/FIRST AND FINAL ADD - TO291 - TD BANK FINANCIAL GROUP EARNINGS/

----------------------------------------------------------------------- As at ------------------- Jan. 31 Oct. 31 (millions of Canadian dollars) 2006 2005 ------------------------------------------------------------------------- ASSETS Cash and due from banks $2,158 $1,673 ------------------------------------------------------------------------- Interest-bearing deposits with banks 11,226 11,745 ------------------------------------------------------------------------- 13,384 13,418 ------------------------------------------------------------------------- Securities Investment 46,376 42,321 Trading 75,000 65,775 ------------------------------------------------------------------------- 121,376 108,096 ------------------------------------------------------------------------- Securities purchased under reverse repurchase agreements 24,847 26,375 ------------------------------------------------------------------------- Loans Residential mortgages 51,152 52,740 Consumer instalment and other personal 61,744 62,754 Credit card 3,171 2,998 Business and government 40,250 35,044 ------------------------------------------------------------------------- 156,317 153,536 Allowance for credit losses (Note 3) (1,358) (1,293) ------------------------------------------------------------------------- Loans (net of allowance for credit losses) 154,959 152,243 ------------------------------------------------------------------------- Other Customers' liability under acceptances 6,699 5,989 Investment in TD Ameritrade (Note 13) 3,327 - Trading derivatives' market revaluation 33,781 33,651 Goodwill 7,376 6,518 Other intangibles 2,275 2,124 Land, buildings and equipment 1,701 1,801 Other assets 14,652 14,995 ------------------------------------------------------------------------- 69,811 65,078 ------------------------------------------------------------------------- Total assets $384,377 $365,210 ------------------- ------------------- LIABILITIES ------------------------------------------------------------------------- Deposits Personal $135,875 $131,783 Banks 15,380 11,505 Business and government 105,030 103,693 ------------------------------------------------------------------------- 256,285 246,981 ------------------------------------------------------------------------- Other Acceptances 6,699 5,989 Obligations related to securities sold short 26,357 24,406 Obligations related to securities sold under repurchase agreements 12,520 11,284 Trading derivatives' market revaluation 34,934 33,498 Other liabilities 17,244 18,545 ------------------------------------------------------------------------- 97,754 93,722 ------------------------------------------------------------------------- Subordinated notes and debentures (Note 6) 7,225 5,138 ------------------------------------------------------------------------- Liabilities for preferred shares and capital trust securities (Note 7) 1,793 1,795 ------------------------------------------------------------------------- Non-controlling interest in subsidiaries 2,847 1,708 ------------------------------------------------------------------------- SHAREHOLDERS' EQUITY ------------------------------------------------------------------------- Common shares (millions of shares issued and outstanding: 714.7 and 711.8) (Note 8) 6,015 5,872 Preferred shares (millions of shares issued and outstanding: 17.0 and nil) (Note 8) 425 - Contributed surplus 47 40 Foreign currency translation adjustments (666) (696) Retained earnings 12,652 10,650 ------------------------------------------------------------------------- 18,473 15,866 ------------------------------------------------------------------------- Total liabilities and shareholders' equity $384,377 $365,210 ------------------- ------------------- Certain comparative amounts have been restated 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) 2006 2005 ------------------------------------------------------------------------- Interest income Loans $2,452 $1,832 Securities Dividends 222 229 Interest 1,037 856 Deposits with banks 80 95 ------------------------------------------------------------------------- 3,791 3,012 ------------------------------------------------------------------------- Interest expense Deposits 1,534 1,108 Subordinated notes and debentures 86 79 Preferred shares and capital trust securities 39 29 Other liabilities 525 385 ------------------------------------------------------------------------- 2,184 1,601 ------------------------------------------------------------------------- Net interest income 1,607 1,411 ------------------------------------------------------------------------- Other income Investment and securities services 642 600 Trading income 292 76 Insurance, net of claims 224 184 Service charges 221 170 Loan securitizations (Note 4) 92 93 Credit fees 86 98 Card services 81 52 Trust fees 29 17 Net investment securities gains 23 52 Other 107 53 ------------------------------------------------------------------------- 1,797 1,395 ------------------------------------------------------------------------- Total revenues 3,404 2,806 ------------------------------------------------------------------------- Provision for credit losses (Note 3) 114 10 ------------------------------------------------------------------------- Dilution gain, net (Note 13) 1,564 - ------------------------------------------------------------------------- Non-interest expenses Salaries and employee benefits 1,174 981 Occupancy including depreciation 166 148 Equipment including depreciation 147 132 Amortization of other intangibles 128 134 Restructuring costs 50 - Marketing and business development 133 104 Brokerage related fees 53 58 Professional and advisory services 105 108 Communications 49 46 Other 285 234 ------------------------------------------------------------------------- 2,290 1,945 ------------------------------------------------------------------------- Income before provision for income taxes and non-controlling interest in subsidiaries 2,564 851 Provision for income taxes 220 221 ------------------------------------------------------------------------- Income before non-controlling interest in subsidiaries 2,344 630 Non-controlling interest 37 - ------------------------------------------------------------------------- Net income 2,307 630 Preferred dividends 5 - ------------------------------------------------------------------------- Net income available to common shareholders $2,302 $630 ---------------------------- ---------------------------- Average number of common shares outstanding (millions) Basic 712.5 656.6 Diluted 718.9 661.9 Earnings per share (in dollars) Basic $3.23 $.96 Diluted 3.20 .95 Dividends per share (in dollars) .42 .36 ---------------------------- ---------------------------- Certain comparative amounts have been restated 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) 2006 2005 ------------------------------------------------------------------------- Common shares Balance at beginning of period $5,872 $3,373 Proceeds from shares issued on exercise of options 45 27 Proceeds from shares issued as a result of dividend reinvestment plan 100 73 Impact of shares (acquired) sold in Wholesale Banking (2) 2 ------------------------------------------------------------------------- Balance at end of period 6,015 3,475 ------------------------------------------------------------------------- Preferred Shares Proceeds from share issues 425 - ------------------------------------------------------------------------- Balance at end of period 425 - ------------------------------------------------------------------------- Contributed surplus Balance at beginning of period 40 20 Stock option expense (Note 9) 7 4 ------------------------------------------------------------------------- Balance at end of period 47 24 ------------------------------------------------------------------------- Foreign currency translation adjustments Balance at beginning of period (696) (265) Foreign exchange gains (losses) from investments in subsidiaries and other items (392) 243 Impact of reduction in investment in TD Waterhouse U.S.A. (Note 13) 66 - Foreign exchange gains (losses) from hedging activities 528 (279) (Provision for) benefit of income taxes (172) 89 ------------------------------------------------------------------------- Balance at end of period (666) (212) ------------------------------------------------------------------------- Retained earnings Balance at beginning of period 10,650 9,540 Net income 2,307 630 Common dividends (300) (236) Preferred dividends (5) - Other - (18) ------------------------------------------------------------------------- Balance at end of period 12,652 9,916 ------------------------------------------------------------------------- Total shareholders' equity at end of period $18,473 $13,203 ---------------------------- ---------------------------- Certain comparative amounts have been restated 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) 2006 2005 ------------------------------------------------------------------------- Cash flows from (used in) operating activities Net income $2,307 $630 Adjustments to determine net cash flows from (used in) operating activities Provision for credit losses 114 10 Restructuring costs 50 - Depreciation 85 62 Amortization of other intangibles 128 134 Stock option expense 7 4 Dilution gain, net (1,564) - Net investment securities gains (23) (52) Gain on securitizations (33) (39) Non-controlling interest 37 - Changes in operating assets and liabilities Future income taxes 169 (48) Current income taxes payable (47) (159) Interest receivable and payable (44) 365 Trading securities (9,225) (9,084) Unrealized gains and amounts receivable on derivatives contracts (130) (2,225) Unrealized losses and amounts payable on derivatives contracts 1,436 893 Other (1,021) 1,528 ------------------------------------------------------------------------- Net cash used in operating activities (7,754) (7,981) ------------------------------------------------------------------------- Cash flows from (used in) financing activities Change in deposits 5,000 15,069 Securities sold under repurchase agreements 530 842 Securities sold short 1,951 3,720 Issue of subordinated notes and debentures 1,800 - Repayment of subordinated notes and debentures (150) (2) Subordinated notes and debentures (acquired) sold in Wholesale Banking 1 5 Liability for preferred shares and capital trust securities (2) (350) Translation adjustment on subordinated notes and debentures issued in a foreign currency - 13 Common shares issued on exercise of options 45 27 Common shares issued as a result of dividend reinvestment plan 100 73 Common shares (acquired) sold in Wholesale Banking (2) 2 Dividends paid on common shares (300) (236) Issuance of preferred shares 425 - Dividends paid on preferred shares (5) - ------------------------------------------------------------------------- Net cash from financing activities 9,393 19,163 ------------------------------------------------------------------------- Cash flows from (used in) investing activities Interest-bearing deposits with banks 519 (1,225) Activity in investment securities Purchases (11,088) (10,130) Proceeds from maturities 5,345 2,916 Proceeds from sales 4,719 3,791 Activity from lending activities Origination and acquisitions (49,148) (18,160) Proceeds from maturities 46,510 13,540 Proceeds from sales 333 1,061 Proceeds from loan securitizations 1,057 1,640 Land, buildings and equipment (75) 27 Securities purchased under reverse repurchase agreements 1,536 (4,332) Acquisition and disposition less cash and cash equivalents acquired (819) - ------------------------------------------------------------------------- Net cash used in investing activities (1,111) (10,872) ------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents (43) 15 ------------------------------------------------------------------------- Net changes in cash and cash equivalents 485 325 Cash and cash equivalents at beginning of period 1,673 1,404 ------------------------------------------------------------------------- Cash and cash equivalents at end of period represented by cash and due from banks $2,158 $1,729 ---------------------------- ---------------------------- Supplementary disclosure of cash flow information Amount of interest paid during the period $2,281 $1,587 Amount of income taxes paid during the period 343 331 ------------------------------------------------------------------------- Certain comparative amounts have been restated to conform to the current period's presentation. The accompanying notes are an integral part of these Interim Consolidated Financial Statements. 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 (Canadian GAAP) and follow the same accounting policies and methods of application as the Bank's Consolidated Financial Statements for the year ended October 31, 2005. Under Canadian GAAP, additional disclosures are required in the annual financial statements and accordingly, these interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended October 31, 2005 and the accompanying notes included on pages 71 to 109 of the Bank's 2005 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 ------------------------------------------------------------------------- There were no changes in the Bank's accounting policies during the quarter. Note 3: 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 Bank's allowance for credit losses at January 31 is shown in the table below. Allowance for Credit Losses ------------------------------------------------------------------------- Jan. 31, 2006 Jan. 31, 2005 ----------------------------------------------------- (millions of Specific General Specific General Canadian dollars) allowance allowance Total allowance allowance Total ------------------------------------------------------------------------- Balance at beginning of period $153 $1,140 $1,293 $266 $917 $1,183 Acquisition of TD Banknorth (includes Hudson United) - 69 69 - - - Provision for (reversal of) credit losses 120 (6) 114 45 (35) 10 Write-offs (152) - (152) (111) - (111) Recoveries 31 - 31 54 - 54 Other(1) 3 - 3 2 - 2 ------------------------------------------------------------------------- Allowance for credit losses at end of period $155 $1,203 $1,358 $256 $882 $1,138 ----------------------------------------------------- ----------------------------------------------------- (1) Includes foreign exchange rate changes and losses on loan sales booked to sectoral allowance. Note 4: LOAN SECURITIZATIONS ------------------------------------------------------------------------- The following tables summarize the Bank's securitization activity for the three months ended January 31. In most cases, the Bank retained the responsibility for servicing the assets securitized. New Securitization Activity ------------------------------------------------------------------------- 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 interest 16 5 26 - 47 Cash flows received on retained interests 57 8 44 - 109 ------------------------------------------------------------------------- ------------------------------------------------------------------------- For the three months ended --------------------------------------------------------- Jan. 31, 2005 ------------------------------------------------------------------------- Residential Credit Commercial (millions of mortgage Personal card mortgage Canadian dollars) loans loans loans loans Total ------------------------------------------------------------------------- Gross proceeds $1,649 $471 $1,300 $- $3,420 Retained interest 35 3 24 - $62 Cash flows received on retained interests 44 10 43 2 $99 ------------------------------------------------------------------------- The following table summarizes the impact of securitizations on the Bank's Consolidated Interim Statement of Income for the three months ended January 31. Securitization Gains and Servicing Income ------------------------------------------------------------------------- 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 Servicing income 37 4 18 - 59 ------------------------------------------------------------------------- Total $40 $9 $43 $- $92 --------------------------------------------------------- --------------------------------------------------------- ------------------------------------------------------------------------- For the three months ended --------------------------------------------------------- Jan. 31, 2005 ------------------------------------------------------------------------- Residential Credit Commercial (millions of mortgage Personal card mortgage Canadian dollars) loans loans loans loans Total ------------------------------------------------------------------------- Gain on sale(1) $14 $3 $22 $- $39 Servicing income 23 10 21 - 54 ------------------------------------------------------------------------- Total $37 $13 $43 $- $93 --------------------------------------------------------- --------------------------------------------------------- (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 as at January 31 are shown in the table below. Key Assumptions ------------------------------------------------------------------------- 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 .1 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2005 ---------------------------------------------- Residential Credit Commercial mortgage Personal card mortgage loans loans loans loans ------------------------------------------------------------------------- Prepayment rate(1) 20.0% 5.9% 41.0% 3.0% Excess spread(2) .7 1.1 12.9 - Discount rate 5.0 3.1 4.2 9.8 Expected credit losses(3) - - 2.9 .1 ------------------------------------------------------------------------- (1) Represents monthly payment rate for personal and credit card loans. (2) The excess spread for credit card loans reflects the net portfolio yield, which is interest earned and other revenues less funding costs and losses. (3) There are no expected credit losses for residential mortgage loans as these mortgages are government guaranteed. During the three months ended January 31, 2006, there were maturities of previously securitized loans and receivables of $2,036 million (Q1/05 - $1,780 million). Proceeds from new securitizations were $1,057 million for the three months ended January 31, 2006 (Q1/05 - $1,640 million). Note 5: VARIABLE INTEREST ENTITIES ------------------------------------------------------------------------- There were no changes in the Bank's position in non-consolidated Variable Interest Entities during the quarter. Note 6: SUBORDINATED NOTES AND DEBENTURES ------------------------------------------------------------------------- During the first quarter 2006, the Bank issued two medium term notes constituting subordinated indebtedness pursuant to its medium term note program. The first is an $800 million issue which will pay 4.97% until October 30, 2015 and then reset every 5 years thereafter to the 5-year Government of Canada yield plus 1.77% until maturity on October 30, 2104. The notes are redeemable at par on October 30, 2015 and qualify as Tier 2A regulatory capital. The second is a $1 billion issue which will pay 4.317% until January 18, 2011 and the bankers' acceptance rate plus 1.00% thereafter until maturity on January 18, 2016. The notes are redeemable at par on January 18, 2011 and qualify as Tier 2B regulatory capital. During the first quarter 2006, the Bank also redeemed all of the outstanding $150 million 8.40% subordinated debentures, due December 1, 2010, which qualified as Tier 2B regulatory capital. Note 7: LIABILITIES FOR PREFERRED SHARES AND CAPITAL TRUST SECURITIES ------------------------------------------------------------------------- The Bank's liability for preferred shares and capital trust securities is as below: Liabilities ------------------------------------------------------------------------- Jan. 31, Oct. 31, (millions of Canadian dollars) 2006 2005 ------------------------------------------------------------------------- Preferred Shares Preferred shares issued by the Bank (thousands of shares): Class A - 16 Series I $- $- 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 343 345 ------------------------------------------------------------------------- Total Preferred shares 893 895 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Capital Trust Securities (thousands of units)(1) Trust units issued by TD Capital Trust (900) 900 900 ------------------------------------------------------------------------- Total Preferred Shares and Capital Trust Securities $1,793 $1,795 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (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 Bank's common shares are not redeemable or convertible. Dividends are declared by the Bank on a quarterly basis and the amount may vary from quarter to quarter. Preferred Shares On November 1, 2005, the Bank issued 17 million Class A First Preferred Shares, Series O shares for gross cash consideration of $425 million, which have been classified as equity on the Consolidated Statement of Changes in Shareholders' Equity and qualify as Tier 1 capital. On or after November 1, 2010, the Bank may redeem all, or from time to time, part of the outstanding Series O shares by payment in cash of $26.00 per share if redeemed prior to October 30, 2011; $25.75 if redeemed on or after October 30, 2011 and prior to October 30, 2012; $25.50 if redeemed on or after October 30, 2012 and prior to October 30, 2013; $25.25 if redeemed on or after October 30, 2013 and prior to October 30, 2014; and $25.00 if redeemed thereafter together with the unpaid dividends to the date of redemption. Shares Issued and Outstanding ------------------------------------------------------------------------- For the three For the three months ended months ended -------------------------------------------- Jan. 31, 2006 Oct. 31, 2005 -------------------------------------------- (millions of shares and millions of Number of Number of Canadian dollars) shares Amount shares Amount ------------------------------------------------------------------------- Common: ------------------------------------------------------------------------- Balance at beginning of period 711.8 5,872 709.0 5,744 ------------------------------------------------------------------------- Issued on exercise of options 1.3 45 1.0 31 Issued as a result of dividend reinvestment plan 1.6 100 1.9 104 Impact of shares (acquired) sold in Wholesale Banking - (2) (0.1) (7) Issued on the acquisition of TD Banknorth - - - - Balance at end of period - Common 714.7 $6,015 711.8 5,872 Preferred: ------------------------------------------------------------------------- Class A - Series O 17.0 $425 - $- ------------------------------------------------------------------------- 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. For the three months ended ------------------------------------------------------------------------- Jan. 31 Jan. 31 (millions of Canadian dollars) 2006 2005 ------------------------------------------------------------------------- TD Bank $6 $4 TD Banknorth 1 N/A ------------------------------------------------------------------------- Total $7 $4 ------------------------------------------------------------------------- During the three months ended Jan. 31, 2006, 1.9 million (three months ended January 31, 2005 - 2.2 million) options were granted by TD Bank with a weighted average fair value of $11.27 per option (three months ended January 31, 2005 - $10.63 per option). During the three months ended January 31, 2006, 2.3 million (three months ended January 31, 2005 - N/A) options were granted by TD Banknorth with a weighted average fair value of $6.01 per option (three months ended January 31, 2005 - N/A). The fair value of options granted by TD Bank was 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 2006 2005 ------------------------------------------------------------------------- Risk-free interest rate 3.91% 3.70% Expected option life 5.1 years 5.3 years Expected volatility 21.9% 25.7% Expected dividend yield 2.88% 2.84% ------------------------------------------------------------------------- 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) 2006 2005 ------------------------------------------------------------------------- Elements of pension plan expense before adjustments to recognize the long term nature of the cost Service cost - benefits earned $18 $11 Interest cost on projected benefit obligation 26 26 Actual return on plan assets 12 (31) Plan amendments - 53 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) (44) 3 Actuarial (gains) losses(2) 5 3 Plan amendments(3) 2 (52) ------------------------------------------------------------------------- Total $19 $13 ---------------------------- ---------------------------- (1) For the three months ended January 31, 2006, includes expected return on plan assets of $32 million (Q1/05 - $28 million) less actual return on plan assets of $(12) million (Q1/05 - $31 million). (2) For the three months ended January 31, 2006, includes loss recognized of $5 million (Q1/05 - $3 million) less actuarial losses on projected benefit obligation of nil (Q1/05 - nil). (3) For the three months ended January 31, 2006, includes amortization of costs for plan amendments of $2 million (Q1/05 - $1 million) less actual cost amendments of nil (Q1/05 - 53 million). Other Pension Plans' Expense ------------------------------------------------------------------------- For the three months ended ---------------------------- Jan. 31 Jan. 31 (millions of Canadian dollars) 2006 2005 ------------------------------------------------------------------------- CT defined benefit pension plan $1 $1 TD Banknorth defined benefit pension plans 2 N/A Supplemental employee retirement plans 8 6 ------------------------------------------------------------------------- Total $11 $7 ---------------------------- ---------------------------- Principal Non-Pension Post-Retirement Benefit Plans Expense ------------------------------------------------------------------------- For the three months ended ---------------------------- Jan. 31 Jan. 31 (millions of Canadian dollars) 2006 2005 ------------------------------------------------------------------------- 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 2 - Plan amendments 64 - ------------------------------------------------------------------------- Total $9 $8 ---------------------------- ---------------------------- 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) 2006 2005 ------------------------------------------------------------------------- Principal pension plan $15 $14 CT defined benefit pension plan 1 1 TD Banknorth defined benefit pension plans 32 N/A Supplemental employee retirement plans 2 2 Non-pension post-retirement benefit plans 2 2 ------------------------------------------------------------------------- Total $52 $19 ---------------------------- ---------------------------- As at January 31, 2006, the Bank expects to contribute an additional $46 million to its principal pension plan, $2 million to its CT defined benefit pension plan, $34 million to its TD Banknorth defined benefit pension plans, $6 million to its supplemental employee retirement plans and $6 million to its non-pension post-retirement benefit plans by the end of the year. However, future contribution amounts may change upon the Bank's review of the current contribution levels during the year. Note 11: EARNINGS PER SHARE ------------------------------------------------------------------------- The Bank's basic and diluted earnings per share at January 31 are as follows: Basic and Diluted Earnings per Share ------------------------------------------------------------------------- For the three months ended ---------------------------- Jan. 31 Jan. 31 2006 2005 ------------------------------------------------------------------------- Basic Earnings per Share Net income available to common shares ($ millions) $2,302 $630 Average number of common shares outstanding (millions) 712.5 656.6 Basic earnings per share ($) $3.23 $.96 ---------------------------- ---------------------------- Diluted Earnings per Share Net income available to common shares ($ millions) $2,302 $630 Average number of common shares outstanding (millions) 712.5 656.6 Stock options potentially exercisable as determined under the treasury stock method(1) 6.4 5.3 ------------------------------------------------------------------------- Average number of common shares outstanding - diluted (millions) 718.9 661.9 Diluted earnings per share ($) $3.20 $.95 ---------------------------- ---------------------------- (1) For the three months ended January 31, 2006, the computation of diluted earnings per common share excluded weighted average options outstanding of 945 thousand (Q1/05 - 1.1 million) with a weighted exercise price of $60.02 (Q1/05 - $49.40) as the options' price was greater than the average market price of the Bank's common shares. Note 12: SEGMENTED INFORMATION ------------------------------------------------------------------------- The Bank's operations and activities are organized around the following businesses: Canadian Personal and Commercial Banking, U.S. Personal and Commercial Banking, Wholesale Banking and Wealth Management. Results for these segments for the three months ended January 31 are presented in the following table: Results by Business Segment ------------------------------------------------------------------------- Canadian Personal U.S. Personal and Commercial and Commercial (millions of Canadian dollars) Banking Banking ------------------------------------------------------------------------- Jan. 31 Jan. 31 Jan. 31 For the three months ended 2006 2005 2006 ------------------------------------------------------------------------- Net interest income $1,177 $1,089 $284 Other income 627 574 73 ------------------------------------------------------------------------- Total revenue 1,804 1,663 357 Provision for (reversal of) credit losses 99 95 7 Non-interest expenses 985 924 225 ------------------------------------------------------------------------- Income (loss) before provision for (benefit of) income taxes 720 644 125 Provision for (benefit of) income taxes 244 220 42 Non-controlling interest - - 37 ------------------------------------------------------------------------- Net income (loss) $476 $424 $46 ----------------------------------------- ----------------------------------------- Total assets (billions of Canadian dollars) - balance sheet $133.5 $123.3 $48.0 - securitized 33.6 31.5 - ----------------------------------------- ----------------------------------------- (millions of Canadian dollars) Wholesale Banking(1) Wealth Management ------------------------------------------------------------------------- Jan. 31 Jan. 31 Jan. 31 Jan. 31 For the three months ended 2006 2005 2006 2005 ------------------------------------------------------------------------- Net interest income $138 $278 $178 $145 Other income 523 292 564 518 ------------------------------------------------------------------------- Total revenue 661 570 742 663 Provision for (reversal of) credit losses 29 13 - - Non-interest expenses 395 332 525 508 ------------------------------------------------------------------------- Income (loss) before provision for (benefit of) income taxes 237 225 217 155 Provision for (benefit of) income taxes 73 84 79 57 Non-controlling interest - - - - ------------------------------------------------------------------------- Net income (loss) $164 $141 $138 $98 ----------------------------------------- ----------------------------------------- Total assets (billions of Canadian dollars) - balance sheet $165.1 $165.9 $23.9 $27.0 - securitized - - - - ----------------------------------------- ----------------------------------------- (millions of Canadian dollars) Corporate(1) Total ------------------------------------------------------------------------- Jan. 31 Jan. 31 Jan. 31 Jan. 31 For the three months ended 2006 2005 2006 2005 ------------------------------------------------------------------------- Net interest income $(170) $(101) $1,607 $1,411 Other income 1,574 11 3,361 1,395 ------------------------------------------------------------------------- Total revenue 1,404 (90) 4,968 2,806 Provision for (reversal of) credit losses (21) (98) 114 10 Non-interest expenses 160 181 2,290 1,945 ------------------------------------------------------------------------- Income (loss) before provision for (benefit of) income taxes 1,265 (173) 2,564 851 Provision for (benefit of) income taxes (218) (140) 220 221 Non-controlling interest - - 37 - ------------------------------------------------------------------------- Net income (loss) $1,483 $(33) $2,307 $630 ----------------------------------------- ----------------------------------------- Total assets (billions of Canadian dollars) - balance sheet $13.9 $17.1 $384.4 $333.3 - securitized (9.9) (10.3) 23.7 21.2 ----------------------------------------- ----------------------------------------- (1) The taxable equivalent basis adjustment is reflected primarily in the Wholesale Banking segment's results and eliminated in the Corporate segment. Note 13: ACQUISITIONS AND DISPOSITIONS ------------------------------------------------------------------------- TD Waterhouse U.S.A. and Ameritrade On January 24, 2006 the Bank closed the transaction involving the sale of its U.S. brokerage business TD Waterhouse U.S.A. at a fair market value of CDN$2.69 billion to Ameritrade Holding Corporation in exchange for a 32.5% ownership in the combined legal entity operating under the name TD Ameritrade. The transaction has resulted in a net dilution gain on sale of U.S.$1.45 billion (CDN$1.67 billion) after-tax in Q1 2006 (CDN$1.64 billion pre-tax). Accordingly, the Bank's investment in TD Ameritrade over the Bank's share of TD Ameritrade's net book value was approximately CDN$3.7 billion and consists primarily of goodwill and intangibles. The Bank reports the investment in TD Ameritrade using the equity method of accounting. The fiscal periods of the Bank and TD Ameritrade are not coterminus. The Bank's equity share of TD Ameritrade's results from the January 24, 2006 acquisition date to TD Ameritrade's calendar quarter end date will be reported in the Bank's second quarter results. Thereafter, the Bank's equity share of TD Ameritrade's results for TD Ameritrade's calendar quarter end date will be reported in the Bank's results for the fiscal quarter. As of January 31, 2006 the net investment in TD Ameritrade on the Bank's Interim Consolidated Balance Sheet was CDN$3.3 billion. In connection with the transaction, TD Waterhouse Canada acquired 100% of Ameritrade's Canadian brokerage operations for U.S.$60 million cash consideration which primarily consisted of goodwill and intangible assets. On February 22, 2006, the Bank announced that it committed to purchase at least 15 million shares of TD Ameritrade by August 22, 2006 pursuant to one or more stock trading plans in accordance with Rule 10b5-1 under the U.S. Securities Exchange Act and that all purchases would be made in the open market, including through block trades, in compliance with Rule 10b-18 under the U.S. Securities Exchange Act. Previously, the stockholders agreement governing the Bank's investment in TD Ameritrade required the Bank to commence a tender offer to acquire shares of TD Ameritrade common stock at a price of not less than US$16 per share, which, at the time of the announcement, was below the market price for TD Ameritrade common stock. The Bank's purchase commitment replaced its tender offer obligation under the stockholders agreement, and the parties to the stockholders agreement entered into an amendment reflecting this change. In connection with this announcement, the Bank also restated its intention to reach an ownership level of 37.5% of the outstanding TD Ameritrade common stock by January 2007, which would require the acquisition of approximately 15 million shares in addition to the 15 million shares TD has committed to purchase. Hudson United Bancorp On January 31, 2006, TD Banknorth completed the acquisition of Hudson United Bancorp ("Hudson") for total consideration of U.S.$1.9 billion, consisting of cash consideration of U.S.$941.8 million and the remainder in TD Banknorth common shares. The cash consideration was funded by the sale of TD Banknorth common shares to the Bank. TD Banknorth consolidates the financial results of Hudson. The transaction has resulted in a dilution loss for the Bank of CDN$72 million. On February 1, 2006, the Bank announced its intention to commence open market purchases of TD Banknorth shares. The Bank intends to at least maintain its ownership percentage in TD Banknorth at the level prior to the acquisition of Hudson or, as market conditions warrant, to potentially increase its position. As of January 31, 2006 the Bank's ownership percentage was 53.5%. The acquisition of Hudson United Bancorp by TD Banknorth contributed CDN$6.0 billion of personal/business loans and mortgages, CDN$3.2 billion of securities, CDN$1.9 billion of goodwill and intangibles, CDN$.8 billion of other assets, CDN$8.4 billion of deposits and CDN$3.5 billion of other liabilities to the Bank's Interim Consolidated Balance Sheet. The allocation of the purchase price discrepancy will be finalized in the second quarter. Note 14: RESTRUCTURING COSTS ------------------------------------------------------------------------- The Bank previously announced the restructuring of the global structured products businesses within Wholesale Banking to reduce focus on the less profitable and more complex activities and concentrate resources on growing the more profitable areas of the business. In the first quarter the Bank recorded $50 million pre-tax ($35 million after tax) of restructuring costs primarily consisting of severance costs. Note 15: CONTINGENCIES ------------------------------------------------------------------------- At quarter end, the total contingent litigation reserve for Enron-related claims was approximately $618 million. The two principal legal actions regarding Enron to which the Bank is a party are the securities class action and the bankruptcy proceeding. It is possible that additional reserves above this 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. In 2005 the Bank agreed to settle bankruptcy court claims in this matter for approximately $160 million. Payment of this settlement, when made, will reduce the current total reserve for this matter to approximately $458 million. 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 16: RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ------------------------------------------------------------------------- The accounting principles followed by the Bank including the accounting requirements of the Superintendent of Financial Institutions Canada conform with Canadian generally accepted accounting principles (Canadian GAAP). Significant differences between Canadian GAAP and United States generally accepted accounting principles (U.S. GAAP) are described in the Bank's 2005 Annual Report with their impact detailed below. Net Income ------------------------------------------------------------------------- For the three months ended ---------------------------- Jan. 31 Jan. 31 (millions of Canadian dollars) 2006(1) 2005 ------------------------------------------------------------------------- Net income based on Canadian GAAP $2,307 $630 Employee future benefits 2 - Securitizations - (2) Available for sale securities 6 2 Derivative instruments and hedging activities (33) (88) Guarantees (6) (3) Liabilities and equity