Two of Canada's regional banks, Canadian Western Bank and Laurentian Bank, reported better-than-expected quarterly profits on Thursday, sending their shares higher.

Continuing a string of upside surprises by Canada's major banks in the third quarter, Edmonton, Alberta-based CWB and Montreal-based Laurentian Bank reported stronger profits, after one-time items are excluded, as loan growth and relatively low exposure to credit risk boosted revenues.

Shares of CWB climbed 3.8 percent while Laurentian Bank shares were 4.1 percent higher early in the session.

The strong performance closed the Canadian banks' earnings season. Five of Canada's big six banks exceeded market expectations as trading revenues soared.

CWB, the nation's seventh-largest bank, and Laurentian, No. 8, had less exposure to volatile capital markets, and Dundee Securities analyst John Aiken said that makes their profits even more impressive.

The regional banks outperformed based on their lower relative risk profile and leverage to improving credit spreads, Aiken said.

While they do not benefit to the same degree from exposure to the capital markets, this makes their earnings quality higher and much more sustainable than the big six going forward.

CWB net income rose 9 percent to C$28.7 million ($26.1 million), or 38 Canadian cents a share. Analysts were expecting earnings of 32 Canadian cents a share, according to Reuters Estimates.

CWB shares rose 3.8 percent to C$18.26 apiece. That's more than double the 52-week low of C$7.52 reached in March, but still well below the year-high of C$24.13.

The bank, which offers personal and commercial banking in Canada's western provinces of Manitoba, Saskatchewan, Alberta and British Columbia, said total loans increased 12 percent from a year ago.

Tier I capital rose to 11.2 percent, and the quarterly dividend was unchanged 11 Canadian cents a share.

Laurentian bank shares did even better, climbing 4.1 percent to C$37.73 after the Montreal-based bank reported net income of C$28.7 million or C$1.08 a share.

Profit is down from a year ago, but it surpassed analysts' estimates for per share earnings of 88 Canadian cents a share.

Last year's third quarter results included items such as a gain on sale of Montreal Exchange shares that was partly offset by an increase in the general allowance for loan losses, and these distort the comparison with this year's quarter.

Excluding special items, net income was up C$3.4 million, or 14 Canadian cents a share, from the third quarter of 2008, Laurentian said.

Total revenue rose 3 percent to C$176.7 million from a year earlier, mainly on a C$9.4 million increase in net interest income to C$112.8 million as loan and deposit volumes climbed.

($1=$1.10 Canadian) (Reporting by Andrea Hopkins; editing by Janet Guttsman)