TD Bank 2009 Annual Report Download

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Building
on Our
Momentum
2009 Annual Report

Table of contents

  • Page 1
    Building on Our Momentum 2009 Annual Report

  • Page 2
    ... 13 Chairman's Message 14 Corporate Governance Practices 16 Performance Indicators 17 MANAGEMENT'S DISCUSSION AND ANALYSIS FINANCIAL RESULTS Named Best Bank in North America by Euromoney Magazine We have more than 2,300 retail locations in Canada and the U.S. and serve over 18 million customers...

  • Page 3
    ... financial crisis with our business model intact and momentum on our side. NET INCOME available to common shareholders (millions of Canadian dollars) Adjusted Reported EARNINGS PER SHARE (Canadian dollars) Adjusted Reported RETURN ON RISKWEIGHTED ASSETS (per cent) Adjusted Reported TOTAL ASSETS...

  • Page 4
    ...end Total assets Total deposits Total loans Per common share (Canadian dollars) Diluted earnings - reported Diluted earnings - adjusted Dividend payout ratio - adjusted Closing market price Total shareholder return Financial ratios Tier 1 capital ratio Total capital ratio Efficiency ratio - reported...

  • Page 5
    ... understanding our customers' and clients' needs, owning their problems and finding the right solutions for them. P 10 MOMENTUM = OUTSTANDING EMPLOYEES Making TD an extraordinary place to work is essential - that's what attracts great people and makes them want to stay. Great employees share our...

  • Page 6
    ... a top-10 financial institution in North America. Look at our 2009 earnings - despite some exceptionally tough market conditions at the start of the year, TD earned a record $4.7 billion on an adjusted basis. We did all this through old-fashioned banking, by delivering for our customers and clients...

  • Page 7
    ... times with momentum on our side. Ed Clark President and Chief Executive Officer RETAIL NET INCOME (millions of Canadian dollars) Adjusted Reported Our Retail Strategy Continues to Deliver Our retail businesses continue to provide a strong, consistent earnings anchor for our shareholders...

  • Page 8
    ... right the first time - and TD got it right, " says Bill Anthony. "Banking isn't about numbers and procedure. It's about the person - dealing with individuals and supporting them however you can. " Owning the Customer Service and Convenience Space TD Bank, America's Most Convenient Bank, was named...

  • Page 9
    ... as the leading discount brokerage in the U.K., paving the way for us to expand our online business to other European countries. In 2009, TD Waterhouse won a string of U.K. awards, including Stockbroker of the Year at the prestigious Financial Times and Investors Chronicle Investment Awards. "We're...

  • Page 10
    ... the branch, " says Gregory Gerald. "Everyone is so helpful and welcoming - they're really good, regular people and they make you feel so comfortable. And TD Canada Trust's long hours really help. " TD Canada Trust's AwardRecognized Service J.D. POWER AND ASSOCIATES Highest in Customer Satisfaction...

  • Page 11
    ... we opened 24 new branches in Canada and 33 new stores in the U.S. Similarly, our customers remain committed to banking with us. Over the year, personal and business deposit growth was up 11 per cent in both Canada and the U.S. We have a simple approach to lending: Don't make bad loans in good times...

  • Page 12
    ... agribusiness to a global leader. Today, following the company's merger with Agricore United, Viterra is Canada's largest publicly traded agribusiness. It also has a leading agricultural presence in Australia, having acquired ABB Grain in 2009. Along the way, Viterra has turned to TD Securities as...

  • Page 13
    ... TD Insurance products provide credit protection, life, health, travel, home and auto insurance to Canadians. TD Insurance Home and Auto is the largest direct-response insurer and the number 2 automobile insurer in the country. TD Insurance provides the largest number of critical illness policies...

  • Page 14
    ...opportunities today and tomorrow. Despite the tough economic times, we invested more than $55 million in employee training and development in 2009. Providing development and career opportunities is part of our commitment to employees. AN EXTRAORDINARY PLACE TO WORK We work hard every day to make TD...

  • Page 15
    ... CANADA AND THE U.S. One of the most visible ways TD and its employees help make a difference in communities on both sides of the border is through our partnership with the United Way. In 2009, TD's employee giving campaigns and corporate United Way donations directed more than $10 million to North...

  • Page 16
    ...-income Habitat families. MAKING SURE WHAT WE DO FOR OUR CUSTOMERS AND CLIENTS IS GREENER All our major businesses now offer more environmentally friendly products, including insurance discounts if you drive a hybrid vehicle, cash management accounts, loans and mortgages, investment funds, business...

  • Page 17
    ... best managed banks and one of the few in the world rated triple-A by Moody's. While the market is still unsure about the economy, particularly in the U.S., your Board continues to have confidence that over time shareholders will keep benefiting from TD's strategy. CORPORATE GOVERNANCE The problems...

  • Page 18
    ... a summary of significant differences between our governance practices and those required of U.S. domestic issuers listed on the New York Stock Exchange. Proxy Circular Read our Proxy Circular - in February 2010 it will be Risk Committee mailed to shareholders and available on our website. Annual...

  • Page 19
    ... the Board as part of the succession planning process for the position of CEO; • Oversee the selection, evaluation, development and compensation of other members of senior management; • Produce a report on executive compensation for the benefit of shareholders, which is published in TD's annual...

  • Page 20
    ... a healthy, safe and flexible work environment - providing competitive pay, benefits and performance-based compensation - investing in training and development • • • Employee engagement score4 was 4.11 in fall 2009 vs. 4.18 in fall 2008. The year-over-year decline is primarily a result of...

  • Page 21
    ... internationally; changes in accounting policies and methods the Bank uses to report its financial condition, including uncertainties associated with critical accounting assumptions and estimates; changes to our credit ratings; global capital market activity; increased funding costs for credit...

  • Page 22
    ... Bank also ranks among the world's leading online financial services firms, with more than 5.5 million online customers. The Bank had $557 billion in assets on October 31, 2009. The Toronto-Dominion Bank trades under the symbol "TD" on the Toronto and New York Stock Exchanges. HOW THE BANK REPORTS...

  • Page 23
    ... the corporate loan book, net of provision for credit losses14 Other tax items15 Provision for insurance claims16 General allowance (increase) release Canadian Personal and Commercial Banking (excluding VFC) and Wholesale Banking Settlement of TD Banknorth shareholder litigation17 FDIC special...

  • Page 24
    ... after-tax goodwill and intangible assets amortized as of the reporting date. The rate used in the charge for capital is the equity cost of capital calculated using the capital asset pricing model. The charge represents an assumed minimum return required by common shareholders on the Bank's invested...

  • Page 25
    ...by higher trading-related income, largely from interest rate and credit products. Wealth Management earnings decreased by $135 million due to the low interest rate environment and lower average asset levels caused by market-related declines. The Bank's share of earnings in TD Ameritrade decreased by...

  • Page 26
    ... Total loans 241,783 Total earning assets $ 446,256 Interest-bearing liabilities Deposits Personal Banks Business and government Total deposits Subordinated notes and debentures Obligations related to securities sold short and under repurchase agreements Preferred shares and Capital Trust Securities...

  • Page 27
    ... 8 TRADING-RELATED INCOME 2009 2008 2007 (millions of Canadian dollars) Net interest income (loss) Trading income (loss) Loans designated as trading under the fair value option1 Total trading-related income (loss) By product Interest rate and credit portfolios Foreign exchange portfolios Equity...

  • Page 28
    ... assets Restructuring costs Marketing and business development Brokerage-related fees Professional and advisory services Communications Other expenses Capital and business taxes Postage Travel and relocation Other Total other expenses Total expenses Efficiency ratio - reported Efficiency ratio...

  • Page 29
    ... in tax exempt income, and a lower effective tax rate on international operations. The Bank reports its investment in TD Ameritrade using the equity method of accounting. TD Ameritrade's tax expense of $196 million in the year, compared to $178 million in 2008, is not part of the Bank's tax rate...

  • Page 30
    ... compensation related to stronger results. The Bank's reported effective tax rate was 12% for the quarter, compared with 2% in the same quarter last year. The current quarter increase was mainly caused by higher earnings, a decrease in tax exempt income, and a higher effective rate on international...

  • Page 31
    ... the corporate loan book, net of provision for credit losses Other tax items Provision for insurance claims General allowance increase in Canadian Personal and Commercial Banking (excluding VFC) and Wholesale Banking Settlement of TD Banknorth shareholder litigation FDIC special assessment charge...

  • Page 32
    ...on market share of assets, and comprises a number of advisory, distribution, and asset management businesses, including TD Waterhouse, TD Mutual Funds, and TD Asset Management Inc. (TDAM). In Canada, discount brokerage, financial planning, private investment advice, and private client services cater...

  • Page 33
    ... the corporate loan book, net of provision for credit losses Other tax items Provision for insurance claims General allowance increase (release) in Canadian Personal and Commercial Banking (excluding VFC) and Wholesale Banking Settlement of TD Banknorth shareholder litigation FDIC special assessment...

  • Page 34
    ... Canadian dollar (which is expected to touch parity before pulling back). However, the domestic economy will remain the foundation for growth, as evidenced by a housing market that has already rebounded with existing home sales having already returned to pre-recession levels and with prices likely...

  • Page 35
    ... Bank's global insurance operations. Under the TD Canada Trust brand, the retail operations provide a full range of financial products and services to approximately 11 million personal and small business customers. $2,472 (millions of Canadian dollars) 50% (percent) NET INCOME EFFICIENCY RATIO...

  • Page 36
    ...banking customers, fielded in March and June 2009 by J.D. Power and Associates, a global marketing information services firm. TD Canada Trust set the highest benchmark scores across all seven major drivers of customer satisfaction: overall experience, account set-up/product offerings, fees, account...

  • Page 37
    ... personal automobile and home insurance industry in Canada. • TD Life and Health provides simple life, critical illness, and accident insurance in Canada with three million customers covered. • TD Insurance full-service broker is the 9th largest bank owned insurance broker in the U.S. BUSINESS...

  • Page 38
    ... under management: Assets owned by customers, managed by the Bank, where the Bank makes investment selections on behalf of the client (in accordance with an investment policy). In addition to the TD family of mutual funds, the Bank manages assets on behalf of individuals, pension funds, corporations...

  • Page 39
    ... with sales exceeding $700 million. TD Mutual Funds achieved record sales for long-term funds and completed the year being ranked number one in long-term funds in the industry. CHALLENGES IN 2009 • Fee revenue in the first half of the year was impacted by declines in global equity markets, though...

  • Page 40
    ... taxes Global Wealth net income Equity in net income of an associated company, net of income taxes Net income - reported Selected volumes and ratio Assets under administration (billions of Canadian dollars) Assets under management (billions of Canadian dollars) Return on invested capital Efficiency...

  • Page 41
    ... by adding 75 net new investment advisors and financial planners this fiscal year. • The focus for our wealth management business in the U.S. is to leverage our retail bank client base. Asset Management • In 2009, we were ranked number one in the industry in long term net fund sales. This was...

  • Page 42
    ...NET INCOME EFFICIENCY RATIO $800 80% 600 60 400 40 200 20 0 07 08 09 0 07 08 09 Assets1 (millions of dollars) 2009 Canadian dollars 2008 2007 2009 2008 U.S. dollars 2007 Consumer loans Business and government loans Debt securities classified as loans2 Investment securities3 Other assets...

  • Page 43
    ... challenges related to asset quality and capital levels. TD Bank is subject to vigorous competition from other banks and financial institutions, including savings banks, finance companies, credit unions and other providers of financial services, such as money market mutual funds, brokerage...

  • Page 44
    ..., privatization, and merger-related charges. Average deposits and margin on average earning assets exclude the impact related to the money market deposit account (MMDA) agreement with TD Ameritrade. The MMDA is described in Note 35 to the 2009 Consolidated Financial Statements. KEY PRODUCT GROUPS...

  • Page 45
    ... NET INCOME RISK-WEIGHTED ASSETS $3,500 3,000 2,500 $1,200 $60 1,000 50 800 40 2,000 600 30 1,500 400 20 1,000 500 0 07 08 09 200 10 0 07 08 09 0 07 08 09 Revenue (millions of Canadian dollars) 2009 2008 2007 Investment banking and capital markets Corporate banking Equity investments...

  • Page 46
    ... underwriting, distributing, and trading high quality fixed income products. • Support and enhance the Bank's brand with our corporate, government, and institutional client base. REVIEW OF FINANCIAL PERFORMANCE Wholesale Banking net income for the year was a record $1,137 million, an increase of...

  • Page 47
    .... Equity and energy businesses also performed well, and underwriting revenue was strong. Partially offsetting these increases were lower merger and acquisition advisory fees. Corporate Banking • Corporate banking revenue which includes corporate lending, trade finance, and cash management services...

  • Page 48
    ... the corporate loan book, net of provision for credit losses Other tax items Provision for insurance claims General allowance increase (release) in Canadian Personal and Commercial Banking (excluding VFC) and Wholesale Banking Settlement of TD Banknorth shareholder litigation FDIC special assessment...

  • Page 49
    ... 2 to the 2009 Consolidated Financial Statements. TABLE 21 REVIEW OF 2008 FINANCIAL PERFORMANCE Canadian Personal and Commercial Banking U.S. Personal and Commercial Banking (millions of Canadian dollars) Wealth Management Wholesale Banking Corporate Total Net interest income Non-interest...

  • Page 50
    ... the year. 2008 FINANCIAL RESULTS OVERVIEW 2008 Financial Performance by Business Line Canadian Personal and Commercial Banking reported record earnings in 2008. Net income of $2,424 million for the year increased by $171 million, or 8%, from the prior year. Return on invested capital increased...

  • Page 51
    ... other tax items. Adjusted net income in the prior year excluded a $39 million aftertax charge, being the Bank's share of TD Banknorth's restructuring, privatization, and merger-related charges. The $447 million increase in adjusted net income related primarily to the contribution of Commerce since...

  • Page 52
    ... of Canadian and U.S. Generally Accepted Accounting Principles contained in the Bank's 2009 Annual Report on Form 40-F filed with the SEC and available on the Bank's website at http://www.td.com/investor/index.jsp and at the SEC's website (http://www.sec.gov). Total assets under U.S. GAAP were $518...

  • Page 53
    ... business and risk management strategies and a continuing low interest rate environment. During 2009, the loans and acceptances portfolio continued to be diversified between retail and business and government. The Bank increased its credit portfolio by $32 billion, or 14%, from the prior year...

  • Page 54
    ...of $226 million). No allowance is recorded for trading loans or loans designated as trading under the fair value option. 2 Effective 2009, multiple-unit residential (MUR) mortgages, and any related credit losses, have been reclassified from personal - residential mortgages to business and government...

  • Page 55
    ...-sale and held-to-maturity securities were reclassified to loans, as described in the "Changes in Accounting Policies during the Current Year" section. Loans authorized and amounts outstanding to Canadian and U.S. small and mid-sized business customers are provided below. TABLE 25 LOANS TO SMALL...

  • Page 56
    ... CHANGES IN GROSS IMPAIRED LOANS AND ACCEPTANCES 2009 2008 (millions of Canadian dollars) Balance at beginning of period Impact due to reporting-period alignment of U.S. entities Additions Return to performing status, repaid or sold Write-offs Foreign exchange and other adjustments Balance at end...

  • Page 57
    ...210 million (amortized cost of $226 million). No allowance is recorded for trading loans or loans designated as trading under the fair value option. 2 Effective 2009, MUR mortgages, and any related credit losses, have been reclassified from personal - residential mortgages to business and government...

  • Page 58
    ... LOAN LOSSES BY GEOGRAPHY Percentage of total 2009 2008 2007 2009 2008 2007 (millions of Canadian dollars, except as noted) Canada Atlantic provinces British Columbia1 Ontario1 Prairies1 Québec Total Canada2 United States Connecticut Florida Maine Massachusetts New Hampshire New Jersey New York...

  • Page 59
    ... a summary of provisions charged to the Consolidated Statement of Income. TABLE 29 PROVISION FOR CREDIT LOSSES 2009 2008 2007 (millions of Canadian dollars) Net new specifics (net of reversals)1 Recoveries Total specific provision Change in general allowance VFC U.S. Personal and Commercial...

  • Page 60
    ... $210 million (amortized cost of $226 million). No allowance is recorded for trading loans or loans designated as trading under the fair value option. Effective 2009, MUR mortgages, and any related credit losses, have been reclassified from personal - residential mortgages to business and government...

  • Page 61
    ...the average month-end loan balance, was approximately 6.0% (2008 - approximately 5.8%) on an annual basis. The portfolio continues to perform as expected. These loans are recorded at amortized cost. See Note 3 to the Consolidated Financial Statements for further information regarding the accounting...

  • Page 62
    ... 1, 2008, opening retained earnings and $147 million after tax for 2009 in the Consolidated Statement of Income. During the second quarter of 2009, the Bank re-securitized a portion of the non-agency CMO portfolio. As part of the on-balance sheet re-securitization, new credit ratings were obtained...

  • Page 63
    ..., the Bank's investment in TD Ameritrade is translated using the period end foreign exchange rate of the Bank. Accordingly, with the alignment of the reporting periods of TD Bank N.A., effective April 30, 2009, the net impact relates to TD Ameritrade only. 5 When expected loss as calculated within...

  • Page 64
    ... used to fund acquisitions or investments in fixed assets to support future earnings growth. The Bank uses internal models to determine how much risk-based capital is required to support the enterprise's risk and business exposures. Characteristics of these models are described in the 'Managing Risk...

  • Page 65
    ... businesses in both Canada and the U.S. TABLE 35 OUTSTANDING EQUITY AND SECURITIES 1 EXCHANGEABLE/CONVERTIBLE INTO EQUITY Oct. 31, 2009 Number of shares/units Oct. 31, 2008 Number of shares/units (millions of shares/units, except as noted) TABLE 34 RISK-WEIGHTED ASSETS - BASEL II (millions...

  • Page 66
    ...Financial Statements for further information regarding the accounting for VIEs. Securitizations are an important part of the financial markets, providing liquidity by facilitating investor access to specific portfolios of assets and risks. In a typical securitization structure, the Bank sells assets...

  • Page 67
    ... CONDUITS 2009 Significant unconsolidated SPEs Ratings profile of SPE asset class AAA Expected weightedAA+ to average AA- life (years)1 Significant unconsolidated SPEs 2008 Ratings profile of SPE asset class AAA AA+ to AA- (millions of Canadian dollars) Residential mortgage loans Credit card loans...

  • Page 68
    ... a money market deposit account (MMDA) agreement with TD Ameritrade, pursuant to which the Bank makes available to clients of TD Ameritrade MMDAs as designated sweep vehicles. TD Ameritrade provides marketing and support services with respect to the MMDA. The Bank paid fees of $653.7 million in 2009...

  • Page 69
    ... allows the Bank to earn profits in interest and fee income. Financial instruments also create a variety of risks which the Bank manages with its extensive risk management policies and procedures. The key risks include interest rate, credit, liquidity, equities, and foreign exchange risks. For...

  • Page 70
    ... not be successful in introducing new products and services, achieving market acceptance of its products and services, and/or developing and maintaining loyal customers. Acquisitions and Strategic Plans The Bank regularly explores opportunities to acquire other financial services companies or parts...

  • Page 71
    ... and its earnings. Chair - President & Chief Executive Officer Asset/Liability Committee Oversees the management of TDBFG's non-trading market risk and each of its consolidated liquidity, funding and capital positions. Chair - EVP Corporate Development Risk Capital Assessment Committee Reviews the...

  • Page 72
    ...CRO, and support the CEO in the overall management of risk. These Committees provide oversight on governance, risk, and control at the most senior level, and review and endorse risk management policies, strategies, and controls. All the Committees meet regularly and hold special meetings if required...

  • Page 73
    ..., monthly, and quarterly review requirements for credit exposures. • The key parameters used in our credit risk models are monitored on an ongoing basis. Unanticipated economic or political changes in a foreign country could affect cross-border payments for goods and services, loans, dividends...

  • Page 74
    ... (including small business entities) Corporate 1 2 non-retail credit risk exposures according to the following Basel II counterparty types: corporate (wholesale and commercial customers), sovereign (governments, central banks and certain public sector entities), and bank (regulated deposit-taking...

  • Page 75
    ... development of the model remain valid for the current portfolio and environment. Risk Management ensures that the credit risk rating system complies with the Bank's model risk rating policy. At least annually, the Risk Committee of the Board is informed of the performance of the credit risk rating...

  • Page 76
    ... risk policies, review underwriting inventories, and review the usage of capital and assets in Wholesale Banking. Market Risk Market risk is the risk of loss in financial instruments or the balance sheet due to adverse movements in market factors such as interest and exchange rates, prices, credit...

  • Page 77
    ... and control overall risk levels and to calculate the regulatory capital required for market risk in trading activities. VaR measures the adverse impact that potential changes in market rates and prices could have on the value of a portfolio over a specified period of time. At the end of each day...

  • Page 78
    ... booked at the time of inception for fixedrate assets and liabilities, and to generate more stable net interest income over time. The interest rate risk exposures from products with closed (nonoptioned) fixed-rate cash flows are measured and managed separately from products that offer customers...

  • Page 79
    ... investments in foreign operations. When our foreign currency assets are greater or less than our liabilities in that currency, they create a foreign currency open position. An adverse change in foreign exchange rates can impact our reported net income and shareholders' equity and also our capital...

  • Page 80
    ... for consolidating and reporting the Bank's global liquidity position and for managing the Canadian Personal and Commercial Banking and domestic Wealth Management liquidity positions. • Wholesale Banking, working closely with Trading Risk in Risk Management, is responsible for managing the...

  • Page 81
    ... sustain shareholder value, successfully execute our business strategies, operate efficiently and provide reliable, secure and convenient access to financial services. We maintain a formal Bank-wide operational risk management framework that emphasizes a strong risk management and internal control...

  • Page 82
    ...the insurance business units has primary responsibility for managing insurance risk with oversight by the Chief Risk Officer for Insurance who reports into Risk Management. The Audit Committee of the Board acts as the Audit and Conduct Review Committee for the Canadian Insurance company subsidiaries...

  • Page 83
    .... All directors, officers and employees are required to attest annually that they understand the Code and have complied with its provisions. Business units and corporate areas manage day-to-day regulatory and legal risk primarily by implementing appropriate policies, procedures and controls. The...

  • Page 84
    ...ensure the selection of TD Ameritrade's Chief Executive Officer requires the support of the Bank. The directors we designate participate in a number of TD Ameritrade Board committees, including chairing the Audit Committee and the HR and Compensation Committee. Management processes and protocols are...

  • Page 85
    ... in market liquidity, change in interest rates or due to collectability issues with respect to the expected cash flows over the life of the debt security. See Note 30 to the Bank's Consolidated Financial Statements for additional disclosures regarding the Bank's significant financial assets and...

  • Page 86
    ...Financial assets Availablefor-sale securities2,3 Financial liabilities Obligations related to Trading securities deposits sold short (millions of Canadian dollars, except as noted) Trading securities1 Loans1,3 Derivatives Derivatives 2009 Fair value Based on: Level 1: Quoted market prices Level...

  • Page 87
    ... of expected long-term return on plan assets, compensation increases, health care cost trend rate and discount rate are management's best estimates and are reviewed annually with the Bank's actuaries. The Bank develops each assumption using relevant experience in conjunction with market related data...

  • Page 88
    ... million after tax. In addition, the 2009 Amendments require loans for which the Bank has the intention to sell immediately or in the near term to be classified as trading. As a result, they are accounted for at fair value, with changes in fair value recorded in the Consolidated Statement of Income...

  • Page 89
    ...financial assets out of trading and available-for-sale categories in specified circumstances. For the impact of the reclassification, see Note 2 to the Bank's Consolidated Financial Statements. ALIGNMENT OF REPORTING PERIOD OF U.S. ENTITIES Effective April 30, 2009, the reporting periods of TD Bank...

  • Page 90
    ... the Bank's accounting policies as well as an assessment of the impact of various alternatives is underway. Training is being provided to key employees and the impact of the transition on our business practices, information technology, and internal controls over financial reporting is being closely...

  • Page 91
    ... 2009 the Bank's internal control over financial reporting is effective. The Bank's Board of Directors, acting through the Audit Committee which is composed entirely of independent directors, oversees management's responsibilities for financial reporting. The Audit Committee reviews the Consolidated...

  • Page 92
    ..., Changes in Shareholders' Equity, Comprehensive Income and Cash Flows for the years ended October 31, 2009, 2008 and 2007 of The Toronto-Dominion Bank and our report dated December 2, 2009 expressed an unqualified opinion thereon. Ernst & Young LLP Chartered Accountants Licensed Public Accountants...

  • Page 93
    ... at October 31 (millions of Canadian dollars) 2009 2008 ASSETS Cash and due from banks Interest-bearing deposits with banks Securities (Note 2) Trading (Note 4) Available-for-sale (Note 1a)) Held-to-maturity (Note 1a)) Securities purchased under reverse repurchase agreements (Note 2) Loans (Note...

  • Page 94
    ...Restructuring costs (Note 26) Marketing and business development Brokerage-related fees Professional and advisory services Communications Other (Note 27) Income before income taxes, non-controlling interests in subsidiaries and equity in net income of an associated company Provision for income taxes...

  • Page 95
    ...exercise of stock options Shares issued as a result of dividend reinvestment plan Proceeds from issuance of new shares Repurchase of common shares Shares issued on acquisition of Commerce (Note 7) Impact of shares sold (acquired) for trading purposes1 Balance at end of year Preferred shares (Note 18...

  • Page 96
    ... 5) Equity in net income of an associated company Non-controlling interests Future income taxes (Note 28) Changes in operating assets and liabilities Current income taxes payable Interest receivable and payable (Notes 11, 13) Trading securities Derivative assets Derivative liabilities Other Net cash...

  • Page 97
    ... of Income. The Bank's equity share in TD Ameritrade's earnings is reported on a one month lag basis. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of the Consolidated Financial Statements requires management to make estimates and assumptions based on information...

  • Page 98
    ... Capital Accumulated Other Comprehensive Income (loss) Trading-Related Income Insurance Other Non-Interest Income Stock-Based Compensation Employee Future Benefits Restructuring Costs Other Non-Interest Expenses Income Taxes Earnings Per Share Fair Value of Financial Instruments Interest Rate...

  • Page 99
    ... 2009 Amendments, these loans were accounted for at amortized cost. These loans are recorded in residential mortgages and business and government loans on the Consolidated Balance Sheet. This change did not have a material impact on the financial position, cash flows, or earnings of the Bank. The...

  • Page 100
    ... the fair value of financial assets and financial liabilities, including derivatives. The new guidance did not have a material impact on the financial position, cash flows, or earnings of the Bank. Future Accounting and Reporting Changes Conversion to International Financial Reporting Standards The...

  • Page 101
    ...of $687 million after tax in the year ended October 31, 2009 (three months ended October 31, 2008 - decrease of $561 million after tax). In 2007 and the first three quarters of 2008, the Bank recognized the change in the fair value of these debt securities in its trading income. SECURITIES PURCHASED...

  • Page 102
    ...As at October 31, 2009, equity securities in the available-for-sale portfolio with a carrying value of $2,242 million (2008 - $1,504 million) do not have quoted market prices and are carried at cost. The fair value of these equity securities was $2,471 million (2008 - $1,790 million) and is included...

  • Page 103
    ... 3 LOANS, IMPAIRED LOANS AND ALLOWANCE FOR CREDIT LOSSES LOANS Loans are non-derivative financial assets with fixed or determinable payments that the Bank does not intend to sell immediately or in the near term and that are not quoted in an active market. Loans are accounted for at amortized cost...

  • Page 104
    ... is generally measured by discounting the expected future cash flows at the original effective interest rate inherent in the loan. For personal and small business loans and credit card loans, specific allowances are calculated using a formula that takes into account recent loss experience. General...

  • Page 105
    ... of the loan. The carrying value of loans renegotiated during the year ended October 31, 2009, that would otherwise have been impaired, was $18 million (2008 - $11 million). NOTE 4 FINANCIAL INSTRUMENTS DESIGNATED AS TRADING UNDER THE FAIR VALUE OPTION Financial assets and financial liabilities...

  • Page 106
    ...recorded for the period was a loss of $16 million (2008 - $(109) million), calculated by determining the changes in credit spread implicit in the fair value of the loans. INCOME (LOSS) FROM FINANCIAL INSTRUMENTS DESIGNATED AS TRADING UNDER THE FAIR VALUE OPTION During the year ended October 31, 2009...

  • Page 107
    ... 0.1 Represents monthly payment rate for secured personal and credit card loans and an annual prepayment rate for U.S. loans. 2 The excess spread for credit card loans reflects the net portfolio yield, which is interest earned less funding costs and losses. There are no expected credit losses for...

  • Page 108
    ...31. Loans Managed (millions of Canadian dollars) Gross loans 2009 Gross Write-offs, impaired net of loans recoveries Gross loans Gross impaired loans 2008 Write-offs, net of recoveries Type of loan Residential mortgages1 Consumer instalment and other personal Credit card Business and government and...

  • Page 109
    ...$32.33 per TD Banknorth share for a total cash consideration of $3.7 billion (US$3.3 billion). The acquisition was accounted for by the purchase method. On closing, TD Banknorth became a wholly-owned subsidiary of the Bank and TD Banknorth's shares were delisted from the New York Stock Exchange. As...

  • Page 110
    ..., equities, or other financial measures. Such instruments include interest rate, foreign exchange, equity, commodity and credit derivative contracts. The Bank uses these instruments for trading purposes and non-trading purposes to manage the risks associated with its funding and investing strategies...

  • Page 111
    ... and energy-related products in both OTC and exchange markets. The Bank issues certain loan commitments to customers in Canada at a fixed price. These funding commitments are accounted for as derivatives if there is past practice of selling the loans shortly after funding. These loan commitments are...

  • Page 112
    ... (millions of Canadian dollars) Average fair value for the year1 Positive Negative 2009 Year-end fair value Positive Negative 2008 Year-end fair value Positive Negative Derivative financial instruments held or issued for trading purposes Interest rate contracts Futures Forward rate agreements Swaps...

  • Page 113
    ... (millions of Canadian dollars) Income and on other comprehensive income for the year ended October 31, 2009. Derivatives 2009 1 Hedge Hedged item ineffectiveness2,3 1 Amounts excluded from the assessment of hedge effectiveness2,4 Fair value hedges Interest rate contracts Foreign exchange...

  • Page 114
    ... Consolidated Statement of Income and in other comprehensive income on related non-derivative instruments. Gains (Losses) on Non-Trading Derivatives not Designated in Qualifying Hedge Accounting Relationships (millions of Canadian dollars) 2009 Interest rate contracts1 Foreign exchange contracts1...

  • Page 115
    ...-RELATED RISKS Market Risk Derivative instruments, in the absence of any compensating up-front cash payments, generally have no market value at inception. They obtain value, positive or negative, as relevant interest rates, foreign exchange rates, equity, commodity or credit prices or indices change...

  • Page 116
    ...agreements Swaps Options purchased Total interest rate contracts Foreign exchange contracts Forward contracts Swaps Cross-currency interest rate swaps Options purchased Total foreign exchange contracts Other contracts Credit derivatives Equity contracts Commodity contracts Total derivative financial...

  • Page 117
    ... in an acquisition and term deposit, loan and mutual fund intangibles resulting from acquisitions. Other intangible assets are amortized over their estimated useful life (three to 20 years) proportionate to the expected economic benefit. Other Intangibles (millions of Canadian dollars) All other...

  • Page 118
    ... are in general savings accounts. Term deposits are those payable on a fixed date of maturity purchased by customers to earn interest over a fixed period. The terms are from one day to 10 years. Accrued interest on deposits, calculated using the effective interest rate method, is included in...

  • Page 119
    ... - nil) due to TD Capital Trust lV. Term Deposits (millions of Canadian dollars) Within 1 year Over 1 year to 2 years Over 2 years to 3 years Over 3 years to 4 years Over 4 years to 5 years Over 5 years 2009 2008 Total Total Personal Banks Business and government Trading Total $ 15,298 1,798...

  • Page 120
    ... Bank or its subsidiaries and are subordinated in right of payment to the claims of depositors and certain other creditors. Redemptions, cancellations, exchanges and modifications of subordinated debentures Subordinated Notes and Debentures (millions of Canadian dollars) Maturity date Interest rate...

  • Page 121
    ...substitute purchasers at the purchase price of $25.00 cash per share together with unpaid dividend to the date of conversion. N O T E 16 CAPITAL TRUST SECURITIES Capital Trust Securities - Series 2009 (TD CaTS) were issued by TD Capital Trust (Trust), a closed-end trust established under the laws...

  • Page 122
    .... Starting on June 30, 2021 and on every fifth anniversary thereafter, the interest rate will be reset to the Government of Canada yield plus 4.00%. N O T E 17 NON-CONTROLLING INTERESTS IN SUBSIDIARIES 2009 2008 (millions of Canadian dollars) REIT preferred stock, Series A TD Capital Trust III...

  • Page 123
    ... shares issued on exercise of stock options Shares issued as a result of dividend reinvestment plan Proceeds from issuance of new shares Repurchase of common shares Shares issued on acquisition of Commerce Impact of shares sold (acquired) for trading purposes1 Balance at end of year - common shares...

  • Page 124
    ... from the Bank's treasury at an average market price based on the last five trading days before the date of the dividend payment, with a discount of between 0% to 5% at the Bank's discretion, or from the open market at market price. During the year, a total of 8.8 million common shares were issued...

  • Page 125
    ... foreign currency translation gains on investments in subsidiaries, net of hedging activities - $166 million; and losses on derivatives designated as cash flow hedges - $36 million. 2 The Bank consolidated TD Bank, N.A. and reported the investment in TD Ameritrade using the foreign exchange rate...

  • Page 126
    ... Canada Association and Visa International Service Association, which closed on October 3, 2007, the Bank received shares of the new global entity (Visa Inc.) in exchange for the Bank's membership interest in Visa Canada Association. iii) Loss of $564 million relating to the change in fair value...

  • Page 127
    ... table summarizes information relating to stock options outstanding and exercisable as at October 31, 2009. Range of Exercise Prices Options outstanding Weighted-average remaining Number outstanding contractual (millions of shares) life (years) Weightedaverage exercise price Options exercisable...

  • Page 128
    ...on the Bank's total shareholder return relative to the average of the other major Canadian banks. The number of TD Banknorth share units under these plans as at October 31, 2009 was 0.4 million (2008 - 0.5 million; 2007 - 1.6 million). Compensation expense for these plans is recorded in the year the...

  • Page 129
    ... the projected benefit method pro-rated on service and management's best estimates of expected long-term return on plan assets, compensation increases, health care cost trend rate and discount rate, which are reviewed annually by the Bank's actuaries. The discount rate used to value liabilities is...

  • Page 130
    ...1, 2009, the commencement date of the Plan, using an 8.3% discount rate. 6 Net of fees and expenses for the Society. OTHER PENSION AND RETIREMENT PLANS CT Pension Plan As a result of the acquisition of CT Financial Services Inc. (CT), the Bank sponsors a pension plan consisting of a defined benefit...

  • Page 131
    ... medical coverage and life insurance benefits to a closed group of employees and directors who meet minimum age and service requirements. Effective December 31, 2008 benefit accruals under the retirement and supplemental retirement plans were frozen. In addition, TD Bank, N.A. and its subsidiaries...

  • Page 132
    ... tax, which primarily consisted of legal and investment banking fees, and merger-related costs of $8 million in connection with the integration of Hudson United Bancorp (Hudson) and Interchange with TD Banknorth. In the Consolidated Statement of Income, the privatization and merger-related charges...

  • Page 133
    ...and award agreements and the write-down of long-lived assets due to impairment. Integration charges consisted of costs related to employee retention, external professional consulting charges and marketing (including customer communication and rebranding). In the Consolidated Statement of Income, the...

  • Page 134
    ... in Canada, $194 million (2008 - $1,031 million) in the United States and $44 million (2008 - $23 million) in international jurisdictions. N O T E 29 EARNINGS PER SHARE Basic earnings per share is calculated by dividing net income available to common shareholders by the weighted-average number of...

  • Page 135
    ... financial assets and financial liabilities that are short term in nature or contain variable rate features, fair value is based on the appropriate prevailing interest rates and/or credit curves. The fair value of cash and due from banks, interest-bearing deposits with banks, customers' liability...

  • Page 136
    Financial Assets and Liabilities (millions of Canadian dollars) Carrying value 2009 Fair value Carrying value 2008 Fair value FINANCIAL ASSETS Cash and due from banks Interest-bearing deposits with banks Trading securities1 Government and government-related securities Other debt securities Equity ...

  • Page 137
    ...by Valuation Methodology (millions of Canadian dollars) Level 1 Level 2 Level 3 2009 Total fair value FINANCIAL ASSETS Trading securities1 Government and government-related securities Canadian government debt Federal Provinces U.S. Federal, state, municipal governments, and agencies debt Other OECD...

  • Page 138
    ... the year ended October 31, 2009. Level 3 Reconciliation for Financial Assets and Liabilities Measured at Fair Value (millions of Canadian dollars) Fair value as at Nov. 1, 2008 Total realized and unrealized gains (losses) Movements Transfers Fair value as at Out of Oct. 31, Level 3 2009 Change in...

  • Page 139
    ... rates. Sensitivity Analysis of Level 3 Financial Assets and Liabilities (millions of Canadian dollars) 2009 Impact to net assets Decrease in Increase in fair value fair value Financial Assets and Liabilities Trading securities Available-for-sale securities Loans Derivative assets Trading deposits...

  • Page 140
    ... the Bank could be obligated to extend should contracts be fully utilized. Credit Instruments (millions of Canadian dollars) 2009 2008 In addition, the Bank is committed to fund $459 million of private equity investments. Long-term Commitments or Leases The Bank has obligations under long-term non...

  • Page 141
    ... credit enhancements supporting asset pools are insufficient. Generally, the term of these credit facilities do not exceed 16 years. Written Options Written options are agreements under which the Bank grants the buyer the future right, but not the obligation, to sell or buy at or by a specified date...

  • Page 142
    ... risk of financial instruments, before taking account of any collateral held or other credit enhancements. Gross Maximum Credit Risk Exposure (millions of Canadian dollars) 2009 2008 Cash and due from banks Interest-bearing deposits with banks Securities1 Trading Government and government-insured...

  • Page 143
    ...on the risk rating for the standardized approach. Financial Assets Subject to the Standardized Approach by Risk-Weights (millions of Canadian dollars) 0% 20% 35% 50% 75% 100% 150% Total 2009 Loans Residential mortgages Consumer instalment and other personal Credit card Business and government Debt...

  • Page 144
    ... deposits with banks. Retail Financial Assets Subject to the AIRB Approach by Risk Rating1 (millions of Canadian dollars) Low risk Normal risk Medium risk High risk Default Total 2009 Loans Residential mortgages Consumer instalment and other personal Credit card Business and government Total loans...

  • Page 145
    ...'s global insurance operations and provides financial products and services to personal, small business, insurance, and commercial customers. Wealth Management provides investment products and services to institutional and retail investors and includes the Bank's equity investment in TD Ameritrade...

  • Page 146
    ... Business Segment (millions of Canadian dollars) Canadian Personal and Commercial Banking Wealth Management U.S. Personal and Commercial Banking1,2 Wholesale Banking Corporate Total 2009 Net interest income Non-interest income Provision for credit losses Non-interest expenses Income before income...

  • Page 147
    ...account (MMDA) agreement with TD Ameritrade, pursuant to which the Bank makes available to clients of TD Ameritrade money market deposit accounts as designated sweep vehicles. TD Ameritrade provides marketing and support services with respect to the MMDA. The Bank paid fees of $653.7 million in 2009...

  • Page 148
    ...Company TD Asset Finance Corp. TD Asset Management Inc. TD Waterhouse Private Investment Counsel Inc. TDAM USA Inc. TD Capital Funds Management Ltd. TD Capital Group Limited TD Capital Trust TD Capital Trust III TD Financing Services Home Inc. TD Investment Services Inc. TD Life Insurance Company TD...

  • Page 149
    ...New York) LLC Toronto Dominion Capital (U.S.A.), Inc. Toronto Dominion Investments, Inc. Other International Internaxx Bank S.A. (75%) NatWest Personal Financial Management Limited (50%) NatWest Stockbrokers Limited TD Ireland TD Global Finance TD Waterhouse Bank N.V. TD Waterhouse Investor Services...

  • Page 150
    ... repurchase agreements Loans (net of allowance for credit losses) Other Total Assets Liabilities Deposits Other Subordinated notes and debentures Liabilities for preferred shares and capital trust securities Non-controlling interest in subsidiaries Shareholders' equity Common shares Preferred shares...

  • Page 151
    ...of note", net of income taxes, from reported results) and related terms are not defined terms under GAAP and therefore, may not be comparable to similar terms used by other issuers. For further explanation, see "How the Bank Reports" in the accompanying Management's Discussion and Analysis. Adjusted...

  • Page 152
    ...value of credit default swaps hedging the corporate loan book Other tax items2 Provision for insurance claims General allowance increase (release) relating to Canadian Personal and Commercial Banking (excluding VFC) and Wholesale Banking Settlement of TD Banknorth shareholder litigation FDIC special...

  • Page 153
    ... the price earnings ratio is computed using diluted net income per common share. Prior to 1999, the price earnings ratio is computed using basic net income per common share. 6 Includes customers' liability under acceptances. 7 Reflects the number of employees on an average full-time equivalent basis...

  • Page 154
    ... Group Head Insurance and Global Development & Deputy Chair TD Canada Trust Paul Douglas Executive Vice President Business Banking Tim Hockey Group Head Canadian Banking and President & CEO TD Canada Trust Shailesh Kotwal Executive Vice President Retail Banking Products & Services Margo McConvey...

  • Page 155
    ... Fulton Executive Vice President Private Client Group and Financial Advisory Bill Hatanaka Group Head Wealth Management and Chairman and CEO TD Waterhouse Canada Inc. Brian Murdock Executive Vice President TD Asset Management John See Executive Vice President Discount Brokerage Financial Planning...

  • Page 156
    ...ratio is calculated as total capital divided by RWA. Total Shareholder Return (TSR): The change in market price plus dividends paid during the year as a percentage of the prior year's closing market price per common share. Value-at-Risk (VaR): A metric used to monitor and control overall risk levels...

  • Page 157
    ... account in Canada or the U.S. For this service, please contact the bank's transfer agent at the address below. U.S. dollar dividends: Dividend payments Dividend information for 2010 is available at www.td.com under Investor Relations/Share Information. Dividends, including the amounts and dates...

  • Page 158
    ... products and services. TD Insurance helps protect more than three million customers from the "accidents of life" with a wide range of products including credit protection, life, critical illness, health, travel, home and auto insurance. U.S. Personal and Commercial Banking TD Bank, America...