MONTREAL, QUEBEC--(Marketwired - Jan. 8, 2018) -
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES
Laurentian Bank of Canada (TSX:LB) ("Laurentian" or the "Bank") has announced today that it has entered into an agreement with
a syndicate of underwriters (collectively, the "Underwriters") led by TD Securities Inc., BMO Capital Markets and CIBC Capital
Markets, as bookrunners, under which the Underwriters have agreed to buy on a bought deal basis an aggregate of 2,282,000 common
shares (the "Shares"), at a price of $54.80 per Share for gross proceeds of $125 million (the "Offering"). Laurentian has granted
the Underwriters an over-allotment option, exercisable at the offering price for a period of 30 days following the closing of the
Offering, to purchase up to an additional 15% of the Offering to cover over-allotments, if any (the "Over-Allotment Option"). The
Shares will be offered for sale to the public in each of the provinces of Canada pursuant to a prospectus supplement to
Laurentian's short form base shelf prospectus dated December 20, 2016, which supplement will be filed with Canadian securities
regulatory authorities in all Canadian provinces. The Offering is expected to close on or about January 16, 2018 and is subject
to Laurentian receiving all necessary regulatory approvals.
The net proceeds of this Offering will be added to Laurentian's general funds and will be used for general corporate purposes
and will qualify as common equity tier 1 capital for the Bank. Francois Desjardins, President and Chief Executive Officer of
the Bank, commented: "We just completed year two of our seven-year transformation and we are making good progress towards our
objectives. As we move through an evolving economic environment, we made the prudent decision to replace the preferred share
issue that we recently redeemed with common equity. This further strengthens the Bank's capital base and provides us with greater
flexibility as we pursue organic growth and evolve our loan portfolio mix by increasing the proportion of commercial loans. We
will also continue to invest in the implementation of our core banking system and the Advanced Internal Ratings-Based approach
(AIRB)."
The Bank's common equity tier 1 ratio was 7.9% as of October 31, 2017. The Bank estimates that its pro forma common equity
tier 1 ratio would be approximately 8.5% as at October 31, 2017, after giving effect to the Offering (without taking into account
the Over-Allotment Option).
The Bank also wishes to provide an update on the issues previously disclosed by the Bank arising from a review of mortgages
that it had sold to a third party purchaser (the "Third Party Purchaser"). By way of update, the Bank has recently agreed
with the Third Party Purchaser on the nature and scope of the audit concerning the $1,157 million of mortgages underwritten
in the branch network and sold to the Third Party Purchaser. The Bank, as agreed upon with the Third Party Purchaser, will review
approximately 1,900 mortgages out of the 9,500 mortgages underwritten in the branch network and, to the extent that this review
uncovers additional mortgages that do not conform with the requirements of the Third Party Purchaser facility, the Bank will
either fix such non-conforming mortgages or repurchase them. The 1,900 mortgages selected represent the mortgages that were
considered to represent a greater risk to the Third Party Purchaser based on the term remaining to the loans, the payment record
of the borrowers on the loans and the origination channel for the loans. The Bank and the Third Party Purchaser have also agreed
on a protocol for the review of the mortgages not forming part of the 1,900 mortgages being reviewed within this timeframe
whereby such other mortgages will either be reviewed at the time of their renewal or not subject to any review.
As disclosed previously, the Bank conducted a limited sample review of branch-underwritten mortgages and discovered that
certain of these mortgages did not conform with the requirements of the Third Party Purchaser facility. By applying the
percentage of non-conforming mortgages identified in the Bank's previous limited sample review of branch-underwritten mortgages
to the entire $1,157 million branch-underwritten mortgage portfolio sold to the Third Party Purchaser, the Bank estimates
that a total of approximately $124 million of non-conforming loans would be identified, although the definitive amount will only
be determinable upon completion of the audit. This review is currently expected to be conducted over approximately the next four
months.
The Bank has provided an additional $61 million to the Third Party Purchaser by means of a cash reserve deposit, which amount
will be released following the repurchase by the Bank of all mortgages that do not satisfy the purchase criteria and the
confirmatory audit by the Third Party Purchaser of the review of the selected 1,900 mortgages underwritten in the branch network.
This cash reserve deposit is in addition to the $40 million cash deposit announced on December 5, 2017, which will also be
released once the confirmatory audit by the Third Party Purchaser of the review of the mortgages originated by B2B Bank is
completed. By way of further update, the full amount of affected B2B Bank mortgages sold to the Third Party Purchaser, amounting
to approximately $89 million, have now been repurchased by the Bank. In addition, the issues that led to the inadvertent sale of
$91 million of mortgages to the Third Party Purchaser have been resolved, and such mortgages have now been repurchased. Finally,
the other third party purchaser previously referred to by the Bank (the "Other Third Party Purchaser") confirmed to the Bank that
the $76 million of mortgage loans inadvertently insured, as well as a further $12 million of mortgage loans subsequently
determined by the Other Third Party Purchaser (representing 76 accounts), are no longer eligible for portfolio insurance and such
ineligible loans will be repurchased prior to the end of the Bank's second fiscal quarter. Based on the foregoing, and as
previously stated, the above repurchases from the Third Party Purchaser and the Other Third Party Purchaser are not expected to
be material to the Bank's operations, funding or capital.
The securities offered have not been, and will not be, registered under the U.S. Securities Act of 1933 (the "U.S. Securities
Act"), as amended, and may not be offered, sold or delivered, directly or indirectly, in the United States, its territories, its
possessions and other areas subject to its jurisdiction or to, of for the account or benefit of, a U.S. person (as such term is
defined in the U.S. Securities Act), absent registration or an applicable exemption from the registration requirements. This
press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the
securities in any State in which such offer, solicitation or sale would be unlawful.
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.
Caution Regarding Forward-Looking Statements
In this document and in other documents filed with Canadian regulatory authorities or in other communications, 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. Some of the specific forward-looking statements in this
document include, but are not limited to, statements with respect to the use of proceeds from, and the expected date of the
closing of, the Offering.
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 satisfaction of all
conditions to the completion of each of the Offering, the Bank's ability to execute its transformation plan and strategy; the
expectation of regulatory stability; no downturn in economic conditions; sufficient liquidity and capital resources; no material
changes in competition, market conditions or in government monetary, fiscal and economic policies; and the maintenance of credit
ratings.
The Bank's assumptions and expectations regarding (i) the amount of mortgages to be repurchased and the continued performance
of the repurchased mortgages, (ii) the successful implementation of its enhanced quality control functions and underwriting
procedures and (iii) the Third Party Purchaser facility being unavailable for a limited period of time, as disclosed herein and
in the Bank's other public filings available at www.sedar.com, are subject to
certain risks and uncertainties and these assumptions and expectations may prove inaccurate. Specific risks and uncertainties
which may cause these assumptions and expectations to be inaccurate and may adversely affect the Bank's business, results of
operations and financial condition include (i) the results of the limited sample audit of branch underwritten mortgages sold to
the Third Party Purchaser not being representative of the entire branch underwritten portfolio sold to the Third Party Purchaser,
(ii) the Other Third Party Purchaser requiring an audit or the purchase of an amount of ineligible or problematic loans sold to
the Other Third Party Purchaser, (iii) the enhanced quality control functions and underwriting procedures not working as
contemplated and (iv) the Third Party Purchaser not being satisfied with the enhanced quality control functions and underwriting
procedures and delaying the reopening or refusing to reopen the Third Party Purchaser facility.
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, and developments in the technological environment. The Bank further cautions that the
foregoing list of factors is not exhaustive. For more information on the risks, uncertainties and assumptions that would cause
the Bank's actual results to differ from current expectations, please also refer to the Management's Discussion and Analysis
under the title "Risk Appetite and Risk Management Framework" in the Bank's 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.