TD Bank 2007 Annual Report Download - page 122

TD BANK FINANCIAL GROUP ANNUAL REPORT 2007 Financial Results118
Results of each business segment reflect revenue, expenses,
assets and liabilities generated by the businesses in that segment.
Due to the complexity of the Bank, its management reporting model
uses various estimates, assumptions, allocations and risk-based
methodologies for funds transfer pricing, inter-segment revenue,
income tax rates, capital, indirect expenses and cost transfers to
measure business segment results. Transfer pricing of funds is gen-
erally applied at market rates. Inter-segment revenue is negotiated
between each business segment and approximate the value provid-
ed by the distributing segment. Income tax expense or benefit is
generally applied to each segment based on a statutory tax rate and
may be adjusted for items and activities unique to each segment.
Amortization of intangible expense is included in the Corporate
segment. Accordingly, net income for operating business segments
is presented before amortization of intangibles.
Net interest income within Wholesale Banking is calculated on a
taxable equivalent basis (TEB), which means that the value of non-
taxable or tax-exempt income, including dividends, is adjusted to
its equivalent before-tax value. Using TEB allows the Bank to mea-
sure income from all securities and loans consistently and makes
for a more meaningful comparison of net interest income with
similar institutions. The TEB adjustment reflected in the Wholesale
Banking segment is eliminated in the Corporate segment.
As noted in Note 4, the Bank securitizes retail loans and receiv-
ables held by the Canadian Personal and Commercial Banking
Segment in transactions that are accounted for as sales. For the
purpose of segmented reporting, the Canadian Personal and
Commercial Banking Segment accounts for the transactions as
though they are financing arrangements. Accordingly, the interest
income earned on the assets sold net of the funding costs incurred
by the purchaser trusts is recorded in net interest income and the
provision for credit losses related to these assets is charged to pro-
vision for (reversal of) credit losses. This accounting is reversed in
the Corporate Segment and the gain recognized on sale which is
in compliance with appropriate accounting standards together
with income earned on the retained interests net of credit losses
incurred are included in other income.
Results by Business Segment
(millions of Canadian dollars)
2007
Canadian
Personal and
Commercial
Banking
Wealth
Management
U.S.
Personal and
Commercial
Banking1
Wholesale
Banking2Corporate2Total
Net interest income $ 5,401 $ 318 $ 1,365 $ 875 $ (1,035)$ 6,924
Other income 2,848 1,995 583 1,619 312 7,357
Provision for (reversal of) credit losses 608 –120 48 (131)645
Non-interest expenses 4,256 1,551 1,221 1,261 686 8,975
Income before income taxes 3,385 762 607 1,185 (1,278)4,661
Provision for (benefit of) income taxes 1,132 261 196 361 (1,097)853
Non-controlling interests – – 91 – 4 95
Equity in net income of an associated company, net of tax –261 – – 23 284
Net income (loss) $ 2,253 $ 762 $ 320 $ 824 $ (162)$ 3,997
Total assets
– balance sheet $ 152,100 $ 14,900 $ 58,800 $ 177,200 $ 19,124 $ 422,124
– securitized 44,608 – – – (16,292)28,316
2006
Net interest income $ 4,879 $ 377 $ 1,290 $ 479 $ (654)$ 6,371
Other income 2,573 1,883 490 1,792 83 6,821
Provision for (reversal of) credit losses 413 –40 68 (112)409
Non-interest expenses 4,086 1,575 1,087 1,312 755 8,815
Dilution gain, net – – – – 1,559 1,559
Income before income taxes 2,953 685 653 891 345 5,527
Provision for (benefit of) income taxes 987 242 222 262 (839)874
Non-controlling interests – – 195 –(11)184
Equity in net income of an associated company, net of tax –147 – – (13)134
Net income $ 1,966 $ 590 $ 236 $ 629 $ 1,182 $ 4,603
Total assets
– balance sheet $ 138,700 $ 13,600 $ 43,500 $ 163,900 $ 33,214 $ 392,914
– securitized 43,304 – – – (15,241)28,063
2005
Net interest income $ 4,342 $ 643 $ 705 $ 977 $ (659)$ 6,008
Other income 2,361 2,103 299 1,011 177 5,951
Provision for (reversal of) credit losses 373 – 4 52 (374) 55
Non-interest expenses 3,773 2,083 549 1,325 1,114 8,844
Income (loss) before income taxes 2,557 663 451 611 (1,222)3,060
Provision for (benefit of) income taxes 855 231 161 189 (737)699
Non-controlling interests – – 132 – – 132
Equity in net income of an associated company, net of tax – – – – – –
Net income (loss) $ 1,702 $ 432 $ 158 $ 422 $ (485)$ 2,229
Total assets
– balance sheet $ 131,000 $ 25,600 $ 35,700 $ 156,700 $ 16,210 $ 365,210
– securitized 34,451 – – – (10,577)23,874
1 Commencing May 1, 2007, the results of TD Bank U.S.A. Inc. (previously
reported in the Corporate segment for the period from the second quarter
2006 to the second quarter 2007 and in Wealth Management segment
prior to the second quarter of 2006) are included in the U.S. Personal and
Commercial Banking segment prospectively. Prior periods have not been
restated as the impact is not material.
2 The taxable equivalent basis (TEB) increase to net interest income and
provision for income taxes reflected in the Wholesale Banking segment
results is reversed in the Corporate segment.