Laurentian Bank reports second quarter results

 Highlights of the second quarter of 2014            --  Financial highlights on a reported and adjusted basis for the             second quarter of 2014:       o Net income of $31.0 million       o Return on common shareholders' equity of 9.2%       o Diluted earnings per share of $0.99       o Adjusted net income of $39.4 million       o Adjusted return on common shareholders' equity of 11.9%       o Adjusted diluted earnings per share of $1.29         --  Commercial loan portfolio up 18% year-over-year         --  Strong credit performance, with loan losses at $10.5 million         --  Positive adjusted operating leverage         --  Non tax-deductible charge of $4.1 million, impacting reported             net income, as a result of the final settlement with             AGF Management Limited of the contingent consideration related             to the AGF Trust acquisition         --  Successful issuance of $125.0 million Basel III-compliant             Preferred Shares Series 13         --  Quarterly common share dividend raised by $0.01 to $0.52 per             share  MONTREAL, June 4, 2014 /CNW Telbec/ - Laurentian Bank of Canada reported  adjusted net income of $39.4 million or $1.29 diluted per share for the second  quarter of 2014, compared with $39.2 million or $1.24 diluted per share for  the same period in 2013. Adjusted return on common shareholders' equity was  11.9% for the second quarter of 2014, compared with 12.2% for the same period  in 2013. When including adjusting items(1), net income totalled $31.0 million  or $0.99 diluted per share for the second quarter of 2014, compared with $33.8  million or $1.05 diluted per share for the second quarter of 2013. Return on  common shareholders' equity was 9.2% for the second quarter of 2014, compared  with 10.4% for the same period in 2013.  For the six months ended April 30, 2014, adjusted net income totalled $78.6  million or $2.57 diluted per share, compared with $78.4 million or $2.54  diluted per share in 2013. Adjusted return on common shareholders' equity was  11.8% for the six months ended April 30, 2014, compared with 12.4% for the  same period in 2013. When including adjusting items, net income was $66.5  million or $2.15 diluted per share for the six months ended April 30, 2014,  compared with $66.6 million or $2.13 diluted per share for the same period in  2013. Return on common shareholders' equity was 9.8% for the six months ended  April 30, 2014, compared with 10.4% for the same period in 2013.  Commenting on the Bank's financial results for the second quarter of 2014,  Réjean Robitaille, President and Chief Executive Officer, mentioned: "We  delivered solid core earnings in the quarter, as we continued our targeted  efforts to improve efficiency, maximize operating leverage, and deliver the  synergies related to our acquired businesses. The sustained credit quality of  the loan portfolio and rigorous control over expenses contributed to the good  performance for the quarter. In an environment of consumer deleveraging and  compressed margins, we maintain our focus on further developing our  higher-margin commercial activities and growing income from non-interest  sensitive sources in order to foster profitable revenue growth."  Mr. Robitaille added: "I am pleased with the issuance of $125.0 million of  Basel III compliant preferred shares which, combined with the expected  redemption of $110.0 million of Series 10 preferred shares, strengthens our  capital structure and helps to sustain our growth strategies."  Mr. Robitaille concluded: "As we move forward, we remain committed to  enhancing value for our shareholders and we are working diligently to generate  sustained earnings growth in each of our business segments. I am therefore  pleased to announce that the Board of Directors has approved an increase in  our quarterly common share dividend of $0.01 to $0.52 per share"     ________________________________     1 Certain analyses presented throughout this document are based on the       Bank's core activities and therefore exclude the effect of certain       amounts designated as adjusting items. Refer to the Adjusting items       and Non-GAAP financial measures sections for further details.     Caution Regarding Forward-looking Statements  In this document and in other documents filed with Canadian regulatory  authorities or in other communications, Laurentian Bank of Canada may from  time to time make written or oral forward-looking statements within the  meaning of applicable securities legislation. Forward-looking statements  include, but are not limited to, statements regarding the Bank's business plan  and financial objectives. The forward-looking statements contained in this  document are used to assist the Bank's security holders and financial analysts  in obtaining a better understanding of the Bank's financial position and the  results of operations as at and for the periods ended on the dates presented  and may not be appropriate for other purposes. Forward-looking statements  typically use the conditional, as well as words such as prospects, believe,  estimate, forecast, project, expect, anticipate, plan, may, should, could and  would, or the negative of these terms, variations thereof or similar  terminology.  By their very nature, forward-looking statements are based on assumptions and  involve inherent risks and uncertainties, both general and specific in nature.  It is therefore possible that the forecasts, projections and other  forward-looking statements will not be achieved or will prove to be  inaccurate. Although the Bank believes that the expectations reflected in  these forward-looking statements are reasonable, it can give no assurance that  these expectations will prove to have been correct.  The Bank cautions readers against placing undue reliance on forward-looking  statements when making decisions, as the actual results could differ  considerably from the opinions, plans, objectives, expectations, forecasts,  estimates and intentions expressed in such forward-looking statements due to  various material factors. Among other things, these factors include capital  market activity, changes in government monetary, fiscal and economic policies,  changes in interest rates, inflation levels and general economic conditions,  legislative and regulatory developments, competition, credit ratings, scarcity  of human resources and technological environment. The Bank further cautions  that the foregoing list of factors is not exhaustive. For more information on  the risks, uncertainties and assumptions that would cause the Bank's actual  results to differ from current expectations, please also refer to the Bank's  Annual Report under the title "Risk Appetite and Risk Management Framework"  and other public filings available at www.sedar.com.  With respect to the anticipated benefits from the acquisition AGF Trust  Company(1) (AGF Trust) and the Bank's statements with regards to this  transaction being accretive to earnings, such factors also include, but are  not limited to: the fact that synergies may not be realized in the time frame  anticipated; the ability to promptly and effectively integrate the businesses;  reputational risks and the reaction of B2B Bank's or AGF Trust's customers to  the transaction; and diversion of management time on acquisition-related  issues.  The Bank does not undertake to update any forward-looking statements, whether  oral or written, made by itself or on its behalf, except to the extent  required by securities regulations.     ________________________________     1 AGF Trust was amalgamated with B2B Bank as of September 1, 2013.     Highlights ([1] )                                                FOR THE THREE MONTHS ENDED                      FOR THE SIX MONTHS ENDED     In thousands of     Canadian     dollars, except     per     share and     percentage     amounts            APRIL 30    JANUARY 31                  APRIL 30                  APRIL 30      APRIL 30   (Unaudited)            2014          2014    VARIANCE          2013    VARIANCE          2014          2013     VARIANCE                                                                                                                                      Profitability                                                                                                                   Total revenue $ 216,890     $ 216,109     — %   $ 214,850           1 %   $ 432,999     $ 428,764           1 %       Net income    $  30,989     $  35,525        (13) %   $  33,839         (8) %   $  66,514     $  66,627     — %       Diluted       earnings per     share         $    0.99     $    1.16        (15) %   $    1.05         (6) %   $    2.15     $    2.13            1 %          Return on       common       shareholders'       equity [2]          9.2 %        10.5 %                    10.4 %                     9.8 %        10.4 %                     Net interest       margin [2]         1.68 %        1.66 %                    1.68 %                    1.67 %        1.66 %                     Efficiency       ratio [2]          73.7 %        73.6 %                    75.2 %                    73.7 %        75.7 %                     Operating       leverage[2]       [3]               (0.1) %         8.1 %                     1.3 %                     2.8 %         n. m.                                                                                                                                                 Per common     share                                                                                                                           Share price                                                                                                                     High        $   47.54     $   47.96                 $   45.41                 $   47.96     $   45.97                         Low         $   45.00     $   44.34                 $   42.57                 $   44.34     $   42.57                       Close       $   47.08     $   45.73           3 %   $   44.21           6 %   $   47.08     $   44.21            6 %          Price /       earnings       ratio       (trailing       four       quarters) [4]      12.3 x        11.8 x                     n. m.                    12.3 x         n. m.                     Book value     [2]           $   44.61     $   44.03           1 %   $   41.75           7 %   $   44.61     $   41.75            7 %          Market to       book value          106 %         104 %                     106 %                     106 %         106 %                     Dividends       declared      $    0.51     $    0.51     — %   $    0.49           4 %   $    1.02     $    0.98           4 %       Dividend       yield [2]           4.3 %         4.5 %                     4.4 %                     4.3 %         4.4 %                     Dividend       payout ratio       [2]                51.3 %        44.1 %                    46.5 %                    47.4 %        46.0 %                                                                                                                                                 Adjusted     financial     measures                                                                                                                        Adjusted net       income [2]    $  39,375     $  39,261     — %   $  39,247     — %   $  78,636     $  78,363     — %       Adjusted       diluted       earnings per       share [2]     $    1.29     $    1.29     — %   $    1.24           4 %   $    2.57     $    2.54           1 %       Adjusted       return on       common       shareholders'       equity [2]         11.9 %        11.7 %                    12.2 %                    11.8 %        12.4 %                     Adjusted       efficiency       ratio [2]          71.7 %        71.8 %                    72.4 %                    71.7 %        72.5 %                     Adjusted       operating       leverage [2]       [3]                 0.2 %         4.9 %                     0.5 %                     1.1 %         n. m.                     Adjusted       dividend       payout ratio       [2]                39.6 %        39.6 %                    39.3 %                    39.6 %        38.5 %                                                                                                                                                 Financial     position (in     millions of     Canadian     dollars)                                                                                                                        Balance sheet       assets        $  34,261     $  33,631           2 %   $  34,480         (1) %                                                 Loans and       acceptances   $  27,233     $  27,092           1 %   $  27,035           1 %                                                 Deposits      $  23,759     $  23,804     — %   $  23,809     — %                                                                                                                                                                           Basel III     regulatory     capital ratios     — All-in     basis [5]                                                                                                                       Common Equity       Tier I              7.6 %         7.6 %                     7.6 %                                                             Tier 1             10.0 %         9.1 %                     9.1 %                                                             Total              13.3 %        12.4 %                    12.6 %                                                                                                                                                                                         Other     information                                                                                                                     Number of       full-time       equivalent       employees         3,764         3,850                     4,254                                                               Number of       branches            153           153                       154                                                               Number of       automated       banking       machines            423           422                       423                                                             [1] Comparative figures reflect the adoption of amendments to IAS 19,         Employee Benefits. Refer to Note 2 in the unaudited condensed         interim consolidated financial statements.     [2] Refer to the non-GAAP financial measures section. Effective         November 1, 2013, the Bank has modified its definition of common         shareholders' equity, which is now better aligned with regulatory         requirements. Book value per common share and return on common         shareholders' equity measures for the quarters ended in 2013 have         been amended accordingly.     [3] Quarterly growth rates are calculated sequentially. Operating         leverage for the six months ended April 30, 2013 is not meaningful         as 2012 results were not restated to reflect the adoption of         amendments to IAS 19, Employee Benefits.     [4] Price / earnings ratios for the three months and six months ended         April 30, 2013 are not meaningful as 2012 results were not restated         to reflect the adoption of amendments to IAS 19, Employee Benefits.     [5] Regulatory capital ratios for 2013 are presented as filed with OSFI         and have not been adjusted to include the impact of the adoption of         amendments to IAS 19, Employee Benefits.     Review of Business Highlights  Personal & Commercial — Business services generated strong growth during the  quarter. In particular, the commercial loan portfolio grew 18% year-over-year,  approaching the $3.0 billion mark. The strategy of specialization is  contributing to these excellent results. Recently hired account managers are  becoming increasingly productive and delivering added value to clients. With  respect to leasing and equipment financing, solid teams, systems and processes  are now in place. The offer is being well received in the market and a strong  pipeline is being built. The Business Services segment continues to be well  positioned as one of the Bank's engines of growth. — Retail activities are  benefitting from ongoing investments to improve the Bank's website. Thanks to  significant enhancements made to the platform, the number of LBCDirect users  has increased by 30% over the past six months. The Bank is committed to  enhancing its internet offering to ensure that client needs, expectations and  preferences are met.  B2B Bank added two new mortgage programs to its offering for mortgage brokers  and their clients towards the end of the quarter, presenting one of the most  comprehensive product lines in the industry. Along with insured and  conventional mortgages, B2B Bank offers alternative and expanded mortgage  solutions designed for borrowers who, due to their employment status or credit  history, may not qualify for insured or conventional mortgage loans. This is  yet another step to strengthen B2B Bank's position as a leader in serving  financial advisors and brokers in Canada. Furthermore, the Bank reached a  final settlement with AGF Management of the contingent consideration related  to the AGF Trust acquisition for $10.0 million.  Laurentian Bank Securities hosted its first Annual Equity Small Cap Conference  in April. The event was very well received, with 35 corporate issuers  presenting and almost 200 institutional investors from across Canada in  attendance. This success underscores the expertise and reputation of the LBS  Institutional Equity team and validates their strategic focus on the small cap  market niche. This group is well positioned to further leverage their small  cap capability.  Supporting all of the Bank's activities is a solid capital base. During the  quarter, $125.0 million of preferred shares, Series 13, yielding 4.3%  annually, was issued. Subsequent to quarter-end, it was announced that the  $110.0 million preferred share issue, Series 10, yielding 5.3% annually, will  be redeemed on June 15, 2014. The Bank's proactive approach to capital  management ensures the optimization of capital and will contribute to lower  overall funding costs.  The Bank released its Social Responsibility Report for fiscal 2013 in March  2014. As a responsible corporate citizen, the Bank carefully considers all of  its stakeholders in the development of strategies and implementation of  business decisions. Paying  particular attention to its governance, whether it  be the composition and diversity of the Board of Directors, managing  relationships with its shareholders and financial markets, its human resource  programs for officers and employees or its community involvement, the Bank  ensures that its practices are effective and equitable for shareholders,  customers, employees and partners alike.  Management's Discussion and Analysis  This Management's Discussion and Analysis (MD&A) is a narrative explanation,  through the eyes of management, of the Bank's financial condition as at April  30, 2014, and of how it performed during the three-month and six-month periods  then ended. This MD&A, dated June 4, 2014, should be read in conjunction with  the unaudited condensed interim consolidated financial statements for the  period ended April 30, 2014, prepared in accordance with IAS 34 Interim  financial reporting, as issued by the International Accounting Standards Board  (IASB). Supplemental information on risk management, critical accounting  policies and estimates, and off-balance sheet arrangements is also provided in  the Bank's 2013 Annual Report.  Additional information about the Laurentian Bank of Canada, including the  Annual Information Form, is available on the Bank's website at  www.laurentianbank.ca and on SEDAR at www.sedar.com.  Adoption of the amended IFRS accounting standard on employee benefits  Effective November 1, 2013, the Bank adopted the amendments to the employee  benefits standard under International Financial Reporting Standards (IFRS),  which required restatement of the Bank's 2013 comparative information and  financial measures. Additional information on the impact of the adoption is  available in the notes to the unaudited condensed interim consolidated  financial statements and in the Supplementary Information reported for the  second quarter of 2014.  Economic Outlook  North American economic growth resumed this spring. Prospects, particularly in  the United States, are bright as US companies, consumers, workers and  governments are all showing more confidence. Accordingly, the Federal Reserve  has continued to reduce its stimulus asset purchase program and has begun to  shift its focus on the near zero policy rate. However, as inflation remains  low, interest rates are expected to increase only in the second half of 2015.  In Canada, the goods sector is better positioned to benefit from improving US  demand and a lower currency. The services sector growth, driven to a larger  extent by domestic demand, should however remain more modest. All-in, economic  activity should continue to advance at a modest pace, around 2 %, for the  remainder of 2014. Furthermore, inflation is expected to rise only moderately  from its early 2014 trough. This should provide the Bank of Canada with the  needed flexibility to postpone any increase to its rate policy until the end  of 2015 at the earliest  and, in any case, not before a Federal Reserve  increase. The ensuing moderate increase in interest rates should not exert  undue pressure on households and housing affordability and favour a soft  landing in the Canadian housing sector.  2014 Financial Performance  The following table presents management's financial objectives for 2014 and  the Bank's performance to date. These financial objectives are based on the  assumptions noted on page 21 of the Bank's 2013 Annual Report under the title  "Key assumptions supporting the Bank's objectives" and exclude adjusting  items(1).     2014 FINANCIAL OBJECTIVES                                                   [1]                                                  FOR THE SIX MONTHS ENDED                                2014 OBJECTIVES             APRIL 30, 2014                                                                                   Adjusted return on common     shareholders' equity        10.5% to 12.5%                       11.8 %     Adjusted net income (in     millions of dollars)      $145.0 to $165.0                      $78.6       Adjusted efficiency ratio   72.5% to 69.5%                       71.7 %     Adjusted operating     leverage[2]                       Positive                        1.1 %     Common Equity Tier I     capital ratio —     All-in basis                        > 7.0%                        7.6 %     [1] Refer to the non-GAAP financial measures section.     [2] For the purpose of calculating 2014 financial objectives,         year-to-date growth rates are calculated year-over-year         (i.e. current period versus the corresponding prior year period).   Based on the results for the six months ended April 30, 2014 and current  forecasts, management believes that the Bank is in line to meet its objectives  as set out at the beginning of the year. Good organic growth in the  higher-margin commercial businesses, strategies to diversify other income, a  disciplined management of expenses and strong credit quality are expected to  remain the key drivers of the Bank's overall financial performance for the  year.        _______________________________     1 Refer to Adjusting items and Non-GAAP financial measures sections for       further details.     Analysis of Consolidated Results     CONDENSED     CONSOLIDATED     RESULTS [1]                                                                                                  FOR THE THREE MONTHS ENDED       FOR THE SIX MONTHS ENDED     In thousands     of Canadian     dollars,     except per     share amounts    APRIL 30    JANUARY 31      APRIL 30      APRIL 30      APRIL 30     (Unaudited)          2014          2014          2013          2014          2013                                                                                           Net interest                                                                          income        $ 138,726     $ 140,856     $ 140,430     $ 279,582     $ 282,774     Other income     78,164        75,253        74,420       153,417       145,990       Total revenue   216,890       216,109       214,850       432,999       428,764       Amortization     of net     premium on     purchased     financial     instruments     and     revaluation     of contingent     consideration     5,498         1,136         1,224         6,634         2,280       Provision for     loan losses      10,500        10,500         9,000        21,000        17,000       Non-interest     expenses        159,904       159,133       161,630       319,037       324,723       Income before     income taxes     40,988        45,340        42,996        86,328        84,761       Income taxes      9,999         9,815         9,157        19,814        18,134       Net income    $  30,989     $  35,525     $  33,839     $  66,514     $  66,627       Preferred     share     dividends,     including     applicable     taxes             2,501         2,501         4,059     $   5,002     $   6,592       Net income                                                                            available to     common     shareholders  $  28,488     $  33,024     $  29,780     $  61,512     $  60,035                                                                                           Diluted                                                                               earnings per     share         $    0.99     $    1.16     $    1.05     $    2.15     $    2.13     [1] Comparative figures reflect the adoption of amendments to IAS 19,         Employee Benefits. Refer to Note 2 in the unaudited condensed         interim consolidated financial statements.     Adjusting items  The Bank has designated certain amounts as adjusting items and presents  adjusted GAAP results to facilitate understanding of its underlying business  performance and related trends. Adjusting items are included in the B2B Bank  business segment's results. The Bank assesses performance on a GAAP basis and  on an adjusted basis and considers both to be useful to investors and analysts  in obtaining a better understanding of the Bank's financial results and  analyzing its growth and profit potential more effectively. Adjusted results  and measures are non-GAAP measures. Comments on the uses and limitations of  such measures are disclosed in the Non-GAAP Financial Measures section  hereafter.     IMPACT OF     ADJUSTING ITEMS     [1] [2]                                                                                                                                      FOR THE SIX MONTHS                            FOR THE THREE MONTHS ENDED                ENDED     In thousands of     Canadian     dollars, except     per share     amounts           APRIL 30   JANUARY 31     APRIL 30     APRIL 30     APRIL 30     (Unaudited)           2014         2014         2013         2014         2013                                                                                        Impact on net     income                                                                             Reported net                                                                       income          $ 30,989     $ 35,525     $ 33,839     $ 66,514     $ 66,627     Adjusting     items, net of     income taxes                                                                       Amortization of     net premium on     purchased     financial     instruments and     revaluation of     contingent     consideration                                                                        Amortization       of net       premium on       purchased       financial       instruments      1,026          836          902        1,862        1,680         Revaluation       of contingent       consideration    4,100      —      —        4,100      —       Costs related     to business     combinations     [3]                                                                                  MRS Companies       integration       related costs  —          474        1,332          474        5,650         AGF Trust       integration       related costs    3,260        2,426        3,174        5,686        4,406                          8,386        3,736        5,408       12,122       11,736       Adjusted net                                                                       income          $ 39,375     $ 39,261     $ 39,247     $ 78,636     $ 78,363                                                                                        Impact on     diluted     earnings per     share                                                                              Reported                                                                           diluted     earnings per     share           $   0.99     $   1.16     $   1.05     $   2.15     $   2.13     Adjusting items     0.29         0.13         0.19         0.42         0.42       Adjusted                                                                           diluted     earnings per     share [4]       $   1.29     $   1.29     $   1.24     $   2.57     $   2.54     [1] Comparative figures reflect the adoption of amendments to IAS 19,         Employee Benefits. Refer to Note 2 in the unaudited condensed         interim consolidated financial statements.     [2] Refer to the Non-GAAP Financial Measures section.     [3] Also referred to as Transaction and Integration Costs (T&I Costs).     [4] The impact of adjusting items on a per share basis does not add due         to rounding for the three months ended April 30, 2014 and six         months ended April 30, 2013.   Three months ended April 30, 2014 compared with the three months ended April  30, 2013  Net income was $31.0 million or $0.99 diluted per share for the second quarter  of 2014, compared with $33.8 million or $1.05 diluted per share for the second  quarter of 2013.  Adjusted net income was $39.4 million for the second quarter ended April 30,  2014, up marginally from $39.2 million for the same quarter of 2013, while  adjusted diluted earnings per share was $1.29, compared with $1.24 diluted per  share in 2013. The calculation of diluted earnings per share in the second  quarter of 2013 included a final $1.5 million dividend on the Series 9  preferred shares redeemed in March 2013.  Total revenue  Total revenue increased by $2.0 million or 1% to $216.9 million in the second  quarter of 2014, compared with $214.9 million in the second quarter of 2013,  as 5% year-over-year growth in other income was partly offset by slightly  lower net interest income.  Net interest income decreased by $1.7 million to $138.7 million for the second  quarter of 2014, from $140.4 million in the second quarter of 2013. In the  second quarter of 2014, the revenue impact of a lower level of personal loans  was partially offset by interest recoveries resulting from favourable  settlements in the commercial loan portfolio. Overall, margins were unchanged  at 1.68% in the quarter, as the unfavourable repricing of maturing loans and  deposits in the very low interest rate environment over the last twelve months  was offset by the higher interest recoveries mentioned above and a better  asset mix.  Other income increased by $3.7 million or 5% and amounted to $78.2 million in  the second quarter of 2014, compared with $74.4 million in the second quarter  of 2013. Higher income from brokerage operations, particularly in the  small-cap equity markets, as well as continued solid mutual fund commissions  mainly contributed to the year-over-year increase. These strong results were  partly offset by lower income from treasury and financial market operations,  mainly due to lower income from trading activities. Furthermore, consistent  with its syndication strategy, the Bank completed the sale of $102.4 million  of commercial mortgage loans during the second quarter of 2014. This led to  the recognition of a $3.7 million gain in other income, including $1.2 million  reported in the Personal & Commercial business segment results and $2.5  million in the Other sector. In a similar transaction, a $3.7 million gain on  sale of a $94.7 million commercial mortgage loan portfolio had been recorded  during the second quarter of 2013.  Amortization of net premium on purchased financial instruments and revaluation  of contingent consideration  For the second quarter of 2014, the line-item "Amortization of net premium on  purchased financial instruments and revaluation of contingent consideration"  amounted to $5.5 million, compared with $1.2 million in the second quarter of  2013. Results for the second quarter of 2014 include an additional $4.1  million non tax-deductible charge to reflect the impact of an agreement  reached on May 30, 2014 with AGF Management Limited to settle the $20.0  million maximum contingent consideration, which was based on the credit  performance of the acquired AGF Trust loan portfolio, for a lower total amount  of $10.0 million. This amount will represent the final payment for the  purchase of AGF Trust. The amortization of net premium on purchased financial  instruments amounted to $1.4 million in the second quarter of 2014,  essentially unchanged from the second quarter of 2013. Refer to Note 13 to the  unaudited condensed interim consolidated financial statements.  Provision for loan losses  The provision for loan losses increased by $1.5 million to $10.5 million in  the second quarter of 2014 from $9.0 million in the second quarter of 2013 as  the Bank maintained its prudent approach to loan loss provisioning.  Nonetheless, loan losses remained at a low level reflecting the overall  underlying quality of the loan portfolios. Refer to the Risk Management  section for additional information.  Non-interest expenses  Non-interest expenses decreased by $1.7 million to $159.9 million for the  second quarter of 2014, compared with $161.6 million for the second quarter of  2013, mainly reflecting lower T&I Costs. The Bank's other non-interest  expenses were held unchanged through tight cost control, acquisition synergies  and process reviews.  Salaries and employee benefits decreased by $2.6 million or 3% to $84.4  million for the second quarter of 2014, compared with the second quarter of  2013, mainly due to lower headcount from acquisition synergies over the last  twelve months and the optimization of certain activities in the fourth quarter  of 2013. Regular salary increases, higher performance-based compensation and  slightly higher expenses related to group insurance programs partly offset  this decrease year-over-year.  Premises and technology costs increased by $3.0 million to $45.6 million  compared with the second quarter of 2013. The increase mostly stems from  higher IT costs related to ongoing business growth, regulatory requirements  and enhanced on-line services. Higher amortization expenses related to  completed regulatory IT projects and rental costs for IT development teams  also contributed to the increase.  Other non-interest expenses decreased by $0.5 million to $25.4 million for the  second quarter of 2014, compared with the second quarter of 2013. The decrease  mainly reflects cost synergies in B2B Bank as well as the continued  disciplined control over discretionary expenses throughout the Bank in light  of a slower growth environment.  T&I Costs for the second quarter of 2014 totalled $4.4 million compared with  $6.1 million a year ago, and mainly related to IT systems conversion costs,  salaries, professional fees and other expenses as integration activities of  AGF Trust operations are winding down.  The adjusted efficiency ratio was 71.7% in the second quarter of 2014,  compared with 72.4% in the second quarter of 2013, mainly due to higher other  income, integration synergies, continued rigorous cost control and efforts to  streamline operations. The Bank continues to invest in strategic initiatives  to ensure growth and efficiency in each of its business segments.  Income taxes  For the quarter ended April 30, 2014, the income tax expense was $10.0 million  and the effective tax rate was 24.4%. 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  and the lower taxation level on revenues from foreign insurance operations.  For the quarter ended April 30, 2013, the income tax expense was $9.2 million  and the effective tax rate was 21.3%. Year-over-year, the higher effective tax  rate for the quarter ended April 30, 2014 resulted from a $4.1 million non  tax-deductible charge recorded as a result of the final settlement of the  contingent consideration related to the AGF Trust acquisition. On an adjusted  basis, the effective tax rate was 22.7% for the second quarter of 2014  compared with 22.1% for the second quarter of 2013.  Six months ended April 30, 2014 compared with the six months ended April 30,  2013  Net income was $66.5 million or $2.15 diluted per share for the six months  ended April 30, 2014, compared with $66.6 million or $2.13 diluted per share  for the six months ended April 30, 2013. Adjusted net income was $78.6 million  for the six months ended April 30, 2014, essentially unchanged compared with  $78.4 million in 2013, while adjusted diluted earnings per share was $2.57,  compared with $2.54 diluted per share in 2013.  Total revenue  Total revenue increased by $4.2 million or 1% to $433.0 million in the six  months ended April 30, 2014, compared with $428.8 million in the six months  ended April 30, 2013. The year-over-year growth of 5% in other income was  partly offset by lower net interest income.  Net interest income decreased by $3.2 million to $279.6 million for the six  months ended April 30, 2014, from $282.8 million in the six months ended April  30, 2013, mainly reflecting a reduced level of personal loans and lower  prepayment penalties on residential mortgage loans, partly offset by improved  margins. When compared with the six months ended April 30, 2013, margins  increased by 1 basis point to 1.67% for the six months ended April 30, 2014.  Other income increased by $7.4 million or 5% and amounted to $153.4 million in  the six months ended April 30, 2014, compared with $146.0 million in the six  months ended April 30, 2013. Higher lending fees stemming from increased  business activity and loan prepayment penalties in the commercial portfolios  amounting to $1.8 million in the first quarter of 2014 contributed to the  year-over-year increase. Solid mutual funds commissions as well as higher  insurance income and income from brokerage operations also contributed to the  year-over-year increase. These strong improvements were partly offset by lower  income from treasury and financial market operations mainly due to trading  activities in the six months ended April 30, 2014. In addition, as noted  above, the Bank recognized a $3.7 million gain on sale of a commercial  mortgage portfolio during the second quarter of 2014, compared to a similar  $3.7 million gain in the second quarter of 2013.  Amortization of net premium on purchased financial instruments and revaluation  of contingent consideration  For the six months ended April 30, 2014, the line item "Amortization of net  premium on purchased financial instruments and revaluation of contingent  consideration" amounted to $6.6 million, compared with $2.3 million in the six  months ended April 30, 2013. As noted above, an additional $4.1 million non  tax-deductible charge was recorded in the second quarter of 2014 as a result  of the final settlement of the contingent consideration for an amount of $10.0  million related to the AGF Trust acquisition. The amortization of net premium  on purchased financial instruments amounted to $2.5 million in the six months  ended April 30, 2014, essentially unchanged compared with the six months ended  April 30, 2013. Refer to Note 13 to the unaudited condensed interim  consolidated financial statements.  Provision for loan losses  The provision for loan losses increased by $4.0 million to $21.0 million in  the six months ended April 30, 2014 from $17.0 million in the six months ended  April 30, 2013. While still comparatively low, this reflects a return to more  normalized overall loan losses from the 2013 levels. Refer to the Risk  Management section for additional information.  Non-interest expenses  Non-interest expenses decreased by $5.7 million to $319.0 million for the six  months ended April 30, 2014, compared with $324.7 million for the six months  ended April 30, 2013. This mainly reflects lower T&I Costs while the Bank's  other non-interest expenses were held unchanged through tight cost control and  process reviews.  Salaries and employee benefits decreased by $8.2 million or 5% to $169.9  million for the six months ended April 30, 2014, compared with the six months  ended April 30, 2013, mainly due to lower headcount from acquisition synergies  over the last twelve months and the optimization of certain activities in the  fourth quarter of 2013, partly offset by regular salary increases. Lower  pension costs and lower performance-based compensation expense also  contributed to the decrease year-over-year.  Premises and technology costs increased by $10.1 million to $91.6 million  compared with the six months ended April 30, 2013. As noted above, the  increase mostly stems from higher IT costs related to ongoing business growth,  regulatory requirements and enhanced on-line services. Higher amortization  expenses related to completed regulatory IT projects and rental costs also  contributed to the increase.  Other non-interest expenses decreased by $2.3 million to $49.1 million for the  six months ended April 30, 2014, from $51.4 million for the six months ended  April 30, 2013. As cost synergies are being realized, the Bank continued to  exercise disciplined control over discretionary expenses in light of a slower  growth environment.  T&I Costs for the six months ended April 30, 2014 totalled $8.4 million  compared with $13.7 million a year ago. They mainly related to IT systems  conversion costs, salaries, professional fees, employee relocation costs and  other expenses mostly for the integration of AGF Trust operations.  The adjusted efficiency ratio was 71.7% in the six months ended April 30,  2014, compared with 72.5% in the six months ended April 30, 2013. On the same  basis, the Bank generated positive operating leverage of 1.1% year-over-year,  mainly due to higher other income, integration synergies, continued rigorous  cost control and efforts to streamline its operations.  Income taxes  For the six months ended April 30, 2014, the reported income tax expense was  $19.8 million and the effective reported tax rate was 23.0%. 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 and the lower taxation level on revenues from foreign  insurance operations. For the six months ended April 30, 2013, the income tax  expense was $18.1 million and the effective tax rate was 21.4%.  Year-over-year, the higher income tax rate for the six months ended April 30,  2014 resulted from a $4.1 million non tax-deductible charge recorded in the  second quarter of 2014 as a result of the final settlement of the contingent  consideration related to the AGF Trust acquisition. On an adjusted basis, the  effective tax rate was 22.4% for the six months ended April 30, 2014 compared  with 22.2% for the same period in 2013.  Three months ended April 30, 2014 compared with the three months ended January  31, 2014  Net income was $31.0 million or $0.99 diluted per share for the second quarter  of 2014 compared with $35.5 million or $1.16 diluted per share for the first  quarter of 2014. Adjusted net income was $39.4 million or $1.29 diluted per  share, compared with $39.3 million or $1.29 diluted per share for the first  quarter of 2014.  Total revenue increased to $216.9 million in the second quarter of 2014,  compared with $216.1 million in the previous quarter. Net interest income  decreased by $2.1 million sequentially to $138.7 million in the second quarter  of 2014, mainly due to three less days in the second quarter. Net interest  income for the second quarter also included interest recoveries resulting from  favourable settlements in the commercial loan portfolio. Net interest margin  increased sequentially by 2 basis points to 1.68% in the second quarter of  2014, compared with 1.66% in the first quarter of 2014. This increase mainly  resulted from interest recoveries, which more than compensated for modest loan  and deposit margin tightening.  Other income increased by $2.9 million sequentially, largely due to a $3.7  million gain on sale of a $102.4 million commercial mortgage loan portfolio  during the second quarter, as well as higher income from brokerage operations,  partly offset by lower income from treasury and financial market operations.  Other income for the first quarter of 2014 also included loan prepayment  penalties in the commercial portfolios amounting to $1.8 million.  The line-item "Amortization of net premium on purchased financial instruments  and revaluation of contingent consideration" amounted to $5.5 million in the  second quarter of 2014, compared with $1.1 million for the last quarter mainly  due to the final $4.1 million contingent consideration charge noted above.  Refer to Note 13 to the unaudited condensed interim consolidated financial  statements for additional information.  The provision for loan losses remained low at $10.5 million for the second  quarter of 2014, unchanged from the first quarter of 2014, reflecting the  continued high quality of the portfolio. Refer to the Risk Management section  for additional information.  Non-interest expenses amounted to $159.9 million for the second quarter of  2014, compared with $159.1 million for the first quarter of 2014. T&I Costs  increased to $4.4 million in the second quarter of 2014, compared with $3.9  million in the first quarter of 2014. Excluding T&I Costs, non-interest  expenses were unchanged sequentially, mainly due to three less days in the  second quarter which was partly offset by a full quarter of regular salary  increases, as the Bank continued to carefully control costs.  Financial condition        CONDENSED BALANCE     SHEET [1]                                                                   In thousands of     Canadian dollars     AS AT APRIL 30   AS AT OCTOBER 31   AS AT APRIL 30     (Unaudited)                    2014               2013             2013                                                                                 ASSETS                                                                        Cash and deposits       with other banks   $    215,508     $    208,838       $    317,013         Securities            4,532,598        4,480,525          5,756,762         Securities       purchased under       reverse repurchase       agreements            1,582,181        1,218,255            545,974         Loans and       acceptances, net     27,110,647       27,113,107         26,920,674         Other assets            820,062          890,301            939,178                            $ 34,260,996     $ 33,911,026       $ 34,479,601                                                                                   LIABILITIES AND     SHAREHOLDERS' EQUITY                                                          Deposits           $ 23,758,753     $ 23,927,350       $ 23,808,825         Other liabilities     3,557,742        3,129,918          3,347,240         Debt related to       securitization       activities            4,896,007        4,974,714          5,473,470         Subordinated debt       446,485          445,473            444,469         Liability related       to preferred       shares                  120,946          —            —         Shareholders'       equity                1,481,063        1,433,571          1,405,597                            $ 34,260,996     $ 33,911,026       $ 34,479,601       [1] Comparative figures reflect the adoption of amendments to IAS 19,         Employee Benefits. Refer to Note 2 in the unaudited condensed         interim consolidated financial statements.   Balance sheet assets amounted to $34.3 billion at April 30, 2014, up $0.3  billion or 1% from year-end 2013. Over the last twelve months, balance sheet  assets decreased by $0.2 billion.  Liquid assets  Liquid assets, including cash, deposits with other banks, securities and  securities purchased under reverse repurchase agreements, totalled $6.3  billion as at April 30, 2014, an increase of $422.7 million or 7% compared  with October 31, 2013. This higher level supports loan growth, particularly in  the commercial loan portfolios, while maintaining diverse funding sources.  Liquid assets as a percentage of total assets remained relatively unchanged at  18% compared with October 31, 2013. The Bank continues to prudently manage the  level of liquid assets and to hold sufficient cash resources 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 $27.1 billion as  at April 30, 2014, unchanged compared with October 31, 2013. On a gross basis,  continued organic growth in the higher-margin commercial loan portfolios more  than offset the decrease in the personal loan and residential mortgage loan  portfolios. Commercial loans, including bankers' acceptances, increased by  $192.9 million or 7% since October 31, 2013, and commercial mortgage loans  increased by $47.1 million or 2% over the same period as the Bank maintained  its efforts to develop these growth engines. The sale of $102.4 million  commercial mortgage loans during the second quarter of 2014 partially muted  the growth in the underlying portfolio. Personal loans decreased by $166.1  million or 2% since October 31, 2013, mainly reflecting attrition in the  investment loan portfolio. Residential mortgage loans decreased marginally by  $69.8 million from October 31, 2013, mainly due to the combined effect of a  slower growth environment in 2014 and the B2B Bank business segment's current  focus on integration to build the foundation for future growth.  Deposits  Personal deposits stood at $19.2 billion as at April 30, 2014, relatively  unchanged from October 31, 2013. Business and other deposits, which include  institutional deposits decreased slightly by $0.1 billion or 1% since October  31, 2013 to $4.6 billion as at April 30, 2014. This is in line with the modest  growth in the Bank's loan portfolio during the six-month period. Moreover, the  Bank continues to focus on personal deposit gathering and maintaining this  solid retail funding base. Personal deposits represented 81% of total deposits  as at April 30, 2014, unchanged from year-end 2013.  Other Liabilities  Debt related to securitization activities and subordinated debt remained  essentially unchanged compared with October 31, 2013 and stood at $4.9 billion  and $0.4 billion respectively as at April 30, 2014.  On April 3, 2014, the Bank issued 5,000,000 Basel III-compliant Non-Cumulative  Class A Preferred Shares, Series 13 (the "Preferred Shares Series 13"), at a  price of $25.00 per share for gross proceeds of $125.0 million, $120.9 million  net of issuance costs of $4.1 million, and yielding 4.3% annually. The  Preferred Shares Series 13 are recorded as liabilities as the Bank may be  required to convert any or all of the preferred shares into a variable number  of common shares upon the occurrence of a non-viability trigger event. When  declared, dividends on these preferred shares will be recorded in equity  directly through retained earnings. Refer to Note 7 to the unaudited condensed  interim consolidated financial statements for additional information.  Shareholders' equity  Shareholders' equity stood at $1,481.1 million as at April 30, 2014, compared  with $1,433.6 million as at October 31, 2013. This increase resulted mainly  from the net income contribution for the first six months, net of declared  dividends. In addition, the issuance of 210,733 new common shares under the  Shareholder Dividend Reinvestment and Share Purchase Plan further contributed  to the increase in shareholders' equity. The Bank's book value per common  share(1 )appreciated to $44.61 as at April 30, 2014 from $43.19 as at October  31, 2013. There were 28,743,230 common shares and 20,000 share purchase  options outstanding as at May 29, 2014.  Capital Management  Regulatory capital  The regulatory capital calculation is determined based on the guidelines  issued by the Office of the Superintendent of Financial Institutions Canada  (OSFI) originating from the Basel Committee on Banking Supervision (BCBS)  regulatory risk based capital framework, "Basel III: A global regulatory  framework for more resilient banks and banking systems". Under OSFI's Capital  Adequacy Requirements Guideline (the CAR Guideline), transitional requirements  for minimum Common Equity Tier 1, Tier 1 and Total capital ratios were set at  4.0%, 5.5% and 8.0% respectively for 2014, which, for the Bank, will be fully  phased-in to 7.0%, 8.5% and 10.5% by 2019, including the effect of capital  conservation buffers.  In its CAR Guideline, OSFI indicated that it expected deposit-taking  institutions to attain target capital ratios without transition arrangements  equal to or greater than the 2019 minimum capital ratios plus conservation  buffer levels (the "all-in" basis). The "all-in" basis includes all of the  regulatory adjustments that will be required by 2019, while retaining the  phase-out rules of non-qualifying capital instruments. Refer to page 39 of the  Bank's 2013 Annual Report under the title "Capital Management" for additional  information on the Bank's implementation of Basel III.  In August 2013, OSFI issued a guideline clarifying the application of the  Credit Valuation Adjustment (CVA). The CVA capital charge took effect as of  January 1, 2014 and will be phased-in over a five-year period beginning in  2014. This had no significant impact on the regulatory capital ratios for the  Bank.  As detailed in the table below, on an "all-in" basis, the Common Equity Tier  1, Tier 1 and Total capital ratios stood at 7.6%, 10.0% and 13.3%,  respectively, as at April 30, 2014. These ratios meet all current requirements.        ________________________________     1   Effective November 1, 2013, the Bank has modified its definition of         common shareholders' equity, which is now better aligned with         regulatory requirements. Book value per common share and return on         common shareholders' equity measures for the quarters ended in 2013         have been amended accordingly. Refer to the Non-GAAP financial         measures section for further information.        REGULATORY CAPITAL     [1]                                                                         In thousands of     Canadian dollars,     except percentage    AS AT APRIL 30   AS AT OCTOBER 31   AS AT APRIL 30     amounts (Unaudited)            2014               2013             2013                                                                                 Regulatory capital                                                            Common Equity Tier       1 capital (A)      $  1,030,263     $  1,017,659       $  1,018,515         Tier 1 capital (B) $  1,356,413     $  1,222,863       $  1,223,661         Total capital (C)  $  1,811,191     $  1,694,167       $  1,698,448                                                                                   Total risk-weighted     assets (D) [2]       $ 13,576,578     $ 13,379,834       $ 13,428,594                                                                                   Regulatory capital     ratios                                                                        Common Equity Tier       1 capital ratio       (A/D)                       7.6 %            7.6   %            7.6 %       Tier 1 capital       ratio (B/D)                10.0 %            9.1   %            9.1 %       Total capital       ratio (C/D)                13.3 %           12.7   %           12.6 %     [1] The amounts are presented on an "all-in" basis. Regulatory capital         for 2013 is presented as filed with OSFI and has not been adjusted         to include the impact of the adoption of amendments to IAS 19,         Employee Benefits.     [2] Using the Standardized Approach in determining credit risk capital         and to account for operational risk.   The Common Equity Tier 1 capital ratio held stable at 7.6% as at April 30,  2014, unchanged compared with October 31, 2013. As mentioned previously,  effective November 1, 2013, the Bank adopted an amended version of IAS 19,  Employee Benefits which reduced the Common Equity Tier 1 capital ratio by  approximately 0.2%. This impact was essentially offset by internal capital  generation during the six months ended April 30, 2014, including actuarial net  losses on employee benefit plans, and re-invested dividends, which overall  increased total equity, while risk-weighted assets only increased marginally.  On April 3, 2014, the Bank issued 5,000,000 Preferred Shares, Series 13 for  net proceeds of $120.9 million. These preferred shares fully qualify as  Additional Tier 1 capital under the Basel III capital adequacy framework and  the CAR Guideline as they include mandatory non-viability contingency capital  provisions. These preferred shares are classified as liabilities on the  balance sheet.  On May 5, 2014, the Bank announced that it will redeem, on June 15, 2014, all  of its 4,400,000 outstanding Non-Cumulative Class A Preferred Shares Series  10. Such preferred shares will be redeemed at a redemption price of $25.00 per  share, together with the final declared dividends.  Basel leverage ratio requirement  The Basel III capital reforms introduced a non-risk based leverage ratio  requirement to act as a supplementary measure to the risk-based capital  requirements. The leverage ratio is currently defined as the Tier 1 capital  divided by on-balance sheet assets and off-balance sheet commitments,  derivatives and securities financing transactions, as defined within the  requirements. It differs from OSFI's current Asset to Capital Multiple (ACM)  requirement in that it includes more off-balance-sheet exposures and a  narrower definition of capital (Tier 1 Capital instead of Total Capital).  In January 2014, the BCBS issued the full text of Basel III leverage ratio  framework and disclosure requirements following endorsement by its governing  body. OSFI indicated that it will replace the ACM with the new Basel III  leverage test as of January 1, 2015 and is expected to issue a new leverage  guideline later this year. Federally regulated deposit-taking institutions  will be expected to have Basel III leverage ratios that exceed 3%.  Dividends  On May 21, 2014, the Board of Directors declared the regular dividend on the  Preferred Shares  Series 11, the final dividend on the Preferred Shares Series  10, as well as the initial dividend on the Preferred Shares Series 13, to  shareholders of record on June 6, 2014. Concurrent impact of these dividends  will be recorded in the third quarter of 2014. At its meeting on June 4, 2014,  given the Bank's solid results, solid balance sheet and capital position, the  Board of Directors approved an increase of $0.01 per share, or 2%, to the  quarterly dividend and declared a dividend of $0.52 per common share, payable  on August 1, 2014, to shareholders of record on July 2, 2014.        COMMON SHARE DIVIDENDS AND     PAYOUT RATIO [1]                                                                                                                        FOR THE                                                                                      SIX                                                   MONTHS                    FOR THE THREE MONTHS ENDED     ENDE     FOR THE YEARS ENDED     In Canadian     dollars,     except     payout                  JANUARY                          OCTOBER    OCTOBER    OCTOBER     ratios      APRIL 30         31   APRIL 30   APRIL 30         31         31         31     (Unaudited)     2014       2014       2013       2014       2013       2012       2011                                                                                                Dividends     declared     per common     share       $ 0.51     $ 0.51     $ 0.49     $ 1.02     $ 1.98     $ 1.84     $ 1.62       Dividend     payout     ratio [2]     51.3 %     44.1 %     46.5 %     47.4 %     52.0 %     37.0 %     34.8 %     Adjusted     dividend     payout     ratio [2]     39.6 %     39.6 %     39.3 %     39.6 %     40.3 %     36.9 %     32.9 %     [1] Comparative figures for 2013 reflect the adoption of amendments to         IAS 19, Employee benefits. Comparative figures for 2012 and 2011         have not been restated. Refer to Note 2 in the unaudited condensed         interim consolidated financial statements.     [2] Refer to the Non-GAAP Financial Measures section.     Risk Management  The Bank is exposed to various types of risks owing to the nature of its  activities. These risks are mainly related to the use of financial  instruments. In order to manage these risks, controls such as risk management  policies and various risk limits have been implemented. These measures aim to  optimize the risk/return ratio in all operating segments. Refer to the section  "Risk Appetite and Risk Management Framework" on page 42 of the Bank's 2013  Annual Report for additional information.  Credit risk  The following sections provide further details on the credit quality of the  Bank's loan portfolios.     PROVISION FOR LOAN LOSSES                                                                                                                FOR THE SIX MONTHS                          FOR THE THREE MONTHS ENDED                ENDED     In thousands     of Canadian     dollars,     except     percentage     amounts          APRIL 30   JANUARY 31    APRIL 30     APRIL 30     APRIL 30     (Unaudited)          2014         2014        2013         2014         2013                                                                                      Provision for     loan losses                                                                        Personal       loans        $  8,003     $  4,473     $ 7,455     $ 12,476     $ 15,513         Residential       mortgage       loans             922          648         872        1,570        2,279         Commercial       mortgage       loans         (2,508)        2,892          48          384        1,149         Commercial       and other       loans       (including       acceptances)    4,083        2,487         625        6,570      (1,941)                      $ 10,500     $ 10,500     $ 9,000     $ 21,000     $ 17,000       As a % of     average loans     and     acceptances        0.16 %       0.15 %      0.14 %       0.16 %       0.13 %   The provision for loan losses amounted to $10.5 million in the second quarter  of 2014, unchanged from the first quarter of 2014 and up $1.5 million compared  to the same quarter a year ago. For the six months ended April 30, 2014,  provisions for loan losses increased by $4.0 million and amounted to $21.0  million compared with $17.0 million for the same period in 2013. Despite the  gradual increase from the 2013 very low levels, the provision for loan losses  remains low and reflects the strong credit quality of the Bank's loan  portfolios and prolonged favourable credit conditions in the Canadian market.  Loan losses on personal loans slightly increased by $0.5 million compared with  the second quarter of 2013. For the six months ended April 30, 2014, loan  losses on personal loans decreased by $3.0 million, reflecting lower  provisions in the investment loan and point-of-sale financing portfolios  compared to last year due to the reduced exposure. On a sequential basis, loan  losses on personal loans increased by $3.5 million, mostly explained by higher  losses at B2B Bank in the second quarter of 2014 from the unsustainable low  losses level in the first quarter.  Loan losses on residential mortgage loans were up marginally from the second  quarter of 2013 and sequentially. For the six months ended April 30, 2014,  loan losses on residential mortgage loans decreased slightly by $0.7 million  year-over-year.  Loan losses on commercial mortgages and commercial loans remained very low and  cumulatively amounted to $1.6 million in the second quarter of 2014, a  year-over-year increase of $0.9 million. Favourable settlements and  improvements in the commercial mortgage loan portfolio were offset by losses  on commercial loans. On a sequential basis, loan losses in these portfolios  decreased by a combined $3.8 million, mainly explained by favourable  settlements and improvements on a limited number of impaired loans. For the  six months ended April 30, 2014, loan losses on commercial mortgages and  commercial loans totalled $7.0 million compared with a negative amount of $0.8  million for the same period in 2013. The year-over-year increase in loan  losses mainly results from growth in the underlying portfolios, a higher  amount of favourable settlements and improvements of commercial loans in 2013,  which led to a net credit of $1.9 million in loan losses in the commercial  loan portfolio last year.        IMPAIRED LOANS                                                              In thousands of      AS AT APRIL 30   AS AT OCTOBER 31   AS AT APRIL 30     Canadian dollars,              2014               2013             2013     except percentage     amounts (Unaudited)                                                                                 Gross impaired loans                                                          Personal           $   28,476       $   13,971         $   21,243           Residential            31,794           32,651             21,972           mortgages       Commercial             13,360           14,082             32,251           mortgages       Commercial and         33,653           38,687             42,200           other (including       acceptances)                             107,283           99,391            117,666                                                                                     Allowances for loan                                                         losses against     impaired loans       Individual           (27,440)         (34,266)           (39,487)           allowances       Collective           (16,896)         (12,049)           (12,802)           allowances                            (44,336)         (46,315)           (52,289)                                                                                     Net impaired loans   $   62,947       $   53,076         $   65,377                                                                                     Collective           $ (77,767)       $ (69,275)         $ (62,079)         allowances against     other loans                                                                                 Impaired loans as a                                                         % of loans and     acceptances       Gross                    0.39   %         0.37     %         0.44   %       Net                      0.23   %         0.19     %         0.24   %   Gross impaired loans amounted to $107.3 million as at April 30, 2014, down  sequentially from $113.9 million as at January 31, 2014, while up from $99.4  million as at October 31, 2013, as continued improvement in the commercial  loan portfolio was more than offset by increases in impaired loans in the  personal loan portfolio. Despite the increase, gross impaired loans remain  historically low and borrowers continue to benefit from the favourable low  interest rate environment and good business conditions in Canada.  Since the beginning of the year, individual allowances decreased by $6.8  million to $27.4 million mainly explained by favourable settlements on a  limited number of impaired commercial loans. Collective allowances against  impaired loans increased by $4.8 million over the same period, in-line with  the higher impaired loans level. Net impaired loans, calculated as gross  impaired loans less individual allowances and collective allowances against  impaired loans, amounted to $62.9 million as at April 30, 2014, compared with  $53.1 million as at October 31, 2013. At 0.23% of loans and acceptances as at  April 30, 2014 and 0.19% as at October 31, 2013, net impaired loans continue  to be at a low level and reflect management's continued prudent approach to  provisioning of impaired loans.  Liquidity and funding risk  Liquidity and funding risk represents the possibility that the Bank may not be  able to gather sufficient cash resources, when required and on reasonable  conditions, to meet its financial obligations. There have been no material  changes to the Bank's liquidity and funding risk management framework from  year-end 2013. The Bank continues to maintain liquidity and funding that is  appropriate for the execution of its strategy, with liquidity and funding risk  remaining well within its approved limits.  Regulatory developments concerning liquidity  In December 2010, the BCBS issued the regulatory liquidity framework, "Basel  III: International framework for liquidity risk measurement, standards and  monitoring", which mainly outlines two new liquidity requirements. This  document prescribes the Liquidity Coverage Ratio (LCR) and Net Stable Funding  Ratio (NSFR) as minimum regulatory standards effective January 2015 and  January 2018, respectively. Further updates regarding these new requirements  were also published in 2013 and 2014.  In addition, in January 2014, the BCBS issued its final paper on "Liquidity  coverage ratio disclosure standards". Banks are expected to comply with the  BCBS LCR disclosure standards beginning in the first full fiscal quarter of  calendar 2015 (expected to be the second quarter of 2015 for Canadian banks).  In May 2014, OSFI issued a comprehensive domestic Liquidity Adequacy  Requirements Guideline that reflects the aforementioned BCBS liquidity  standards and monitoring tools and formalized the use of the Net Cumulative  Cash Flow (NCCF) supervisory tool. At this stage, it is still too early to  determine their definitive impact on liquidity management. The Bank is  presently developing its liquidity data and reporting systems to meet the  upcoming liquidity requirements. Based on its preliminary review of the  recently published regulatory requirements and prior analyses, management  expects that the Bank will meet the upcoming standards.  Market risk  Market risk represents the financial losses that the Bank could incur  following unfavourable fluctuations in the value of financial instruments  subsequent to changes in the underlying factors used to measure them, such as  interest rates, exchange rates or equity prices. This risk is inherent to the  Bank's financing, investment, trading and asset and liability management (ALM)  activities.  The purpose of ALM activities is to manage structural interest rate risk,  which corresponds to the potential negative impact of interest rate movements  on the Bank's revenues and economic value. Dynamic management of structural  risk is intended to maximize the Bank's profitability while protecting the  economic value of common shareholders' equity from sharp interest rate  movements. As at April 30, 2014, the effect on the economic value of common  shareholders' equity and on net interest income before taxes of a sudden and  sustained 1% increase in interest rates across the yield curve was as follows.        STRUCTURAL INTEREST RATE SENSITIVITY     ANALYSIS                                                                    In thousands of Canadian dollars      AS AT APRIL 30   AS AT OCTOBER 31     (Unaudited)                                     2014               2013                                                                                 Effect of a 1% increase in interest     rates                                                                         Increase in net interest income       before taxes over the next 12       months                              $    4,455       $    9,984             Decrease in the economic value of       common shareholders' equity (Net of       income taxes)                       $ (30,004)       $ (22,746)         As shown in the table above, the sensitivity to changes in interest rates  remained low as at April 30, 2014. Management continues to expect that long  term rates will remain within a narrow range for now. These results reflect  efforts to take advantage in the movement of short-term and long-term interest  rates, while maintaining the sensitivity to these fluctuations within approved  risk limits.  Segmented Information  This section outlines the Bank's operations according to its organizational  structure. Services to individuals, businesses, financial intermediaries and  institutional clients are offered through the three following business  segments: Personal & Commercial, B2B Bank, and Laurentian Bank Securities &  Capital Markets. The Bank's other activities are grouped into the Other sector.  Realignment of reportable segments  Commencing November 1, 2013, the Bank reports its retail and commercial  activities, which were previously reported in the Retail & SME-Québec and  Real Estate & Commercial business segments, in the newly formed Personal &  Commercial segment. The new business segment better reflects the  interdependencies associated with these activities. In addition, the new  segments more closely align the Bank's reporting to the industry practice. The  B2B Bank and Laurentian Bank Securities & Capital Markets segments are not  affected by this realignment. Furthermore, certain restructurings implemented  in the fourth quarter of 2013 resulted in small adjustments to segment  allocations. Comparative figures were reclassified to conform to the current  presentation.  Personal & Commercial ([1] )                            FOR THE THREE MONTHS ENDED      FOR THE SIX MONTHS ENDED     In thousands     of Canadian     dollars,     except     percentage     amounts        APRIL 30   JANUARY 31     APRIL 30      APRIL 30      APRIL 30     (Unaudited)        2014         2014         2013          2014          2013                                                                                       Net interest     income       $ 97,592     $ 98,054     $ 92,572     $ 195,646     $ 190,673       Other income   49,110       48,630       48,768        97,740        92,297       Total     revenue       146,702      146,684      141,340       293,386       282,970       Provision     for loan     losses          7,436       10,254        5,850        17,690        10,452       Non-interest     expenses       99,947       99,809      103,156       199,756       206,036       Income     before     income taxes   39,319       36,621       32,334        75,940        66,482       Income taxes    9,037        8,343        7,500        17,380        15,112       Net income   $ 30,282     $ 28,278     $ 24,834     $  58,560     $  51,370                                                                                         Efficiency     ratio [2]        68.1 %       68.0 %       73.0 %        68.1 %        72.8 %     [1] Comparative figures reflect the realignment of reportable segments         and the adoption of amendments to IAS 19, Employee Benefits. Refer         to Notes 2 and 12 in the unaudited condensed interim consolidated         financial statements.     [2] Refer to the non-GAAP financial measures section.   The Personal & Commercial business segment's contribution to net income was  $30.3 million in the second quarter of 2014 compared with $24.8 million in the  second quarter of 2013.  Total revenue increased by $5.4 million from $141.3 million in the second  quarter of 2013 to $146.7 million in the second quarter of 2014, mainly driven  by higher net interest income, which increased by $5.0 million to $97.6  million. This increase reflects interest recoveries resulting from favourable  settlements in the commercial loan portfolio, good volume growth in the  commercial portfolios and improved margins. Other income increased by $0.3  million to $49.1 million in the second quarter of 2014, mainly due to higher  mutual fund commissions and lending fees, offset by lower gains on loan sales.  Consistent with the Bank's syndication strategy, the sale of a $102.4 million  commercial mortgage loan portfolio was completed during the second quarter of  2014, which led to the recognition of a $3.7 million gain of which $1.2  million was recorded in the Personal & Commercial business segment. In a  similar transaction, a $3.7 million gain on the sale of a $94.7 million  commercial mortgage loan portfolio had been recorded during the second quarter  of 2013 of which $3.1 million was recorded in Personal & Commercial.  Loan losses increased by $1.6 million from $5.9 million in the second quarter  of 2013 to $7.4 million in the second quarter of 2014. Higher losses on  personal and commercial loans compared to the 2013 low levels were partly  offset by favourable settlements in the commercial mortgage loan portfolio.  Non-interest expenses decreased by $3.2 million, from $103.2 million in the  second quarter of 2013 to $99.9 million in the second quarter of 2014, mainly  due to lower headcount from the optimization of certain activities in the  fourth quarter of 2013 and disciplined control over discretionary expenses.  Compared with the first quarter of 2014, net income increased by $2.0 million,  mainly as a result of interest recoveries, favourable settlements and  improvement on a limited number of impaired loans, which more than offset the  revenue impact of the three less days in the second quarter.  For the six months ended April 30, 2014, net income increased from $51.4  million to $58.6 million. Growth in commercial loan volumes of 18%  year-over-year, a strong increase in other income and lower non-interest  expenses contributed to this performance and compensated for higher loan  losses. The efficiency ratio was 68.1% for the six months ended April 30,  2014, compared with 72.8% for the six months ended April 30, 2013. The segment  generated positive operating leverage of 6.7% year-over-year, reflecting the  Bank's priorities to diversify other income, grow commercial businesses and  control costs rigorously.  B2B Bank ([1] )                                                                FOR THE SIX MONTHS                          FOR THE THREE MONTHS ENDED                ENDED     In thousands     of Canadian     dollars,     except     percentage     amounts         APRIL 30   JANUARY 31     APRIL 30     APRIL 30     APRIL 30     (Unaudited)         2014         2014         2013         2014         2013                                                                                      Net interest     income        $ 43,377     $ 46,197     $ 47,195     $ 89,574     $ 96,607       Other income     9,107        9,102        8,884       18,209       17,940       Total revenue   52,484       55,299       56,079      107,783      114,547       Amortization     of net     premium on     purchased     financial     instruments     and     revaluation     of contingent     consideration    5,498        1,136        1,224        6,634        2,280       Provision for     loan losses      3,064          246        3,150        3,310        6,548       Non-interest     expenses [2]    30,971       31,576       33,196       62,547       67,181       Costs related     to business     combinations     [3]              4,437        3,949        6,136        8,386       13,693       Income before     income taxes     8,514       18,392       12,373       26,906       24,845       Income taxes     3,432        4,959        3,283        8,391        6,564       Net income    $  5,082     $ 13,433     $  9,090     $ 18,515     $ 18,281                                                                                        Efficiency     ratio [4]         67.5 %       64.2 %       70.1 %       65.8 %       70.6 %                                                                                      Adjusted net     income [4]    $ 13,468     $ 17,169     $ 14,498     $ 30,637     $ 30,017       Adjusted     efficiency     ratio [4]         59.0 %       57.1 %       59.2 %       58.0 %       58.6 %     [1] Comparative figures reflect the adoption of amendments to IAS 19,         Employee Benefits. Refer to Note 2 in the unaudited condensed         interim consolidated financial statements.     [2] During the first quarter of 2014, the Bank retroactively adjusted         its corporate expenses allocation methodology. As a result,         non-interest expenses amounting to $1.0 million ($0.7 million net         of income taxes) per quarter in 2013, which were previously         reported in the Other sector, were reclassified to the B2B Bank         business segment.     [3] Integration costs related to the integration of the MRS Companies         and AGF Trust (T&I Costs).     [4] Refer to the non-GAAP financial measures section.   The B2B Bank business segment's contribution to adjusted net income was $13.5  million for the second quarter of 2014, down $1.0 million from $14.5 million  for the second quarter of 2013. Reported net income for the second quarter of  2014 was $5.1 million compared with $9.1 million a year ago.  Total revenue decreased to $52.5 million in the second quarter of 2014 from  $56.1 million in the second quarter of 2013. Net interest income decreased by  $3.8 million to $43.4 million in the second quarter of 2014 compared with the  corresponding period in 2013. This decrease resulted from the reduced level of  investment loans as investors continue to deleverage, as well as margin  compression on mortgage loans. Other income amounted to $9.1 million in the  second quarter of 2014, up $0.2 million from the second quarter of 2013.  As shown above, the line item "Amortization of net premium on purchased  financial instruments and revaluation of contingent consideration" increased  by $4.3 million and amounted to $5.5 million in the second quarter of 2014  compared with $1.2 million for the second quarter of 2013. This increase  mainly resulted from the additional $4.1 million non tax-deductible charge to  reflect the impact of an agreement reached on May 30, 2014 with AGF Management  Limited to settle the $20.0 million maximum contingent consideration related  to the AGF Trust acquisition for a lower total amount of $10.0 million. Refer  to Note 13 to the unaudited condensed interim consolidated financial  statements.  Loan losses decreased by $0.1 million compared with the second quarter of 2013  and amounted to $3.1 million in the second quarter of 2014. Lower provisions  in the investment loan portfolios due to the reduced exposure compared to last  year were mostly offset by higher provisions on other personal loans.  Excluding T&I Costs, non-interest expenses decreased by $2.2 million or 7% to  $31.0 million in the second quarter of 2014, compared with $33.2 million in  the second quarter of 2013. As integration activities are winding down, T&I  Costs for the second quarter of 2014 decreased to $4.4 million and mainly  related to IT systems conversion costs, salaries, professional fees and other  expenses for the integration of former AGF Trust operations.  Compared with the first quarter of 2014, adjusted net income decreased by $3.7  million, mainly resulting from lower net interest income, which was impacted  by the fewer number of days in the quarter and higher loan losses. These  items, combined with the final contingent consideration charge mentioned above  and slightly higher T&I Costs contributed to the $8.4 million decrease in  reported net income over the same period.  For the six months ended April 30, 2014, adjusted net income was $30.6  million, $0.6 million higher than the same period of 2013, as the items  impacting revenues, as detailed above, were compensated by higher spread  earned on deposits year-over-year and lower loan losses. Reported net income  for the six months ended April 30, 2014 remained relatively stable over the  same period in 2013, mainly due to the same factors mentioned above and as a  result of lower T&I Costs year-over-year.  Laurentian Bank Securities & Capital Markets ([1] )                                                               FOR THE SIX MONTHS                         FOR THE THREE MONTHS ENDED                ENDED     In thousands     of Canadian     dollars,     except     percentage     amounts        APRIL 30   JANUARY 31     APRIL 30     APRIL 30     APRIL 30     (Unaudited)        2014         2014         2013         2014         2013                                                                                     Total     revenue      $ 17,590     $ 16,165     $ 16,967     $ 33,755     $ 34,050       Non-interest     expenses       14,059       13,087       12,959       27,146       26,433       Income     before     income taxes    3,531        3,078        4,008        6,609        7,617       Income taxes      947          826        1,033        1,773        1,961       Net income   $  2,584     $  2,252     $  2,975     $  4,836     $  5,656                                                                                       Efficiency     ratio [2]        79.9 %       81.0 %       76.4 %       80.4 %       77.6 %     [1] Comparative figures reflect the adoption of amendments to IAS 19,         Employee Benefits. Refer to Note 2 in the unaudited condensed         interim consolidated financial statements.     [2] Refer to the non-GAAP financial measures section.   Laurentian Bank Securities & Capital Markets business segment's contribution  to net income decreased to $2.6 million in the second quarter of 2014,  compared with $3.0 million in the second quarter of 2013. Total revenue  increased by $0.6 million to $17.6 million in the second quarter of 2014  compared with $17.0 million in the second quarter of 2013, mainly as a result  of higher underwriting fees in the small-cap equity markets. Non-interest  expenses increased by $1.1 million to $14.1 million in the second quarter of  2014, mainly due to higher performance-based compensation, commissions and  transaction fees, in-line with higher market-driven income.  For the six months ended April 30, 2014, net income decreased by $0.8 million  compared with the same period last year. Total revenue decreased by $0.3  million to $33.8 million in the six months ended April 30, 2014, mainly as a  result of lower underwriting fees in the fixed income market compared to  strong results for the six months ended April 30, 2013, mainly during the  first quarter of 2013. Non-interest expenses increased by $0.7 million to  $27.1 million for the six months ended April 30, 2014, mainly due to higher  performance-based compensation, commissions and transaction fees.  Other sector ([1] )                                  FOR THE THREE MONTHS ENDED     FOR THE SIX MONTHS ENDED     In thousands     of Canadian     dollars         APRIL 30    JANUARY 31      APRIL 30       APRIL 30      APRIL 30     (Unaudited)         2014          2014          2013           2014          2013                                                                                           Net interest     income       $ (2,749)     $ (4,078)     $   (407)     $  (6,827)     $ (6,257)       Other income     2,863         2,039           871          4,902         3,454       Total     revenue            114       (2,039)           464        (1,925)       (2,803)       Non-interest     expenses [2]    10,490        10,712         6,183         21,202        11,380       Loss before     income taxes  (10,376)      (12,751)       (5,719)       (23,127)      (14,183)       Income taxes     recovery       (3,417)       (4,313)       (2,659)        (7,730)       (5,503)       Net loss     $ (6,959)     $ (8,438)     $ (3,060)     $ (15,397)     $ (8,680)       [1] Comparative figures reflect the realignment of reportable segments         and the adoption of amendments to IAS 19, Employee Benefits. Refer         to Notes 2 and 12 in the unaudited condensed interim consolidated         financial statements.     [2] During the first quarter of 2014, the Bank retroactively adjusted         its corporate expenses allocation methodology. As a result,         non-interest expenses amounting to $1.0 million ($0.7 million net         of income taxes) per quarter in 2013, which were previously         reported in the Other sector, were reclassified to the B2B Bank         business segment.   The Other sector posted a negative contribution to net income of $7.0 million  in the second quarter of 2014 compared with a negative contribution of $3.1  million in the second quarter of 2013.  Net interest income decreased to negative $2.7 million in the second quarter  of 2014, compared with negative $0.4 million in the second quarter of 2013,  mainly as a result of less favourable market conditions compared to a year ago  impacting balance sheet management. Other income increased to $2.9 million in  the second quarter of 2014, compared with $0.9 million in the second quarter  of 2013, mainly as a result of the $2.5 million of the total $3.7 million gain  related to the sale of $102.4 million of commercial mortgage loans during the  second quarter of 2014, compared with a similar gain of $0.6 million in the  second quarter of 2013. Non-interest expenses increased to $10.5 million in  the second quarter of 2014 compared with $6.2 million in the second quarter of  2013, mainly due to higher unallocated technology expenses related to new  initiatives aimed at improving IT infrastructure and on-line services.  On a sequential basis, net income improved by $1.5 million from the previous  quarter due to higher total revenue, which includes the positive impact of the  gain on the sale of commercial mortgage loans as discussed above.  For the six months ended April 30, 2014, the negative contribution to net  income was $15.4 million, compared to negative $8.7 million for the six months  ended April 30, 2013, mainly explained by non-interest expenses which  increased by $9.8 million compared to 2013. The increase in non-interest  expenses essentially results from unallocated costs related to systems for  regulatory requirements as well as the new IT initiatives mentioned above.  Additional Financial Information - Quarterly Results ([1])        In thousands of     Canadian     dollars, except     per share and     percentage   amounts            APRIL 30    JANUARY 31    OCTOBER 31       JULY 31      APRIL 30    JANUARY 31    OCTOBER 31        JULY 31        (Unaudited)            2014          2014          2013          2013          2013          2013          2012           2012                                                                                                                                        Net interest   income          $ 138,726     $ 140,856     $ 141,437     $ 144,549     $ 140,430     $ 142,344     $ 142,411     $  129,664    Other income       78,164        75,253        74,094        76,493        74,420        71,570        67,985         64,169    Total revenue     216,890       216,109       215,531       221,042       214,850       213,914       210,396        193,833          Gain on     acquisition,     amortization of     net premium on     purchased     financial     instruments and     revaluation of     contingent   consideration       5,498         1,136         1,006         1,140         1,224         1,056      (23,795)        —    Provision for  loan losses        10,500        10,500        10,000         9,000         9,000         8,000         8,000          7,500    Non-interest  expenses          159,904       159,133       172,651       176,705       161,630       163,093       165,377        148,955    Income before  income taxes       40,988        45,340        31,874        34,197        42,996        41,765        60,814         37,378    Income taxes        9,999         9,815         6,008         7,213         9,157         8,977        15,129          7,380    Net income      $  30,989     $  35,525     $  25,866     $  26,984     $  33,839     $  32,788     $  45,685     $   29,998                                                                                                                                             Earnings per     share                                                                                                                              Basic         $    0.99     $    1.16     $    0.82     $    0.86     $    1.05     $    1.07     $    1.51     $   1.06      Diluted       $    0.99     $    1.16     $    0.82     $    0.86     $    1.05     $    1.07     $    1.51     $   1.06          Return on     common     shareholders'   equity [2]            9.2 %        10.5 %         7.6 %         8.1 %        10.4 %        10.3 %        14.2 %       10.1 %        Balance sheet     assets (in     millions of     Canadian   dollars)        $  34,261     $  33,631     $  33,911     $  33,758     $  34,480     $  34,252     $  34,937     $   31,416                                                                                                                                             Adjusted     measures                                                                                                                             Adjusted net     income [2]    $  39,375     $  39,261     $  33,919     $  38,547     $  39,247     $  39,116     $  36,186     $   35,253            Adjusted       diluted       earnings per     share [2]     $    1.29     $    1.29     $    1.10     $    1.27     $    1.24     $    1.30     $    1.17     $   1.27            Adjusted       return on       common       shareholders'     equity [2]         11.9 %        11.7 %        10.2 %        12.0 %        12.2 %        12.5 %        10.9 %       12.1 %        [1] Comparative figures for 2013 reflect the adoption of amendments to         IAS 19, Employee Benefits. 2012 results have not been restated.         Refer to Note 2 in the unaudited condensed interim consolidated         financial statements.     [2] Refer to the non-GAAP financial measures section.     Accounting Policies  A summary of the Bank's significant accounting policies is presented in Notes  2 and 3 of the 2013 audited annual consolidated financial statements. Pages 58  to 61 of the 2013 Annual Report also contain a discussion of critical  accounting policies and estimates which refer to material amounts reported in  the consolidated financial statements or require management's judgement. The  unaudited condensed interim consolidated financial statements for the second  quarter of 2014 have been prepared in accordance with these accounting  policies, except for accounting changes detailed below.  Accounting changes  Effective November 1, 2013, the Bank adopted new standards and amendments to  existing standards on employee benefits, consolidation, fair value  measurement, and disclosure of offsetting arrangements. Additional information  on the new standards, amendments to existing standards and new accounting  policy can be found in Note 2 to the unaudited condensed interim consolidated  financial statements.  Future accounting changes  The IASB has issued new standards and amendments to existing standards on  financial instruments and offsetting. These future accounting changes will be  applicable for the Bank in various annual periods beginning on November 1,  2014 at the earliest. The Bank is currently assessing the impact of the  adoption of these standards on its financial statements. Additional  information on the new standards and amendments to existing standards can be  found in Note 3 to the unaudited condensed interim consolidated financial  statements.  Corporate Governance and Changes in Internal Control over Financial Reporting  During the second quarter ended April 30, 2014, there have been no changes in  the Bank's policies or procedures and other processes that comprise its  internal control over financial reporting which have materially affected, or  are reasonably likely to materially affect, the Bank's internal control over  financial reporting.  The Board of Directors and the Audit Committee of Laurentian Bank reviewed  this document prior to its release.  Non-GAAP Financial Measures  The Bank uses both generally accepted accounting principles (GAAP) and certain  non-GAAP measures to assess performance. Non-GAAP measures do not have any  standardized meaning prescribed by GAAP and are unlikely to be comparable to  any similar measures presented by other companies. These non-GAAP financial  measures are considered useful to investors and analysts in obtaining a better  understanding of the Bank's financial results and analyzing its growth and  profit potential more effectively. The Bank's non-GAAP financial measures are  defined as follows:  Common shareholders' equity  Effective November 1, 2013, the Bank has modified its definition of common  shareholders' equity, as detailed below. All financial measures for the  quarters and for the year ended in 2013 have been amended accordingly.  The Bank's common shareholders' equity is defined as the sum of the value of  common shares, retained earnings and accumulated other comprehensive income,  excluding cash flow hedge reserves. This definition is now better aligned with  regulatory requirements.  Return on common shareholders' equity  Return on common shareholders' equity is a profitability measure calculated as  the net income available to common shareholders as a percentage of average  common shareholders' equity.  Book value per common share  The Bank's book value per common share is defined as common shareholders'  equity divided by the number of common shares outstanding at the end of the  period.  Net interest margin  Net interest margin is the ratio of net interest income to total average  assets, expressed as a percentage or basis points.  Efficiency ratio and operating leverage  The Bank uses the efficiency ratio as a measure of its productivity and cost  control. This ratio is defined as non-interest expenses as a percentage of  total revenue. The Bank also uses operating leverage as a measure of  efficiency. Operating leverage is the difference between total revenue and  non-interest expenses growth rates. Quarterly growth rates are calculated  sequentially (i.e. current period versus the immediately preceding period).  Year-to-date growth rates are calculated year-over-year (i.e. current period  versus the corresponding prior year period).  Dividend payout ratio  The dividend payout ratio is defined as dividends declared on common shares as  a percentage of net income available to common shareholders.  Dividend yield  The dividend yield is defined as dividends declared per common share divided  by the closing common share price.  Adjusted financial measures  Certain analyses presented throughout this document are based on the Bank's  core activities and therefore exclude the effect of certain amounts designated  as adjusting items, as presented in the table in the Adjusting Items section.  Most of the adjusting items relate to gains and expenses that arise as a  result of acquisitions. The gain on acquisition and ensuing amortization of  net premium on purchased financial instruments are considered adjusting items  since they represent, according to management, significant non-cash  adjustments and due to their non-recurrence. The revaluation of the contingent  consideration related to the AGF Trust acquisition, transaction and  integration-related costs in respect of the MRS Companies and AGF Trust have  been designated as adjusting items due to the significance of the amounts and  their non-recurrence.  About Laurentian Bank  Laurentian Bank of Canada is a banking institution whose activities extend  across Canada. Recognized for its excellent service, proximity and simplicity,  the Bank serves one and a half million clients throughout the country. Founded  in 1846, the Bank is among the 2014 edition of the Montréal's Top Employers  competition, which showcases the city's top 25 companies offering enviable  places to work. It currently employs some 3,800 people whose talent and  dedication has made it a major player in numerous market segments.  Laurentian Bank distinguishes itself through the excellence of its execution  and its agility. Catering to the needs of retail clients via its extensive  branch network and constantly evolving virtual offerings, the Bank has also  earned a solid reputation among SMEs, larger businesses and real estate  developers thanks to its growing presence across Canada and its specialized  teams in Ontario, Québec, Alberta and British Columbia. For its part, the  organization's B2B Bank subsidiary is a Canadian leader in providing banking  and investment products and services to financial advisors and brokers, while  Laurentian Bank Securities is an integrated broker that is also widely known  for its expert and effective services nationwide. The institution has more  than $34 billion in balance sheet assets and more than $41 billion in assets  under administration.  Access to Quarterly Results Materials  Interested investors, the media and others may review this press release,  unaudited condensed interim consolidated financial statements, supplementary  financial information and our report to shareholders which are posted on our  web site at www.laurentianbank.ca.  Conference Call  Laurentian Bank invites media representatives and the public to listen to the  conference call with financial analysts to be held at 2:00 p.m. Eastern Time  on Wednesday, June 4, 2014. The live, listen-only, toll-free, call-in number  is 416 642-5212 or 1 866 321-6651.  You can listen to the call on a delayed basis at any time from 5:00 p.m. on  Wednesday, June 4, 2014 until 5:00 p.m. on July 3, 2014, by dialing the  following playback number: 647 436-0148 or 1 888 203-1112 Code 5653302#. The  conference call can also be heard through the Investor Relations section of  the Bank's Web site at www.laurentianbank.ca. The Bank's Web site also offers  additional financial information.    Unaudited Condensed Interim Consolidated Financial Statements  The unaudited condensed interim consolidated financial statements for the  quarter ended April 30, 2014, including the notes to consolidated financial  statements, are also available on the Bank's Web site at www.laurentianbank.ca.  Consolidated Balance Sheet ([1] )     In thousands of     Canadian dollars     AS AT APRIL 30   AS AT OCTOBER 31   AS AT APRIL 30     (Unaudited)                    2014               2013             2013                                                                                 ASSETS                                                                      Cash and                                                                    non-interest-bearing     deposits with other     banks                $     92,282     $     82,836       $     83,512     Interest-bearing     deposits with other     banks                     123,226          126,002            233,501       Securities                                                                    Available-for-sale    2,027,794        1,679,067          2,151,551         Held-to-maturity        390,045          648,874          1,030,366         Held-for-trading      2,114,759        2,152,584          2,574,845                               4,532,598        4,480,525          5,756,762       Securities purchased     under reverse     repurchase     agreements              1,582,181        1,218,255            545,974       Loans                                                                         Personal              7,079,386        7,245,474          7,605,244         Residential       mortgage             14,665,381       14,735,211         14,499,292         Commercial       mortgage              2,535,881        2,488,826          2,434,514         Commercial and       other                 2,651,025        2,488,137          2,239,842         Customers'       liabilities under       acceptances             301,077          271,049            256,150                              27,232,750       27,228,697         27,035,042         Allowances for       loan losses           (122,103)        (115,590)          (114,368)                              27,110,647       27,113,107         26,920,674       Other                                                                         Premises and       equipment                74,535           73,261             72,108         Derivatives             126,777          126,617            156,308         Goodwill                 64,077           64,077             64,077         Software and other       intangible assets       208,779          197,594            165,225         Deferred tax       assets                   12,882           21,588             32,470         Other assets            333,012          407,164            448,990                                 820,062          890,301            939,178                            $ 34,260,996     $ 33,911,026       $ 34,479,601                                                                                   LIABILITIES AND     SHAREHOLDERS' EQUITY                                                        Deposits                                                                      Personal           $ 19,168,273     $ 19,282,042       $ 19,535,193         Business, banks       and other             4,590,480        4,645,308          4,273,632                              23,758,753       23,927,350         23,808,825       Other                                                                         Obligations       related to       securities sold       short                 1,436,150        1,464,269          1,679,095         Obligations       related to       securities sold       under repurchase       agreements              887,384          339,602            394,725         Acceptances             301,077          271,049            256,150         Derivatives             101,494          102,041             96,626         Deferred tax       liabilities               1,884            9,845             19,264         Other liabilities       829,753          943,112            901,380                               3,557,742        3,129,918          3,347,240       Debt related to     securitization     activities              4,896,007        4,974,714          5,473,470       Subordinated debt         446,485          445,473            444,469       Liability related to     preferred shares          120,946          —            —       Shareholders' equity                                                          Preferred shares        205,204          205,204            205,146         Common shares           456,032          446,496            438,454         Share-based       payment reserve              91               91                136         Retained earnings       812,229          776,256            732,032         Accumulated other       comprehensive       income                    7,507            5,524             29,829                               1,481,063        1,433,571          1,405,597                            $ 34,260,996     $ 33,911,026       $ 34,479,601       [1] Comparative figures reflect the adoption of amendments to IAS 19,         Employee Benefits. Refer to Note 2 in the unaudited condensed         interim consolidated financial statements.     Consolidated Statement of Income ([1] )                               FOR THE THREE MONTHS ENDED       FOR THE SIX MONTHS ENDED     In thousands of     Canadian     dollars, except     per share     amounts             APRIL 30    JANUARY 31      APRIL 30      APRIL 30      APRIL 30     (Unaudited)             2014          2014          2013          2014          2013                                                                                              Interest income                                                                            Loans          $ 260,326     $ 269,084     $ 264,704     $ 529,410     $ 541,574         Securities        10,136        10,321        16,178        20,457        33,306         Deposits with       other banks          194           181           499           375         1,413         Other,       including       derivatives       10,167        10,188        11,193        20,355        24,646                          280,823       289,774       292,574       570,597       600,939       Interest expense                                                                           Deposits         108,811       114,020       112,525       222,831       233,948         Debt related       to       securitization       activities        29,140        30,529        35,163        59,669        75,388         Subordinated       debt               3,933         4,031         3,927         7,964         7,951         Other                213           338           529           551           878                          142,097       148,918       152,144       291,015       318,165       Net interest     income             138,726       140,856       140,430       279,582       282,774       Other income                                                                               Fees and       commissions on       loans and       deposits          32,964        34,755        31,724        67,719        63,054         Income from       brokerage       operations        16,992        15,207        14,523        32,199        31,045         Income from       investment       accounts           8,343         8,027         7,894        16,370        15,752         Income from       sales of       mutual funds       7,151         6,580         5,415        13,731        10,555         Income from       treasury and       financial       market       operations         2,766         4,339         4,601         7,105         9,942         Insurance       income, net        4,744         4,633         4,415         9,377         7,810         Other income       5,204         1,712         5,848         6,916         7,832                           78,164        75,253        74,420       153,417       145,990       Total revenue      216,890       216,109       214,850       432,999       428,764       Amortization of     net premium on     purchased     financial     instruments and     revaluation of     contingent     consideration        5,498         1,136         1,224         6,634         2,280       Provision for     loan losses         10,500        10,500         9,000        21,000        17,000       Non-interest     expenses                                                                                   Salaries and       employee       benefits          84,407        85,540        86,977       169,947       178,136         Premises and       technology        45,642        45,940        42,626        91,582        81,507         Other             25,418        23,704        25,891        49,122        51,387         Costs related       to business       combinations       4,437         3,949         6,136         8,386        13,693                          159,904       159,133       161,630       319,037       324,723       Income before     income taxes        40,988        45,340        42,996        86,328        84,761       Income taxes         9,999         9,815         9,157        19,814        18,134       Net income       $  30,989     $  35,525     $  33,839     $  66,514     $  66,627       Preferred share     dividends,     including     applicable taxes     2,501         2,501         4,059         5,002         6,592       Net income     available to     common     shareholders     $  28,488     $  33,024     $  29,780     $  61,512     $  60,035       Average number     of common shares     outstanding (in     thousands)                                                                                 Basic             28,677        28,570        28,287        28,622        28,227         Diluted           28,684        28,577        28,297        28,630        28,239       Earnings per     share                                                                                      Basic          $    0.99     $    1.16     $    1.05     $    2.15     $    2.13         Diluted        $    0.99     $    1.16     $    1.05     $    2.15     $    2.13       Dividends     declared per     share                                                                                      Common share   $    0.51     $    0.51     $    0.49     $    1.02     $    0.98         Preferred       share - Series       9                     n.a.          n.a.   $    0.38            n.a.   $    0.75         Preferred       share - Series       10             $    0.33     $    0.33     $    0.33     $    0.66     $    0.66         Preferred       share - Series       11             $    0.25     $    0.25     $    0.25     $    0.50     $    0.41       [1] Comparative figures reflect the adoption of amendments to IAS 19,         Employee Benefits. Refer to Note 2 in the unaudited condensed         interim consolidated financial statements.     Consolidated Statement of Comprehensive Income ([1] )                                                                    FOR THE SIX MONTHS                                 FOR THE THREE MONTHS ENDED                ENDED     In thousands of     Canadian dollars       APRIL 30   JANUARY 31     APRIL 30     APRIL 30     APRIL 30     (Unaudited)                2014         2014         2013         2014         2013                                                                                             Net income           $ 30,989     $ 35,525     $ 33,839     $ 66,514     $ 66,627       Other comprehensive     income, net of     income taxes                                                                            Items that may     subsequently be     reclassified to the     statement of income                                                                       Unrealized net       gains (losses) on       available-for-sale       securities            5,941          758        1,484        6,699        2,600         Reclassification       of net (gains)       losses on       available-for-sale       securities to net       income              (1,236)      (1,061)        (427)      (2,297)      (1,885)         Net change in       value of       derivatives       designated as cash       flow hedges         (4,965)        2,546        4,929      (2,419)      (5,114)                               (260)        2,243        5,986        1,983      (4,399)       Items that may not     be subsequently     reclassified to the     statement of income                                                                       Actuarial gains       (losses) on       employee benefit       plans               (2,012)        5,634      (6,638)        3,622      (4,290)       Comprehensive income $ 28,717     $ 43,402     $ 33,187     $ 72,119     $ 57,938       Income Taxes — Other Comprehensive Income  The following table presents the income taxes for each component of other  comprehensive income:                                                                 FOR THE SIX MONTHS                               FOR THE THREE MONTHS ENDED               ENDED     In thousands of                    JANUARY                               Canadian dollars      APRIL 30          31    APRIL 30    APRIL 30      APRIL 30     (Unaudited)               2014        2014        2013        2014          2013                                                                                          Income tax expense                                         (recovery) on:                                                                         Unrealized net                                   gains (losses) on       available-for-sale       securities         $ 2,103     $   243     $   508     $ 2,346     $     941         Reclassification                                           of net (gains)       losses on       available-for-sale       securities to net       income               (449)       (390)       (157)       (839)         (693)         Net change in                                              value of       derivatives       designated as cash       flow hedges        (1,808)         925       1,799       (883)       (1,871)         Actuarial gains                                            (losses) on       employee benefit       plans                (738)       2,066     (2,434)       1,328       (1,573)                            $ (892)     $ 2,844     $ (284)     $ 1,952     $ (3,196)     [1] Comparative figures reflect the adoption of amendments to IAS 19,         Employee Benefits. Refer to Note 2 in the unaudited condensed         interim consolidated financial statements.     Consolidated Statement of Changes in Shareholders' Equity ([1] )                                                                                              FOR THE SIX MONTHS ENDED  APRIL 30, 2014                                                                                         AOCI RESERVES                                                                                                                                                    SHARE-            TOTAL     In thousands of                                                AVAILABLE-          CASH                    BASED           SHARE-     Canadian dollars       PREFERRED        COMMON      RETAINED     FOR-SALE          FLOW                  PAYMENT         HOLDERS'     (Unaudited)            SHARES[2]        SHARES      EARNINGS   SECURITIES        HEDGES        TOTAL     RESERVE           EQUITY                                                                                                                                               Balance as at   October 31, 2013     $ 205,204     $ 446,496     $ 776,256     $  9,536     $ (4,012)     $  5,524     $      91      $ 1,433,571          Net income                                          66,514                                                                 66,514       Other comprehensive     income (net of     income taxes)                                                                                                                             Unrealized net       gains (losses) on       available-for-sale       securities                                                      6,699                      6,699                          6,699         Reclassification       of net (gains)       losses on       available-for-sale       securities to net       income                                                        (2,297)                    (2,297)                        (2,297)         Net change in       value of       derivatives       designated as cash       flow hedges                                                                 (2,419)      (2,419)                        (2,419)         Actuarial gains       (losses) on       employee benefit       plans                                              3,622                                                                  3,622       Comprehensive income                                70,136        4,402       (2,419)        1,983                         72,119       Issuance of share     capital                                9,536                                                                                9,536       Dividends                                                                                                                                 Preferred shares,       including       applicable taxes                                 (5,002)                                                                (5,002)         Common shares                                   (29,161)                                                               (29,161)       Balance as at April   30, 2014             $ 205,204     $ 456,032     $ 812,229     $ 13,938     $ (6,431)     $  7,507     $      91      $ 1,481,063                                                                                                                                                                                                                                           FOR THE SIX MONTHS ENDED  APRIL 30, 2013                                                                                         AOCI RESERVES                                                                                                                                                    SHARE-            TOTAL     In thousands of                                                AVAILABLE-          CASH                    BASED           SHARE-     Canadian dollars       PREFERRED        COMMON      RETAINED     FOR-SALE          FLOW                  PAYMENT         HOLDERS'     (Unaudited)               SHARES        SHARES      EARNINGS   SECURITIES        HEDGES        TOTAL     RESERVE           EQUITY                                                                                                                                               Balance as at   November 1, 2012     $ 303,249     $ 428,526     $ 706,035     $ 12,201     $  22,027     $ 34,228     $     227      $ 1,472,265          Net income                                          66,627                                                                 66,627       Other comprehensive     income (net of     income taxes)                                                                                                                             Unrealized net       gains (losses) on       available-for-sale       securities                                                      2,600                      2,600                          2,600         Reclassification       of net (gains)       losses on       available-for-sale       securities to net       income                                                        (1,885)                    (1,885)                        (1,885)         Net change in       value of       derivatives       designated as cash       flow hedges                                                                 (5,114)      (5,114)                        (5,114)       Actuarial gains     (losses) on employee     benefit plans                                      (4,290)                                                                (4,290)       Comprehensive income                                62,337          715       (5,114)      (4,399)                         57,938       Issuance of share     capital                  (218)         9,928                                                                (91)            9,619       Repurchase of share   capital               (97,885)                     (2,115)                                                            (100,000)          Dividends                                                                                                                                 Preferred shares,       including       applicable taxes                                 (6,592)                                                                (6,592)         Common shares                                   (27,633)                                                               (27,633)       Balance as at April   30, 2013             $ 205,146     $ 438,454     $ 732,032     $ 12,916     $  16,913     $ 29,829     $     136      $ 1,405,597          [1] Comparative figures reflect the adoption of amendments to IAS 19,         Employee Benefits. Refer to Note 2 in the unaudited condensed         interim consolidated financial statements.     [2] Excluding preferred shares presented as liabilities. Refer to Note         7 in the unaudited condensed interim consolidated financial         statements.    SOURCE  Laurentian Bank of Canada  Chief Financial Officer: Michel C. Lauzon, 514 284-4500 #7997 Media and  Investor Relations contact: Gladys Caron, 514 284-4500 #7511;  cell: 514  893-3963  To view this news release in HTML formatting, please use the following URL:  http://www.newswire.ca/en/releases/archive/June2014/04/c7586.html  CO: Laurentian Bank of Canada ST: Quebec NI: FIN ERN CONF DIV  
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