performance and our transformation plan. Our move from traditional to digital banking is well underway with the implementation of the first wave of core banking, the simplification of our product offer and process improvements. Changing the mix of the business towards Business Services was accelerated with the acquisition of NCF. I am particularly proud of the efforts and support of the entire team, together we are making this plan happen."


                                                                            
                                     FOR THE THREE MONTHS ENDED             
                       -----------------------------------------------------
                         OCTOBER 31       JULY 31               OCTOBER 31  
                               2017          2017   VARIANCE          2016  
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Profitability                                                               
  Total revenue         $   267,968   $   248,002          8%  $   236,369  
  Net income            $    58,635   $    54,798          7%  $    18,383  
  Diluted earnings per                                                      
   share                $      1.42   $      1.48         (4)% $      0.45  
  Return on common                                                          
   shareholders' equity                                                     
   (1)                         11.1%         11.8%                     3.7% 
  Net interest margin          1.75%         1.63%                    1.67% 
  Efficiency ratio             68.8%         67.9%                    85.5% 
  Operating leverage           (1.5)%         4.2%                   (22.7)%
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Per common share                                                            
  Share price - Close   $     60.00   $     54.17         11%  $     49.57  
  Price / earnings                                                          
   ratio (trailing four                                                     
   quarters)                  11.1x        12.3 x                   10.9 x  
  Book value            $     51.18   $     50.54          1%  $     47.92  
  Market to book value          117%          107%                     103% 
  Dividends declared    $      0.62   $      0.62          -%  $      0.60  
  Dividend yield                4.1%          4.6%                     4.8% 
  Dividend payout ratio        44.3%         41.8%                   143.5% 
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Adjusted financial                                                          
 measures (1)                                                               
  Adjusted net income   $    66,476   $    59,906         11%  $    50,542  
  Adjusted diluted                                                          
   earnings per share   $      1.63   $      1.63          -%  $      1.47  
  Adjusted return on                                                        
   common shareholders'                                                     
   equity                      12.7%         13.0%                    12.1% 
  Adjusted efficiency                                                       
   ratio                       64.3%         65.6%                    67.4% 
  Adjusted operating                                                        
   leverage                     2.2%          2.5%                     3.9% 
  Adjusted dividend                                                         
   payout ratio                38.7%         38.0%                    43.8% 
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Financial position (in                                                      
 millions of Canadian                                                       
 dollars)                                                                   
  Balance sheet assets  $    46,683   $    45,212          3%  $    43,006  
  Loans and acceptances $    36,696   $    34,917          5%  $    33,379  
  Deposits              $    28,930   $    28,232          2%  $    27,573  
  Average earning                                                           
   assets               $    40,056   $    38,419          4%  $    35,473  
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Key growth drivers (in                                                      
 millions of Canadian                                                       
 dollars)                                                                   
  Loans to business                                                         
   customers            $    12,171   $    10,795         13%  $    10,016  
  Residential mortgage                                                      
   loans through                                                            
   independent brokers                                                      
   and advisors         $     8,571   $     8,087          6%  $     7,046  
  Assets under                                                              
   management at                                                            
   Laurentian Bank                                                          
   Securities           $     3,904   $     3,730          5%  $     3,458  
  Assets under                                                              
   management from                                                          
   Retail Services                                                          
   clients              $    11,049          n.a.       n.a.          n.a.  
  Total deposits from                                                       
   clients              $    25,173          n.a.       n.a.          n.a.  
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Basel III regulatory                                                        
 capital ratios - All-                                                      
 in basis                                                                   
  Common Equity Tier 1          7.9%          7.9%                     8.0% 
  Total                        11.6%         13.0%                    11.5% 
  Leverage ratio                4.2%          4.1%                     4.1% 
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Other information                                                           
  Number of full-time                                                       
   equivalent employees       3,732         3,598                    3,687  
  Number of branches            104           104                      145  
  Number of automated                                                       
   banking machines             341           343                      398  
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                          FOR THE                                         
                           THREE                                          
                           MONTHS                                         
                           ENDED              FOR THE YEAR ENDED          
                        ------------ -------------------------------------
                                      OCTOBER 31   OCTOBER 31             
                           VARIANCE         2017         2016    VARIANCE 
 -------------------------------------------------------------------------
                                                                          
 Profitability                                                            
   Total revenue                 13% $   996,410  $   915,451           9%
   Net income                   219% $   206,461  $   151,910          36%
   Diluted earnings per                                                   
    share                       216% $      5.40  $      4.55          19%
   Return on common                                                       
    shareholders' equity                                                  
    (1)                                     10.9%         9.6%            
   Net interest margin                      1.68%        1.71%            
   Efficiency ratio                         69.2%        74.2%            
   Operating leverage                        7.4%         8.0%            
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 Per common share                                                         
   Share price - Close           21% $     60.00  $     49.57          21%
   Price / earnings                                                       
    ratio (trailing four                                                  
    quarters)                              11.1x       10.9 x             
   Book value                     7% $     51.18  $     47.92           7%
   Market to book value                      117%         103%            
   Dividends declared             3% $      2.46  $      2.36           4%
   Dividend yield                            4.1%         4.8%            
   Dividend payout ratio                    45.7%        53.1%            
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 Adjusted financial                                                       
  measures (1)                                                            
   Adjusted net income           32% $   230,741  $   187,013          23%
   Adjusted diluted                                                       
    earnings per share           11% $      6.09  $      5.70           7%
   Adjusted return on                                                     
    common shareholders'                                                  
    equity                                  12.3%        12.0%            
   Adjusted efficiency                                                    
    ratio                                   66.1%        69.6%            
   Adjusted operating                                                     
    leverage                                 5.4%         2.5%            
   Adjusted dividend                                                      
    payout ratio                            40.5%        42.4%            
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 Financial position (in                                                   
  millions of Canadian                                                    
  dollars)                                                                
   Balance sheet assets           9%                                      
   Loans and acceptances         10%                                      
   Deposits                       5%                                      
   Average earning                                                        
    assets                       13% $    38,055  $    34,458          10%
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 Key growth drivers (in                                                   
  millions of Canadian                                                    
  dollars)                                                                
   Loans to business                                                      
    customers                    22%                                      
   Residential mortgage                                                   
    loans through                                                         
    independent brokers                                                   
    and advisors                 22%                                      
   Assets under                                                           
    management at                                                         
    Laurentian Bank                                                       
    Securities                   13%                                      
   Assets under                                                           
    management from                                                       
    Retail Services                                                       
    clients                    n.a.                                       
   Total deposits from                                                    
    clients                    n.a.                                       
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 Basel III regulatory                                                     
  capital ratios - All-                                                   
  in basis                                                                
   Common Equity Tier 1                                                   
   Total                                                                  
   Leverage ratio                                                         
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 Other information                                                        
   Number of full-time                                                    
    equivalent employees                                                  
   Number of branches                                                     
   Number of automated                                                    
    banking machines                                                      
 -------------------------------------------------------------------------
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(1)  Refer to the Non-GAAP Measures section.                                

2017 Performance and Medium-Term Financial Objectives

The Bank's cost control efforts resulted in significant progress in 2017 towards achieving its adjusted efficiency ratio and operating leverage objectives. Growth in key business areas also remained strong throughout the year, as loans to business customers were up 22% and residential mortgage loans through independent brokers and advisors were up 22% year-over-year.

Adjusted diluted earnings per share growth was 7%, while adjusted net income rose by 23%. Adjusted return on common shareholders' equity improved to 12.3% compared with 12.0% in fiscal 2016, while maintaining a ROE gap(3) with major Canadian banks at 360 bps.

The positive past 2 years have also seen economic challenges, market disruptions and new regulatory requirements. To continue to progress in 2018 and to ensure disciplined growth, the Bank will make further investments in its people, processes and technologies. These investments will ensure disciplined growth, strengthen the Bank's foundation and simplify the organization. Given this fast changing environment, management has reset the mid-term objectives from 2019 to 2020 while keeping the 2022 targets intact.

These medium-term objectives depend on a number of assumptions, as detailed in the Outlook section of the Bank's 2017 Management's Discussion and Analysis.


                                                                            
MEDIUM-TERM FINANCIAL OBJECTIVES AND 2017 PERFORMANCE                       
For the years ended October 31 (in billions of Canadian dollars, except     
 per share and percentage amounts)                                          
                                     2020                         Variance  
                               OBJECTIVES      2017      2016    2017/2016  
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Adjusted Financial                                                          
 Performance (1)                                                            
  Adjusted return on common   Narrow gap                       Current gap  
   shareholders' equity        to 300 bps                              at   
                                      (2)      12.3%     12.0% 360 bps (3)  
  Adjusted efficiency ratio less than 65%     66.1%     69.6%        (3.5)%
  Adjusted diluted earnings       Grow by                                   
   per share                    5% to 10%                                   
                                 annually  $   6.09  $   5.70            7% 
  Adjusted operating leverage    Positive       5.4%      2.5%           3% 
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Key growth drivers                                                          
  Loans to business customers     Grow to                                   
                                   $14.0B  $   12.2  $   10.0           22% 
  Residential mortgage loans                                                
   through independent            Grow to                                   
   brokers and advisors            $10.0B  $    8.6  $    7.0           22% 
  Assets under management at      Grow to                                   
   Laurentian Bank Securities       $4.3B  $    3.9  $    3.5           13% 
  Assets under management                                                   
   from Retail Services           Grow to                                   
   clients                         $12.6B  $   11.0      n.a.         n.a.  
  Total deposits from clients     Grow to                                   
                                   $27.1B  $   25.2      n.a.         n.a.  
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(1)  Refer to the Non-GAAP Measures section.                                
(2)  Compared to the major Canadian banks and achieve a comparable return on
     common shareholders' equity by 2022.                                   
(3)  Compared to Q3 2017 year-to-date for major Canadian banks.             

Consolidated Results

Non-GAAP measures

Management uses both generally accepted accounting principles (GAAP) and certain non-GAAP measures to assess the Bank's performance. The Bank's non-GAAP measures presented throughout this document exclude the effect of certain amounts designated as adjusting items due to their nature or significance. These non-GAAP measures are considered useful to readers in obtaining a better understanding of how management analyzes the Bank's results and in assessing underlying business performance and related trends. 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 issuers.

The following table presents the impact of adjusting items on reported results.


IMPACT OF ADJUSTING ITEMS                                                   
                                          FOR THE THREE MONTHS ENDED        
                                 -------------------------------------------
In thousands of Canadian dollars,                                           
 except per share amounts             OCTOBER 31       JULY 31    OCTOBER 31
 (Unaudited)                                2017          2017          2016
----------------------------------------------------------------------------
Impact on net income                                                        
Reported net income                $      58,635 $      54,798 $      18,383
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Adjusting items, net of income                                              
 taxes                                                                      
Impairment and restructuring                                                
 charges (1)                                                                
  Impairment of goodwill,                                                   
   software and intangible                                                  
   assets, and premises and                                                 
   equipment                                   -             -        16,178
  Provisions related to lease                                               
   contracts                                   -             -         8,675
  Severance charges                        2,364             -         3,200
  Other restructuring charges              1,791         1,584             -
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                                           4,155         1,584        28,053
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Items related to business                                                   
 combinations (2)                                                           
  Amortization of net premium on                                            
   purchased financial                                                      
   instruments                               519           563           868
  Amortization of acquisition-                                              
   related intangible assets               2,226           181             -
  Other costs related to business                                           
   combinations                              941         2,780         3,238
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                                           3,686         3,524         4,106
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                                           7,841         5,108        32,159
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Adjusted net income                $      66,476 $      59,906 $      50,542
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Impact on diluted earnings per                                              
 share                                                                      
Reported diluted earnings per                                               
 share                             $        1.42 $        1.48 $        0.45
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Adjusting items                                                             
Impairment and restructuring                                                
 charges                                    0.11          0.05          0.89
Items related to business                                                   
 combinations                               0.09          0.11          0.13
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                                            0.21          0.15          1.02
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Adjusted diluted earnings per                                               
 share (3)                         $        1.63 $        1.63 $        1.47
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IMPACT OF ADJUSTING ITEMS                                     
                                       FOR THE YEAR ENDED     
                                  ----------------------------
In thousands of Canadian dollars,                             
 except per share amounts            OCTOBER 31     OCTOBER 31
 (Unaudited)                               2017           2016
--------------------------------------------------------------
Impact on net income                                          
Reported net income               $     206,461  $     151,910
--------------------------------------------------------------
Adjusting items, net of income                                
 taxes                                                        
Impairment and restructuring                                  
 charges (1)                                                  
  Impairment of goodwill,                                     
   software and intangible                                    
   assets, and premises and                                   
   equipment                                  -         16,178
  Provisions related to lease                                 
   contracts                                  -          8,675
  Severance charges                       2,364          3,200
  Other restructuring charges             5,315              -
--------------------------------------------------------------
                                          7,679         28,053
--------------------------------------------------------------
Items related to business                                     
 combinations (2)                                             
  Amortization of net premium on                              
   purchased financial                                        
   instruments                            2,487          3,812
  Amortization of acquisition-                                
   related intangible assets              2,771              -
  Other costs related to business                             
   combinations                          11,343          3,238
--------------------------------------------------------------
                                         16,601          7,050
--------------------------------------------------------------
                                         24,280         35,103
--------------------------------------------------------------
Adjusted net income               $     230,741  $     187,013
--------------------------------------------------------------
--------------------------------------------------------------
Impact on diluted earnings per                                
 share                                                        
Reported diluted earnings per                                 
 share                            $        5.40  $        4.55
--------------------------------------------------------------
Adjusting items                                               
Impairment and restructuring                                  
 charges                                   0.22           0.92
Items related to business                                     
 combinations                              0.47           0.23
--------------------------------------------------------------
                                           0.69           1.15
--------------------------------------------------------------
Adjusted diluted earnings per                                 
 share (3)                        $        6.09  $        5.70
--------------------------------------------------------------
--------------------------------------------------------------
(1)  Impairment and restructuring charges result from the realignment of    
     strategic priorities of the Bank's Retail Services activities and the  
     transformation of the branch network. Impairment charges are comprised 
     of impairment of goodwill, software and intangible assets, and premises
     and equipment. Restructuring charges are comprised of provisions       
     related to lease contracts, severance charges, other restructuring     
     charges including salaries, communication expenses and professional    
     fees, as well as other impairment charges related to IT projects.      
(2)  Items related to business combinations include the amortization of     
     acquisition-related intangible assets, as well as integration costs    
     related to acquired businesses. These costs mainly consist of legal    
     costs, information technology costs, external professional consulting  
     costs, severance charges and marketing costs. The amortization of the  
     net premium on purchased financial instruments, which resulted from the
     revaluation at fair value of net assets acquired as part of a business 
     combination, was also considered an adjusting item.                    
(3)  The impact of adjusting items on a per share basis does not add due to 
     rounding for the quarter ended October 31, 2017.                       

Three months ended October 31, 2017 compared with three months ended October 31, 2016

Net income was $58.6 million or $1.42 diluted per share for the fourth quarter of 2017, compared with $18.4 million or $0.45 diluted per share for the fourth quarter of 2016. As noted below, results for the fourth quarter of 2016 included impairment and restructuring charges of $38.3 million ($28.1 million after income taxes) or $0.89 diluted per share. Adjusted net income was $66.5 million for the fourth quarter of 2017, up 32% from $50.5 million for the fourth quarter of 2016, while adjusted diluted earnings per share were $1.63, up 11% compared with $1.47 for the fourth quarter of 2016.

Total revenue

Total revenue increased by $31.6 million or 13% to $268.0 million for the fourth quarter of 2017 from $236.4 million for the fourth quarter of 2016, driven by growth in net interest income stemming in part from acquisitions.

Net interest income increased by $27.5 million or 18% to $176.2 million for the fourth quarter of 2017, from $148.7 million for the fourth quarter of 2016. This increase was mainly due to strong volume growth in the commercial loan portfolio, both organic and from acquisitions, coupled with the higher margins earned on these loans. Net interest margin stood at 1.75% for the fourth quarter of 2017, an increase of 8 basis points compared with the fourth quarter of 2016, essentially due to the higher proportion of higher-yielding loans to business customers.

Other income increased by $4.1 million, amounting to $91.7 million for the fourth quarter of 2017, compared with $87.6 million for the fourth quarter of 2016. Other income included a $5.9 million gain on the sale of the Bank's investment in Verico Financial Group Inc. In addition, fees and commissions on loans and deposits increased by $2.2 million, mainly driven by higher lending fees due to increased activity in the commercial portfolios. These increases were partly offset by a decrease in income from investment accounts of $4.6 million, mainly due to the decision of an important client to internalize the administration of its clients' accounts at the beginning of the year. As a result, the Bank had recognized in the fourth quarter of 2016, one-time revenues of $3.1 million in other income, net of impairment charges on related intangible assets and associated costs. Furthermore, income from treasury markets decreased by $1.6 million.

Amortization of net premium on purchased financial instruments

For the fourth quarter of 2017, the amortization of net premium on purchased financial instruments amounted to $0.7 million, compared with $1.2 million for the fourth quarter of 2016. Refer to Note 3.3 in the annual consolidated financial statements for additional information.

Provision for credit losses

The provision for credit losses increased to $11.5 million for the fourth quarter of 2017 from $10.3 million for the fourth quarter of 2016. This low level of credit losses continues to reflect the overall underlying good credit quality of the loan portfolios. Over the medium term, the provision for credit losses should trend gradually higher as the loan portfolio mix evolves and volumes increase.

Non-interest expenses

Non-interest expenses amounted to $184.4 million for the fourth quarter of 2017, a decrease of $17.6 million compared with the fourth quarter of 2016. Non-interest expenses for the fourth quarter of 2017 and for the fourth quarter of 2016 were affected by impairment and restructuring charges of $5.7 million and $38.3 million respectively, as noted below. Adjusted non-interest expenses increased by $13.0 million or 8% to $172.3 million for the fourth quarter of 2017 from $159.2 million for the fourth quarter of 2016, due to the full-quarter impact of the acquisition of CIT Canada and additional costs incurred in 2017 following the acquisition of NCF.

Salaries and employee benefits increased by $11.8 million or 14% to $94.2 million for the fourth quarter of 2017, compared with the fourth quarter of 2016, this increase is mainly due to the addition of employees from CIT Canada and NCF, as well as higher performance-based compensation.

Premises and technology costs decreased by $0.8 million to $45.5 million compared with the fourth quarter of 2016. The decrease mostly stems from the lower amortization expense resulting from impairment charges on assets recorded in the fourth quarter of 2016.

Other non-interest expenses increased by $5.5 million to $36.2 million compared with the fourth quarter of 2016, mainly due to the amortization of acquisition related intangibles, the annual increase in CDIC premiums, as well as higher professional fees incurred to support the Bank's transformation.

Impairment and restructuring charges amounted to $5.7 million for the fourth quarter of 2017 compared with $38.3 million for the fourth quarter of 2016. In 2017, the Bank incurred salaries, communication expenses and professional fees related to the optimization of Retail Services activities and branch mergers. In the fourth quarter of 2016, the value of the assets related to the Retail Services unit was reviewed and impairment charges of $22.1 million were recorded. Provisions related to lease contracts amounting to $11.9 million and severance charges of $4.4 million were also recorded during that quarter as a result of the announcement of branch mergers. Refer to Note 30 to the annual consolidated financial statements for additional information.

Costs related to business combinations amounted to $2.9 million for the fourth quarter of 2017 and included technology costs related to CIT Canada's operations, in addition to costs related to the acquisition of NCF which closed mid-August.

The adjusted efficiency ratio was 64.3% for the fourth quarter of 2017, compared with 67.4% for the fourth quarter of 2016, mainly reflecting the impact of the CIT Canada and NCF acquisitions and continued cost control initiatives, as well as the savings related to the branch optimization measures and restructuring charges of 2016. The adjusted operating leverage was positive year-over-year, driven by both revenue growth and expense control.

Income taxes

For the quarter ended October 31, 2017, the income tax expense was $12.8 million and the effective tax rate was 17.9%. 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, the lower taxation level on revenues from foreign operations and tax-exempt gains. For the quarter ended October 31, 2016, the income tax expense was $4.5 million and the effective tax rate was 19.7%. The lower tax rate, compared to the statutory rate, resulted mainly from the aforementioned factors and the lower level of Canadian income given the impairment and restructuring charges.

Three months ended October 31, 2017 compared with three months ended July 31, 2017

Net income was $58.6 million or $1.42 diluted per share for the fourth quarter of 2017 compared with net income of $54.8 million or $1.48 diluted per share for the third quarter of 2017. Adjusted net income was $66.5 million or $1.63 diluted per share for the fourth quarter of 2017, compared with $59.9 million or $1.63 diluted per share for the third quarter of 2017.

Total revenue increased by $20.0 million or 8% to $268.0 million for the fourth quarter of 2017, compared with $248.0 million for the previous quarter, mainly driven by growth in net interest income, which increased by $18.5 million sequentially to $176.2 million. This increase was mainly due to strong volume growth in the commercial loan portfolio through the NCF acquisition, as well as the higher margins earned on these loans. The Bank's net interest margin increased by 12 basis points to 1.75% for the fourth quarter of 2017, compared with 1.63% for the third quarter of 2017. This increase was mainly driven by the higher proportion of higher-yielding loans to business customers.

Other income increased by $1.5 million sequentially to $91.7 million for the fourth quarter of 2017. As mentioned above, other income included a $5.9 million gain on the sale of the Bank's investment in Verico Financial Group Inc., in the fourth quarter of 2017. This was partly offset by a decrease in income from treasury and financial market operations of $2.7 million, mainly due to hedging ineffectiveness losses on the asset-liability management interest rate swap portfolio, given the recent variations in the Prime rate.

The line-item "Amortization of net premium on purchased financial instruments" amounted to $0.7 million for the fourth quarter of 2017, down marginally compared with the third quarter of 2017. Refer to Note 3.3 in the annual consolidated financial statements for additional information.

Provision for credit losses totalled $11.5 million for the fourth quarter of 2017 and included the impact of the recently acquired NCF business. This level of losses continues to reflect the underlying credit quality of the Bank portfolio. Compared to the third quarter of 2017, loan losses increased by $5.1 million. During that quarter, as part of the Bank's ongoing project to implement the AIRB Approach to credit risk, the review of allowance models had resulted in the release of approximately $3.0 million in provision for credit losses. In addition, the completion and delivery of certain real estate development projects and improving economic indicators in Alberta had prompted the release of allowances of approximately $2.0 million. Over the medium term, the provision for credit losses should trend gradually higher as the loan portfolio mix evolves and volumes increase.

Non-interest expenses increased to $184.4 million for the fourth quarter of 2017 from $168.4 million in the third quarter of 2017, mainly due to the acquisition of NCF, including the amortization of acquisition related intangibles. Higher professional fees incurred to support the Bank's transformation, as well as an increase in severances and performance based compensation also contributed to the increase quarter over quarter. Furthermore, restructuring charges increased by $0.3 million, as the Bank incurred additional expenses related to the optimization of its Retail Services activities and branch mergers. Adjusted non-interest expenses amounted to $172.3 million and increased by 6% compared with the third quarter of 2017.

Financial Condition

As at October 31, 2017, the Bank's total assets amounted to $46.7 billion, a 9% increase compared with $43.0 billion as at October 31, 2016. The increase mainly reflects loan growth of $3.3 billion, as well as an increase in liquid assets of $0.3 billion as explained below.

Liquid assets

Liquid assets consist of cash, deposits with other banks, securities and securities purchased under reverse repurchase agreements. As at October 31, 2017, these assets totalled $9.0 billion, an increase of $0.3 billion compared with $8.7 billion as at October 31, 2016.

Over the past year, the Bank has increased its securitization activities to improve its funding mix and raised institutional sourced deposits to meet additional liquidity needs. Overall, the Bank continues to prudently manage the level of liquid assets and to hold sufficient cash resources from various sources in order to meet its current and future financial obligations, under both normal and stressed conditions.

Loans

Loans and bankers' acceptances, net of allowances, stood at $36.6 billion as at October 31, 2017, up $3.3 billion or 10% from October 31, 2016. This increase reflects the acquisition of NCF, as well as strong organic growth in loans to business customers and residential mortgage loans as detailed below.

Personal loans amounted to $6.0 billion and decreased by $0.6 billion or 9% since October 31, 2016, mainly due to net repayments in the investment loan portfolio, reflecting expected attrition given some deleveraging in the retail consumer market.

Residential mortgage loans stood at $18.5 billion as at October 31, 2017, an increase of $1.7 billion or 10% year-over-year. This reflected continued growth in residential mortgage loans distributed through independent brokers and advisors, as well as the acquisition of insured mortgage loans originated by third-parties as part of a program initiated by the Bank in 2016 to optimize the usage of National Housing Act mortgage-backed securities (NHA MBS) allocations.

Commercial loans, including acceptances, increased by $1.7 billion or 31% since October 31, 2016, mainly due to the acquisition of NCF's loan portfolio of $1.0 billion as well as growth in equipment financing loans through LBC Capital Inc., and increased volumes from syndication activities. Commercial mortgage loans increased by $0.5 billion or 11% over the same period. Of note during the fourth quarter of 2017, the Bank sold a $155.7 million commercial loan portfolio to optimize its portfolio mix, which resulted in a nominal loss. When combined, total loans to business customers amounted to $12.2 billion as at October 31, 2017, up 22% year-over-year as a result of strong organic growth and of the acquisition of NCF in the fourth quarter of 2017.

Other assets

Other assets stood at $1.1 billion as at October 31, 2017, $59.4 million higher than as at October 31, 2016, and mainly included goodwill, software and other intangible assets, as well as the fair value of derivatives. Investments to modernize and grow the Bank have contributed to increase other assets year-over-year, including increases in internally developed intangibles increased as the Bank continued to progress on the development of its new core banking system and its project to adopt the AIRB Approach to credit risk. The acquisition of NCF further resulted in goodwill and acquisition related intangibles assets of $137.4 million. These increases were partly offset by a decrease in the value of the derivatives mainly used to manage market risks associated with the Bank's portfolios.

Liabilities

Deposits increased by $1.4 billion or 5% to $28.9 billion as at October 31, 2017 compared with $27.6 billion as at October 31, 2016. Personal deposits stood at $21.2 billion as at October 31, 2017, up $0.2 billion compared with October 31, 2016, mainly driven by higher term deposits sourced through independent brokers and advisors. Business and other deposits increased by $1.2 billion to $7.7 billion over the same period, mainly reflecting higher institutional deposits. Personal deposits represented 73% of total deposits as at October 31, 2017, compared with 76% as at October 31, 2016, and contributed to the Bank's good liquidity position.

Debt related to securitization activities increased by $1.0 billion or 14% compared with October 31, 2016 and stood at $8.2 billion as at October 31, 2017. Over the last twelve months, the Bank continued to optimize this source of term funding for residential mortgages by participating in various programs sponsored by the CMHC and other Canadian banks.

Subordinated debt increased to $348.4 million as at October 31, 2017, from $199.8 million as at October 31, 2016. During the third quarter of 2017, the Bank issued $350.0 million of notes (Non-Viability Contingent Capital (NVCC)) (subordinated indebtedness). During the fourth quarter of 2017, the Bank redeemed all of its Series 2012-1 subordinated Medium Term Notes maturing in 2022, with an aggregate notional amount of $200.0 million. Refer to Note 15 to the annual consolidated financial statements for additional information. Subordinated debt is an integral part of the Bank's regulatory capital and affords its depositors additional protection.

Shareholders' equity and regulatory capital

Shareholders' equity stood at $2,330.4 million as at October 31, 2017, compared with $1,974.8 million as at October 31, 2016. This $355.6 million increase is mainly explained by the $240.6 million common share issuance in the fourth quarter of 2017 to support the NCF transaction and the net income contribution for the year, net of declared dividends. For additional information, please refer to the annual consolidated statement of changes in shareholders' equity. On November 14, 2017, the Bank announced that it will redeem, on December 15, 2017, all of its Non-Cumulative Class A Preferred Shares Series 11 then outstanding for a total amount of $100.0 million.

The Bank's book value per common share appreciated to $51.18 as at October 31, 2017 from $47.92 as at October 31, 2016.

The Common Equity Tier 1 capital ratio stood at 7.9% as at October 31, 2017, compared with 7.9% as at July 31, 2017 and 8.0% as at October 31, 2016. The decrease compared with October 31, 2016 was mainly driven by the significant investments in the core-banking system and the project to adopt the AIRB Approach to credit risk, which are key initiatives of the Bank's transformation. Otherwise, the $240.6 million common share issuance that closed in August 2017 and internal capital generation more than provided the necessary capital to support the strong growth, including the NCF acquisition.

Optimization of Retail Services Activities

At the beginning of 2016, the Bank announced its seven-year transformation plan, which included optimizing and simplifying retail operations. This strategy led to the initial decision, in September 2016, to reorganize the branch network by the end of 2017. To date, 41 branches have been merged and another 23 branches have become advice-only. These concrete measures address the changes in customer behaviour and have provided for a significant improvement in operating efficiency. Management continues to monitor the impact of these actions on its core client base. The initial response from customers and employees has been positive and the impact on operations and results are in line with expectations. Building on this positive outcome, the Bank decided in September 2017 to further digitize services. As such, the branch model will transition to focus on delivering financial advice while migrating customers to electronic- and web-based platforms by December 2018. These actions are in line with customer preferences towards online banking over branch visits. As well, in order to improve flexibility and efficiency, certain administrative functions were outsourced at the end of 2017.

As detailed in the Consolidated Results section above, these measures led to additional restructuring charges, mainly with regards to severance charges. Additional costs are expected to be incurred over the next 12 months, as the reorganization continues. In addition it was decided, as of November 1, 2017 Retail Services in Quebec will solely originate residential mortgages through the branch network and no longer through the mortgage broker channel.

Industry Developments

Over the past year, Canadian financial markets have been facing challenging conditions related to the housing sector, including new policy measures from the Federal Government. The new mortgage rules issued last fall by the CMHC have temporarily reduced the ability of potential buyers to qualify for the purchase of a home. In July, OSFI issued draft changes to its Guideline B-20 "Residential Mortgage Underwriting Practices and Procedures". Changes were finalized in October 2017 and are applicable as of January 1, 2018. The new guideline introduces more stringent mortgage loan origination requirements, and could further affect access to mortgage financing. These measures combined with concerns about overheated housing markets in the greater Toronto and Vancouver areas, have kept housing in the spotlight. Notwithstanding, the Bank's activities are well diversified, and its business plan strategically positions it to meet these challenges. It is very difficult to predict the extent of the impact on the market as the behavior of current and future home owners will probably adapt to the new regulations.

In addition, intensifying competition for funding through the brokered deposit network has gained attention. The Bank benefits from well diversified sources of deposits, including personal deposits sourced through its branch network and through independent advisors and brokers. As well, the expanding securitization activities and institutional funding program contribute to diversified, strong and stable funding. Furthermore, given current market conditions, the Bank continues to prudently manage the level of liquid assets and maintains an adequate level of liquidity to meet current obligations and support growth.


                                                                            
Condensed Interim Consolidated Financial Statements (unaudited)             
                                                                            
Consolidated Balance Sheet                                                  
                                                                            
In thousands of Canadian dollars         AS AT OCTOBER 31  AS AT OCTOBER 31 
 (Unaudited)                                         2017              2016 
----------------------------------------------------------------------------
                                                                            
ASSETS                                                                      
Cash and non-interest-bearing deposits                                      
 with other banks                       $         111,978 $         123,716 
----------------------------------------------------------------------------
Interest-bearing deposits with other                                        
 banks                                            215,384            63,383 
----------------------------------------------------------------------------
Securities                                                                  
  Available-for-sale                            3,032,159         2,723,693 
  Held-to-maturity                                405,088           502,232 
  Held-for-trading                              2,148,767         2,434,507 
----------------------------------------------------------------------------
                                                5,586,014         5,660,432 
----------------------------------------------------------------------------
Securities purchased under reverse                                          
 repurchase agreements                          3,107,841         2,879,986 
----------------------------------------------------------------------------
Loans                                                                       
  Personal                                      6,038,692         6,613,392 
  Residential mortgage                         18,486,449        16,749,387 
  Commercial mortgage                           5,161,470         4,658,734 
  Commercial and other                          6,302,537         4,727,385 
  Customers' liabilities under                                              
   acceptances                                    707,009           629,825 
----------------------------------------------------------------------------
                                               36,696,157        33,378,723 
  Allowances for loan losses                      (99,186)         (105,009)
----------------------------------------------------------------------------
                                               36,596,971        33,273,714 
----------------------------------------------------------------------------
Other                                                                       
  Derivatives                                     104,426           232,791 
  Premises and equipment                           35,214            32,989 
  Software and other intangible assets            293,422           150,490 
  Goodwill                                        118,100            55,812 
  Deferred tax assets                              38,702            36,495 
  Other assets                                    474,606           496,532 
----------------------------------------------------------------------------
                                                1,064,470         1,005,109 
----------------------------------------------------------------------------
                                        $      46,682,658 $      43,006,340 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
Deposits                                                                    
  Personal                              $      21,198,982 $      21,001,578 
  Business, banks and other                     7,731,378         6,571,767 
----------------------------------------------------------------------------
                                               28,930,360        27,573,345 
----------------------------------------------------------------------------
Other                                                                       
  Obligations related to securities sold                                    
   short                                        2,165,097         1,707,293 
  Obligations related to securities sold                                    
   under repurchase agreements                  2,678,629         2,525,441 
  Acceptances                                     707,009           629,825 
  Derivatives                                     217,785           150,499 
  Deferred tax liabilities                         22,112            32,755 
  Other liabilities                             1,051,908           968,077 
----------------------------------------------------------------------------
                                                6,842,540         6,013,890 
----------------------------------------------------------------------------
Debt related to securitization                                              
 activities                                     8,230,921         7,244,454 
----------------------------------------------------------------------------
Subordinated debt                                 348,427           199,824 
----------------------------------------------------------------------------
Shareholders' equity                                                        
  Preferred shares                                341,600           341,600 
  Common shares                                   953,536           696,493 
  Retained earnings                             1,035,770           924,861 
  Accumulated other comprehensive income             (496)           11,873 
----------------------------------------------------------------------------
                                                2,330,410         1,974,827 
----------------------------------------------------------------------------
                                        $      46,682,658 $      43,006,340 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Consolidated Statement of Income                                            
                                          FOR THE THREE MONTHS ENDED        
                                  ----------------------------------------- 
In thousands of Canadian dollars,                                           
 except per share amounts            OCTOBER 31       JULY 31    OCTOBER 31 
 (Unaudited)                               2017          2017          2016 
----------------------------------------------------------------------------
                                                                            
Interest income                                                             
  Loans                           $     325,714 $     289,335 $     270,757 
  Securities                             11,591        11,411         8,624 
  Deposits with other banks                 461           232           356 
  Other, including derivatives            7,617        11,772        16,592 
----------------------------------------------------------------------------
                                        345,383       312,750       296,329 
----------------------------------------------------------------------------
Interest expense                                                            
  Deposits                              124,665       116,039       116,452 
  Debt related to securitization                                            
   activities                            36,780        34,241        29,164 
  Subordinated debt                       5,256         3,268         1,623 
  Other                                   2,462         1,495           363 
----------------------------------------------------------------------------
                                        169,163       155,043       147,602 
----------------------------------------------------------------------------
Net interest income                     176,220       157,707       148,727 
----------------------------------------------------------------------------
Other income                                                                
  Fees and commissions on loans                                             
   and deposits                          39,640        39,861        37,467 
  Income from brokerage operations       18,726        18,316        18,518 
  Income from sales of mutual                                               
   funds                                 12,242        12,184        10,646 
  Income from investment accounts         4,880         5,060         9,478 
  Insurance income, net                   4,493         4,523         4,809 
  Income from treasury and                                                  
   financial market operations            2,607         5,291         4,237 
  Other                                   9,160         5,060         2,487 
----------------------------------------------------------------------------
                                         91,748        90,295        87,642 
----------------------------------------------------------------------------
Total revenue                           267,968       248,002       236,369 
----------------------------------------------------------------------------
Amortization of net premium on                                              
 purchased financial instruments            707           766         1,181 
----------------------------------------------------------------------------
Provision for credit losses              11,500         6,400        10,300 
----------------------------------------------------------------------------
Non-interest expenses                                                       
  Salaries and employee benefits         94,203        89,157        82,356 
  Premises and technology                45,466        45,017        46,229 
  Other                                  36,161        28,819        30,660 
  Restructuring charges                   5,673         2,163        38,344 
  Costs related to business                                                 
   combinations                           2,862         3,208         4,409 
----------------------------------------------------------------------------
                                        184,365       168,364       201,998 
----------------------------------------------------------------------------
Income before income taxes               71,396        72,472        22,890 
Income taxes                             12,761        17,674         4,507 
----------------------------------------------------------------------------
Net income                        $      58,635 $      54,798 $      18,383 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Preferred share dividends,                                                  
 including applicable taxes               4,276         4,273         4,270 
----------------------------------------------------------------------------
Net income available to common                                              
 shareholders                     $      54,359 $      50,525 $      14,113 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Average number of common shares                                             
 outstanding (in thousands)                                                 
  Basic                                  38,228        34,112        31,553 
  Diluted                                38,228        34,112        31,553 
----------------------------------------------------------------------------
Earnings per share                                                          
  Basic                           $        1.42 $        1.48 $        0.45 
  Diluted                         $        1.42 $        1.48 $        0.45 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Dividends declared per share                                                
  Common share                    $        0.62 $        0.62 $        0.60 
  Preferred share - Series 11     $        0.25 $        0.25 $        0.25 
  Preferred share - Series 13     $        0.27 $        0.27 $        0.27 
  Preferred share - Series 15     $        0.37 $        0.37 $        0.37 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                                                    
       Consolidated Statement of Income                             
                                              FOR THE YEAR ENDED    
                                         ---------------------------
       In thousands of Canadian dollars,                            
        except per share amounts            OCTOBER 31    OCTOBER 31
        (Unaudited)                               2017          2016
       -------------------------------------------------------------
                                                                    
       Interest income                                              
         Loans                           $   1,169,852 $   1,066,245
         Securities                             42,469        35,265
         Deposits with other banks                 913         1,740
         Other, including derivatives           42,311        63,630
       -------------------------------------------------------------
                                             1,255,545     1,166,880
       -------------------------------------------------------------
       Interest expense                                             
         Deposits                              465,151       454,862
         Debt related to securitization                             
          activities                           134,900       114,346
         Subordinated debt                      11,718         6,433
         Other                                   5,686         1,595
       -------------------------------------------------------------
                                               617,455       577,236
       -------------------------------------------------------------
       Net interest income                     638,090       589,644
       -------------------------------------------------------------
       Other income                                                 
         Fees and commissions on loans                              
          and deposits                         154,584       145,690
         Income from brokerage operations       75,123        71,435
         Income from sales of mutual                                
          funds                                 47,088        40,299
         Income from investment accounts        21,804        30,271
         Insurance income, net                  18,188        17,527
         Income from treasury and                                   
          financial market operations           17,776        12,782
         Other                                  23,757         7,803
       -------------------------------------------------------------
                                               358,320       325,807
       -------------------------------------------------------------
       Total revenue                           996,410       915,451
       -------------------------------------------------------------
       Amortization of net premium on                               
        purchased financial instruments          3,383         5,190
       -------------------------------------------------------------
       Provision for credit losses              37,000        33,350
       -------------------------------------------------------------
       Non-interest expenses                                        
         Salaries and employee benefits        361,001       334,903
         Premises and technology               182,397       187,696
         Other                                 119,385       114,197
         Restructuring charges                  10,485        38,344
         Costs related to business                                  
          combinations                          16,091         4,409
       -------------------------------------------------------------
                                               689,359       679,549
       -------------------------------------------------------------
       Income before income taxes              266,668       197,362
       Income taxes                             60,207        45,452
       -------------------------------------------------------------
       Net income                        $     206,461 $     151,910
       -------------------------------------------------------------
       -------------------------------------------------------------
       Preferred share dividends,                                   
        including applicable taxes              17,096        13,313
       -------------------------------------------------------------
       Net income available to common                               
        shareholders                     $     189,365 $     138,597
       -------------------------------------------------------------
       -------------------------------------------------------------
       Average number of common shares                              
        outstanding (in thousands)                                  
         Basic                                  35,059        30,488
         Diluted                                35,059        30,488
       -------------------------------------------------------------
       Earnings per share                                           
         Basic                           $        5.40 $        4.55
         Diluted                         $        5.40 $        4.55
       -------------------------------------------------------------
       -------------------------------------------------------------
       Dividends declared per share                                 
         Common share                    $        2.46 $        2.36
         Preferred share - Series 11     $        1.00 $        1.00
         Preferred share - Series 13     $        1.08 $        1.08
         Preferred share - Series 15     $        1.46 $        0.73
       -------------------------------------------------------------
       -------------------------------------------------------------
                                                                            
Consolidated Statement of Comprehensive Income                              
                                          FOR THE THREE MONTHS ENDED        
                                    --------------------------------------- 
In thousands of Canadian dollars      OCTOBER 31      JULY 31   OCTOBER 31  
 (Unaudited)                                2017         2017         2016  
----------------------------------------------------------------------------
Net income                          $     58,635 $     54,798 $     18,383  
----------------------------------------------------------------------------
Other comprehensive income (loss),                                          
 net of income taxes                                                        
Items that may subsequently be                                              
 reclassified to the statement of                                           
 income                                                                     
  Net change in available-for-sale                                          
   securities                                                               
    Unrealized net gains (losses) on                                        
     available-for-sale securities         4,679       (2,174)       4,113  
    Reclassification of net (gains)                                         
     losses on available-for-sale                                           
     securities to net income               (368)        (759)        (996) 
----------------------------------------------------------------------------
                                           4,311       (2,933)       3,117  
----------------------------------------------------------------------------
  Net change in value of derivatives                                        
   designated as cash flow hedges         10,565      (24,112)        (317) 
----------------------------------------------------------------------------
  Net foreign currency translation                                          
   adjustments                                                              
    Unrealized foreign currency                                             
     translation gains on                                                   
     investments in foreign                                                 
     operations                            5,257            -            -  
    Unrealized net losses on hedges                                         
     of investments in foreign                                              
     operations                           (3,309)           -            -  
----------------------------------------------------------------------------
                                           1,948            -            -  
----------------------------------------------------------------------------
                                          16,824      (27,045)       2,800  
----------------------------------------------------------------------------
  Items that may not subsequently be                                        
   reclassified to the statement of                                         
   income                                                                   
    Remeasurement gains (losses) on                                         
     employee benefit plans               (6,134)       6,768       (2,161) 
----------------------------------------------------------------------------
Comprehensive income                $     69,325 $     34,521 $     19,022  
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                                                     
       Consolidated Statement of Comprehensive Income                
                                               FOR THE YEAR ENDED    
                                           --------------------------
       In thousands of Canadian dollars      OCTOBER 31   OCTOBER 31 
        (Unaudited)                                2017         2016 
       --------------------------------------------------------------
       Net income                          $    206,461 $    151,910 
       --------------------------------------------------------------
       Other comprehensive income (loss),                            
        net of income taxes                                          
       Items that may subsequently be                                
        reclassified to the statement of                             
        income                                                       
         Net change in available-for-sale                            
          securities                                                 
           Unrealized net gains (losses) on                          
            available-for-sale securities        10,424        9,412 
           Reclassification of net (gains)                           
            losses on available-for-sale                             
            securities to net income             (5,778)       2,182 
       --------------------------------------------------------------
                                                  4,646       11,594 
       --------------------------------------------------------------
         Net change in value of derivatives                          
          designated as cash flow hedges        (18,963)     (14,087)
       --------------------------------------------------------------
         Net foreign currency translation                            
          adjustments                                                
           Unrealized foreign currency                               
            translation gains on                                     
            investments in foreign                                   
            operations                            5,257            - 
           Unrealized net losses on hedges                           
            of investments in foreign                                
            operations                           (3,309)           - 
       --------------------------------------------------------------
                                                  1,948            - 
       --------------------------------------------------------------
                                                (12,369)      (2,493)
       --------------------------------------------------------------
         Items that may not subsequently be                          
          reclassified to the statement of                           
          income                                                     
           Remeasurement gains (losses) on                           
            employee benefit plans                8,104      (26,770)
       --------------------------------------------------------------
       Comprehensive income                $    202,196 $    122,647 
       --------------------------------------------------------------
       --------------------------------------------------------------
                                                                            
Income Taxes - Other Comprehensive Income                                   
The following table presents the income taxes for each component of other   
 comprehensive income.                                                      
                                        FOR THE THREE MONTHS ENDED          
                                ------------------------------------------- 
In thousands of Canadian dollars    OCTOBER 31     JULY 31      OCTOBER 31  
 (Unaudited)                              2017        2017            2016  
----------------------------------------------------------------------------
Income tax expense (recovery)                                               
 on:                                                                        
  Net change in available-for-                                              
   sale securities                                                          
    Unrealized net gains                                                    
     (losses) on available-for-                                             
     sale securities             $       1,743 $      (671) $        1,412  
    Reclassification of net                                                 
     (gains) losses on                                                      
     available-for-sale                                                     
     securities to net income             (471)       (278)           (167) 
----------------------------------------------------------------------------
                                         1,272        (949)          1,245  
----------------------------------------------------------------------------
  Net change in value of                                                    
   derivatives designated as                                                
   cash flow hedges                       (345)     (4,567)           (115) 
----------------------------------------------------------------------------
  Net foreign currency                                                      
   translation adjustments                                                  
    Unrealized net losses on                                                
     hedges of investments in                                               
     foreign operations                   (204)          -               -  
----------------------------------------------------------------------------
                                          (204)          -               -  
----------------------------------------------------------------------------
  Remeasurement gains (losses)                                              
   on employee benefit plans            (2,278)      2,473            (707) 
----------------------------------------------------------------------------
                                 $      (1,555)$    (3,043) $          423  
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                                                    
        Income Taxes - Other Comprehensive Income                   
        The following table presents the income taxes for each      
         component of other comprehensive income.                   
                                             FOR THE YEAR ENDED     
                                        ----------------------------
        In thousands of Canadian dollars   OCTOBER 31    OCTOBER 31 
         (Unaudited)                             2017          2016 
        ------------------------------------------------------------
        Income tax expense (recovery)                               
         on:                                                        
          Net change in available-for-                              
           sale securities                                          
            Unrealized net gains                                    
             (losses) on available-for-                             
             sale securities            $       4,062 $       3,439 
            Reclassification of net                                 
             (gains) losses on                                      
             available-for-sale                                     
             securities to net income          (2,453)          831 
        ------------------------------------------------------------
                                                1,609         4,270 
        ------------------------------------------------------------
          Net change in value of                                    
           derivatives designated as                                
           cash flow hedges                    (6,877)       (5,158)
        ------------------------------------------------------------
          Net foreign currency                                      
           translation adjustments                                  
            Unrealized net losses on                                
             hedges of investments in                               
             foreign operations                  (204)            - 
        ------------------------------------------------------------
                                                 (204)            - 
        ------------------------------------------------------------
          Remeasurement gains (losses)                              
           on employee benefit plans            2,925        (9,734)
        ------------------------------------------------------------
                                        $      (2,547)$     (10,622)
        ------------------------------------------------------------
        ------------------------------------------------------------
                                                                     
Consolidated Statement of Changes in Shareholders' Equity            
                                                                     
                                                                     
                                                                     
                                                                     
In thousands of                                                      
 Canadian dollars         PREFERRED           COMMON        RETAINED 
(Unaudited)                  SHARES           SHARES        EARNINGS 
---------------------------------------------------------------------
                                                                     
Balance as at                                                        
 October 31, 2016   $       341,600  $       696,493  $      924,861 
---------------------------------------------------------------------
Net income                                                   206,461 
Other                                                                
 comprehensive                                                       
 income (net of                                                      
 income taxes)                                                       
  Unrealized net                                                     
   gains on                                                          
   available-for-                                                    
   sale securities                                                   
  Reclassification                                                   
   of net gains on                                                   
   available-for-                                                    
   sale securities                                                   
   to net income                                                     
  Net change in                                                      
   value of                                                          
   derivatives                                                       
   designated as                                                     
   cash flow                                                         
   hedges                                                            
  Net unrealized                                                     
   foreign                                                           
   currency                                                          
   translation                                                       
   gains on                                                          
   investments in                                                    
   foreign                                                           
   operations                                                        
  Unrealized net                                                     
   losses on                                                         
   hedges of                                                         
   investments in                                                    
   foreign                                                           
   operations                                                        
  Remeasurement                                                      
   gains on                                                          
   employee                                                          
   benefit plans                                               8,104 
---------------------------------------------------------------------
Comprehensive                                                        
 income                                                      214,565 
---------------------------------------------------------------------
Issuance of share                                                    
 capital                          -          257,043                 
Dividends                                                            
  Preferred                                                          
   shares,                                                           
   including                                                         
   applicable                                                        
   taxes                                                     (17,096)
  Common shares                                              (86,560)
---------------------------------------------------------------------
Balance as at                                                        
 October 31, 2017   $       341,600  $       953,536  $    1,035,770 
---------------------------------------------------------------------
---------------------------------------------------------------------
Balance as at                                                        
 October 31, 2015   $       219,633  $       466,336  $      886,656 
---------------------------------------------------------------------
Net income                                                   151,910 
Other                                                                
 comprehensive                                                       
 income (net of                                                      
 income taxes)                                                       
  Unrealized net                                                     
   gains on                                                          
   available-for-                                                    
   sale securities                                                   
  Reclassification                                                   
   of net losses                                                     
   on available-                                                     
   for-sale                                                          
   securities to                                                     
   net income                                                        
  Net change in                                                      
   value of                                                          
   derivatives                                                       
   designated as                                                     
   cash flow                                                         
   hedges                                                            
  Remeasurement                                                      
   losses on                                                         
   employer                                                          
   benefit plans                                             (26,770)
---------------------------------------------------------------------
Comprehensive                                                        
 income                                                      125,140 
---------------------------------------------------------------------
Issuance of share                                                    
 capital                    121,967          230,157                 
Dividends                                                            
  Preferred                                                          
   shares,                                                           
   including                                                         
   applicable                                                        
   taxes                                                     (13,313)
  Common shares                                              (73,622)
---------------------------------------------------------------------
Balance as at                                                        
 October 31, 2016   $       341,600  $       696,493  $      924,861 
---------------------------------------------------------------------
---------------------------------------------------------------------

                                                                            
Consolidated Statement of Changes in Shareholders' Equity                   
                                                                            
                                                                            
                                      ACCUMULATED OTHER                     
                                     COMPREHENSIVE INCOME                   
                  ----------------------------------------------------------
In thousands of     AVAILABLE-           CASH TRANSLATION OF                
 Canadian dollars    FOR-SALE           FLOW         FOREIGN                
(Unaudited)         SECURITIES         HEDGES     OPERATIONS          TOTAL 
----------------------------------------------------------------------------
                                                                            
Balance as at                                                               
 October 31, 2016 $        203   $     11,670   $          -   $     11,873 
----------------------------------------------------------------------------
Net income                                                                  
Other                                                                       
 comprehensive                                                              
 income (net of                                                             
 income taxes)                                                              
  Unrealized net                                                            
   gains on                                                                 
   available-for-                                                           
   sale securities      10,424                                       10,424 
  Reclassification                                                          
   of net gains on                                                          
   available-for-                                                           
   sale securities                                                          
   to net income        (5,778)                                      (5,778)
  Net change in                                                             
   value of                                                                 
   derivatives                                                              
   designated as                                                            
   cash flow                                                                
   hedges                             (18,963)                      (18,963)
  Net unrealized                                                            
   foreign                                                                  
   currency                                                                 
   translation                                                              
   gains on                                                                 
   investments in                                                           
   foreign                                                                  
   operations                                          5,257          5,257 
  Unrealized net                                                            
   losses on                                                                
   hedges of                                                                
   investments in                                                           
   foreign                                                                  
   operations                                         (3,309)        (3,309)
  Remeasurement                                                             
   gains on                                                                 
   employee                                                                 
   benefit plans                                                            
----------------------------------------------------------------------------
Comprehensive                                                               
 income                  4,646        (18,963)         1,948        (12,369)
----------------------------------------------------------------------------
Issuance of share                                                           
 capital                                                                    
Dividends                                                                   
  Preferred                                                                 
   shares,                                                                  
   including                                                                
   applicable                                                               
   taxes                                                                    
  Common shares                                                             
----------------------------------------------------------------------------
Balance as at                                                               
 October 31, 2017 $      4,849   $     (7,293)  $      1,948   $       (496)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance as at                                                               
 October 31, 2015 $    (11,391)  $     25,757                  $     14,366 
----------------------------------------------------------------------------
Net income                                                                  
Other                                                                       
 comprehensive                                                              
 income (net of                                                             
 income taxes)                                                              
  Unrealized net                                                            
   gains on                                                                 
   available-for-                                                           
   sale securities       9,412                                        9,412 
  Reclassification                                                          
   of net losses                                                            
   on available-                                                            
   for-sale                                                                 
   securities to                                                            
   net income            2,182                                        2,182 
  Net change in                                                             
   value of                                                                 
   derivatives                                                              
   designated as                                                            
   cash flow                                                                
   hedges                             (14,087)                      (14,087)
  Remeasurement                                                             
   losses on                                                                
   employer                                                                 
   benefit plans                                                            
----------------------------------------------------------------------------
Comprehensive                                                               
 income                 11,594        (14,087)                       (2,493)
----------------------------------------------------------------------------
Issuance of share                                                           
 capital                                                                    
Dividends                                                                   
  Preferred                                                                 
   shares,                                                                  
   including                                                                
   applicable                                                               
   taxes                                                                    
  Common shares                                                             
----------------------------------------------------------------------------
Balance as at                                                               
 October 31, 2016 $        203   $     11,670                  $     11,873 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                                    
Consolidated Statement of Changes in Shareholders'  
 Equity                                             
                                                    
                  ----------------------------------
                           SHARE-             TOTAL 
                           BASED            SHARE-  
                         PAYMENT          HOLDERS'  
                          RESERVE            EQUITY 
                                                    
In thousands of                                     
 Canadian dollars                                   
(Unaudited)                                         
----------------------------------------------------
                                                    
Balance as at                                       
 October 31, 2016 $             -   $     1,974,827 
----------------------------------------------------
Net income                                  206,461 
Other                                               
 comprehensive                                      
 income (net of                                     
 income taxes)                                      
  Unrealized net                                    
   gains on                                         
   available-for-                                   
   sale securities                           10,424 
  Reclassification                                  
   of net gains on                                  
   available-for-                                   
   sale securities                                  
   to net income                             (5,778)
  Net change in                                     
   value of                                         
   derivatives                                      
   designated as                                    
   cash flow                                        
   hedges                                   (18,963)
  Net unrealized                                    
   foreign                                          
   currency                                         
   translation                                      
   gains on                                         
   investments in                                   
   foreign                                          
   operations                                 5,257 
  Unrealized net                                    
   losses on                                        
   hedges of                                        
   investments in                                   
   foreign                                          
   operations                                (3,309)
  Remeasurement                                     
   gains on                                         
   employee                                         
   benefit plans                              8,104 
----------------------------------------------------
Comprehensive                                       
 income                                     202,196 
----------------------------------------------------
Issuance of share                                   
 capital                        -           257,043 
Dividends                                           
  Preferred                                         
   shares,                                          
   including                                        
   applicable                                       
   taxes                                    (17,096)
  Common shares                             (86,560)
----------------------------------------------------
Balance as at                                       
 October 31, 2017 $             -   $     2,330,410 
----------------------------------------------------
----------------------------------------------------
Balance as at                                       
 October 31, 2015 $            36   $     1,587,027 
----------------------------------------------------
Net income                                  151,910 
Other                                               
 comprehensive                                      
 income (net of                                     
 income taxes)                                      
  Unrealized net                                    
   gains on                                         
   available-for-                                   
   sale securities                            9,412 
  Reclassification                                  
   of net losses                                    
   on available-                                    
   for-sale                                         
   securities to                                    
   net income                                 2,182 
  Net change in                                     
   value of                                         
   derivatives                                      
   designated as                                    
   cash flow                                        
   hedges                                   (14,087)
  Remeasurement                                     
   losses on                                        
   employer                                         
   benefit plans                            (26,770)
----------------------------------------------------
Comprehensive                                       
 income                                     122,647 
----------------------------------------------------
Issuance of share                                   
 capital                      (36)          352,088 
Dividends                                           
  Preferred                                         
   shares,                                          
   including                                        
   applicable                                       
   taxes                                    (13,313)
  Common shares                             (73,622)
----------------------------------------------------
Balance as at                                       
 October 31, 2016 $             -   $     1,974,827 
----------------------------------------------------
----------------------------------------------------

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 (the "Bank") 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 readers 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 prospect, 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 be correct. Certain important assumptions by the Bank in making forward-looking statements include, but are not limited to: the Bank's ability to execute its transformation plan and strategy; the expectation of regulatory stability; the continued favourable economic conditions; the Bank's ability to maintain sufficient liquidity and capital resources; the absence of material unfavorable changes in competition, market conditions or in government monetary, fiscal and economic policies; and the maintenance of credit ratings. See also "How the Bank Will Measure its Performance - Key assumptions supporting the Bank's medium-term objectives" in the Outlook section of the Bank's 2017 Management's Discussion and Analysis.

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: changes in capital market conditions, changes in government monetary, fiscal and economic policies, changes in interest rates, inflation levels and general economic conditions, legislative and regulatory developments, changes in competition, modifications to credit ratings, scarcity of human resources, developments with respect to labour relations, as well as developments in the technological environment. Furthermore, these factors include the ability to execute the Bank's transformation plan and in particular the successful reorganization of retail branches, the modernization of the core banking system and the adoption of the Advanced Internal Ratings-Based Approach to credit risk (the AIRB Approach).

With respect to the anticipated benefits from the acquisition of Northpoint Commercial Finance ("NCF") and statements with regards to this transaction being accretive to earnings, such factors also include, but are not limited to: the ability to promptly and effectively integrate the businesses, reputational risks and the reaction of the Bank's and NCF's customers to the transaction; the failure to realize, in the timeframe anticipated or at all, the anticipated benefits and synergies of the acquisition of NCF; the Bank's limited experience in the U.S. market and in inventory financing; and diversion of management time on acquisition-related issues.

With respect to the anticipated benefits from the acquisition of CIT Canada and statements with regards to this transaction being accretive to earnings, such factors also include, but are not limited to: the ability to realize synergies in the anticipated time frame, the ability to promptly and effectively integrate the businesses, and diversion of management time on integration-related issues.

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 "Risk Appetite and Risk Management Framework" on page 44 of the Bank's Management's Discussion and Analysis as contained in the Bank's 2017 Annual Report, as well as to other 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.

Access to Quarterly Results Materials

Interested investors, the media and others may review this press release, the Bank's Annual Report, presentation to investors and supplementary financial information on the Group's website at www.lbcfg.ca, under the Investor Centre tab, Financial Results.

Conference Call

Laurentian Bank Financial Group invites media representatives and the public to listen to the conference call to be held at 3:30 p.m. Eastern Time on December 5, 2017. The live, listen-only, toll-free, call-in number is 1-888-394-8218, code 9201175. A live webcast will also be available on the Group's website under the Investor Centre tab, Financial Results.

The conference call playback will be available on a delayed basis at any time from 6:30 p.m. on December 5, 2017 until 6:00 p.m. on January 4, 2018, on the Group's website under the Investor Centre tab, Financial Results.

The presentation material referenced during the call will be available on the Group's website under the Investor Centre tab, Financial Results.

About Laurentian Bank Financial Group

Founded in 1846, Laurentian Bank Financial Group is a diversified financial services provider whose mission is to help its customers improve their financial health. The Laurentian Bank of Canada and its entities are collectively referred as Laurentian Bank Financial Group (the "Group" or the "Bank").

With more than 3,700 employees guided by the values of proximity, simplicity and honesty, the Group provides a broad range of advice-based solutions and services to its customers through its businesses: Retail Services, Business Services, B2B Bank and Capital Markets. The Group - with pan-Canadian activities and a presence in the United States - is an important player in numerous market segments.

The Group has $47 billion in balance sheet assets and $32 billion in assets under administration.

Contacts:
Investor Relations
Susan Cohen
Director, Investor Relations
Office: 514 284-4500, ext. 4926
Mobile: 514 970-0564
susan.cohen@lbcfg.ca

Media
Helene Soulard
Assistant Vice-President, Communications
Office: 514 284-4500, ext. 8232
Mobile: 514 926-3295
helene.soulard@lbcfg.ca

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