INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) INTERIM
CONSOLIDATED BALANCE SHEET (unaudited)
-------------------------------------------------------------------------
As at --------------------- Jan. 31 Oct. 31 (millions of Canadian
dollars) 2007 2006
-------------------------------------------------------------------------
ASSETS Cash and due from banks $2,113 $2,019 Interest-bearing
deposits with banks 8,724 8,763
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10,837 10,782
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Securities Trading 78,071 77,482 Designated as trading under the
fair value option (Note 14) 1,916 - Available-for-sale 38,394 -
Held-to-maturity 11,810 - Investment - 46,976
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130,191 124,458
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Securities purchased under reverse repurchase agreements 32,357
30,961
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Loans Residential mortgages 51,794 53,425 Consumer instalment and
other personal 63,520 63,130 Credit card 5,175 4,856 Business and
government 43,748 40,514
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164,237 161,925 Allowance for credit losses (Note 4) (1,366)
(1,317)
-------------------------------------------------------------------------
Loans, net of allowance for credit losses 162,871 160,608
-------------------------------------------------------------------------
Other Customers' liability under acceptances 8,425 8,676 Investment
in TD Ameritrade (Note 15) 5,113 4,379 Trading derivatives 26,871
27,845 Goodwill 8,176 7,396 Other intangibles 1,896 1,946 Land,
buildings and equipment 1,877 1,862 Other assets 19,602 14,001
-------------------------------------------------------------------------
71,960 66,105
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Total assets $408,216 $392,914
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------
Deposits Personal $150,638 $146,636 Banks 9,033 14,186 Business and
government 73,780 100,085 Trading 36,237 -
-------------------------------------------------------------------------
269,688 260,907
-------------------------------------------------------------------------
Other Acceptances 8,425 8,676 Obligations related to securities
sold short 26,230 27,113 Obligations related to securities sold
under repurchase agreements 20,597 18,655 Trading derivatives
28,322 29,337 Other liabilities 20,321 17,461
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103,895 101,242
-------------------------------------------------------------------------
Subordinated notes and debentures (Note 6) 9,209 6,900
-------------------------------------------------------------------------
Liabilities for preferred shares and capital trust securities (Note
7) 1,800 1,794
-------------------------------------------------------------------------
Non-controlling interests in subsidiaries 2,607 2,439
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY Common shares (millions of shares issued and
outstanding: Jan. 31, 2007 - 719.0 and Oct. 31, 2006 - 717.4) (Note
8) 6,417 6,334 Preferred shares (millions of shares issued and
outstanding: Jan. 31, 2007 - 17.0 and Oct. 31, 2006 - 17.0) (Note
8) 425 425 Contributed surplus 68 66 Retained earnings 14,375
13,725 Accumulated other comprehensive income (268) (918)
-------------------------------------------------------------------------
21,017 19,632
-------------------------------------------------------------------------
Total liabilities and shareholders' equity $408,216 $392,914
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform to
the current period's presentation. The accompanying notes are an
integral part of these Interim Consolidated Financial Statements.
INTERIM CONSOLIDATED STATEMENT OF INCOME (unaudited)
-------------------------------------------------------------------------
For the three months ended ---------------------------- Jan. 31
Jan. 31 (millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Interest income Loans $3,074 $2,452 Securities Dividends 273 222
Interest 986 1,037 Deposits with banks 47 80
-------------------------------------------------------------------------
4,380 3,791
-------------------------------------------------------------------------
Interest expense Deposits 2,048 1,534 Subordinated notes and
debentures 108 86 Preferred shares and capital trust securities 30
39 Other liabilities 523 525
-------------------------------------------------------------------------
2,709 2,184
-------------------------------------------------------------------------
Net interest income 1,671 1,607
-------------------------------------------------------------------------
Other income Investment and securities services 548 642 Credit fees
96 86 Net securities gains 70 23 Trading income 216 292 Service
charges 249 221 Loan securitizations (Note 5) 134 92 Card services
110 81 Insurance, net of claims 254 224 Trust fees 31 29 Other 94
107
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1,802 1,797
-------------------------------------------------------------------------
Total revenues 3,473 3,404
-------------------------------------------------------------------------
Provision for credit losses (Note 4) 163 114
-------------------------------------------------------------------------
Non-interest expenses Salaries and employee benefits 1,157 1,174
Occupancy, including depreciation 175 166 Equipment, including
depreciation 144 147 Amortization of other intangibles 118 128
Restructuring costs - 50 Marketing and business development 113 133
Brokerage-related fees 36 53 Professional and advisory services 128
105 Communications 49 49 Other 269 285
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2,189 2,290
-------------------------------------------------------------------------
Dilution gain, net - 1,564
-------------------------------------------------------------------------
Income before provision for income taxes, non-controlling interests
in subsidiaries and equity in net income of an associated company
1,121 2,564 Provision for income taxes 218 220 Non-controlling
interests in subsidiaries, net of income taxes 47 37 Equity in net
income of an associated company, net of income taxes 65 -
-------------------------------------------------------------------------
Net income 921 2,307 Preferred dividends 6 5
-------------------------------------------------------------------------
Net income available to common shareholders $915 $2,302
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Average number of common shares outstanding (millions) Basic 718.3
712.5 Diluted 724.9 718.9 Earnings per share (in dollars) Basic
$1.27 $3.23 Diluted 1.26 3.20 Dividends per share (in dollars) 0.48
0.42
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform to
the current period's presentation. The accompanying notes are an
integral part of these Interim Consolidated Financial Statements.
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
-------------------------------------------------------------------------
For the three months ended ---------------------------- Jan. 31
Jan. 31 (millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Common shares Balance at beginning of period $6,334 $5,872 Proceeds
from shares issued on exercise of options 34 45 Shares issued as a
result of dividend reinvestment plan 19 100 Impact of shares sold
(acquired) in Wholesale Banking 30 (2)
-------------------------------------------------------------------------
Balance at end of period 6,417 6,015
-------------------------------------------------------------------------
Preferred shares Balance at beginning of period 425 - Share issues
- 425
-------------------------------------------------------------------------
Balance at end of period 425 425
-------------------------------------------------------------------------
Contributed surplus Balance at beginning of period 66 40 Stock
options (Note 9) 2 7
-------------------------------------------------------------------------
Balance at end of period 68 47
-------------------------------------------------------------------------
Retained earnings Balance at beginning of period 13,725 10,650
Transition adjustment on adoption of Financial Instruments
standards (Note 2) 80 - Net income 921 2,307 Common dividends (345)
(300) Preferred dividends (6) (5)
-------------------------------------------------------------------------
Balance at end of period 14,375 12,652
-------------------------------------------------------------------------
Accumulated other comprehensive income, net of income taxes Balance
at beginning of period (918) (696) Transition adjustment on
adoption of Financial Instrument standards 426 - Other
comprehensive income for the period 224 30
-------------------------------------------------------------------------
Balance at end of period (Note 17) (268) (666)
-------------------------------------------------------------------------
Total shareholders' equity at end of period $21,017 $18,473
-------------------------------------------------------------------------
-------------------------------------------------------------------------
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
-------------------------------------------------------------------------
For the three months ended ---------------------------- Jan. 31
Jan. 31 (millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Net income $921 $2,307 Other comprehensive income (loss), net of
income taxes Change in unrealized gains and (losses) on
available-for-sale securities, net of cash flow hedges(a),(b) 53 -
Reclassification to earnings in respect of available-for-sale
securities(c) (29) - Change in foreign currency translation gains
and (losses) on investments in subsidiaries, net of hedging
activities(d),(e) 323 30 Change in gains and (losses) on derivative
instruments designated as cash flow hedges(f) (127) -
Reclassification to earnings of gains and (losses) on cash flow
hedges(g) 4 -
-------------------------------------------------------------------------
Other comprehensive income for the period 224 30
-------------------------------------------------------------------------
Comprehensive income for the period $1,145 $2,337
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(a) The amount of cumulative loss related to available-for-sale
securities measured at fair value as at January 31, 2007 was $49
million after tax. (b) Net of income taxes of $24 million. (c) Net
of income tax benefit of $14 million. (d) Net of income tax
(benefit) of $(279) million (2006 - $172 million). (e) Fiscal 2007
include $848 million (2006 - $528 million) of after-tax gains
(losses) arising from hedges of the Bank's investment in foreign
operations. (f) Net of income tax benefit of $79 million. (g) Net
of income taxes of $3 million. Certain comparative amounts have
been reclassified to conform to the current period's presentation.
The accompanying notes are an integral part of these Interim
Consolidated Financial Statements. INTERIM CONSOLIDATED STATEMENT
OF CASH FLOWS (unaudited)
-------------------------------------------------------------------------
For the three months ended ---------------------------- Jan. 31
Jan. 31 (millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Cash flows from (used in) operating activities Net income $921
$2,307 Adjustments to determine net cash flows from (used in)
operating activities: Provision for credit losses 163 114
Restructuring costs - 50 Depreciation 82 85 Amortization of other
intangibles 118 128 Stock option 2 7 Dilution gain, net - (1,564)
Net securities gains (70) (23) Net gain on securitizations (Note 5)
(47) (33) Equity in net income of an associated company (65) -
Non-controlling interests 47 37 Future income taxes 170 169 Changes
in operating assets and liabilities: Current income taxes payable
(358) (47) Interest receivable and payable 72 (44) Trading
securities (2,505) (9,225) Unrealized gains and amounts receivable
on derivative contracts 974 (130) Unrealized losses and amounts
payable on derivative contracts (1,015) 1,436 Other (2,737) (1,021)
-------------------------------------------------------------------------
Net cash used in operating activities (4,248) (7,754)
-------------------------------------------------------------------------
Cash flows from (used in) financing activities Change in deposits
7,449 5,000 Securities sold under repurchase agreements 1,942 530
Securities sold short (883) 1,951 Issue of subordinated notes and
debentures 2,274 1,800 Repayment of subordinated notes and
debentures - (150) Subordinated notes and debentures (acquired)
sold in Wholesale Banking (7) 1 Liability for preferred shares and
capital trust securities 6 (2) Translation adjustment on
subordinated notes and debentures issued in a foreign currency 42 -
Common shares issued on exercise of options 34 45 Common shares
(acquired) sold in Wholesale Banking 30 (2) Repurchase of common
shares - - Dividends paid in cash on common shares (326) (200)
Issuance of preferred shares - 425 Dividends paid on preferred
shares (6) (5)
-------------------------------------------------------------------------
Net cash from financing activities 10,555 9,393
-------------------------------------------------------------------------
Cash flows from (used in) investing activities Interest-bearing
deposits with banks 39 519 Activity in available-for-sale,
held-to-maturity and investment securities: Purchases (48,230)
(56,865) Proceeds from maturities 40,478 51,117 Proceeds from sales
4,540 4,724 Activity in lending activities: Origination and
acquisitions (39,496) (49,148) Proceeds from maturities 34,602
46,510 Proceeds from sales 598 333 Proceeds from loan
securitizations (Note 5) 3,124 1,057 Land, buildings and equipment
(97) (75) Securities purchased under reverse repurchase agreements
(1,396) 1,536 Acquisitions and dispositions less cash and cash
equivalents acquired (Note 15) (426) (819)
-------------------------------------------------------------------------
Net cash used in investing activities (6,264) (1,111)
-------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 51
(43)
-------------------------------------------------------------------------
Net increase in cash and cash equivalents 94 485 Cash and cash
equivalents at beginning of period 2,019 1,673
-------------------------------------------------------------------------
Cash and cash equivalents at end of period, represented by cash and
due from banks $2,113 $2,158
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplementary disclosure of cash flow information Amount of
interest paid during the period $2,472 $2,281 Amount of income
taxes paid during the period 398 343
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform to
the current period's presentation. The accompanying notes are an
integral part of these Interim Consolidated Financial Statements.
greater than greater than NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)
-------------------------------------------------------------------------
Note 1: BASIS OF PRESENTATION
-------------------------------------------------------------------------
These Interim Consolidated Financial Statements have been prepared
in accordance with Canadian generally accepted accounting
principles (GAAP) and follow the same accounting policies and
methods of application as the Bank's Consolidated Financial
Statements for the year ended October 31, 2006, except as described
in Note 2. Under GAAP, additional disclosures are required in the
annual financial statements and accordingly, these Interim
Consolidated Financial Statements should be read in conjunction
with the audited Consolidated Financial Statements for the year
ended October 31, 2006 and the accompanying notes included on pages
71 to 113 of the Bank's 2006 Annual Report. The Interim
Consolidated Financial Statements include all adjustments which
are, in the opinion of management, necessary for a fair
presentation of the results for the periods presented. Note 2:
CHANGES IN ACCOUNTING POLICIES
-------------------------------------------------------------------------
FINANCIAL INSTRUMENTS The Bank adopted the Canadian Institute of
Chartered Accountants (CICA) Handbook Section 3855, Financial
Instruments - Recognition and Measurement; Section 3865, Hedges;
Section 1530, Comprehensive Income and Section 3861, Financial
Instruments - Disclosure and Presentation on November 1, 2006. The
adoption of these new Financial Instruments standards resulted in
changes in the accounting for financial instruments and hedges as
well as the recognition of certain transition adjustments that have
been recorded in opening retained earnings or opening accumulated
other comprehensive income as described below. The comparative
Interim Consolidated Financial Statements have not been restated.
With the adoption of these standards, the Bank's accounting for
financial instruments is now largely harmonized with U.S. generally
accepted accounting principles for this area. The principal changes
in the accounting for financial instruments and hedges due to the
adoption of these accounting standards are described below. (a)
Financial Assets and Financial Liabilities Prior to the adoption of
the new standards, the Bank classified all of its financial assets
as trading securities, investment securities or loans and
receivables. Trading securities were accounted for at fair value.
Investment securities were accounted for at cost or amortized cost,
net of any adjustment for other-than-temporary impairment. Loans
and receivables were accounted for at amortized cost using the
effective interest rate method. All of the Bank's financial
liabilities, except those classified as trading and short positions
in securities, were accounted for on an accrual basis. Under the
new standards, financial assets and financial liabilities are
initially recognized at fair value and are subsequently accounted
for based on their classification as described below. The
classification depends on the purpose for which the financial
instruments were acquired and their characteristics. Except in very
limited circumstances, the classification is not changed subsequent
to initial recognition. Financial assets purchased and sold, where
the contract requires the asset to be delivered within an
established time frame, are recognized on a trade-date basis.
Transaction costs are recognized immediately in income or are
capitalized, depending upon the nature of the transaction and the
associated product. Trading ------- Financial assets and financial
liabilities that are purchased and incurred with the intention of
generating profits in the near term are classified as trading.
These instruments are accounted for at fair value with the change
in the fair value recognized in trading income. Investments
totalling $76.4 billion, previously disclosed as trading in the
audited Consolidated Financial Statements for the year ended
October 31, 2006, were classified as trading on November 1, 2006.
On transition, retained interests with a carrying value of $216
million, previously accounted for at amortized costs, were
reclassified to trading securities. Deposit liabilities totaling
$35.5 billion were classified as trading on November 1, 2006.
Available-for-sale ------------------ Financial assets classified
as available-for-sale are carried at fair value with the changes in
fair value recorded in other comprehensive income. Securities that
are classified as available-for-sale and do not have a readily
available market value are recorded at cost. Available-for-sale
securities are written down to fair value through income whenever
it is necessary to reflect other-than-temporary impairment.
Previously, such write-downs were to net realizable value. Gains
and losses realized on disposal of available-for-sale securities,
which are calculated on an average cost basis, are recognized in
net securities gains in other income. Investments totalling $34.8
billion, previously disclosed as "Investment Securities" in the the
audited Consolidated Financial Statements for the year ended
October 31, 2006, were designated as available-for-sale on November
1, 2006. The change in accounting policy related to
other-than-temporary impairment was not material. Held-to-maturity
---------------- Securities that have a fixed maturity date, where
the Bank intends and has the ability to hold to maturity, are
classified as held-to-maturity and accounted for at amortized cost
using the effective interest rate method. Investments totalling
$10.1 billion were reclassified from investment securities to
held-to-maturity securities on November 1, 2006. Bonds totalling
$1.1 billion were reclassified from trading securities to
held-to-maturity securities on November 1, 2006. Loans ----- Loans
are accounted for at amortized cost using the effective interest
rate method. This classification is consistent with the
classification under the prior accounting standards. Financial
assets and financial liabilities designated as trading under the
fair value option --------------------- Financial assets and
financial liabilities, other than those classified as trading, are
designated as trading under the fair value option if they are
reliably measurable, meet one or more of the criteria set out
below, and are so designated by the Bank. The Bank may designate
financial assets and financial liabilities as trading when the
designation: (i) eliminates or significantly reduces valuation or
recognition inconsistencies that would otherwise arise from
measuring financial assets or financial liabilities, or recognizing
gains and losses on them, on different bases; or (ii) applies to
groups of financial assets, financial liabilities or combinations
thereof that are managed, and their performance evaluated, on a
fair value basis in accordance with a documented risk management or
investment strategy, and where information about the groups of
financial instruments is reported to management on that basis.
Financial instruments designated as trading under the fair value
option are accounted for at fair value with the change in the fair
value recognized in trading income. On November 1, 2006 the Bank
designated $2 billion of financial assets as trading under the fair
value option. Determination of fair value
--------------------------- The fair value of a financial
instrument on initial recognition is normally the transaction
price, i.e. the fair value of the consideration given or received.
In certain circumstances, however, the initial fair value may be
based on other observable current market transactions in the same
instrument, without modification or repackaging, or on a valuation
technique whose variables include only data from observable
markets. Subsequent to initial recognition, the fair values of
financial instruments measured at fair value that are quoted in
active markets are based on bid prices for financial assets held
and offer prices for financial liabilities. When independent prices
are not available, fair values are determined by using valuation
techniques which refer to observable market data. These include
comparisons with similar instruments where market observable prices
exist, discounted cash flow analysis, option pricing models and
other valuation techniques commonly used by market participants.
For certain derivatives, fair values may be determined in whole or
in part from valuation techniques using non-observable market data
or transaction prices. A number of factors such as bid-offer
spread, credit profile and model uncertainty are taken into
account, as appropriate, when values are calculated using valuation
techniques. If the fair value of a financial asset measured at fair
value becomes negative, it is recorded as a financial liability
until its fair value becomes positive, at which time it is recorded
as a financial asset, or it is extinguished. (b) Derivatives and
Hedge Accounting Embedded derivatives --------------------
Derivatives may be embedded in other financial instruments (the
"host instrument"). Prior to the adoption of the new standards,
such embedded derivatives were not accounted for separately from
the host instrument except in the case of derivatives embedded in
equity-linked deposit contracts within the scope of Accounting
Guideline 17. Under the new standards, embedded derivatives are
treated as separate derivatives when their economic characteristics
and risks are not clearly and closely related to those of the host
instrument, the terms of the embedded derivative are the same as
those of a stand-alone derivative, and the combined contract is not
held for trading or designated at fair value. These embedded
derivatives are measured at fair value with subsequent changes
recognized in trading income. The change in accounting policy
related to embedded derivatives was not material. Hedge accounting
---------------- At the inception of a hedging relationship, the
Bank documents the relationship between the hedging instrument and
the hedged item, its risk management objective and its strategy for
undertaking the hedge. The Bank also requires a documented
assessment, both at hedge inception and on an ongoing basis, of
whether or not the derivatives that are used in hedging
transactions are highly effective in offsetting the changes
attributable to the hedged risks in the fair values or cash flows
of the hedged items. Under the previous standards, derivatives that
met the requirements for hedge accounting were generally accounted
for on an accrual basis. Under the new standards, all derivatives
are recorded at fair value. Non- trading derivatives are recorded
in other assets or other liabilities. The method of recognizing
fair value gains and losses depends on whether derivatives are held
for trading or are designated as hedging instruments, and, if the
latter, the nature of the risks being hedged. All gains and losses
from changes in the fair value of derivatives held for trading are
recognized in the statement of income. These gains and losses are
reported in other income. When derivatives are designated as
hedges, the Bank classifies them either as: (i) hedges of the
change in fair value of recognized assets or liabilities or firm
commitments (fair value hedges); (ii) hedges of the variability in
highly probable future cash flows attributable to a recognized
asset or liability, or a forecasted transaction (cash flow hedges);
or (iii) hedges of net investments in a foreign operation (net
investment hedges). Fair value hedge ---------------- The Bank's
fair value hedges principally consist of interest rate swaps that
are used to protect against changes in the fair value of fixed-rate
long-term financial instruments due to movements in market interest
rates. Changes in the fair value of derivatives that are designated
and qualify as fair value hedging instruments are recorded in the
statement of income, along with changes in the fair value of the
assets, liabilities or group thereof that are attributable to the
hedged risk. Any gain or loss in fair value relating to the
ineffective portion of the hedging relationship is recognized
immediately in the statement of income in other income. If a
hedging relationship no longer meets the criteria for hedge
accounting, the cumulative adjustment to the carrying amount of the
hedged item is amortized to the statement of income based on a
recalculated effective interest rate over the residual period to
maturity, unless the hedged item has been derecognized in which
case it is released to the statement of income immediately. Upon
adoption of the new standards, the Bank recorded a net increase in
derivative liabilities designated as fair value hedges of $3
million, an increase of $14 million in loans and an increase of $11
million in deposits. Cash flow hedge --------------- The Bank is
exposed to variability in future interest cash flows on non-
trading assets and liabilities that bear interest at variable rates
or are expected to be refunded or reinvested in the future. The
amounts and timing of future cash flows, representing both
principal and interest flows, are projected for each portfolio of
financial assets and liabilities on the basis of their contractual
terms and other relevant factors, including estimates of
prepayments and defaults. The aggregate principal balances and
interest cash flows across all portfolios over time form the basis
for identifying the effective portion of gains and losses on the
derivatives designated as cash flow hedges of forecasted
transactions. The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash flow hedges is
recognized in other comprehensive income. Any gain or loss in fair
value relating to the ineffective portion is recognized immediately
in the statement of income in other income. Amounts accumulated in
other comprehensive income are reclassified to the statement of
income in the period in which the hedged item affects income.
However, when the forecast transaction that is hedged results in
the recognition of a non-financial asset or a non-financial
liability, the gains and losses previously deferred in other
comprehensive income are transferred from other comprehensive
income and included in the initial measurement of the cost of the
asset or liability. When a hedging instrument expires or is sold,
or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in other comprehensive income
at that time remains in other comprehensive income until the
forecasted transaction is eventually recognized in the statement of
income. When a forecasted transaction is no longer expected to
occur, the cumulative gain or loss that was reported in other
comprehensive income is immediately transferred to the statement of
income. Upon adoption of the new standards, the Bank recorded a net
increase in derivative assets of $212 million designated as cash
flow hedges and an increase of $212 million pre-tax in accumulated
other comprehensive income. Net investment hedges
--------------------- Hedges of net investments in foreign
operations are accounted for similar to cash flow hedges. Any gain
or loss on the hedging instrument relating to the effective portion
of the hedge is recognized in other comprehensive income. The gain
or loss relating to the ineffective portion is recognized
immediately in the statement of income. Gains and losses
accumulated in other comprehensive income are included in the
statement of income upon the repatriation or disposal of the
investment in the foreign operation. The adoption of the new
standards resulted in the reclassification of $918 million
previously recorded in the foreign currency translation adjustment
account to opening accumulated other comprehensive income. (c)
Comprehensive Income Comprehensive income is composed of the Bank's
net income and other comprehensive income. Other comprehensive
income includes unrealized gains and losses on available-for-sale
securities, foreign currency translation gains and losses on the
net investment in self-sustaining operations and changes in the
fair market value of derivative instruments designated as cash flow
hedges, all net of income taxes. The components of comprehensive
income are disclosed in the Interim Consolidated Statement of
Comprehensive Income. The following table summarizes the
adjustments required to adopt the new standards. less than less
than Transition Adjustments, net of income taxes
-------------------------------------------------------------------------
Retained earnings Accumulated other comprehensive income
--------------------------------------- Net of Net of income income
(millions of Canadian dollars) Gross taxes Gross taxes
-------------------------------------------------------------------------
Classification of securities as available-for-sale $- $- $440 $287
Classification of securities as trading 76 50 - - Designation of
securities as trading under the fair value option 7 4 - - Reversal
of transition balances deferred upon adoption of AcG-13 37 25 - -
Fair value hedges Cash flow hedges - - 212 139 Other (4) 1 - -
-------------------------------------------------------------------------
Total $116 $80 $652 $426
-------------------------------------------------------------------------
-------------------------------------------------------------------------
greater than greater than Note 3: FUTURE ACCOUNTING CHANGES IN
ACCOUNTING POLICIES
-------------------------------------------------------------------------
Determining Variable Interest Entities In September 2006, the
Emerging Issues Committee of the CICA issued EIC-163, Determining
the Variability to be Considered in Applying AcG-15, which provides
additional guidance on how to analyze and consolidate variable
interest entities. The guidance is effective February 1, 2007 for
the Bank. The new guidance is not expected to have a material
effect on the financial position or earnings of the Bank. Capital
Disclosures The CICA issued a new accounting standard, Section
1535, Capital Disclosures, which requires the disclosure of both
qualitative and quantitative information that enables users of
financial statements to evaluate the entity's objectives, policies
and processes for managing capital. This new standard is effective
for the Bank beginning November 1, 2007. Note 4: ALLOWANCE FOR
CREDIT LOSSES
-------------------------------------------------------------------------
The allowance for credit losses is recorded in the Consolidated
Balance Sheet and maintained at a level which is considered
adequate to absorb credit-related losses on loans, customers'
liability under acceptances and other credit instruments. The
change in the Bank's allowance for credit losses for the three
months ended January 31 is shown in the table below. less than less
than Allowance for Credit Losses
-------------------------------------------------------------------------
Jan. 31, 2007 Jan. 31, 2006
------------------------------------------------------ (millions of
Specific General Specific General Canadian dollars) allowance
allowance Total allowance allowance Total
-------------------------------------------------------------------------
Balance at beginning of period $172 $1,145 $1,317 $153 $1,140
$1,293 Acquisitions of TD Banknorth (including Hudson and
Interchange) and VFC - 14 14 - 69 69 Provision for (reversal of)
credit losses 153 10 163 120 (6) 114 Write-offs (170) - (170) (152)
- (152) Recoveries 31 - 31 31 - 31 Other(1) 6 5 11 3 - 3
-------------------------------------------------------------------------
Allowance for credit losses at end of period $192 $1,174 $1,366
$155 $1,203 $1,358
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Includes foreign exchange rate changes. Note 5: LOAN
SECURITIZATIONS
-------------------------------------------------------------------------
The following tables summarize the Bank's securitization activity
for the three months ended January 31. In most cases, the Bank has
retained responsibility for servicing the assets securitized. New
Securitization Activity
-------------------------------------------------------------------------
For the three months ended
--------------------------------------------------------- Jan. 31,
2007
-------------------------------------------------------------------------
Residential Credit Commercial (millions of mortgage Personal card
mortgage Canadian dollars) loans loans loans loans Total
-------------------------------------------------------------------------
Gross proceeds $2,333 $2,396 $800 $- $5,529 Retained interests 48
32 8 - 88 Cash flows received on retained interests 41 28 17 - 86
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the three months ended
--------------------------------------------------------- Jan. 31,
2006
-------------------------------------------------------------------------
Residential Credit Commercial (millions of mortgage Personal card
mortgage Canadian dollars) loans loans loans loans Total
-------------------------------------------------------------------------
Gross proceeds $1,056 $737 $1,300 $- $3,093 Retained interests 16 5
26 - 47 Cash flows received on retained interests 34 13 44 - 91
-------------------------------------------------------------------------
The following table summarizes the impact of securitizations on the
Bank's Interim Consolidated Statement of Income for the three
months ended January 31. Securitization Gains and Income on
Retained Interests
-------------------------------------------------------------------------
For the three months ended
--------------------------------------------------------- Jan. 31,
2007
-------------------------------------------------------------------------
Residential Credit Commercial (millions of mortgage Personal card
mortgage Canadian dollars) loans loans loans loans Total
-------------------------------------------------------------------------
Gain on sale(1) $7 $34 $7 $(1) $47 Income on retained interests 45
13 29 - 87
-------------------------------------------------------------------------
Total $52 $47 $36 $(1) $134
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the three months ended
--------------------------------------------------------- Jan. 31,
2006
-------------------------------------------------------------------------
Residential Credit Commercial (millions of mortgage Personal card
mortgage Canadian dollars) loans loans loans loans Total
-------------------------------------------------------------------------
Gain on sale(1) $3 $5 $25 $- $33 Income on retained interests 37 4
18 - 59
-------------------------------------------------------------------------
Total $40 $9 $43 $- $92
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) For term loans, the gain on sale is after the impact of hedges
on assets sold. The key assumptions used to value the retained
interests are as follows: Key Assumptions
-------------------------------------------------------------------------
2007 ---------------------------------------------- Residential
Credit Commercial mortgage Personal card mortgage loans loans loans
loans
-------------------------------------------------------------------------
Prepayment rate(1) 20.0% 6.2% 42.5% 9.1% Excess spread(2) .7 1.1
7.0 1.0 Discount rate 6.0 6.0 6.1 5.8 Expected credit losses(3) - -
2.0 0.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2006 ---------------------------------------------- Residential
Credit Commercial mortgage Personal card mortgage loans loans loans
loans
-------------------------------------------------------------------------
Prepayment rate(1) 20.0% 5.9% 43.1% 1.9% Excess spread(2) .6 1.0
14.4 - Discount rate 5.1 3.6 4.2 9.8 Expected credit losses(3) - -
2.6 0.1
-------------------------------------------------------------------------
(1) Represents monthly payment rate for secured personal and credit
card loans. (2) The excess spread for credit card loans reflects
the net portfolio yield, which is interest earned less funding
costs and losses. (3) There are no expected credit losses for
residential mortgage loans as these mortgages are government
guaranteed. greater than greater than During the three months ended
January 31, 2007, there were maturities of previously securitized
loans and receivables of $2,405 million (three months ended January
31, 2006 - $2,036 million). Proceeds from new securitizations were
$3,124 million for the three months ended January 31, 2007 (three
months ended January 31, 2006 - $1,057 million). Note 6:
SUBORDINATED NOTES AND DEBENTURES
-------------------------------------------------------------------------
During the three months ended January 31, 2007, the Bank issued
subordinated reset medium-term notes of $2.25 billion pursuant to
its medium-term note program. The notes pay a coupon of 4.779%
until December 14, 2016, and then reset every five years to the
5-year Government of Canada yield plus 1.74% thereafter until
maturity on December 14, 2105. The notes are redeemable at the
Bank's option at par on December 14, 2016. The Bank has included
the issue as Tier 2A regulatory capital. Note 7: LIABILITIES FOR
PREFERRED SHARES AND CAPITAL TRUST SECURITIES
-------------------------------------------------------------------------
The Bank's liabilities for preferred shares and capital trust
securities are as follows: less than less than Liabilities
-------------------------------------------------------------------------
Jan. 31, Oct. 31, (millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Preferred Shares Preferred shares issued by the Bank (thousands of
shares): Class A - 14,000 Series M $350 $350 Class A - 8,000 Series
N 200 200
-------------------------------------------------------------------------
550 550 Preferred shares issued by TD Mortgage Investment
Corporation (thousands of shares): 350 non-cumulative preferred
shares, Series A 350 344
-------------------------------------------------------------------------
Total preferred shares 900 894
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital Trust Securities(1) Trust units issued by TD Capital Trust
(thousands of units) 900 Capital Trust Securities - Series 2009 900
900
-------------------------------------------------------------------------
Total Capital Trust Securities 900 900
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total preferred shares and Capital Trust Securities $1,800 $1,794
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Included in deposit liabilities on the Interim Consolidated
Balance Sheet is $350 million due to TD Capital Trust II. Note 8:
SHARE CAPITAL
-------------------------------------------------------------------------
Common Shares The Bank is authorized by the shareholders to issue
an unlimited number of common shares, without par value, for
unlimited consideration. The common shares are not redeemable or
convertible. Dividends are typically declared by the Board of
Directors of the Bank on a quarterly basis and the amount may vary
from quarter to quarter. Shares Issued and Outstanding
-------------------------------------------------------------------------
For the three months ended
-------------------------------------------- Jan. 31, 2007 Jan. 31,
2006 -------------------------------------------- (millions of
shares and millions of Number of Number of Canadian dollars) shares
Amount shares Amount
-------------------------------------------------------------------------
Common: Balance at beginning of period 717.4 $6,334 711.8 $5,872
Issued on exercise of options 0.9 34 1.3 45 Issued as a result of
dividend reinvestment plan 0.3 19 1.6 100 Impact of shares
(acquired) sold in Wholesale Banking 0.4 30 - (2)
-------------------------------------------------------------------------
Balance at end of period - common 719.0 $6,417 714.7 $6,015
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Preferred (Class A - Series O): Balance at beginning of period 17.0
$425 - $- Issued during the period - - 17.0 425
-------------------------------------------------------------------------
Balance at end of period - preferred 17.0 $425 17.0 $425
-------------------------------------------------------------------------
-------------------------------------------------------------------------
greater than greater than Normal Course Issuer Bid On December 20,
2006, the Bank commenced a normal course issuer bid, effective for
up to one year, to repurchase for cancellation, up to five million
common shares, representing approximately 0.7% of the Bank's
outstanding common shares as at December 13, 2006. No purchases
were made under this bid during the three months ended January 31,
2007. The Bank repurchased four million common shares at a cost of
$264 million under its previous normal course issuer bid which
commenced on September 18, 2006 and was completed in October 2006.
Note 9: STOCK BASED COMPENSATION
-------------------------------------------------------------------------
The following table summarizes the compensation expense recognized
by the Bank for stock option awards for the three months ended
January 31. less than less than For the three months ended
-------------------------------------------------------------------------
Jan. 31 Jan. 31 (millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
TD Bank $2 $7 TD Banknorth 2 2
-------------------------------------------------------------------------
During the three months ended January 31, 2007, 1.5 million (three
months ended January 31, 2006 - 1.9 million) options were granted
by TD Bank with a weighted average fair value of $11.46 per option
(three months ended January 31, 2006 - $11.27 per option). During
the three months ended January 31, 2007, 27 thousand (three months
ended January 31, 2006 - 2.3 million) options were granted by TD
Banknorth with a weighted average fair value of $5.83 per option
(three months ended January 31, 2006 - $6.01 per option). The fair
value of options granted were estimated at the date of grant using
the Black-Scholes valuation model with the following assumptions:
For the three months ended ---------------------------- Jan. 31
Jan. 31 TD Bank 2007 2006
-------------------------------------------------------------------------
Risk-free interest rate 3.90% 3.91% Expected option life 5.2 years
5.1 years Expected volatility 19.5% 21.9% Expected dividend yield
2.92% 2.88%
-------------------------------------------------------------------------
For the three months ended ---------------------------- Jan. 31
Jan. 31 TD Banknorth 2007 2006
-------------------------------------------------------------------------
Risk-free interest rate 4.45% 4.46% Expected option life 6.0 years
7.5 years Expected volatility 15.07% 15.08% Expected dividend yield
2.98% 2.78%
-------------------------------------------------------------------------
Note 10: EMPLOYEE FUTURE BENEFITS
-------------------------------------------------------------------------
The Bank's pension plans and principal non-pension post-retirement
benefit plans expenses are as follows: Principal Pension Plan
Pension Expense
-------------------------------------------------------------------------
For the three months ended ---------------------------- Jan. 31
Jan. 31 (millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Elements of pension plan expense before adjustments to recognize
the long term nature of the cost: Service cost - benefits earned
$16 $18 Interest cost on projected benefit obligation 28 26 Actual
return on plan assets (87) 12 Adjustments to recognize the
long-term nature of plan cost: Difference between costs arising in
the period and costs recognized in the period in respect of: Return
on plan assets(1) 53 (44) Actuarial (gains) losses(2) 3 5 Plan
amendments(3) 2 2
-------------------------------------------------------------------------
Total $15 $19
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) For the three months ended January 31, 2007, includes expected
return on plan assets of $34 million (three months ended January
31, 2006 - $32 million) less actual return on plan assets of $87
million (three months ended January 31, 2006 - $(12) million). (2)
For the three months ended January 31, 2007, includes loss
recognized of $3 million (three months ended January 31, 2006 - $5
million) less actuarial losses on projected benefit obligation of
nil (three months ended January 31, 2006 - nil). (3) For the three
months ended January 31, 2007, includes amortization of costs for
plan amendments of $2 million (three months ended January 31, 2006
- $2 million) less actual cost amendments of nil (three months
ended January 31, 2006 - nil). Other Pension Plans' Expense
-------------------------------------------------------------------------
For the three months ended ---------------------------- Jan. 31
Jan. 31 (millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
CT defined benefit pension plan $1 $1 TD Banknorth defined benefit
pension plans 2 2 Supplemental employee retirement plans 8 8
-------------------------------------------------------------------------
Total $11 $11
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Principal Non-Pension Post-Retirement Benefit Plans Expense
-------------------------------------------------------------------------
For the three months ended ---------------------------- Jan. 31
Jan. 31 (millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Service cost - benefits earned $3 $3 Interest cost on projected
benefit obligation 5 5 Plan amendments - (65) Difference between
costs arising in the period and costs recognized in the period in
respect of: Actuarial (gains) losses 1 2 Plan amendments (1) 64
-------------------------------------------------------------------------
Total $8 $9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash Flows The Bank's contributions to its pension plans and its
principal non- pension post-retirement benefit plans are as
follows: Pension Plan Contributions
-------------------------------------------------------------------------
For the three months ended ---------------------------- Jan. 31
Jan. 31 (millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Principal pension plan $17 $15 CT defined benefit pension plan 1 1
TD Banknorth defined benefit pension plans 47 32 Supplemental
employee retirement plans 3 2 Non-pension post-retirement benefit
plans 2 2
-------------------------------------------------------------------------
Total $70 $52
-------------------------------------------------------------------------
-------------------------------------------------------------------------
greater than greater than As at January 31, 2007, the Bank expects
to contribute an additional $48 million to its principal pension
plan, $2 million to its CT defined benefit pension plan, $47
million to its TD Banknorth defined benefit pension plans, $9
million to its supplemental employee retirement plans and $6
million to its non-pension post-retirement benefit plans by the end
of the year. However, future contribution amounts may change upon
the Bank's review of the current contribution levels during the
year. Note 11: EARNINGS PER SHARE
-------------------------------------------------------------------------
The Bank's basic and diluted earnings per share at January 31 are
as follows: less than less than Basic and Diluted Earnings per
Share
-------------------------------------------------------------------------
For the three months ended ---------------------------- Jan. 31
Jan. 31 2007 2006
-------------------------------------------------------------------------
Basic Earnings per Share Net income available to common shares ($
millions) $915 $2,302 Average number of common shares outstanding
(millions) 718.3 712.5 Basic earnings per share ($) $1.27 $3.23
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted Earnings per Share Net income available to common shares ($
millions) $915 $2,302 Average number of common shares outstanding
(millions) 718.3 712.5 Stock options potentially exercisable as
determined under the treasury stock method(1) 6.6 6.4
-------------------------------------------------------------------------
Average number of common shares outstanding - diluted (millions)
724.9 718.9
-------------------------------------------------------------------------
Diluted earnings per share ($) $1.26 $3.20
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) For the three months ended January 31, 2007, all options
outstanding were included in the computation of diluted earnings
per common share as the options' exercise prices were less than the
average market price of the Bank's common shares. For the three
months ended January 31, 2006, the computation of diluted earnings
per common share excluded weighted average options outstanding of
945 thousand with a weighted exercise price of $60.02 as the
options' price was greater than the average market price of the
Bank's common shares. greater than greater than Note 12: SEGMENTED
INFORMATION
-------------------------------------------------------------------------
The Bank's operations and activities are organized around the
following businesses: Canadian Personal and Commercial Banking,
Wealth Management, U.S. Personal and Commercial Banking and
Wholesale Banking. Results for these segments for the three months
ended January 31 are presented in the following table: less than
less than Results by Business Segment
-------------------------------------------------------------------------
Canadian Personal U.S. Personal (millions of and Commercial Wealth
and Commercial Canadian dollars) Banking Management Banking
-------------------------------------------------------------------------
For the three Jan. 31 Jan. 31 Jan. 31 Jan. 31 Jan. 31 Jan. 31
months ended 2007 2006 2007 2006 2007 2006
-------------------------------------------------------------------------
Net interest income $1,307 $1,177 $77 $178 $341 $284 Other income
703 627 474 564 145 73
-------------------------------------------------------------------------
Total revenue 2,010 1,804 551 742 486 357 Provision for (reversal
of) credit losses 138 99 - - 17 7 Non-interest expenses 1,059 985
364 525 299 225 Dilution gain, net - - - - - -
-------------------------------------------------------------------------
Income (loss) before provision for (benefit of) income taxes 813
720 187 217 170 125 Provision for (benefit of) income taxes 269 244
65 79 55 42 Non-controlling interests in subsidiaries, net of
income taxes - - - - 51 37 Equity in net income of an associated
company, net of income taxes - - 64 - - -
-------------------------------------------------------------------------
Net income (loss) $544 $476 $186 $138 $64 $46
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total assets (billions of Canadian dollars) - balance sheet $137.9
$133.5 $15.0 $23.9 $47.5 $48.0 - securitized 46.7 33.6 - - - -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(millions of Wholesale Canadian dollars) Banking(1) Corporate(1)
Total
-------------------------------------------------------------------------
For the three Jan. 31 Jan. 31 Jan. 31 Jan. 31 Jan. 31 Jan. 31
months ended 2007 2006 2007 2006 2007 2006
-------------------------------------------------------------------------
Net interest income $203 $138 $(257) $(170) $1,671 $1,607 Other
income 432 523 48 10 1,802 1,797
-------------------------------------------------------------------------
Total revenue 635 661 (209) (160) 3,473 3,404 Provision for
(reversal of) credit losses 24 29 (16) (21) 163 114 Non-interest
expenses 332 395 135 160 2,189 2,290 Dilution gain, net - - - 1,564
- 1,564
-------------------------------------------------------------------------
Income (loss) before provision for (benefit of) income taxes 279
237 (328) 1,265 1,121 2,564 Provision for (benefit of) income taxes
82 73 (253) (218) 218 220 Non-controlling interests in
subsidiaries, net of income taxes - - (4) - 47 37 Equity in net
income of an associated company, net of income taxes - - 1 - 65 -
-------------------------------------------------------------------------
Net income (loss) $197 $164 $(70) $1,483 $921 $2,307
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total assets (billions of Canadian dollars) - balance sheet $172.3
$165.1 $35.5 $13.9 $408.2 $384.4 - securitized - - (16.7) (9.9)
30.0 23.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) The taxable equivalent basis increase to net interest income
and provision for income taxes reflected in the Wholesale Banking
segment results is reversed in the Corporate segment. Note 13:
DERIVATIVES
-------------------------------------------------------------------------
Hedge accounting results for the three months ended January 31,
2007 are as follows: Hedge Accounting Results
-------------------------------------------------------------------------
For the three months ended (millions of Canadian dollars) Jan. 31,
2007
-------------------------------------------------------------------------
Fair value hedges Hedge ineffectiveness $(0.4) Net gain (loss)
excluded from the assessment of effectiveness (0.8)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flow hedges Hedge ineffectiveness $0.5 Net gain (loss)
excluded from the assessment of effectiveness -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
greater than greater than During the three months ended January 31,
2007, there were no firm commitments that no longer qualified as
hedges. Over the next twelve months, the Bank expects an estimated
$46 million in net losses reported in other comprehensive income as
at January 31, 2007 to be reclassified to net income. The maximum
length of time over which the Bank is hedging its exposure to the
variability in future cash flows for anticipated transactions is 18
years. During the three months ended January 31, 2007, there were
no forecasted transactions that failed to occur. Note 14: FINANCIAL
ASSETS DESIGNATED AS TRADING
-------------------------------------------------------------------------
For the three months ended January 31, 2007, a loss of $7 million
was recognized in trading income for financial assets designated as
trading under the fair value option. Note 15: ACQUISITIONS AND
DISPOSITIONS
-------------------------------------------------------------------------
(a) TD Banknorth Interchange Financial Services Corporation
------------------------------------------ TD Banknorth completed
its acquisition of Interchange Financial Services Corporation
(Interchange) on January 1, 2007 for a total cash consideration of
$545 million (US$468.1 million), financed primarily through TD
Banknorth's sale of 13 million of its common shares to the Bank for
$472 million (US$405 million). As a result, the following assets
and liabilities of Interchange were included in the Bank's
Consolidated Balance Sheet: $1,283 million of personal/business
loans and mortgages, $495 million of goodwill and intangibles, $123
million of other assets, $1,332 million of deposits and $97 million
of other liabilities. TD Banknorth consolidates the financial
results of Interchange. As the Bank consolidates TD Banknorth on a
one month lag, Interchange's income/(loss) for the calendar month
of January has not been included in the Bank's results for the
three months ended January 31, 2007 but will be included in the
next reporting period. Going-private transaction
------------------------- On November 20, 2006, the Bank announced
its intention to acquire all of the outstanding common shares of TD
Banknorth that it does not already own. The acquisition will be
accounted for by the purchase method. The offer provides minority
shareholders of TD Banknorth cash of US$32.33 per TD Banknorth
share. Total consideration will be approximately $3.6 billion
(US$3.2 billion). The offer is subject to approval by regulators
and TD Banknorth shareholders, including an affirmative vote by the
holders of a majority of the outstanding common shares not held by
the Bank or its affiliates, and, if approved, is expected to close
before the end of April 2007. Upon completion of the going-private
transaction, TD Banknorth will become a wholly-owned subsidiary of
the Bank. Increase in ownership in TD Banknorth
------------------------------------- During the three months ended
January 31, 2007, the Bank acquired approximately 0.9 million
shares of TD Banknorth pursuant to TD Banknorth's dividend
reinvestment program. In addition, on January 1, 2007, the Bank
acquired 13 million shares of TD Banknorth in connection with the
acquisition of Interchange by TD Banknorth. As a result, the Bank's
ownership interest in TD Banknorth increased to 59.4% as at January
31, 2007 from 57.0% as at October 31, 2006. (b) TD Ameritrade
------------- TD Ameritrade announced two common stock repurchase
programs in 2006 for an aggregate 32 million shares. As a result of
TD Ameritrade's repurchase activity, the Bank's direct ownership
position in TD Ameritrade has increased to 40.2% as at January 31,
2007 from 39.8% as at October 31, 2006. In accordance with the
Stockholders' Agreement, the Bank does not intend to reduce its
direct ownership position in the near term and will not exercise
voting rights in respect of any shares it holds in excess of the
39.9% ownership limit. Moreover, as a result of consolidation of
financial statements of Lillooet Limited (Lillooet) in these
Interim Consolidated Financial Statements, TD Ameritrade shares
held by Lillooet have been included in the Bank's reported
investment in TD Ameritrade. The Bank has recognized income of TD
Ameritrade related to the TD Ameritrade shares owned by Lillooet
for the three months ended December 31, 2006. Note 16:
CONTINGENCIES
-------------------------------------------------------------------------
The two principal legal actions regarding Enron to which the Bank
is a party are the securities class action and the bankruptcy
proceeding. In 2006, the Bank settled the bankruptcy court claims
in this matter for approximately $145 million (US$130 million). As
at January 31, 2007, the total contingent litigation reserve for
Enron-related claims was approximately $486 million (US$413
million). It is possible that additional reserves above the current
level could be required. Additional reserves, if required, cannot
be reasonably determined for many reasons, including that other
settlements are not generally appropriate for comparison purposes,
the lack of consistency in other settlements and the difficulty in
predicting the future actions of other parties to the litigation.
The Bank and its subsidiaries are involved in various other legal
actions in the ordinary course of business, many of which are
loan-related. In management's opinion, the ultimate disposition of
these actions, individually or in the aggregate, will not have a
material adverse effect on the financial condition of the Bank.
Note 17: ACCUMULATED OTHER COMPREHENSIVE INCOME
-------------------------------------------------------------------------
Accumulated other comprehensive income (loss) includes the
after-tax change in unrealized gains and losses on
available-for-sale securities, cash flow hedging activities and
foreign currency translation adjustments. less than less than
Accumulated Other Comprehensive Income, net of income taxes
-------------------------------------------------------------------------
As at (millions of Canadian dollars) Jan. 31, 2007
-------------------------------------------------------------------------
Unrealized gain on available-for-sale securities, net of cash flow
hedges $311 Unrealized foreign currency translation losses on
investments in subsidiaries, net of hedging activities (595) Gains
on derivatives designated as cash flow hedges 16
-------------------------------------------------------------------------
Accumulated other comprehensive income balance as at January 31,
2007 $(268)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
greater than greater than SHAREHOLDER AND INVESTOR INFORMATION
Shareholder Services For shareholder inquiries relating to missing
dividends, lost share certificates, estate questions, address
changes to the share register, dividend bank account changes or the
dividend re-investment program, please contact our transfer agent:
CIBC Mellon Trust Company, P.O. Box 7010, Adelaide Street Postal
Station, Toronto, Ontario, M5C 2W9, 1-800-387-0825 or 416-643-5500
(http://www.cibcmellon.com/ or ). For all other shareholder
inquiries, please contact TD Shareholder Relations at 416-944-6367
or 1-866-756-8936 or email . Internet website: http://www.td.com/
Internet e-mail: General Information Contact Corporate & Public
Affairs: (416) 982-8578 Products and services: Contact TD Canada
Trust, 24 hours a day, seven days a week: 1-866-567-8888 French:
1-866-233-2323 Cantonese/Mandarin: 1-800-328-3698 Telephone device
for the deaf: 1-800-361-1180 On-line Investor Presentation: Full
quarterly report and a presentation to investors and analysts
(available on February 22, 2007) are accessible from the home page
of the TD Bank Financial Group website,
http://www.td.com/investor/calendar.jsp. Quarterly Earnings
Conference Call: Instant replay of the teleconference is available
from February 22, 2007 to March 22, 2007. Please call
1-877-289-8525 toll free, in Toronto (416) 640-1917, passcode
21217832 (pound key). Webcast of Call: A live audio and video
internet webcast of TD Bank Financial Group's quarterly earnings
conference call with investors and analysts is scheduled on
February 22, 2007 at 3:00 p.m. ET. The call is webcast via the TD
Bank Financial Group website at http://www.td.com/investor. In
addition, recordings of the presentations are archived on TD's
website and will be available for replay for a period of at least
one month. Common Share Repurchase The Bank has filed a notice with
the Toronto Stock Exchange of a normal course issuer bid through
the facilities of the Exchange. A copy of the notice of the bid may
be obtained, without charge, by contacting TD Shareholder Relations
at 416-944-6367 or 1-866-756-8936 or email . Further information
regarding the bid is available on our web site at
http://www.td.com/ under Investor Relations/Share
Information/Common Shares. Annual Meeting Thursday, March 29, 2007
9:30 a.m. ET Fairmont The Queen Elizabeth Hotel Montreal, Quebec
About TD Bank Financial Group The Toronto-Dominion Bank and its
subsidiaries are collectively known as TD Bank Financial Group. TD
Bank Financial Group serves more than 14 million customers in four
key businesses operating in a number of locations in key financial
centres around the globe: Canadian Personal and Commercial Banking,
including TD Canada Trust; Wealth Management, including TD
Waterhouse and an investment in TD Ameritrade; U.S. Personal and
Commercial Banking through TD Banknorth; and Wholesale Banking,
including TD Securities. TD Bank Financial Group also ranks among
the world's leading on-line financial services firms, with more
than 4.5 million on-line customers. TD Bank Financial Group had
CDN$408 billion in assets, as of January 31, 2007. The
Toronto-Dominion Bank trades on the Toronto and New York Stock
Exchanges under the symbol "TD", as well as on the Tokyo Stock
Exchange. DATASOURCE: TD Bank Financial Group CONTACT: PRNewswire -
- Feb. 22 END FIRST AND FINAL ADD
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