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TD BANK FINANCIAL GROUP ANNUAL REPORT 2006 Management’s Discussion and Analysis 13
Adjusted net income to reported results
Operating results – adjusted
(millions of Canadian dollars) 2006 2005 2004
Net interest income2$6,371 $6,021 $ 5,773
Other income36,774 6,015 4,961
Total revenues 13,145 12,036 10,734
Provision for credit losses4(441) (319) (336)
Non-interest expenses5(8,172) (7,825) (7,081)
Income before provision for income taxes, non-controlling interests in subsidiaries and
equity in net income of associated company 4,532 3,892 3,317
Provision for income taxes6(1,107) (899) (832)
Non-controlling interests, net of income taxes7(211) (132) –
Equity in net income of associated company, net of income taxes8162 ––
Net income – adjusted 3,376 2,861 2,485
Preferred dividends (22) ––
Net income available to common shareholders – adjusted 3,354 2,861 2,485
Items of note affecting net income, net of income taxes
Amortization of intangibles9(316) (354) (477)
Dilution gain on Ameritrade transaction, net of costs 1,665 ––
Dilution loss on the acquisition of Hudson by TD Banknorth (72) – –
Balance sheet restructuring charge in TD Banknorth (19) – –
Wholesale Banking restructuring charge (35) (29) –
Hedging impact due to AcG-13 717 (50)
General allowance release 39 23 43
Non-core portfolio loan loss recoveries (sectoral related) –127 426
Loss on structured derivative portfolios –(100) –
Tax charges related to reorganizations –(163) –
Other tax items (24) 98 –
Preferred share redemption –(13) –
Initial set up of specific allowance for credit card and overdraft loans (18) ––
Litigation charge –(238) (195)
Total items of note 1,227 (632) (253)
Net income available to common shareholders – reported $ 4,581 $ 2,229 $ 2,232
Reconciliation of reported earnings per share (EPS) to adjusted EPS
(millions of Canadian dollars) 2006 2005 2004
Diluted – reported $ 6.34 $ 3.20 $ 3.39
Items of note affecting income (as above) (1.70) .91 .38
Items of note affecting EPS only10 .02 .03 –
Diluted – adjusted $4.66 $4.14 $3.77
Basic – reported $ 6.39 $ 3.22 $ 3.41
RECONCILIATION OF NON-GAAP MEASURES1
TABLE 2
1Certain comparative amounts have been reclassified to conform to the
presentation adopted in the current year.
2Adjusted net interest income excludes the following item of note:
2005 – $13 million loss on preferred share redemption.
3Adjusted other income excludes the following items of note: 2006 – $11
million pre-tax gain on the hedging impact due to AcG-13; $52 million loss
on balance sheet restructuring charge in TD Banknorth; 2005 – $27 million
gain on the hedging impact due to AcG-13; and $153 million loss on
structured derivative portfolios; 2004 – $78 million loss on the hedging
impact due to AcG-13.
4Adjusted provisions for credit losses exclude the following items of note:
2006 –$60 million loss on general allowance release; $28 million initial set
up of specific allowance for credit card and overdraft loans; 2005 – $35
milliongeneral allowance release; $229 million loss on non-core portfolio
loan loss recoveries (sectoral related). 2004 – $67 million general
allowance release; and $655 million non-core portfolio loan loss recoveries
(sectoral related).
5Adjusted non-interest expenses exclude the following items of note: 2006
–$505 million amortization of intangibles; $50 million Wholesale Banking
restructuring charges; 2005 – $546 million amortization of intangibles;
$368 million litigation charge; and $43 million Wholesale Banking restruc-
turing charge; 2004 – $626 million amortization of intangibles and $300
million litigation charge.
6For reconciliation between reported and adjusted provisions for income
taxes, see Table 11.
7Adjusted non-controlling interests exclude the following items of note:
2006 – $12 million amortization of intangibles; $15 million balance sheet
restructuring charge in TD Banknorth.
8Equity in net income of associated company excludes the following items
of note: 2006 – $28 million amortization of intangibles.
9See additional information in Table 3.
102006 –one-time adjustment for the impact of TD Ameritrade earnings,
due to the one month lag between fiscal quarter ends. The results of the
Bank include its equity share in TD Ameritrade from January 25, 2006 to
September 30,2006. 2005 – adjustment for the impact of TD Banknorth
earnings, due to the one month lag between fiscal quarter ends.