TD Bank Group Reports Fourth Quarter and Fiscal 2013 Results

FOURTH QUARTER FINANCIAL HIGHLIGHTS, compared with the fourth quarter last year:

• Reported diluted earnings per share were $1.68, compared with $1.66.
• Adjusted diluted earnings per share were $1.90, compared with $1.83.
• Reported net income was $1,622 million, compared with $1,597 million.
• Adjusted net income was $1,821 million, compared with $1,757 million.

FULL YEAR FINANCIAL HIGHLIGHTS, compared with last year:

• Reported diluted earnings per share were $6.91, compared with $6.76.
• Adjusted diluted earnings per share were $7.45, compared with $7.42.
• Reported net income was $6,662 million, compared with $6,471 million.
• Adjusted net income was $7,158 million, compared with $7,075 million.

FOURTH QUARTER ADJUSTMENTS (ITEMS OF NOTE)

The fourth quarter reported earnings figures included the following items of note:

• Amortization of intangibles of $59 million after tax (6 cents per share), compared with $60 million after tax (6 cents per share) in the fourth quarter last year.
• A loss of $15 million after tax (2 cents per share), due to the change in fair value of derivatives hedging the reclassified available-for-sale securities portfolio, compared with a loss of $35 million after tax (4 cents per share) in the fourth quarter last year.
• Integration charges of $14 million after tax (2 cents per share), relating to the acquisition of the credit card portfolio of MBNA Canada, compared with $25 million after tax (3 cents per share) in the fourth quarter last year.
• A release of $29 million after tax (3 cents per share), due to the impact of the Alberta flood on the loan portfolio.
• A litigation-related charge of $30 million after tax (3 cents per share).
• Restructuring charges of $90 million after tax (10 cents per share).
• Set-up costs of $20 million after tax (2 cents per share), in preparation for the previously announced affinity relationship with Aimia with respect to Aeroplan Visa credit cards and the related acquisition of accounts.

TORONTO, Dec. 5, 2013 /CNW/ - TD Bank Group (TD or the Bank) today announced its financial results for the fourth quarter ended October 31, 2013. Overall results for the quarter reflected strong performances from TD's Canadian and U.S. personal and commercial banking businesses, and the Wealth business.

"We are pleased with our fourth quarter performance," said Ed Clark, Group President and Chief Executive Officer. "We finished the year with adjusted earnings of over $7.1 billion, which included record results in several of our businesses. These results demonstrate the strength of our business fundamentals, even in a challenging operating environment."

Canadian Personal and Commercial Banking
Canadian Personal and Commercial Banking posted reported net income of $914 million in the fourth quarter. On an adjusted basis, net income was $948 million, an increase of 14% compared with the fourth quarter last year. These earnings reflect continued good loan and deposit volume growth, favourable credit performance and effective expense management.

"Canadian Personal and Commercial Banking had a good fourth quarter and a strong 2013," said Tim Hockey, Group Head, Canadian Banking, Auto Finance, and Wealth Management. "In 2014, we will continue to deliver legendary service and convenience to customers across all of our channels, including our expanding digital and mobile platforms. We look forward to welcoming Aeroplan Visa credit card customers and providing services to help them meet their financial needs."

Wealth and Insurance
Wealth and Insurance delivered net income of $405 million in the quarter, up 38% from the same period last year. Wealth business results were driven by higher fee-based revenue, the addition of Epoch Holding Corporation and higher trading volume compared with same quarter last year. TD Ameritrade contributed $77 million in earnings to the segment, an increase of 51% over the same period last year.

"Our Wealth business delivered a strong finish to a great year," said Hockey. "In 2014, we plan to build on our market leadership positions, expand our asset management capabilities and continue to invest in our operations and technology infrastructure, which will enhance our ability to provide our clients with legendary experiences."

In Insurance, net income in the fourth quarter increased compared with the same period last year, mainly due to premium volume growth, partially offset by higher claims. The business will continue to monitor industry developments related to Ontario auto insurance, focus on improving the client experience, and will invest in our core capabilities and processes.

U.S. Personal and Commercial Banking
U.S. Personal and Commercial Banking generated US$355 million in reported net income for the quarter. On an adjusted basis, the segment earned US$384 million, an increase of 7% compared with the fourth quarter last year. The increase in earnings was primarily due to strong loan and deposit volume growth, the acquisition of Target's U.S. credit card portfolio, and an improvement in credit quality, partially offset by lower margins and investments in new stores and technology.

"TD Bank, America's Most Convenient Bank, delivered a good fourth quarter and strong year," said Mike Pedersen, Group Head, U.S. Banking. "While we are encouraged by the strong fundamentals of the business, we expect the operating environment to remain challenging in 2014. We will remain focused on loan and deposit growth and expense management, while continuing to provide superior customer service."

Wholesale Banking
Wholesale Banking generated net income of $122 million for the quarter, a decrease of 61% compared with the same period last year. The decrease in earnings was primarily due to lower security gains and higher non-interest expenses.

"Overall it was a challenging year for our Wholesale business," said Bob Dorrance, Group Head, Wholesale Banking. "Instability in the economic environment continues to impact corporate and investor activities. Looking ahead, we remain focused on serving our clients, growing our franchise, managing our risks and reducing expenses."

Capital
TD's Common Equity Tier 1 ratio on a Basel III fully phased-in basis was 9%, up from 8.9% last quarter.

Stock Dividend
Today, TD announced a stock dividend of one common share per each issued and outstanding common share, which has the same effect as a two-for-one split of the common shares. Shareholders of record as at the close of business on January 23, 2014, are entitled to receive the stock dividend on the payment date of January 31, 2014. TD also announced an increase of $0.01 to the quarterly cash dividend payable on January 31, 2014. The cash dividend is payable on the common shares that are issued and outstanding on January 6, 2014, and as such will not be payable on any common shares issued pursuant to the stock dividend.

"This announcement reflects the substantial appreciation of our share price over the last decade," said Clark. "We expect that this will help ensure the accessibility of our stock to retail investors." The Bank's share price has increased 170% since the last stock dividend declared by the Bank in 1999.

Conclusion
"In a challenging operating environment, we are very pleased with the great results in a number of our businesses. We're especially proud that TD Bank, America's Most Convenient Bank, delivered $1.6 billion in adjusted net income in 2013, achieving a target we set for our U.S. business three years ago. This represents a terrific milestone in our North American success story," said Clark. "We are confident in our ability to succeed in 2014 and beyond as we strategically invest in our businesses and prudently manage expense growth. A critical component of our success is our employees' passion for delivering winning service to our customers and clients. I truly appreciate the outstanding contributions from the entire TD team."

The foregoing contains forward-looking statements.

This document was reviewed by the Bank's Audit Committee and was approved by the Bank's Board of Directors, on the Audit Committee's recommendation, prior to its release.

HOW WE PERFORMED

How the Bank Reports
The Bank prepares its Interim Consolidated Financial Statements in accordance with IFRS, the current GAAP, and refers to results prepared in accordance with IFRS as "reported" results. The Bank also utilizes non-GAAP financial measures to arrive at "adjusted" results to assess each of its businesses and to measure the overall Bank performance. To arrive at adjusted results, the Bank removes "items of note", net of income taxes, from reported results. The items of note relate to items which management does not believe are indicative of underlying business performance. The Bank believes that adjusted results provide the reader with a better understanding of how management views the Bank's performance. The items of note are listed in the table on the following page. As explained, adjusted results are different from reported results determined in accordance with IFRS. Adjusted results, items of note, and related terms used in this document are not defined terms under IFRS and, therefore, may not be comparable to similar terms used by other issuers.

ECONOMIC PROFIT AND RETURN ON COMMON EQUITY
The Bank's methodology for allocating capital to its business segments is aligned with the common equity capital requirements under Basel III at a 7% Common Equity Tier 1 (CET1) ratio. The return measures for business segments reflect a return on common equity methodology.

The Bank utilizes economic profit as a tool to measure shareholder value creation. Economic profit is adjusted net income available to common shareholders less a charge for average common equity. The rate used in the charge for average common equity is the equity cost of capital calculated using the capital asset pricing model. The charge represents an assumed minimum return required by common shareholders on the Bank's common equity. The Bank's goal is to achieve positive and growing economic profit.

Adjusted return on common equity (ROE) is adjusted net income available to common shareholders as a percentage of average common equity. ROE is a percentage rate and is a variation of economic profit which is a dollar measure. When ROE exceeds the equity cost of capital, economic profit is positive.

Economic profit and adjusted ROE are non-GAAP financial measures as these are not defined terms under IFRS. Readers are cautioned that earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings under IFRS and, therefore, may not be comparable to similar terms used by other issuers.

SIGNIFICANT EVENTS IN 2013

Acquisition of Target Corporation's U.S. Credit Card Portfolio
On March 13, 2013, the Bank, through its subsidiary, TD Bank USA, N.A., acquired substantially all of Target Corporation's existing U.S. Visa and private label credit card portfolios (Target), with a gross outstanding balance of $5.8 billion. TD Bank USA, N.A. also entered into a seven-year program agreement under which it will become the exclusive issuer of Target-branded Visa and private label consumer credit cards to Target Corporation's U.S. customers.

Under the terms of the program agreement, the Bank and Target Corporation share in the profits generated by the portfolios. Target Corporation is responsible for all elements of operations and customer service, and bears most of the operating costs to service the assets. The Bank controls risk management policies and regulatory compliance, and bears all costs relating to funding the receivables for existing Target Visa accounts and all existing and newly issued Target private label accounts in the U.S. The Bank accounted for the purchase as an asset acquisition. The results of the acquisition from the acquisition date to October 31, 2013 have been recorded in the U.S. Personal and Commercial Banking segment.

At the date of acquisition the Bank recorded the credit card receivables acquired at their fair value of $5.7 billion and intangible assets totalling $98 million. The gross amount of revenue and credit losses have been recorded on the Consolidated Statement of Income since that date. Target Corporation shares in a fixed percentage of the revenue and credit losses incurred. Target Corporation's net share of revenue and credit losses is recorded in Non-interest expenses on the Consolidated Statement of Income and related receivables from, or payables to, Target Corporation are recorded in Other assets or Other liabilities, respectively, on the Consolidated Balance Sheet.

Acquisition of Epoch Investment Partners, Inc.
On March 27, 2013, the Bank acquired 100% of the outstanding equity of Epoch Holding Corporation including its wholly-owned subsidiary Epoch Investment Partners, Inc. (Epoch), a New York-based asset management firm. Epoch was acquired for cash consideration of $674 million. Epoch Holding Corporation shareholders received US$28 in cash per share.

The acquisition was accounted for as a business combination under the purchase method. The results of the acquisition from the acquisition date have been consolidated with the Bank's results and are reported in the Wealth and Insurance segment. As at March 27, 2013, the acquisition contributed $34 million of tangible assets, and $9 million of liabilities. The excess of consideration over the fair value of the acquired net assets of $649 million has been allocated to customer relationship intangibles of $149 million and goodwill of $500 million. Goodwill is not expected to be deductible for tax purposes. For the year ended October 31, 2013, the acquisition contributed $96 million to revenue and $2 million to net income.

Sale of TD Waterhouse Institutional Services
On November 12, 2013, TD Waterhouse Canada Inc., a subsidiary of the Bank, completed the sale of the Bank's institutional services business, known as TD Waterhouse Institutional Services, to a subsidiary of National Bank of Canada. The transaction price was $250 million, subject to certain price adjustment mechanisms. The effects of the sale will be recorded in the first quarter of fiscal 2014.

Agreement with Aimia Inc. and Acquisition of certain CIBC Aeroplan Credit Card Accounts
On August 12, 2013, the Bank and Aimia Inc. (Aimia) announced that the Bank will become the primary credit card issuer for Aeroplan, a loyalty program owned by Aimia, starting on January 1, 2014. On September 16, 2013, the Bank, Aimia, and the Canadian Imperial Bank of Commerce (CIBC) jointly announced agreements under which the Bank will also acquire approximately 50% of CIBC's existing Aeroplan credit card portfolio, which will primarily include accounts held by customers who do not have an existing retail banking relationship with CIBC. The Bank expects to acquire approximately 550,000 cardholder accounts, representing approximately $3 billion in card balances and $20 billion in annual retail spend. The Bank will pay a purchase price of par plus $50 million for the CIBC Aeroplan accounts. In addition, the Bank will pay CIBC a further $112.5 million plus HST over three years under a commercial subsidy agreement. Depending on the migration of Aeroplan-branded credit card accounts between CIBC and TD over the next five years, TD, Aimia, and CIBC have agreed to make additional potential payments of up to $400 million. TD will be responsible for, or entitled to receive, up to $300 million of these potential payments.

Additionally, TD will make a $100 million upfront payment to Aimia to assist in the development and maintenance of the new Distinction program. The minimum miles purchase commitment is a five-year volume commitment based on miles purchases by TD and CIBC. These payments by TD, in aggregate, would not exceed $95 million. Also, TD and Aimia will undertake a joint marketing spend of approximately $140 million in the first four years of the program to support the new Aeroplan Visa co-branded credit cards and program features.

The CIBC portfolio acquisition is subject to customary closing conditions and is expected to close in the first quarter of fiscal 2014.

HOW OUR BUSINESSES PERFORMED

For management reporting purposes, the Bank's operations and activities are organized around four key business segments operating in a number of locations in key financial centres around the globe: Canadian Personal and Commercial Banking, Wealth and Insurance, U.S. Personal and Commercial Banking, and Wholesale Banking. The Bank's other activities are grouped into the Corporate segment. Effective December 1, 2011, results of the acquisition of the credit card portfolio of MBNA Canada (MBNA) are reported primarily in the Canadian Personal and Commercial Banking and Wealth and Insurance segments. Integration charges and direct transaction costs relating to the acquisition of MBNA are reported in Canadian Personal and Commercial Banking. The results of TD Auto Finance Canada are reported in Canadian Personal and Commercial Banking. The results of TD Auto Finance U.S. are reported in U.S. Personal and Commercial Banking. Integration charges, direct transaction costs, and changes in fair value of contingent consideration related to the Chrysler Financial acquisition were reported in the Corporate segment.

Effective March 13, 2013, results of Target are reported in U.S. Personal and Commercial Banking. Effective March 27, 2013, the results of Epoch are reported in Wealth and Insurance.

Results of each business segment reflect revenue, expenses, assets, and liabilities generated by the businesses in that segment. The Bank measures and evaluates the performance of each segment based on adjusted results where applicable, and for those segments the Bank notes that the measure is adjusted. Net income for the operating business segments is presented before any items of note not attributed to the operating segments. For further details, see the "How the Bank Reports" section, the "Business Focus" section in the MD&A of the Bank's 2013 Annual Report, and Note 1 to the Bank's Consolidated Financial Statements for the year ended October 31, 2013. For information concerning the Bank's measures of economic profit and adjusted return on common equity, which are non-GAAP financial measures, see the "How We Performed" section of this document.

Net interest income within Wholesale Banking is calculated on a taxable equivalent basis (TEB), which means that the value of non-taxable or tax-exempt income, including dividends, is adjusted to its equivalent before-tax value. Using TEB allows the Bank to measure income from all securities and loans consistently and makes for a more meaningful comparison of net interest income with similar institutions. The TEB increase to net interest income and provision for income taxes reflected in Wholesale Banking results is reversed in the Corporate segment. The TEB adjustment for the quarter was $100 million, compared with $112 million in the fourth quarter last year, and $80 million in the prior quarter.

Quarterly comparison - Q4 2013 vs. Q4 2012
Canadian Personal and Commercial Banking net income for the quarter on a reported basis was $914 million, an increase of $108 million, or 13%, compared with the fourth quarter last year. Adjusted net income for the quarter was $948 million, an increase of $117 million, or 14%, compared with the fourth quarter last year. The increase in adjusted earnings was primarily driven by loan and deposit volume growth, favourable credit performance, and effective cost management. The reported annualized return on common equity for the quarter was 45.8%, while the adjusted annualized return on common equity was 47.5%, compared with 41.9% and 43.1%, respectively, in the fourth quarter last year.

Canadian Personal and Commercial Banking revenue is derived from personal and business banking, auto lending and credit cards. Revenue for the quarter was $2,831 million, an increase of $82 million, or 3%, compared with the fourth quarter last year. Net interest income growth was driven primarily by portfolio volume growth, and higher revenue from mortgage refinancing, partially offset by the inclusion of the MBNA credit mark release in the fourth quarter last year. The personal banking business generated solid but slowing lending volume growth of $8.6 billion, or 3%, reflecting slower growth in the housing market and moderation in household borrowing. Compared with the fourth quarter last year, average real estate secured lending volume increased $7.8 billion, or 4%. Auto lending average volume increased $0.4 billion, or 3%, while all other personal lending average volumes increased $0.4 billion or 1% largely driven by credit card balances. Business loans and acceptances average volume increased $5.1 billion, or 12%. Average personal deposit volumes increased $3.6 billion, or 2%, due to strong growth in core chequing and savings accounts, partially offset by lower term deposit volume. Average business deposit volumes increased $5.3 billion, or 8%.

Margin on average earning assets was 2.81%, a 2 basis point (bps) decrease primarily due to lower deposit margins. Non-interest income increased $2 million compared to the fourth quarter last year largely due to volume growth.

PCL for the quarter was $224 million, a decrease of $82 million, or 27%, compared with the fourth quarter last year. Personal banking PCL was $223 million, a decrease of $66 million, or 23%, due primarily to better credit performance, low bankruptcies and elevated PCL in the fourth quarter last year due to an adjustment related to past due accounts. Business banking PCL was $1 million, a decrease of $16 million, compared with the fourth quarter last year primarily due to higher recoveries. Annualized PCL as a percentage of credit volume was 0.28%, a decrease of 13 bps, compared with the fourth quarter last year. Net impaired loans were $882 million, a decrease of $118 million, or 12%, compared with the fourth quarter last year. Net impaired loans as a percentage of total loans were 0.28%, compared with 0.33% as at October 31, 2012.

Reported non-interest expenses for the quarter were $1,362 million, an increase of $19 million, or 1%, compared with the fourth quarter last year. Adjusted non-interest expenses for the quarter were $1,316 million, relatively flat compared with the fourth quarter last year as volume growth and investments in the business were largely offset by initiatives to increase productivity.

The average full-time equivalent (FTE) staffing levels decreased by 31 compared with the fourth quarter last year, as investments in front line sales staff was more than offset by volume-related reductions and productivity gains. The reported efficiency ratio for the quarter improved to 48.1%, while the adjusted efficiency ratio improved to 46.5%, compared with 48.9% and 47.7%, respectively, in the fourth quarter last year.

Quarterly comparison - Q4 2013 vs. Q3 2013
Canadian Personal and Commercial Banking net income for the quarter on a reported basis decreased $59 million, or 6%, compared with the prior quarter. Adjusted net income for the quarter decreased $49 million, or 5%, compared with the prior quarter. The decrease in earnings was primarily due to an increase in non-interest expenses. The reported annualized return on common equity for the quarter was 45.8%, while the adjusted annualized return on common equity was 47.5%, compared with 49.4% and 50.6% respectively, in the prior quarter.

Revenue for the quarter increased $10 million compared with the prior quarter. Net interest income growth was driven by portfolio volume growth in loans and deposits. Compared with the prior quarter, average real estate secured lending volume increased $3.4 billion, or 2%. All other personal lending average volumes increased $0.9 billion or 2%. Business loans and acceptances average volumes increased $1.1 billion, or 2%. Average personal deposit volumes increased $2.4 billion, or 2%, while average business deposit volumes increased $1.7 billion, or 2%. Margin on average earning assets was 2.81%, a 2 bps decrease primarily due to lower deposit margins. Non-interest income decreased $15 million or 2%, largely due to higher seasonal fee income in the third quarter.

PCL for the quarter increased $8 million, or 4%, compared with the prior quarter. Personal banking PCL for the quarter increased $12 million, or 6%, due primarily to higher provisions in auto lending and credit cards. Business banking PCL decreased $4 million due to higher recoveries. Net impaired loans increased $2 million, relatively flat compared with the prior quarter. Net impaired loans as a percentage of total loans were 0.28%, in line with the prior quarter.

Reported non-interest expenses for the quarter increased $81 million, or 6%, compared with the prior quarter. Adjusted non-interest expenses for the quarter increased $68 million, or 5%, compared with the prior quarter largely due to timing of business investments, marketing initiatives, and higher employee related costs.

The average FTE staffing levels increased by 73, compared with the prior quarter, largely due to new branch openings and higher staffing for business initiatives. The reported efficiency ratio for the quarter worsened to 48.1%, compared with 45.4% in the prior quarter, while the adjusted efficiency ratio worsened to 46.5%, compared with 44.2% in the prior quarter.

Quarterly comparison - Q4 2013 vs. Q4 2012
Wealth and Insurance net income for the quarter was $405 million, an increase of $112 million, or 38%, compared with the fourth quarter last year, reflecting higher earnings in Wealth, Insurance and TD Ameritrade. Wealth and Insurance net income excluding TD Ameritrade was $328 million, an increase of $86 million, or 36%, compared with the fourth quarter last year. The Bank's reported investment in TD Ameritrade generated net income for the quarter of $77 million, an increase of $26 million, or 51%, compared with the fourth quarter last year, driven by higher TD Ameritrade earnings. For its fourth quarter ended September 30, 2013, TD Ameritrade reported net income of US$200 million, an increase of US$57 million, or 40%, compared with the fourth quarter last year, driven by increased transaction-based and fee-based revenue, and increased investment gains, partially offset by higher operating expenses. The annualized return on common equity for the quarter was 25.3%, compared with 17.9% in the fourth quarter last year.

Wealth and Insurance revenue is derived from direct investing, advice-based businesses, asset management services, life and health insurance, and property and casualty insurance. Revenue for the quarter was $1,834 million, an increase of $183 million, or 11%, compared to the fourth quarter last year. In the Wealth business, revenue increased mainly due to higher fee-based revenue from asset growth and equity market appreciation, the addition of Epoch, and higher trading volume. In the Insurance business, revenue increased mainly due to premium volume growth and higher fair value of assets due to the impact of lower interest rates, partially offset by the sale of the U.S. Insurance business in fiscal 2012.

Insurance claims and related expenses for the quarter were $711 million, an increase of $23 million, or 3%, compared with the fourth quarter last year, primarily due to higher current year claims and volume growth, partially offset by lower unfavourable prior years' claims development and lower cost of weather-related events.

Non-interest expenses for the quarter were $730 million, an increase of $54 million, or 8%, compared with the fourth quarter last year, primarily due to the addition of Epoch, higher revenue-based variable expenses in the Wealth business, and increased costs to support business growth in Wealth and Insurance, partially offset by expense reductions due to the sale of the U.S. Insurance business in fiscal 2012.

Assets under administration of $293 billion as at October 31, 2013 increased $35 billion, or 14%, compared with October 31, 2012. Assets under management of $257 billion as at October 31, 2013 increased $50 billion, or 24%, compared with October 31, 2012. These increases were mainly driven by market appreciation of assets, the addition of Epoch assets under management, and growth in new client assets for the period.

Gross originated insurance premiums were $993 million, an increase of $50 million, or 5%, compared with the fourth quarter last year. The increase was primarily due to organic business growth.

The average FTE staffing levels decreased by 388, or 3%, compared to the fourth quarter last year, primarily due to the sale of the U.S. Insurance business in fiscal 2012. The efficiency ratio for the current quarter improved to 39.8%, compared with 40.9% in the fourth quarter last year.

Quarterly comparison - Q4 2013 vs. Q3 2013
Wealth and Insurance net income for the quarter increased $398 million compared with the prior quarter, reflecting higher earnings in Wealth, Insurance and TD Ameritrade. For the quarter ended July 31, 2013, the Bank took charges of $565 million ($418 million after tax) to increase reserves for Ontario automobile insurance claims and for claims resulting from severe weather-related events in southern Alberta and the Greater Toronto Area. Wealth and Insurance net income excluding TD Ameritrade increased $390 million compared with the prior quarter. The Bank's reported investment in TD Ameritrade increased $8 million, or 12%, compared with the prior quarter, mainly driven by higher TD Ameritrade earnings. For its fourth quarter ended September 30, 2013, TD Ameritrade reported net income increased US$16 million, or 9%, compared with the prior quarter, primarily driven by increased investment gains, partially offset by lower transaction-based revenue. The annualized return on common equity for the quarter was 25.3%, compared with 0.4% in the prior quarter.

Revenue for the quarter increased $104 million, or 6%, compared with the prior quarter. In the Wealth business, revenue increased mainly due to higher fee-based revenue from asset growth and equity market appreciation. In the Insurance business, revenue increased mainly due to higher fair value of assets due to the impact of lower interest rates and premium volume growth.

Insurance claims and related expenses for the quarter decreased $429 million, or 38%, compared with the prior quarter, due to unfavourable prior years' claims development recorded in the prior quarter relating to Ontario auto insurance and lower claims from weather-related events.

Non-interest expenses for the quarter increased $19 million, or 3%, compared to the prior quarter, primarily due to higher expenses in the Wealth business, mainly from higher costs in support of strategic business initiatives and higher variable expenses driven by revenue growth.

Assets under administration as at October 31, 2013 increased by $14 billion, or 5%, compared with July 31, 2013. Assets under management as at October 31, 2013 increased by $11 billion, or 4%, compared with July 31, 2013. The increases were mainly due to market appreciation of assets and growth in new client assets for the period.

Gross originated insurance premiums decreased $56 million, or 5%, compared with the prior quarter due largely to seasonality.

The average FTE staffing levels for the current quarter decreased by 210, or 2%, compared with the prior quarter due to the impact of efficiency initiatives and seasonality in the Insurance business. The efficiency ratio for the current quarter improved to 39.8%, compared with 41.1% in the prior quarter.

Quarterly comparison - Q4 2013 vs. Q4 2012
U.S. Personal and Commercial Banking reported net income, in Canadian dollar terms, for the quarter was $369 million, an increase of $53 million, or 17%, compared with the fourth quarter last year. Adjusted net income for the quarter was $399 million, an increase of $46 million, or 13%, compared with the fourth quarter last year. In U.S. dollar terms, reported net income for the quarter was US$355 million, an increase of US$34 million, or 11%, compared with the fourth quarter last year and adjusted net income for the quarter was US$384 million, an increase of US$26 million, or 7%, compared with the fourth quarter last year. Results include activity related to the credit card program agreement with Target Corporation subsequent to the acquisition of approximately US$5.6 billion of credit card receivables on March 13, 2013. Revenue and expenses related to Target are reported on a gross basis on the income statement and non-interest expenses include our expenses related to the business, and amounts due to Target Corporation under the credit card program agreement. The increase in earnings was primarily due to Target, strong loan and deposit volume growth, and an improvement in credit quality, partially offset by lower margins and investments in new stores. The reported and adjusted annualized return on common equity for the quarter were 7.5% and 8.1%, respectively, compared with 7.2% and 8.1%, respectively, in the fourth quarter last year.

U.S. Personal and Commercial Banking revenue is derived from personal banking, business banking, investments, auto lending, and credit cards. In U.S. dollar terms, reported revenue for the quarter was US$1,829 million, an increase of US$285 million, or 18%, compared with the fourth quarter last year. Adjusted revenue for the quarter was US$1,829 million, an increase of US$284 million, or 18%, compared with the fourth quarter last year primarily due to the inclusion of revenue from Target, strong organic loan and deposit growth and fee growth, partially offset by a lower margin and lower gains on sales of securities. Excluding Target, average loans increased US$9 billion, or 10%, compared with the fourth quarter last year, with a 14% increase in personal loans and an 8% increase in business loans. Average deposits increased US$19 billion, or 11%, compared with the fourth quarter last year driven by 8% growth in personal deposit volume, 7% growth in business deposit volume, and 17% growth in TD Ameritrade deposit volume. Margin on average earning assets was 3.89%, a 41 bps increase compared with the fourth quarter last year due to the impact of Target, partially offset by core margin compression.

PCL for the quarter was US$177 million, a decrease of US$80 million, or 31%, compared with the fourth quarter last year on a reported basis, and a decrease of US$25 million, or 12%, compared with the fourth quarter last year on an adjusted basis. Reported PCL in the fourth quarter of 2012 included provisions for Superstorm Sandy and the impact of new regulatory guidance related to loans discharged in bankruptcy which were the primary drivers of the $80 million decrease. Personal banking PCL was US$175 million, an increase of US$47 million, or 37%, compared with the fourth quarter last year primarily due to provisions for Target and increased provisions in auto loans, offset by the impact of the new regulatory guidance recorded in the fourth quarter of 2012. Business banking PCL was US$25 million, a decrease of US$46 million, or 65%, compared with the fourth quarter last year reflecting improved credit quality of commercial loans. Annualized PCL as a percentage of credit volume for loans excluding debt securities classified as loans was 0.77%, a decrease of 11 bps, compared with the fourth quarter last year reflecting improving credit quality trends and growth in the portfolio. Net impaired loans, excluding acquired credit-impaired loans and debt securities classified as loans, as a percentage of total loans were 1.3% as at October 31, 2013, compared with 1.2% as at October 30, 2012. Net impaired debt securities classified as loans were US$985 million, a decrease of US$358 million, or 27%, compared with the fourth quarter last year.

Reported non-interest expenses for the quarter was US$1,234 million, an increase of US$293 million, or 31%, compared with the fourth quarter last year. Adjusted non-interest expenses for the quarter were US$1,206 million, an increase of US$272 million, or 29%, compared with the fourth quarter last year primarily due to increased expenses related to the credit card agreement with Target Corporation, investments in new stores and other growth initiatives, partially offset by productivity gains.

The average FTE staffing levels decreased by 507, primarily due to efficiencies in store network operations including optimization of store locations and planned declines in TD Auto Finance U.S., partially offset by investments in growth initiatives. The efficiency ratio for the quarter worsened to 67.5% on a reported basis, and 65.9% on an adjusted basis, compared with 61.0% and 60.5% respectively, in the fourth quarter last year primarily driven by lower margins.

Quarterly comparison - Q4 2013 vs. Q3 2013
U.S. Personal and Commercial Banking reported net income, in Canadian dollar terms, for the quarter decreased $76 million, or 17%, compared with the prior quarter. Adjusted net income for the quarter decreased $46 million, or 10%, compared with the prior quarter. In U.S. dollar terms, reported net income for the quarter decreased US$77 million, or 18%, and adjusted net income for the quarter decreased US$48 million, or 11%, compared with the prior quarter. The reported and adjusted annualized return on common equity for the quarter were 7.5% and 8.1%, compared with 9.1% on both a reported and an adjusted basis in the prior quarter.

In U.S. dollar terms, revenue for the quarter decreased US$80 million, or 4%, compared with the prior quarter primarily due to lower gains on security sales. Excluding Target, average loans were up 2%, compared with the prior quarter, with a 2% increase in personal loans and a 3% increase in business loans. Average deposits increased US$4 billion, or 2%, compared with the prior quarter. Margin on average earning assets increased by 9 bps to 3.89%, compared with the prior quarter as additional margin compression from personal and commercial loans was more than offset by higher deposit margins reflecting higher long term interest rates and increased net interest income on acquired credit-impaired loans and debt securities classified as loans.

PCL for the quarter decreased US$40 million, or 18%, compared with the prior quarter driven primarily by lower provisions on debt securities classified as loans and acquired credit-impaired loans reflecting lower expected losses. Personal banking PCL decreased US$29 million, or 14%, from the prior quarter primarily due to lower provisions on auto loans. Business banking PCL was flat compared with prior quarter as provisions for portfolio growth were offset by improvements in asset quality. Annualized adjusted PCL as a percentage of credit volume for loans excluding debt securities classified as loans was 0.77%, a decrease of 11 bps, compared with the prior quarter. Net impaired loans, excluding acquired credit-impaired loans and debt securities classified as loans, as a percentage of total loans were 1.3% as at October 31, 2013, flat compared with July 31, 2013. Net impaired debt securities classified as loans were US$985 million, a decrease of US$48 million, or 5%, compared with the prior quarter.

Reported non-interest expenses for the quarter increased US$64 million, or 5%, compared with the prior quarter. Adjusted non-interest expenses increased US$36 million, or 3%, compared with the prior quarter primarily due to increased expenses related to the credit card agreement with Target Corporation, higher regulatory compliance costs and timing of planned initiatives.

The average FTE staffing levels decreased by 14 compared with the prior quarter due primarily to efficiencies in store network operations including optimization of store locations and planned declines in TD Auto Finance U.S. The efficiency ratio for the quarter worsened to 67.5% on a reported basis, and 65.9% on an adjusted basis, compared with 61.3% in the prior quarter mainly driven by higher expenses and lower security gains.

Quarterly comparison - Q4 2013 vs. Q4 2012
Wholesale Banking net income for the quarter was $122 million, a decrease of $187 million, or 61%, compared with the fourth quarter last year. The decrease in earnings was primarily due to lower revenue, higher non-interest expenses and a higher effective tax rate. The annualized return on common equity for the quarter was 12.0%, compared with 30.3% in the fourth quarter last year.

Wholesale Banking revenue is derived primarily from capital markets services and corporate lending. The capital markets businesses generate revenue from advisory, underwriting, trading, facilitation, and trade execution services. Revenue for the quarter was $602 million, a decrease of $123 million, or 17%, compared with the fourth quarter last year. The decrease in revenue was primarily due to lower security gains in the investment portfolio, partially offset by higher trading-related revenue. The increase in trading-related revenue was due to improved fixed income markets that resulted in increased client activity, partially offset by lower equity trading. Debt underwriting was solid this quarter partially offset by lower mergers and acquisitions (M&A) and advisory fees due to lower industry wide volumes.

PCL for the quarter was $5 million, compared with $8 million in the fourth quarter last year. PCL in the current quarter primarily consisted of the accrual cost of credit protection.

Non-interest expenses for the quarter were $422 million, an increase of $48 million, or 13%, compared with the fourth quarter last year due to litigation matters.

Risk-weighted assets were $47 billion as at October 31, 2013, an increase of $4 billion, or 9%, compared with October 31, 2012. The increase was primarily due to the implementation of the Basel III regulatory framework.

Quarterly comparison - Q4 2013 vs. Q3 2013
Wholesale Banking net income for the quarter decreased by $25 million, or 17%, compared with the prior quarter. The decrease was largely due to higher non-interest expenses, partially offset by higher trading-related revenue. The annualized return on common equity for the quarter was 12.0%, compared with 14.3% in the prior quarter.

Revenue for the quarter increased $39 million, or 7%, compared with the prior quarter, primarily due to higher fixed income trading-related revenue and debt underwriting fees. The increase was partially offset by reduced credit origination revenue and lower equity underwriting fees both impacted by reduced volumes.

PCL for the quarter was $5 million, compared with $23 million in the prior quarter which included a specific credit provision in the corporate lending portfolio.

Non-interest expenses for the quarter increased by $71 million, or 20%, compared with the prior quarter, primarily due to litigation matters.

Risk-weighted assets as at October 31, 2013 increased $1 billion, or 2%, compared with July 31, 2013.

Quarterly comparison - Q4 2013 vs. Q4 2012
Corporate segment's reported net loss for the quarter was $188 million, compared with a reported net loss of $127 million in the fourth quarter last year. Adjusted net loss was $53 million, compared with an adjusted net loss of $29 million in the fourth quarter last year. The increased loss reflected a lower contribution from Other items which included lower gains from treasury and hedging activities partially offset by positive tax items. Corporate expenses declined as a result of lower project and initiative costs.

Quarterly comparison - Q4 2013 vs. Q3 2013
Corporate segment's reported net loss for the quarter was $188 million, compared with a reported net loss of $45 million in the prior quarter. Adjusted net loss was $53 million, compared with an adjusted net loss of $8 million in the prior quarter. The increased loss was due to the unfavourable impact of Other items and higher net corporate expenses. Other items were unfavourable largely due to lower gains from treasury and other hedging activities and the reduction of allowance for incurred but not identified credit losses related to the Canadian loan portfolio in the prior quarter partially offset by positive tax items. Net corporate expenses were elevated from the prior quarter.

Certain comparative amounts have been reclassified to conform with the presentation adopted in the current year.

All items presented in other comprehensive income will be reclassified to the Consolidated Statement of Income in subsequent periods.